Silicon Valley warning: Detroit still doesn't get it
* U.S. carmakers still need business model overhaul
* Venture capitalists say Detroit needs a fresh start
* Funds back emerging bets in electric vehicles, batteries
SAN FRANCISCO, Sept 18 (Reuters) - From Detroit's union halls to its boardrooms, the consensus belief is that billions of dollars in federal investment and loans kept the American auto industry from collapse.
But drive up Silicon Valley, and you hear a sharply different -- and far darker view -- from some of the world's most prominent venture investors.
The U.S. auto industry, they warn, remains too wedded to a dying business model and too out of touch with the sources of innovation to become competitive again.
Instead, they look for a new group of upstart companies to shoot to prominence and profitability, eclipsing the automakers once known as the "Big Three" just as Google Inc (GOOG.O) came from nowhere a decade ago to eclipse established technology companies.
"I do not believe that the U.S. auto business can be competitive," said Ray Lane, Managing Partner, Kleiner Perkins Caufield & Byers. "I don't see any of these new car companies based in Detroit."
Lane, who is backing plug-in hybrid carmaker Fisker Automotive that is planning to launch a $39,000 model, said Detroit has lost its entrepreneurial spirit.
"For years they have been led by accountants and lawyers, not engineers and entrepreneurs," Lane said. "That's OK if the industry isn't changing."
So, what do the three U.S. automakers need to do to get back their once-dominant position in the marketplace?
"Start over," said Marc van den Berg, Managing Director of VantagePoint Venture Partners, which backs high-profile electric carmaker Tesla Motors and electric vehicle infrastructure firm Better Place.
The U.S. auto industry has been hit hard by high fixed costs and plunging sales in the past year. Even after $3 billion in federal trade-in incentives helped stabilize the market in recent months, overall sales remain down 28 percent.
General Motors Co and Chrysler have been put through federally sponsored bankruptcies and restructured with $60 billion in federal funding.
Even Ford Motor Co (F.N), which avoided bankruptcy, is counting on government support in other areas, including nearly $6 billion in low-cost U.S. loans to retool old factories. Continued...
