Organizing for America | Think Electric: Onetime Motor City

Onetime Motor City

By Steve Lee - Nov 16th, 2008 at 5:27 pm EST

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Detroit, Michigan's automoble industry is having to resort to asking the Federal Government for financial aid as the high gasoline prices that caused it's current sales problems continue to drop.

Prices at the pump are below $2.00 a gallon (July 4th they were $4.11) and there are surprising results in the October sales figures, Click:

http://www.communati.com/steve-lee/think-american-car

The current gasoline price situation has happen before, in the early 1980's there also was a big run-up in oil prices when "BIG CARS" were the automakers best sellers. It takes several years to design and build new car models; by the time the new small cars were in the dealers showrooms, gasoline prices had fallen again and demand for "small fuel efficient cars" had declined.

During both gas price swings the automakers get stuck with cars that American's didn't want to drive, Click:

http://www.communati.com/steve-lee/think-gasoline-prices

Barack Obama is the first Internet President:

http://www.communati.com/steve-lee/think-obamadotcom

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Ford has a BETTER IDEA | Report to Admin

By Robert from Jekyll Island, GA Nov 16th 2008 at 5:38 pm EST (Updated Nov 16th 2008 at 5:38 pm EST)

Ford is laying off design staff and simply importing desgins from its successful European division.

What took so long?

Automakers have been "dumbing down" Japanese and European designs for decades. Even the Japanese do it. Toyota imported its Scion xB which was a total hit. Americans want REAL Japanese cars.

So what does Toyota do? Re-design it for the US Market, making it fatter, heavier, uglier, and putting in an engine nearly double in size of the original.

GM and Ford do the same thing. They think all we car about is chrome and landau tops. So we, as Americans, have to look to Europe and Japan for cutting edge cars to buy.

This time around, it is different that the Chrysler bailout of the 1980's. The car companies have huge obligations in terms of employee pensions and health care that are totally unfunded.

The 1980's was just the miner's canary - one that we ignored. We bailed out Chrysler and thought everything was OK. But over the next two decades, the "Big 3" lost more and more market share. GM had 60% of the market back then. They have half that now, maybe less.

The boom times of the 1990's and cheap gas masked the problem - for a while. We all bought big SUVs and Pickups, and the Big-3 made money. GM made $8000 a car on a Yukon. Ford adds two doors to an F-150 and charges $40,000 for it (today, you can buy it for $25,000. Talk about markup!)

We failed to notice that sales of smaller American cars were dropping - and that the few small American cars made were inexpensive loss-leaders that were tossed out the door so they could meet CAFE requirements.

Meanwhile, Toyota and Nissan build TRUCK plants in the USA, attacking the last profitable segment of the big-3: SUV's and Pickups. We know who "won" the wars for the other segments.

The TRIGGER was gas prices, not the cause of the downturn. Everything was in place for a perfect storm. We had a prime fuel:air mixture, high gas prices provided the spark. Blammo.

Re: Ford has a BETTER IDEA | Report to Admin

By Robert from Jekyll Island, GA Nov 16th 2008 at 5:48 pm EST (Updated Nov 16th 2008 at 5:48 pm EST)

I disagree with the premise in the link you mentioned.

Yes, the Ford F-150 WAS the best-selling vehicle in the USA for decades (GM actually sells more pickups, but since they are badged under two different brands, Ford wins the sales race).

However, in recent months, when gas shot up, the price of used SUVs plummeted. You couldn't GIVE those things away. As a result, the price of new ones dropped as well.

As I noted, a four-door pickup that was fetching 40 grand at the Ford dealer is now modestly priced under 30 grand. Sales are way down, but still a lot of trucks are sold. But GM, FORD, and CHRYSLER are not making as much, if anything, on the sales.

And leasing is another problem. Even BMW got burned on this. Resale value on cars is dropping, so many carmakers are losing their shirts on leases. GM has a "Lease to buy" program, encouraging Leasees to PURCHASE a car once their existing lease expires.

BMW is trying to convince car buyers to actually BUY rather than LEASE, as the glut of used off-lease cars is flooding the market.

The tight CREDIT MARKET is making it hard to finance the sweet deals they used to offer even a year ago.

There is no ONE cause of the current problems in Detroit. There is a long-term chronic condition, with a number of recent triggers - gas prices, financing, etc.

Doing a bailout might take GM over the hump another time. But the next time gas spikes - we'll be right back where we started.

As for Americans "preferring" trucks to cars, most human beings will purchase the largest, fastest, and most expensive car they can afford. When gas is cheap and credit is freely available, a $40,000 3-tom SUV "makes sense" to many consumers.

When conditions change, these cars no longer make sense. Although the price of gas has dropped, many Americans will remember this summer when buying a new car, and think twice before making a 4 or 5 year committment to a 10 mpg gas hog.

Re: Ford has a BETTER IDEA | Report to Admin

By Steve Lee Nov 17th 2008 at 11:18 am EST (Updated Nov 17th 2008 at 11:18 am EST)

Robert- Thank you for your very knowledgeable (and clever titled comment.)
Back in the '70's the "Big Three" were very competetive, with each other; ("Ford has a Better Idea" was trying to catch-up with Chrysler and GM bigger, more powerful cars) ignoring the foreign competition, until the "gas crisis" of that time, a shortfall in crude oil supply.
Now that GM has the "Chevy Volt" slated for sale in 2010, will the company have enough money to stay in business until then? That is the being debated in Congress tody.
Meanwhile, Americans will have the opportunity to purchase an Electric Commuter Car in 2009, Click:
Link

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