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Beat Old Car Plants Into Cleantech Factories? Great Idea, If Automakers Got Onboard

The U.S. auto industry is clearly not the colossus it once was. Chrysler and General Motors (GM) nearly disappeared in 2009. Ford (F) had to borrow billions to stay in business. The once-mighty industrial Midwest is now dotted with idled car factories. So naturally, analysts have looked at the unused capacity and thought, "Hey, we can use that to build wind turbines and solar panels."

Welcome to Upper Midwest Economy, version 2.0, in which old automobile plants are retooled to make the green manufacturing revolution happen. Sounds great! The only question is, Why didn't the automakers think of this before? After all, General Electric (GE) makes everything from dishwashers to jet engines. Manufacturing is manufacturing, right?

The automakers have always been in the automaking business
For Detroit though, excepting only a brief period during World War II when the major carmakers shifted production from personal vehicles to military trucks, tanks, and aircraft, autos have been the name of the game. And why not? You build a product that costs thousands, that has to be replaced every few years, that demands a steady stream of replacement parts, and that people will gladly go into debt to possess.

Even now, as pundits argue that Detroit's expertise in managing the building of complex things means that General Motors could become General Manufacturing, the carmakers would rather build cars. This doesn't mean they don't want to do cleantech. They just want to do cleantech as it applies to the auto business. Electric cars. Hybrids. Sophisticated new versions of the internal combustion engine. Motors that run on fuels that aren't gasoline.

Boom markets in the developing world make this worse
If U.S. automakers were only dealing with North American, where the market plummeted from 17 million vehicles sold annually to less than 10 million in 2008-09, they would have an incentive to change. One of the main reasons Michigan tends to get so excited about old auto plants being used for cleantech is that it adds valuable diversity to a one-industry region.

But the carmakers are understandably reluctant to similarly diversify. Even GM Ventures, the VC arm of the automaker, is making investments in futuristic automotive technologies.

One reason is that they don't have to diversify. They can look to the developing world -- especially China and Latin America -- and see enormous potential growth for their product. If you're GM, it makes no sense to spend billions to make solar panels in Michigan when you can spend billions to make cars in China. China's going to need a lot of cars. Depending on how things go with fossil fuel supplies, nuclear power, and government subsidies, nobody may need solar panels.

The automakers don't need to seal their fate
The Detroit carmakers do actually have a historic opportunity to break out of their old business model in the U.S. Sure, they'll continue to pursue growth in developing markets. But right now, the federal and state governments are pressing hard to create a domestic green energy industry -- and putting up the money to make it happen. But so far, the carmakers have shown themselves to be mostly interested in batteries.

They can, and should, think bigger. GM could become more like GE, if it creates advanced energy projects, using its manufacturing know-how. It could also begin to strategically devote some of its capital to funding cleantech projects that fit with its capabilities, much as it does now with GM Ventures.

Or it could stick with what it knows best. But this would mean that when the next downturn comes, and when a downturn inevitably arrives in the developing world, the automakers will lack the diversification they so urgently need.


Photo: Wikimedia Commons
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