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“Letter to Obama: What the Car Industry Needs Is A Steve Jobs”
Designed by GM in California?
In an open letter to President Obama, Todd Dagres of Spark Capital nominates Steve Jobs as the go-to guy to save the US auto industry.
Our country’s leadership in the auto industry lies in developing future cars that are more like computers with wheels than mechanical sleighs addicted to dinosaur juice. The future of the automotive industry will be defined by electronics and software. The good news is that there is no country with more talent and capability in this arena than the United States.
At first, to some, Jobs as the savior of the American auto industry seems logical. He did bring back Apple from near death by applying a superior user interface to existing and, in regard to cellular phones, established product categories in the form of iPod and iPhone respectively.
But, as many who commented after Dagres’ letter to President Obama, Jobs likely doesn’t know a thing about building cars and even less about the old-school businesses involved in the process.
But, this is exactly why Dagres is right and why Jobs is the man for the job.
The heavy, metal vehicles of today, powered by complex internal combustion engines, are the mechanical watches of our time. In an increasingly solid state world, the modern reciprocating engine is the epitome of “vintage.” And, despite the presence of robots and automation, modern cars are relatively expensive to produce.
What Detroit needs is someone who knows as little about current car manufacturing as possible and even less about the established “business” of making cars. I think Jobs may qualify.
As Dagres points out, cars of the future will be “computers with wheels” and they will be “defined by electronics and hardware.” Michelin’s E-Wheel is the obvious example. Michelin’s “Active Wheel Technology” eliminates the need for a traditional engine, transmission, suspension and drive shafts by employing two electric motors housed inside the hub of each wheel. Mounting the motors in the wheels is not new; the first gas/electric hybrid car, built by Porsche over 100 years ago, used a similar configuration.
The in-wheel electric motors were an absolute stroke of genius as they significantly increased the vehicle’s efficiency by removing all mechanical parts.
Once all of a car’s mechanical parts are removed, there’s more room for people and safety and less weight, which hinders efficiency and performance. What’s left starts to look more like “a computer with wheels.”
There will be those who will complain about lost industrial production and profits going overseas, but the former has been the case since we moved past the peak of the Industrial Revolution decades ago. Regarding the latter, Jobs has managed to design the iPod and iPhone in California, send production to East Asia and keep most of the profits here in the USA.
Of the $299 price of the iPod, Apple (and the United States) gets $76 as the lead firm in the value chain, plus a potential $45 if the unit is sold directly through its retail channel. Value capture for parts gives $7 to the U.S. (e.g. video/multimedia processor, controller chip), and $27 to Japan (e.g. hard drive, display). Manufacturing (as assembly and test of the unit) results only in $4 of value capture for Taiwan.
Despite much opinion to the contrary, I think Dagres is right-on regarding his letter to President Obama; Jobs could not only resurrect the US auto industry, he might reinvent the car. But, like the iPod and iPhone, the reinvention part does not involve any single revolutionary element; the genius is the application of existing technologies into a composite product that “just works.”
-KES
Note: As of this writing Apple has about $28B in cash and the combined market capitalization of Ford and GM is about $5B.
Letter to Obama: What the Car Industry Needs Is A Steve Jobs – TechCrunch
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