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Does America Even Need Its Own Automakers?
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Well it's fairly easy to price a Chrysler minivan over $30K and the Limited with a few options is $40K, so I would say minivans and SUV's (with the exception of the Escalade) are about the same price.
And I believe this is for a FWD minivan that lacks the functionality of getting up my driveway during a snowstorm. (BTW - I have 2 AWD cars). Many SUV's offer 4WD or AWD as you know. And the minivan's mpg is nothing great, and if you did add the AWD it would be right there with the SUV's.
So there's not much of a difference if you ask me, unless you get the cheapo MV, but then you could get a cheapo foreign 2WD SUV too.
But yes we need an auto industry, if for no other reason then to have sufficient heavy industry to produce heavy machinery in times of crisis.
But you're right, "overpriced" is a loaded and imprecise word. Harleys are really only overpriced to those of us who think they aren't worth the money. However, this opinion *might* have the weight of discrimination and knowledge about motorcycles. We cannot assume all consumer decisions are based on the same amount of knowledge, or lack thereof.
But not thinking something is worth the money, and thus plunging the company into debt, is not at all the same situation as those who are still wanting something and not HAVING the money for it.
In that way I think Harley and the Big Three have two distinctly different problems.
Keep buying foreign made products, and you can watch your purchasing power disappear year after year.
So damned if you do, damned if you don't. Welcome to globalization.
PRICING: I think there is a distinction to be made in the car market analysis, between:
1. Not buying a car because you don't think it's worth it (1985)
2. Not buying a car because you don't have the money. (2008)
So if you have a mediocre product AND it's hard times besides, then you are in extremely deep doo doo.
I would assert that for a large portion of buyers image is what they are (or were) paying for in the case of the SUVs. For the most part, they never use those extra capabilities. The minivans also have some capabilities that comparable SUVs may lack (more passenger room, higher maximum cargo weight rating, FWD rather than RWD is better in snow for those who don't want to shell out for AWD), so that goes both ways, but my point is for the fuctions that most buyers actually use them for they are essentially interchangeable. The prices of minivans and SUVs, with comparable SUVs sure were not comparable when we bought.
The same goes for many truck buyers, as I think I posted before those who are trading their F-150 for a Focus surely did not need the functionality of the F-150...they were buying an image (and paying for functionality that they did not need).
The point here, as it relates to the topic, is that the US manufacturers were not dumb for going after the high profits available from selling SUVs and trucks. It is only those with 20-20 hindsight who "knew" what the future would bring. If they really knew, then they why did they not act on that knowledge themselves and become wealthy as a result?
I don't think any 20-20 is at work here. Nothing magic about predicting the fate of the Big Three. The painful situation of the Big Three has been obvious to most automotive journalists, business analysts (and certainly to Consumer Reports) for many years. I'm not sure how one profits from this, unless negatively, by selling your Big Three stock in time.
I mean, one could just have plotted the sale of compact and subcompact cars over the last ten years, and see a massive change in buyer spending. No crystal ball required.
I think the problem is that American boards of directors are real short-termers.
Everybody is a genius in a bull market.
Well, I was not intending to refer to that sort of thing...but you could have sold the stocks short.
I meant those who had a crystal ball telling them that gas would be quadrupling in price (or doubling, depending on your starting point). The price of gas is what has caused the profits to evaporate.
one could just have plotted the sale of compact and subcompact cars over the last ten years, and see a massive change in buyer spending.
Perhaps, perhaps not...but in any case this would not mean that selling these cars would be profitable. Americans still insist on pricing vehicles by the pound, for the most part. I'd want to see some proof of this long term trend, as I think the shift is a very recent phenonmenon and certainly it would have been reasonable to think it'll shortly reverse as soon as gas prices stop rising.
Small Cars Hold Substantial Market
Why is it Honda can sell these cars at a profit. Toyota can sell them at a profit. Nissan can sell them at a profit. Hyundai can sell them at a profit. Yet Ford, Chrysler, and GM seem to be unable to sell them at a profit?
The article also says: Smaller vehicles, though, mean smaller profit margins for automakers. Since these companies are in business to make money, even with increasing sales of small cars, there would not be increased profits, so that would present a dilema for the manufacturers.
Where are the articles from, I don't know...maybe 5 years ago, predicting this shift that some think was so obvious long ago? It's real easy to say: Automakers ignore the move to smaller vehicles at their own peril. today.
Why is what is essentially a Civic wagon (the CR-V) priced like an Accord?
Why are the highest priced Toyotas the Land Cruiser, Sequoia, 4 Runner, and Highlander?
That is an excellent question...why, indeed? The answer needs to also consider that Ford, Chysler, and GM were able to dominate and earn huge profits from SUVs and trucks for so long and Honda, Toyota, et. al. not so much.
Whatever created this situation, this is how it was and I think Ford, GM, and Chysler would have ignored their profitable trucks and SUVs at their own peril in the 90s and early 2000s.
The facts have been right there on the table for at least a decade.
I suspect that when you are "in the game", it is natural to presume that "trends" are only temporary, but when you aren't in the game, you can look with more impartiality at the matter.
All I did was follow compact cars sales as a percentage of total, and also plotted gas prices against inflation year by year, and charted declining Big Three market share for the last decade.
They all pointed to the same thing IMO.
No crystal ball required.
Finding this retrospective trend, does not mean that it was possible to know, for example, after 5 years that this would continue to be the case for the next 5. Things could have gone differently. Just one example...suppose economic growth in developing countries had reversed, this certainly could have happened and would have caused a decilne in demand for fuel and thus lower gasoline prices.
If 5 or 10 years ago you knew just where gas prices were going, you should have been able to profit greatly from this knowlege. Did you?
Toyota did. Honda did. Hyundai did. Nissan did. They knew that sooner or later oil was going to go up and up and up. Probably even the big 3 knew it. They just seem to be highly allergic to small cars. :shades:
As for "trends" I think the fact that US automakers have been losing market share for about 30 years in a row is a pretty easy trend to spot. That info is not hard to find.
From which we may deduce:
1. Given: US automakers losing market share over decades.
2. Question: Who is gaining market share?
3. Question: What are they making, to gain this market share?
4. Answer: Oh, I get it--either smaller, fuel efficient cars that don't break or stylish larger cars of higher quality.
Add to This:
5. Given: Chart of gas prices last ten years:
http://localfuture.org/charts/20071216gaspricesweekly.GIF
6. Question: With 30 years of plummeting market share, and ten years of rising gas prices, does the future belong to small fuel efficient cars or Ford Expeditions?
I'm not being modest. This was not a hard trend to predict (as many people did in fact predict it).
And I sold my gas guzzler in 2006 and bought a Scion. Between gas savings and great resale value in 2008, I drove that car practically for FREE for 36,000 miles. (saved 1200 gallons of gas).
No I didn't get rich but I rode the wave as best I could.
Well, remember "at least a decade" ago puts us at a time when the SUV market was exploding. Heck, GM even dropped their full-sized RWD cars after an abbreviated 1996 run to switch the assembly line over to build even bigger, heavier, thirstier Tahoes and Yukons...simply because they were more profitable and the demand was there for them.
I don't think that first uptick in fuel prices in late 1999 was really enough to change people's buying habits. I remember complaining about $1.40-1.50/gallon gas at the end of 1999, and by the summer of 2000, hi-octane was breaking the $2.00 barrier. But then by the fall of 2001, we were back under a buck a gallon for 87 octane.
Now, it didn't stay under a buck for long, but it seemed to hover around $1.30-1.40 per gallon until early 2004. Then suddenly, around maybe May/June 2004, we were seeing $2.00 per gallon again. Now THAT, IMO, is when the tides really started turning and people were trending towards smaller cars.
Still, it came down a bit in the fall/winter. Then it shot back up in the summer of 2005, and went WAY up when Katrina hit. But by late 2005 it was back down to about two bucks a gallon again. Then in the summer of 2006, it was back up north of $3.00. I remember the most I paid that summer was about $3.25 for 89 octane. But by October of 2006, it was back down near $2.00 again.
I think we got used to these cycles in fuel prices, and started thinking of the increases as just momentary spikes that would ultimately come back down. The only problem is, the late 2006 drop-off was short-lived, and 2007's onslaught seemed to hit extra early. And then there really wasn't a drop-off in late 2007, like there "should" have been.
I think it was that spike in 2006, and then the even more brutal prices in 2007 onward that have really helped fuel the fire for smaller cars. There was also a market "correction" in the summer of 2006 that scared a lot of people. The stock markets dropped about 10-11% in the course of a month or two. And the housing market was starting to climax.
If anything, I'd say small cars were starting to go away, until just the past few years. The Echo wasn't a very strong seller. Neither was the xA, but the xB wasn't too bad and, surprise of surprises, the larger tC was by far the strongest seller of them all.
The Metro went way, and was replaced by the Aveo, which while small, is considerably larger. The Escort was replaced by the larger Focus. The Neon was replaced by a larger Neon, and then finally the Caliber. The Lumina grew up to become the Impala, while the Corsica grew up to become the Malibu. The Protege was replaced by the larger 3. The Accord, Altima, Maxima, Corolla, and Avalon all grew pretty substantially. And to a lesser degree, so did the Camry and Civic.
That's why they just recently came out with their new Tundra, right?
Prior to 2005, I would wager that what was happening was that those who wanted bigger cars shifted to SUVs, while those who stayed with cars went for the subcompacts and compacts. (The Escalade is today's Sedan DeVille/Fleetwood Brougham.) Now, with gas prices on the upswing, buyers are abandoning the bigger SUVs and full-size pickups.
And many smaller cars are really "small" in name only. A 2008 Civic fills the space occupied by the Accord during the 1990s. It is a bigger vehicle than a 1990s Civic, and much nicer, too - it can be bought with satellite radio, navigation system and leather interior. A far cry from the "we keep it simple" Civic that originally landed on these shores.
Note that while Toyota was building the Prius, it simultaneously launched an assault on the big pickup market with the T-100/Tundra. Nissan did the same thing with the Titan. Both companies also built full-size SUVs. Toyota just launched an all-new Sequoia and Land Cruiser.
The domestics weren't the only ones to chase visions of gold by building bigger vehicles.
The mistake the domestics made was in putting the lion's share of their efforts into the bigger vehicles while ignoring the smaller segments.
A Chevrolet Silverado and Tahoe/Suburban are every bit as good as competitive vehicles from Toyota and Nissan. If anything, they are probably better.
The problem is that the Cobalt is a dud next to a Corolla. The new Malibu is a much better car, but it has an uphill climb against the Camry's popularity and reputation. GM is paying the price for previous half-hearted entries in this segment.
That's okay when gas is $1.50 a gallon, but when prices spike up to $3.60-4 a gallon for unleaded, the company that offers smaller vehicles as an afterthought will be the one in trouble. Which is where GM and Ford find themselves today.
I've always bought with at least one eye on mileage which probably makes me a bit of an odd duck but I watched over a long time as others started joining the bandwagon.
I think that Katrina was the real eye opener for a lot of people. While prices went down after a while they never went down to where they'd been and then started shooting up again and haven't stopped. To a degree I think we're still in the aftershocks of Katrina.
Their legacy costs are so high, they can't mess around with small cars. For them its all about the big money makers.
You don't think you can profit, in all sorts of ways, from knowing the future? You're kidding right? There are certainly ways to invest in directly in oil that would result in making lots of money from rising oil prices. If you really believe you knew this was coming, you left a fortune on the table.
Since, instead, I know that I don't know the future I really don't know the details of these sorts of invstments, I only know that they would be far more profitable, with rising oil prices, than investing in oil stocks...which have been very profitable, themselves.
Simply investing in an energy fund (such as VGENX) would have netted you about 36% per year over the last 5 years, that means more than quadrupling your money (how does that compare to your "green" investing?). If you knew this would be the future, why would you not put every penny you have, including all you could borrow, into oil stocks or directly in oil?
Then again, who cares? That's the next CEO's problem. That's the American corporate attitude. :sick:
I also heard that the Ford Focus went on to oust the Chevy Citation for top spot as the most recalled car in history. They improved them dramatically in later years, but those early models could be troublesome.
I think that was for number of recalls though, not number of units recalled. GM's X-cars sold something like 1.5 million units in their extra-long 1980 debut year. The Focus probably took 6-7 years to get to that amount...if it's there yet.
Really? That surprises me.
I double checked on my memory and CR had the 2000 Focus at below average reliability (as of April 2006). Every subsequent model year has achieved an average rating (to me averagein this context = pretty good).
I believe they have just recalled for the 2nd time a fix to the cruise controls, that their 1st recall and fix, didn't fix.
This is not just my opinion, but the unscientific opinion of the group of people I work with, as we regularly chat about cars. It's the seriousness of the problems that matters, not just the count.
"Green been good to me".
I count 14 recalls on the 2000 Focus. Shockingly, the Citation only had 9 ( http://www.automallusa.net/1980/chevrolet/citation/recalls.html ) which I find hard to believe. Maybe GM paid someone off to make a few of 'em disappear?
One thing to remember though, is that not every recall affects every single car that rolls off the assembly line. And they'll issue recalls for the stupidest things nowadays. For instance, the 2000 Dodge Intrepid, which I have, has been recalled 7 times. ( http://www.automallusa.net/2000/dodge/intrepid/recalls.html ). However, only two of the recalls affected my car. The first had to do with the front seat recliners. Supposedly they used weak bolts that could break, causing the seatback to unexpectedly recline. The second was a defect in the owner's manual, of all things! They forgot to include adequate instructions on how to install a child car seat, so for this "recall", they just mailed out an addendum with the recall notice!
But, as far as the Focus is concerned, Ford got their act together pretty quickly, and later models have been pretty good cars. And yeah, with the way Consumer Reports lumps their reliability ratings together, even if it just scores "average", it's still pretty good overall. It's like having your kid get an "A-" on a spelling test while everybody else got an "A+"
My only real issue with the Focus is that I don't care for the driving position. Headroom's good, but it's cramped for my legs. Oh, and I don't like the 2008 facelift.
Here's a quick rundown:
1) stuck throttle cable, causing sudden acceleration
2) rear axle shafts could come loose, basically allowing your rear wheels to fall off
3) rear axle control arms could come loose from the frame. While it's probably unlikely you'd lose the whole rear axle, it would probably make for exciting times!
4) rear window defogger could create "hot spots", making the window shatter without provocation
5) rear wheel brake cylinders could come loose and rotate, causing loss of rear brakes.
Compared to that, a couple flimsy recliner bolts and an owner's manual misprint don't sound so bad. :surprise:
Mercedes had a good one many years back---the driveshaft u-joint would break and the driveshaft broke through the floor into the passenger compartment. Whoa!
Just trying to get you to admit that you did not really know the future. Your reference to it as a "bet" is enough of an admission to suit me :shades: , because it's not a bet if you know the outcome in advance.
BTW, after adjusting for inflation, do you still see a clear trend in gas prices:
http://www.inflationdata.com/inflation/images/charts/Oil/Gasoline_inflation_char- t.htm
If so, try covering up just the portion of that chart after 2003 and then tell me what trend you would have seen 5 years ago. (imo, even covering up only data from 2005 and beyond seems sufficient to eliminate the supposed obvious trend)
Next, tell me how you know that the current data points are not just like those that occured around 1981?
Just saying. :shades:
The massive shift in market share from the Big Three to foreign automakers suggests to me that knowing the future was not all that hard for most car buyers.
You want to get richer on the oil crisis? Just invest in companies that have the hi-tech necessary to find oil in extremely difficult places. There's your tip, enjoy your millions, and you don't even have to thank me! :P
Within a year they bought a 1967 Oldsmobile Delmont 88 hardtop sedan from a neighbor. It had always been garaged and only had 19,000 miles after five years. Even then, I remember thinking what a big step up from the Chevy that Oldsmobile was. When the Oldsmobile was made, there were still some distinctions among the GM divisions, at least among the full-size cars.
GM really started to decline in the early 1970s...the Chevy motor mount issue was a huge deal at the time, while the Vega was beginning to make a name for itself, and not a good one. Even the post-1970 Cadillacs were a big step down from the previous models, and were really falling behind the big Mercedes models in prestige.
GM's V-8s and I-6s, along with the transmissions and air conditioning compressors, were still bulletproof, but workmanship and structural rigidity were really declining. Unfortunately, the rush to downsize engines and transmissions in the wake of the first fuel crunch (in late 1973) resulted in some very compromised drivetrains from GM. Downsizing and the pressure from the accountants also wiped out the distinctions between the various divisions.
At this point, GM really only needs Chevrolet and Cadillac, but can't just unilaterally shut down plants and yank dealer franchise agreements. The corporation is between a rock and a hard place....
Funny thing is I've been thinking the same thing about you
some forms of profit are morally objectionable to me.
If by this you mean that it is morally objectionable to own stock in an oil company, then I would call you misguided rather than "crazy".
You want to get richer on the oil crisis? Just invest in companies that have the hi-tech necessary to find oil in extremely difficult places. There's your tip, enjoy your millions, and you don't even have to thank me!
As I said, I know that I don't know the future. I also don't think you know any more about the future than I do.
While I do have an investment in a natural resources fund, this is as a hedge against possible high energy prices and/or high inflation, not a "bet" and not based on claims of knowing the future.
I'm not "predicting the future" any more than a pilot who checks the weather, his airplane, charts a course and gets to where he's going, is "predicting" the future.
That's what a CEO is supposed to do, too.
If I figured it out where things were heading before the CEO of Company X did, that doesn't reflect on my genius, but rather his or her lack of it IMO.
You think the sale of 250,000 hybrids was an unpredictable accident? I don't. Somebody figured something out.
Should it be GM? Yes, it should be GM.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Mercury, Pontiac and possibly Saturn will go away (all-new lineup for Saturn, and sales are still down).
Chrysler will most likely be broken up, as Jeep is the one really valuable part of the company. Nissan or VW will absorb the remainder of the company, probably for the trucks and minivans.
Well, that's too bad. GM is the only one that should. If that were to happen, it could probably support most of those divisions if it continued to drastically limit their roles (ie Pontiac, Saturn, Buick, GMC with just a couple models each, three at the most, all of GMCs should be trucks and nothing but real trucks...no crossovers...and none of these brands should share ANYTHING in any discernible way with Chevy....that could happen if GM were to absorb some of its lost market share from the passing of Chrysler and Ford)
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
I can't agree. Ford is making real gains in quality (recorded by independent organizations), and is making genuine changes to its corporate culture. I'm not seeing the same level of corporate change at GM. SOME of the cars and crossovers are better, but the quality is still uneven. Ford also has managed its relations with the UAW better than GM has - note that all of the recent labor strife has bypassed Ford. It's not just because Ford hired all of the nice, cooperative UAW workers.
Ford is also in better financial condition than GM (althought that isn't saying much).
The Flex is already earning rave reviews; the new Fiesta will be here within the next 18 months, and if it's anything like the European version (and it's supposed to be), it will easily rank with the best entries in that particular class.
This January a revamped Fusion with upgraded drivetrains, new front and rear styling and an improved interior debuts. The Escape has been selling well thanks to its interior and exterior refresh; for the 2009 model year it gets new drivetrains that improve performance AND economy and chassis tweaks that improve handling and braking. Both the chassis tweaks and new drivetrains (particularly the six-speed automatic transmission) have received good reviews.
In 2010 we get a new Taurus, with very handsome styling.
The Mustang is restyled for 2010, with a new 5.0 V-8.
The Focus has been selling well, despite ugly styling and an interior that lags the competitors. Synch and higher gas prices saved it. The next Focus will once again be based on the European model.
nippononly: If that were to happen, it could probably support most of those divisions if it continued to drastically limit their roles (ie Pontiac, Saturn, Buick, GMC with just a couple models each, three at the most, all of GMCs should be trucks and nothing but real trucks...no crossovers...and none of these brands should share ANYTHING in any discernible way with Chevy...
Problem is that this will never happen as long as the dealer networks remain in place. Each dealer group will demand as wide a range of vehicles to sell as possible (i.e., Pontiac/Buick/GMC dealers demanding a Cavalier clone, the Pontiac G5), and GM is rapidly running out of the money necessary to give each version distinctive sheetmetal and drivetrains.
It also doesn't have enough money to properly promote each one...Toyota spends more to promote the Camry than GM spends on ALL of its competing models. In this market, middling entries with no promotion quickly get lost in the noise.
Importing models from Europe won't necessarily work...the Saturn Astra looks as though it is landing with a big, fat thud in the U.S.
I'm not necessarily more bullish on GM than on Ford...I'm not as impressed with what GM is doing. Bob Lutz talks a good game, and he has helped the product development process, but GM needed a Mulally to really revamp the entire corporate culture.
I really hope Ford puts some effort into the 4-cyl engine this time around. I like the Fusion in all respects except for one...its current 4-cyl/automatic combination. Nissan, Toyota, Honda, and now even GM actually put some effort into the 4-cyl versions of their competing models, but Ford just seemed to focus (sorry, bad pun) on making the base Fusion kinda cheap. Not that economical, and not very fast...just a low sticker price and that's it.