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Ford and the Transatlantic Learning Community

How have rising oil prices brought the U.S. and Europe closer together?

Takeaways


  • The fact that the Europeans have had to contend with higher oil prices long before the current steep increases turns out to be a transatlantic virtue in disguise.
  • Whatever the vagaries of the future oil price, Ford has a viable option for quickly converting its production portfolio without wasting more time.
  • Politicians and business leaders alike unceasingly repeated a mantra that one meant to show that there is more to European-American relations than disagreements.

During the years of transatlantic infighting over Iraq and related matters, politicians and business leaders alike unceasingly reminded themselves that there is more to European-American relations than disagreements.

Foreign policy aside, they said, look at the real world. European and American businesses have a very intensive relationship. They do a lot of trade with each other. And, as “insourcing” investors, they also produce a lot on each others’ shores — and employ quite a few of each others’ workers.

True as that statement is, it always seemed so abstract, the stuff of such un-sexy matters as export statistics and foreign affiliate production and employment tables.

In short, it was seen by the public-at-large as little more than a highly transparent cover-up by a transatlantic business elite increasingly desperate to paint bright colors over a darkening political relationship.

What a difference a change in the oil price makes. With Ford’s unsentimental announcement in July 2008 that the company is re-gearing its product line-up in the United States, a brave new transatlantic world is rapidly taking shape.

The decision to shift the production line-up from gas-guzzling trucks and SUVs to fuel-efficient cars underscores the real benefits derived from the — admittedly, often contentious — transatlantic relationship.

Instead of having to go to the drawing board, or its product engineers, Ford has essentially done all that already — and now merely needs to transfer the production know-how and plant designs to its U.S. manufacturing facilities.

Welcome the Ford Focus and Ford Fiesta — smaller cars, yes, but comfortable cars that have helped Europeans, long accustomed to high oil prices, to stay mobile — but within the household budget.

Now, one needs to realize, of course, that U.S. manufacturers have been there before. After the 1973 oil crisis, there was an emphasis on adapting smaller European models — being built, marketed and sold by the Big Three’s European subsidiaries — to the U.S. marketplace.

Before long, that effort fizzled. Based on the misplaced hope that oil would stay cheap over the long-term horizon, U.S. manufacturers reverted to their previous preference — and bet heavily on cars that were both heavy in weight and big in size.

Cynics would say that, in order to prevent U.S. manufacturers from really making that switch, the oil price will decline significantly before long — so that U.S. consumers will go back to their luxurious ways of gasoline consumption.

Whatever the vagaries of the future oil price, the fact of the matter is that Ford has a viable option for quickly converting its production portfolio without wasting more time.

The fact that the Europeans, due to the steep gasoline taxes imposed throughout the EU, have had to contend with higher oil prices long before the current steep increases turns out to be a transatlantic virtue in disguise.

What this demonstrates is that, while Europeans and Americans are at times at opposite ends of whatever the issue in question may be, there is a veritable learning community in place.

If, as in this case witnessed at Ford Motor Co., it helps to overcome past strategy mistakes or a general shortsightedness, all the better. That, after all, is what real partners are for.

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About Stephan Richter

Stephan Richter is the publisher and editor-in-chief of The Globalist. [Berlin/Germany]

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