Another day, another restructuring. Since the beginning of this decade U.S. auto companies have announced a steady stream of capacity cuts, plant closings, and cost-cutting measures. As the auto industry reporter for NBR, I've covered all of these announcements. I haven't been surprised by the content of the announcements, but something caught my ear today.
In today's restructuring GM estimated that auto companies will sell 14 million cars and trucks in the U.S. this year and next. That is a startling number and a precipitous drop from last year. In 2007 Americans bought about 16.1 million vehicles. Only a few weeks ago when I was in Detroit, J.D. Power & Associates economists were estimating sales at 14.9 million units.
I couldn't fathom how sales could fall so far, so fast. But, Global Insight Auto Analyst Rebecca Lindland put it into perspective for me. She said for every $10 increase in a barrel of crude oil, vehicle sales decline between 190,000 and 200,000 units annually. So, if you factor in all of the run-ups in oil prices, it makes sense.
What doesn't make sense is why GM, Ford, and Chrysler didn't pursue more fuel efficient technologies and vehicles at the beginning of the decade the way Toyota and Honda did. Granted, $4-a-gallon gasoline is a recent phenomenon, but pump prices have been rising over the past few years with increasing fuel demand from developing countries.
In the past, auto companies could pull sales forward with rebates and incentives. Those won't work now. Hopefully, the tough medicine GM is taking will help it survive and thrive when the economy improves. And, hopefully the entire U.S. auto industry will learn from this experience and not repeat its past behavior.
Comments
Hello;
It's 11/12/08 now, and the government is actually considering a monster "bail-out", for the now defunct american auto industry.
Answer: "SCREW THEM!" They "played" the people with thier names & ads, to get the little guys to feel really biG! by buying a 4x4, that would NEVER leave the bloody road!
Sad, for the workers, but- Let these greedy (much profit on SUVS/4X4's), companies go bankrupt! They dug their own grave.
What a sick country, truck driving bitches, with cell-phones, and 40lb kids, to soccer games & the market. Let them go, and let forward thinking companies get what they truly deserve.
THE AUTO INDUSTRY NEED TO WORK ON HYBRIDS IN A BIG WAY IN FOURWHEEL DRIVE SO IT WILL TAKE THE POUNDING OF FOURWHEELING AND GET GO MPG WHILE GETTING THERE, CAUSE NORMAL FWD ONLY GET 4 MPG IN FOURWHEEL DRIVE LOW SO THESE GAS PRICES ARE REALLY TAKEING THE FUN OUT OF THE AUTO INDUSTRY ONLY THE RICH CAN BUY THE GAS GUZZLERS NOW , BUT IT IS US REDNECKS THAT NEED THEM AT A GOOD PRICE AND $40,000 FOR AN SUV DOES NOT HELP PEOPLE WHO WORK A WALMART AND STUFF THAT IS WHY THEY ARE STILL ON THE LOT !!!!DULL
Bill,
My producer Hart Billings has wondered about this same thing for years. Actually, GM and Ford are beginning to build more global cars. The Saturn Astra is built in Europe and is on sale here now. The same vehicle is sold under the Opel nameplate in Europe. Ford is going to begin selling the Fiesta here in a couple of years. That small car has been on sale throughtout the world for years.
One of the issues the auto companies have to get around in sharing platforms involves more stringent U.S. safety standards. GM had to lengthen the front of the Astra to meet tougher crash requirements here.
I think you can anticipate seeing more global products and technology in the years ahead.
Hi Diane:
A simple question for you. We both know Detroit has manufactured cars around the world, yes? It lurks in the back of my mind that Ford (at least) has sold cars in Europe, in fairly substantial #'s, for what, since the 60's? The 70's?? The ? that has been plaguing me is Europe has, if I recall correctly, been demanding HIGHER mpg (or fuel efficient) engines for many, many years. Is this my imagination? If not, then it would seem that what technology is sold over there, is not sold HERE!
Btw, since you are the automotive reporter, I thought I read yesterday that Richard Wagoner took his post at GM in 2000. Since then, the stock is down 87%!!!!! I can flip one of my silver dollars with better results than that. Why are people back there still kissing his patootie?
One more thing, tell that insufferable Jeff Yastine how to pronounce Nevada!
Thanks.....Bill ...Reno, NV.
p.s.- I am very interested in your answers, don't forget about Jeff, & say hello to Susie & Paul for me.