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Apple stock has been on the rise this week. That is partly because of just a rumor that Apple wants to build a car by 2020. While Wall Street and Silicon Valley seem excited, Detroit remains skeptical. NPR's Sonari Rhodes Glinton reports.
SONARI RHODES GLINTON, BYLINE: When you hear that Apple wants to get into the car business, you might think - oh, wow, sweet, an iCar or Car MacPro. But people in the car business are like yeah, not so much.
BILL VISNIC: Why in the world would any sane company want to get into the car business right now when the risks essentially are huge?
GLINTON: Bill Visnic is with edmunds.com, the auto sales website. He says recalls, labor problems, all the safety regulations, fuel economy standards and the multiple bankruptcies - those are just the first risks that come to mind.
VISNIC: And the rewards in the meantime historically - and are well known to everyone in the financial industry - the margins in the car business are remarkably thin.
GLINTON: Visnic points out that Apple makes a couple hundred dollars on an iPhone. A car company is happy to make not much more than that on a sedan.
MATT ANDERSON: My name is Matt Anderson, curator of transportation at the Henry Ford.
GLINTON: That's the Henry Ford Museum in Dearborn, Mich.
ANDERSON: Yeah, some people would argue that the door kind of closed to new entrants in the automobile industry in the 1920s when Walter Chrysler got in.
GLINTON: Anderson says Apple is certainly not the first big company to get into the car business after it was successful someplace else.
ANDERSON: Sears for several years produced an automobile from about 1908 to 1912.
GLINTON: Remember, Sears was the innovator, the disruptor, the Apple of the time.
ANDERSON: They certainly had a built-in name recognition and customer base, so maybe it didn't seem so far a leap for them. It was only when they realized they were selling the cars for less than what they could make them for that they decided it was time to get out of this. The industry was just changing too fast for them.
GLINTON: Anderson says all kinds of companies over the last century got into the car business because it seemed like a natural fit - watch companies, bike companies, carriage companies - almost all of them failed. Bob Lutz is the former chairman of General Motors and the former chairman of Ford Europe and the former vice chairman of Chrysler. He says every few years, a reformer comes along who thinks they're going to change the business - people like Preston Tucker or John DeLorean or Nicholas Hayek, who founded the Swatch watch company.
BOB LUTZ: He decided that we in the car business were all dummies and we're all a bunch of dinosaurs. And so he was going to do what he called the Swatch car. And he invested a great deal of his own money and lost it all.
GLINTON: Lutz is on the board of a bunch of tech startups. He says lead times in the tech world are weeks or months, as opposed to years and years in the car business. He says the stakes are just lower in the tech world. Remember the first BlackBerry?
LUTZ: Like BlackBerry back in the old days, they'd crash once a day, you'd have to do a battery flip and then wait two minutes for it to reinitialize. And in the world of consumer electronics, that's OK, well, it is not OK in the world of the automobile. And this always comes as a huge surprise to them.
GLINTON: OK, so is Apple actually going to build actual cars and factories with all those headaches? Bob Lutz says no.
LUTZ: They'll make their money off of the hardware and software that they will offer to the automobile companies when they do the autonomous cars of the future.
GLINTON: Because trying to build a car - that would be kind of stupid.
LUTZ: Well, why would you want to do that? I mean, I know they have a ton of money, but the shareholders don't like it when you waste money. And spending the $10 to $14 or $15 billion that it would take to get into the automobile business would be a total waste of money.
GLINTON: Then again, many people said the same thing when Apple got into the computer business or the music business or the phone business. I mean, you can see how that worked out for them. Sonari Glinton, NPR News, Culver City.
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