Posted on 08/07/2008 4:49:20 AM PDT by shrinkermd
Should Detroit have seen this disaster coming? Yes. Gasoline prices have been climbing steadily for more than three years now. The Bush-Bernanke debasement of the dollar didn't do Detroit any favors, because the dollar's collapse has contributed mightily to the soaring price of crude oil.
But the Detroit Three stuck with a business model based on leasing SUVs for way too long. The two things wrong with that model were, well, leasing and SUVs.
The residual values on which SUV lease payments are based turned out to be enormously inflated. With gas around $4 a gallon, the auto makers can't resell leased SUVs, after they are returned by customers, for anywhere near the price that the companies had assumed. Big write-downs to reflect this "impairment" contributed to the recent multibillion-dollar quarterly losses at Ford and GM, prompting the Detroit Three to curtail or cease their leasing programs. Japanese and European car companies are suffering leasing losses too, but they are much less dependent on SUV leases than Detroit.
All this said, let's acknowledge that it's human nature to resist changing behavior that has been successful, as SUVs were for two decades. If Detroit is Exhibit A, then Exhibit B surely must be the newspaper and magazine industry. It has been equally clear for most of this decade that the business models of print publications, which are based on selling advertising, were becoming as obsolete as big SUVs, because advertising is shifting to the Internet.
(Excerpt) Read more at online.wsj.com ...
What are THEY supposed to do without seven passenger vehicles?
I live in such a place.
Now they can buy a SECOND one for a nickel a pound, if they wait a while.
Well, we bought a nine-passenger 1994 Chevy Caprice Wagon. Unfortunately, those wagons were no longer made after ‘97. Its predecessor, a 1991 Ford Aerostar served us well.
For the large family, vans and minivans are most efficient. Crossovers (e.g. the XUV GMC Acadia, Saturn Outlook, Buick Enclave) are certainly serviceable.
Back in the mid 80s, our family did OK with a Chevy Celebrity wagon with a 4 cyl engine. It wasn’t very sporty but carried the load and got good fuel economy.
For a vacation trip we had to load a carrier on the roof, but that wasn’t a big deal.
My daughter (now with her own family) pointed out that a station wagon based on the new Chevy Malibu would be a pretty nice ride.
The American auto industry has missed the forecast on the two oil crunches of my lifetime: Carter oil crunch and the Bush oil crunch. Both times the Japanese were already marketing high mileage vehicles. In fact, IIRC, that oil crunch really put the Japanese auto makers on the map in the minds of many American consumers.
Did the foreign auto makers have higher mileage autos because they better forecasted the direction of oil? I don’t think so.
I think they had in their own economies so inflated the price of oil through taxation that they were already producing higher mileage vehicles because they were practical in their own countries, given their higher priced gasoline.
Nonetheless, I don’t like small cars. I think they’re uncomfortable, less useful for transport of multiple passengers/cargo, and less safe. I’m willing to pay a bit more for size and the comfort, utility, and safety that come with size.
American auto manufacturers will always do well to continue to improve the mileage of larger vehicles. They should focus like a laser beam on larger, high-mileage vehicles.
Who really wants to cram into an Aveo, anyway? Certainly not a family with 2+ kids.
And, of course, there is cost. American auto workers should decide now that it’s better to have their total package of pay, benefits, and retirement cut from incredible pay down to good/excellent pay. It’s better to have a good job with good pay than no job with no pay.
The American automobile manufacturing model is based on a vibrant domestic post WWII economy when most of the industrialized world lay in ruins, and could afford the demands of labor unions, generous wages, and retirement packages. Times have changed.
Notice quite clearly that the business model that a company operates under is determined by the company’s management, not its union. The situation that GM and Ford find themselves in is due to rigid (and not too bright ) management. The chickens are flapping home to roost.
One wonders what it will take to get these companies to change? And one wonders when the US will step in to bail them out?
Chrysler 300 is reasonably priced.
The answer to the author’s question is yes.
I think the era of the SUV is probably over and Americans will by and large move back to conventional sedans and small station wagon types. We really never needed those huge and weighty vehicles for what we used them for.
I happened to drive a new Ford Focus the other day and although I am too big for it most people would be pleasantly surprised. Plenty of zip and I’ll bet it might get close to 40 mpg on the highway, as I got 34 mpg in my Fusion.
I think GM is pissing in the wind if they think that they will revive their company on the Volt which will cost $45,000+. They have some good models in the Malibu and CTS but a lot of their product is not up to speed.
Personally I think Hyundai is the best deal going these days. And it is made right in Alabama. And they aren’t asking an arm and a leg for a really nice vehicle.
Apparently hardly anybody wants decent-sized station wagons. Mazda had a wagon version of the Mazda 6 - the new model has no wagon version, probably because I don’t think they really sold very many of them. A few companies (mostly European ones, where wagons are still fairly popular) do a pretty good business in wagons, but the Japanese have largely abandoned them. I would have loved a new Honda Accord wagon, but they don’t have one in north America - the european Accord is a little smaller than ours, but they do have a wagon version.
The primary reason US manufacturers decided to pass off FWD on the American car buyer was cost. It was cheaper to build a self contained power unit that could be installed on the production line as one piece.(engine/transmission) The old front engine/rear drive was comprised of too many pieces that required more assembly line stations and personel. In addition, the transmission/driveline/rear end components required more materials, mostly metals, to manufacture than a self contained and relatively compact transaxle.
Leave Detroit, go South, ditch the Unions...then the auto makers will have viable companies. Until then they are like the water spinning down a drain...
Acura TL is very nice. The 2000 300 was a POS - very much improved when they remade it for 2005. You have to like the ‘Chicago Gangster’ styling it has tho’. For most people it’s a love it or hate it - little in between.
In a free enterprise, market economy they're supposed to solve their own problems...and if they can't, they're supposed to fail.
That's equivalent to saying they should concentrate on repealing the most basic laws of physics.
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