Revisiting the 2016 entry, "Ford Motor Company as a transportation company not a "car" company: bike share and small scale transit"

The Congress for the New Urbanism publication Public Square is somewhat Panglossian for my taste.  They just published an article, "Ford promotes street grids," about how Ford Motor is supporting the efforts of Bastrop, Texas to re-orient its urban form to a grid.

Myself and others pointed out that Ford Motor Company, and other auto companies, foremost focus on the promotion of automobility, regardless of this particular project.  You can hardly say coming up with the funding for a video indicates that the company has been transformed.

This ad was published by Ford in 1953, their 50th anniversary, as part of a series.The title: "The street will never be the same again" was prophetic in terms of the impact of the car and automobility on center cities. 

My joke is that the current state of Detroit is what the auto industry intended to happen to cities, because it wasn't in their interest to have center city urban form promote mobility alternatives to the car (walking, transit, biking).

In my comments on the article, I mentioned an entry from 2016, "Ford Motor Company as a transportation company not a "car" company: bike share and small scale transit."

While I think it's a great analysis from that point in time, a number of things have changed in the interim, and a major conclusion I drew is wrong.  Here were the major points:

-- Millennial demographic and psychographic changes are changing the US automobile industry.  That's still true.  Fewer people were buying cars overall, especially younger segments.  More people are buying trucks, to the point that GM and Ford have announced a reduction in the sales of cars while expanding the sales of trucks and SUVs ("Ford to stop making all passenger cars except the Mustang," NBC News).

But with the pandemic, more people took up automobility as opposed to using mass transit.  

-- Telecommunications enables car use without car ownership.  This is true, but few companies have figured out how to make money doing so.  Mercedes, BMW, GM, and others have dropped out of the business of car sharing.  

More recently, ride hailing (Uber, Lyft) has been repriced upward as drivers leave the business because of minimal profitability and an unwillingness of venture capital to continue to subsidize rides ("Farewell, Millennial Lifestyle Subsidy," New York Times).

-- New entrants competing to sell cars using different technologies or business models.  This is mostly about electric cars, and is unchanged.  EVs require a different fueling system than gasoline, which requires the buildout of a charging network ("The White House wants a robust electric vehicle charging network. Here's the plan," WGBH/NPR, "A perspective on equity in the transition to electric vehicles," MIT Science Policy Review).  And companies like Tesla prefer to sell cars directly rather than through independent dealers.  

-- Car companies versus transportation companies.  The entry focuses on something Ted Levitt wrote decades ago, about GM thinking of itself as a car company, not a transportation company.  I don't think he was right exactly, but he was on to something.  

GM saw itself as a "vehicle manufacturer" producing cars, trucks, heavy trucks, construction equipment, buses, and railroad locomotives.  That's transportation.  

What Levitt got wrong was that GM's problem was three-fold, that they didn't think of transportation as opposed to vehicles, they were stuck with a production and operations model that was increasingly unprofitable except for luxury vehicles and trucks, and they weren't sufficiently focused on the quality of the customer experience in terms of manufacturing quality, dealership to customer relations, and on technology like OnStar instead of the experience (versus Tesla).

When the price of gas changed significantly GM was stuck--their design sensibility didn't work with smaller cars, and their labor-health insurance and pension requirements made cars not particularly profitable.

Ford was similar, producing heavy trucks, tractors, airplanes for a time, with some dabbling in transit.  Like GM they got out of everything but cars and trucks, with an increasing focus on trucks, especially SUVs.   Both companies have been downsizing foreign operations, while still focused on China.

Ford created the Ford Mobility division (GM has a similar unit), its arm focused on serving customers "using cars" not necessarily owning them, along with other initiatives such as small group passenger services ("Ford’s Farley On Building Mobility Technology And Services Amid Auto Industry Disruption," Forbes). 

But these initiatives have shifted from dealing with "car customers" versus "car buyers and owners" and more towards technology initiatives like automated vehicles.  The Chariot group passenger unit was shut down in 2019.

Some of Ford Mobility's initiatives, like sponsoring for a time the SF bike sharing program, I argued were more about seeming appealing to potential and younger employees, especially in the Silicon Valley.  Ford ended  its participation in 2019.  

They still have a research unit there, but it's pretty small, about 300 employees ("A New Frontier: How Ford is Engaging Silicon Valley Startups to Transform Transportation").

More recently, Ford announced the acquisition of the long abandoned Michigan Central Station, and committed to its rehabilitation and that the Company's advanced technology initiatives would be based there as part of a new "Mobility Innovation District" ("Ford Reveals Plans for Inclusive, Vibrant, Walkable Mobility Innovation District Around Michigan Central Station").

It will have about 5,000 employees, demonstrating it tends to work better for companies to have employees and innovation units closer to the center.

New developments:

• I was wrong about Tesla, it will become a mass manufacturer.  Part of my problem was recognizing that just because Elon Musk is a blowhard and the stock is driven up by fanboys disconnected from underlying value, the company is transformational, and is redefining the car industry.
• The other thing that I didn't fully understand is that Tesla's entry as an exogenous shock (disruptive innovation), the lead promoter of electric vehicles, and the first mover especially in terms of branding has the strong possibility of boxing out the ability of GM and Ford to reposition and rebrand around electric vehicles.  Electric vehicles challenge the ways cars are designed, internal combustion engines and the billions of dollars of sunken investment, gasoline producers and sellers, existing business models, and traditional car dealerships.
• Just as Sony's Walkman lost out to smartphones, VHS to DVDs, Kodak to digital photography, Nokia to Apple, newspapers and travel agencies versus the Internet, taxi companies versus Uber and Lyft, etc., GM and Ford may be analogous to Sony, Kodak and the printed newspaper.  That's the power of exogenous shock.
• Tesla is years ahead both in terms of battery technology and IT systems and it may be too difficult for the other companies to catch up, especially as younger buyers see legacy companies as old news and not worth considering.
• GM's Chevy Bolt has been a failure ("Chevy Bolt Battery Recall: How Could This Have Happened?," Car and Driver), when I thought it would redefine the industry.  Even without the battery fire problem, most potential customers preferred to buy a Tesla over a Bolt.
• Tesla has opened a plant in China, and has one under construction in Germany.
• However Ford and GM do have an advantage in the truck segment, which may keep them in the game as trucks shift from ICE to electric.  But not for cars?
• Focusing on "car users" rather than "car owners" is likely to remain a niche market, and may require direct participation by public transportation agencies along with subsidy ("In DC and Seattle could Car2Go (ShareNow) be converted to a nonprofit and remain in business? (Or could it be sold to Zipcar?)," 2020) as part of transportation demand management planning.

• In 2019, GM and Ford announced a shift away from car production to focus on trucks and SUVs.  Foreign manufacturers like Toyota and VW in a wide range of segments, and BMW and Mercedes in luxury segments, continue to offer a wide range of cars.
• GM and Ford announced massive new programs for electric vehicle production.  
• The big hang up is battery production, and the scarcity of the unique minerals necessary for batteries ("Is There Enough Lithium to Maintain the Growth of the Lithium-Ion Battery Market?," GreenTech).
• Interestingly, rather than use existing plants, many of the vehicles will be produced in new facilities increasingly outside of Michigan and the core of the Midwest.  Is this because Michigan isn't competitive or is it a way to get cheaper labor and reduce the power of the UAW? ("Michigan Gov. Whitmer slammed after Ford opens electric vehicle plants in other states," Fox Business).
• Car sales are up, but there are also supply problems because of a microchip shortage ("Microchip Shortage Update: Car Inventories Could Stay Low All Next Year," Kelly Blue Book).  This has led to a massive increase in the price of used cars too.
• Gas prices are high as a result of supply difficulties, but mostly because of the contraction of the US shale oil industry because of a price reduction campaign by Saudi Arabia, designed to put many of the companies out of business ("With shale subdued, Saudi, Russia become more comfortable with oil rally," Reuters). 
• It's not clear the US electricity grid is robust and resilient enough to power an automobile fleet shifting in toto from internal combustion engines to EVs ("Plug in cars are the future: the grid isn't ready," Washington Post).
• And legacy dealers aren't necessarily committed to EVs, which demonstrates the importance of Tesla's decision to sell direct, starting from a fresh plate.
• Many cities in Europe have "low emissions zones" in their center cities, which means that diesel and gasoline cars can't enter, or have to pay a significant daily fee upon entrance to the zone. 
• In 2020, California banned the sales of gasoline powered vehicles effective in 2035 ("California will ban new gas cars starting in 2035. Gas station owners worry about their livelihoods," KCRW/NPR).  But too many states are dependent on fossil fuel production, car dealerships, car manufacturing, and the sprawl land use paradigm to be as bold.