Piston Slap: The Ram-ifications of Dodge v. Ford Motor Company

Jay writes:

Do automakers stay competitive in the market by being perceived as modern, cutting-edge, and ahead-of-the-curve? Does it seem that each wants to be seen as the best, most advanced and sophisticated manufacturer?

Automobiles are ridiculously complex-is there an end in sight? All this impacts affordability too, right?

When will this end?

Sajeev answers:

What entertaining series of thought experiments! Let's peer into the collective minds of your average, publicly-traded automaker to see if we can draw somewhat valid conclusions to these questions.

The Competitive Advantages of Modernity

Ford

Be it a self-starting engine, integrated bodies, high-performance engines, lower emissions, safety equipment, or even self-driving software, every decade or so the automakers come up with a "killer app" that everyone needs in their next car. The prevalence of smartphones and their subsequent arrival on the automotive landscape is the lowest hanging fruit for us to pick and savor.

Ford was one of those early adopters in smartphone vehicle integration, having critical success with their first Microsoft SYNC system in 2007. (Not to be confused with its MyFordTouch successor, which was bleeding edge technology personified.) Everyone wanted to capitalize on the popularity of these little gadgets in our pockets, and it didn't take long for every automaker to have something like SYNC in their vehicles.

Ford

But why? Revenue generation from cellphone-savvy drivers is one reason. But once technology became a driving factor in company valuations, there was a good chance that stuff like SYNC could also boost a company's stock price.

(This is likely why many non-automotive companies now have a veneer of artificial intelligence added to their products/services. The AI boom can make you a lot of money.)

Dodge vs. Ford

MecumMike Drilling

Here's where the title of this Piston Slap comes into focus, as perhaps Dodge v. Ford Motor Co. provides proper context for my answers to Jay's questions. In 1919, the largest shareholders of Ford Motor Company stock (The Dodge brothers, with 10% of the company) sued for a fatter dividend. While they likely wanted more money to finance their own car company, Dodge's legal claim hinged on the fact that Ford was sacrificing profits (selling Model Ts for less money over time, $5 workdays, etc.) at the expense of shareholders.

But Henry Ford was perhaps pioneering what we currently see as standard operating practice: Lowering prices to grow the market and gain market share. Ford was looking at long-term success at the expense of short-term profits, and he won the case. While the court's ruling did not specifically state that a public company must use its resources to maximize shareholder wealth, it does give senior management latitude to invest capital as they see fit.

In today's world, senior management is more inclined to think about the stockholders these days, often for the sake of their own stock-fueled paycheck. But that's not to say that big picture thinkers don't have their place in society. Though we have seen a steady rise in vehicle cost and complexity, just like Henry Ford's mission to put more of the world behind the wheel, we are beginning to see glimpses that his modern-day counterparts are making a similar play for today's customer.

Complexity Made Simple?

UpFix

Jay is right, it is true that automobiles are quite complex these days. This is mostly because of extra mechanical (i.e. why is everything turbocharged, with a million gears in the transmission?) and electrical bits with secret features like the ability to spy on us. There could be an end in sight, as we will discuss in the next section.

But even if there wasn't such an ending, remember that many vehicles have strong aftermarket services for these complex modules and subsystems. Much in the same way we hire a plumber, an HVAC tech, or a licensed electrician to repair our homes, we have places like UpFix (and their Mom and Pop local counterparts) that rebuild seemingly impossible to repair items: All we do is diagnose the problem, yank the module, and ship it to a rebuilder.

Aftermarket support makes such complexity a lot simpler, but there's no doubt that modern engines and transmissions will place unnecessary demands as the years turn into decades. And that neediness might accelerate our transition to EVs in many zip codes: Rebuilding oil-starved turbochargers and dead 8-speed cog swappers isn't as easy as replacing a bad cells in a depreciated Tesla Model 3 or Mustang Mach-E battery pack. (Once EV diagnostic tools are as common as OBD-II scanners, of course.)

Sticker Shock

Chevrolet

Being able to afford a new vehicle is likely a big problem for many readers. All this complexity adds a layer of cost that is splitting the market, as even franchised new car dealers sell more used than new cars in some quarters over the past five-10 years.

It's not just cars, but American retailing as a whole: Dollar General's CEO once famously remarked, "we do very good in good times and we do fabulous in bad times." Oh, dear.

2000 Ford 24.7 Concept truckFord2000 Ford 24.7 Concept sedanFord2000 Ford 24.7 Concept coupeFord

Car dealers can pivot between new makes and used models, but alienating an ever larger number of people is bad for an OEM automaker's long term prospects. Ford's own CEO wants Americans to fall back in love with small cars, ones that are presumably cheaper. In order to appeal to more folks, they'd need modular body styles, a mix of gasoline and EV technology, and have a smattering of modern electronic interfaces in the same manner of cheap Chinese vehicles. They basically need a modern take on the Ford 24.7 concepts from the year 2000.

Judging by the chatter on social media I hear about Chinese automaker BYD (once the mainstream media realized they are a better story than non-stop Tesla coverage), it's entirely likely that younger folks priced out of today's new cars would buy something that we've traditionally considered a penalty box. And if they do, others will follow. Just like they've always done.

When will this end?

A BYD Seagull small electric car is on display in Shanghai, April 18, 2023.VCG/Getty Images

Answering your final question takes the shiniest of crystal balls, but I'll give it a shot. As previously mentioned, complexity aside, the writing is on the wall for big vehicles, and we haven't even discussed the general rise in traffic fatalities in the last 10 years.

US Department of Transportation

I am not suggesting the strong sales of full-size trucks, SUVs, Crossovers, and heavy luxury vehicles shall disappear via radical forces like government intervention or a popular uprising. I am merely suggesting that a neglected market for simpler, more affordable, and smaller vehicles is finally showing signs of interest by both the automakers, and the mainstream media. Combine that with the sales of the uniquely American Ford Maverick trucklet, and we have a darn good chance of a more balanced, nutritious product mix of automobiles in America in the next decade or so.

How BYD fares in Mexico could also be a bellwether for the rest of North America. Success isn't gauranteed, as it could fail like the Tata Nano in India if automakers don't get the mix of product, price, and promotion correct. (That case study may be less of a problem here, because so many of us need a car to function in our sprawling society.)

Perhaps one final sentence can wrap up this whole thought experiment:

"Fear not, for the need of automakers to seek profit (above all else?) will end our increasingly worrisome lack of affordable, pragmatic modes of transport."

Sanjeev Sajeev Mehta

Have a question you'd like answered on Piston Slap? Send your queries to [email protected]-give us as much detail as possible so we can help! Keep in mind this is a weekly column, so if you need an expedited answer, please tell me in your email.

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