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After a boom year, what’s down the road for the auto industry?

In 2015, Americans spent roughly $570 billion dollars on more than 17 million cars and trucks, breaking a record set 15 years earlier. But it was also a year of automaker scandal, including a probe into GM's defective ignition switch problems, faulty airbags found in more than 19 million vehicles and Volkswagen's emissions cheating. Judy Woodruff talks with David Shepardson of Reuters.

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  • JUDY WOODRUFF:

    2015 turned out to be a boom year for the auto industry, despite some of the worst news about its practices in recent years.

    Americans spent roughly $570 billion on 17.5 million cars and trucks last year, an almost 6 percent increase over the prior year, and breaking a record set 15 years earlier.

    But, in the same 12 months, GM faced public congressional hearings and paid a $900 million settlement over its handling of a defective ignition switch. U.S. regulators recalled more than 19 million vehicles over faulty air bags, and Volkswagen admitted to rigging diesel cars to pass emissions tests.

    Some insight into this from David Shepardson of Reuters news service. He covers the automotive industry, as well as other regulatory matters.

    And welcome back to the program.

  • DAVID SHEPARDSON, Reuters:

    Thanks, Judy.

  • JUDY WOODRUFF:

    So, Dave, should we be surprise at this jump in auto sales last year?

  • DAVID SHEPARDSON:

    No, I think it's continuing a record-setting six-year trend, really the longest increase in auto sales since the 1920s.

    But it says Americans, our cars in the garages are still pretty old, a record 11.5 years on average. And there's been a lot of pent-up demand. Plus, you have got low gas prices, low interest rates, and a lot of good deals on — in showrooms. And Americans are feeling more confident. Unemployment has declined. So, really, all the economic indicators that would help boost sales have been in the auto companies' favor.

  • JUDY WOODRUFF:

    And I want to ask you about some of those factors.

    But this happened, as we just reported, despite all this bad news about the industry. What does that say about consumers?

  • DAVID SHEPARDSON:

    It's pretty remarkable that consumers have shrugged off all the bad news. And, really, it's hard to keep it straight, from the air bags, to the fines to companies for not disclosing defects and handling recalls properly, not to mention Volkswagen, Takata and General Motors.

    So, consumers have been able to separate some of those issues, especially because they're older vehicles not in the showrooms, in part they need cars and trucks, and they're not going to sort of wait for the industry to get all its practices back in a row.

  • JUDY WOODRUFF:

    But what does it say, though, I'm just curious, in terms of the auto industry's advertising and reaching out? They were clearly trying to put out the good story, while some of these other bad stories were out there.

  • DAVID SHEPARDSON:

    Right.

    I think — and also, with recalls, remember, we had a record 60 million vehicles recalled in 2014. Last year, 2015, was the second highest. I think there's a little recall fatigue. Americans can't keep tracks of all the recalls. There is an onslaught. So I think people have sort of said, yes, there are recalls, yes, there are issues, but I still need a car and I'm still confident in my brand or the vehicle I choose to buy.

  • JUDY WOODRUFF:

    What's interesting, too, is not just that people are buying more cars, but the kind of cars they're buying, I mean, bigger cars, SUVs. How do you explain that?

  • DAVID SHEPARDSON:

    Right, and not cars at all.

    In fact, as car sales declined, and SUVs and pickups and crossovers have spiked dramatically. Take GM. GM sold — just 30 percent of all vehicles in the U.S. last year were cars. And 70 percent were trucks, SUVs and crossovers.

    Because these crossovers are car-based SUVs, get pretty good gas mileage, but they have the utility for people to haul more stuff around, get more kids in the back or dogs, or what have you, people have just shifted away from cars. And, as a result, the — it's a big concern. Will people be able to — will the auto companies be able to meet these fuel-efficiency standards?

    Remember, the administration has proposed doubling them to 55 miles per gallon by 2025.

  • JUDY WOODRUFF:

    Because we know the price of gas is down, but these are vehicles that gobble up more fuel.

  • DAVID SHEPARDSON:

    Exactly.

    They are more fuel-efficient than predecessors, but they still do use more fuel than cars.

  • JUDY WOODRUFF:

    Dave, what about the industry, the health of the industry overall? Does this say that this is an industry that's out of its slump and is going to stay strong for some time, or is this a temporary thing? What's your reading on that?

  • DAVID SHEPARDSON:

    It is a strong industry. And all the analysts think sales in 2016 are going to go back up, although there are some warning signs. Interest rates are going to start to rise again.

    There are a lot of used cars, cars coming off leases that will go back on the market, which is a concern. Will used car prices go down, make people less likely to buy new cars? But the bigger threat is the massive disruption from Silicon Valley coming to the auto industry through Google and autonomous cars, Tesla, Apple potentially?

  • JUDY WOODRUFF:

    You mean the self-driving cars, cars with batteries, still a small part of the market, but…

  • DAVID SHEPARDSON:

    Yes, right, but down the road, fully electric cars with batteries with longer ranges. People will feel more confident in buying those cars. And, presumably, gas prices will go back up.

    But the big question is, will people ultimately completely revisit how they use cars for personal mobility? Will they share cars, not just in big cities? Will they not want to own a car? Cars sit in driveways and garages and are not used 90 percent of the time. Should people — are people willing to share cars and not perhaps actually take it home from the dealership?

    And so the industry is preparing for a major disruption in the current way we buy and sell cars.

  • JUDY WOODRUFF:

    Presumably spending a lot of time trying to figure out the answers to all those questions.

  • DAVID SHEPARDSON:

    And stay in business and do it profitably.

  • JUDY WOODRUFF:

    David Shepardson with Reuters, thank you.

  • DAVID SHEPARDSON:

    Thanks, Judy.

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