How will Detroit get out of its financial crisis – with a broad, deep, fast change and a focus on fuel economy, according to the University of Michigan Transportation Research Institute.
Its report outlines that successful turnarounds hinge on cultural transformation, including the replacement of management teams, as well as higher value being placed on fuel economy, which has previously been underestimated.
The study models the impact of increased fuel economy standards and finds that an industry wide mandated increase in fuel economy of 30 per cent to 40 per cent (35mpg to 40.4mpg) would see gross profits leap by around $3billion a year and increase sales by the equivalent of two large assembly plants.
It finds that not only would the Detroit three gain profits over base in all scenarios, but Japanese automakers’ profit gains would be smaller and the Japanese industry would lose sales while the North American industry would continue to grow.
The report goes on to suggest that there is ‘compelling evidence’ that the Detroit three have underestimated fuel economy so far and that raising standards would not cost more than consumers are willing to pay.
