Can Silicon Valley and Detroit Reinvent the Car Business?

In the month of October, General Motors, Ford and Chrysler once again increased their share of cars and light trucks sold in America. In the third quarter of this year, the companies all reported solid profits. In fact, for the 12 months that just ended, their net income totaled $13 billion — compared to losses of that size and more just three years ago. None can dispute that this qualifies as one of the most remarkable turnarounds in corporate history.

But while we enjoy the glow of success, it is worth looking ahead and asking whether this good fortune has legs. A dozen years from now, will these companies still be moving forward or will they be swept away by the seemingly inexorable tide of globalization? The prize here is large — keeping America as a prime location for the millions of jobs associated with making cars.

It is a tall order. We need a combination of good government policy, including a level playing field with our global trading partners and visionary leadership from corporate executives and labor leaders. But if we have these and combine them with the natural assets America brings to this challenge, this is a game that we can win.

Here’s why. I believe that in next decade, the automobile industry will see more change than it has in the last 50 years — fundamental changes in how cars are powered, perform and are made.
For almost 100 years, the energy to power cars has come almost exclusively from oil and the amount of oil required to move a car a given distance has decreased at a very slow rate. In the next decade, substantial steps could be taken toward using electricity, bio-fuels and natural gas to power our cars, while those vehicles still using oil will consume far less of it.

For the last 50 years, we have slowly been placing more technology into our cars. Cars today are far smarter than they were 50 or even five years ago. However, the next dozen years will likely see an exponential expansion of a car’s ability to interact with its driver and its environment.

Finally, we will see dramatic changes in the way that we manufacture cars. Our production methods today are still largely based on the methods developed by Henry Ford, but we are fast moving to a world of customized, on-demand manufacturing where the consumer can build their car from the ground up, sending their plans directly to the factory floor for rapid assembly.

Done right, these changes all play to our nation’s greatest strength — our inexhaustible supply of brains and skilled labor, of innovators, inventors, entrepreneurs and investors, that incredible brew of vision and drive that have made this the best place in the world to build a company that changes the world. The car industry is being reinvented. And inventing new things and reinventing old ones is what we do in America.

Most people think that spirit is best exemplified by Silicon Valley, where they seem to reinvent the entire world every 18 months. Gordon Moore, the visionary founder of Intel, once suggested that if the auto industry advanced at the rate of the semiconductor industry, cars would soon get 100,000 miles per gallon and it would cost more to park a Rolls Royce than to buy one. Yes, the price of a gigabyte of memory marches inexorably down. But we would be more than a little surprised if our car regularly told us that it had a “fatal error” and that “the system will now shut down.”

For while Silicon Valley brings us rapid innovation, Detroit brings us unflinching reliability. Whether it is 4° in Fargo or 107° in Phoenix, we expect our cars to run. We also expect our cars to last. In the past decade many people have purchased four, five or maybe six cell phones. But the overwhelming majority of cars manufactured a decade ago are today still on the road and still performing as expected.

There is no doubt that Detroit has much to learn from Silicon Valley, but Silicon Valley has much to learn from Detroit. The good news is that this combination is truly only available in America.