By on August 7, 2006

bilde2222.jpgLast Thursday, Mark LeNeve declared that General Motors has “turned a corner.” Obviously, GM’s Vice President of North American Sales and Marketing was unaware of the phrase’s historical baggage. To wit: General William Westmoreland’s famous announcement that the American war effort in Indochina had “turned a corner”– just before North Vietnam’s Tet Offensive returned the corner. Since ‘68, any US authority figure announcing an angle exceeded instantly reveals themselves as a master of unintended irony, and sets themselves up for an ignominious defeat.

Metaphorical misstep aside, LaNeve’s triumphalism seems to reflect normal corporate dishonestly. Surely LaNeve was simply lying when he claimed that “interest in new vehicle models such as the 2007 Chevrolet Tahoe SUV and a potential sales lift from upcoming products are helping put GM back in contention after excruciating declines in recent years.” After all, the statement is positively dizzy with spin. “Interest in new models” (as opposed to actual sales) is leading to a “potential sales lift” (as opposed to an actual sales increase) which is “helping to put GM in contention” (as opposed to putting GM back in the black) and reversing “declines in recent years” (as opposed to, say, declines during LaNeve’s tenure). But no, I honestly believe LaNeve honestly believes the unbelievable: that GM’s on the rebound.

You see, the thing is, the above statement about GM’s prospects isn’t a direct quote. It’s paraphrasing provided by automotive journalist Brett Clanton. In a Detroit News article on the GM Veep’s unbridled optimism, LaNeve’s surrogate spinmeister failed to provide any evidence for “growing signs that a massive turnaround effort at GM is gaining strength.” Sure, the article flags several ways GM could be derailed by “factors outside its control.” But its tone, tenor and existence all indicate that LaNeve’s comments reflect an accepted Detroit shibboleth: GM’s on the rebound!

By now, even casual observers know GM’s unofficial turnaround strategy: we’re gonna do what we’ve always done better than we’ve done it in “recent years.” Remember those intractable problems that brought us to the brink of bankruptcy: legacy and labor costs, bureaucracy, a bloated dealer network, badge engineering, ill-defined brands, etc.? Forgeddaboutit. We’ll just sell our best assets, close some factories, pay-off some workers, release a dozen or so new products (most of which look suspiciously like the old products) and everything will be allllllright.

My God, how wrong can you be? At last Wednesday’s press launch of GM’s new(ish) pickup trucks, GM Car Czar Bob Lutz once again explored the possibilities. “The effect [of high gas prices] will decrease over time as people adjust to the thought of $3 a gallon, just as they did when it was $2 a gallon and just as they did when it was $1 a gallon.” In other words, sooner or later, GM’s truck sales will return to “normal” and everything will be allllllright. And then GM CEO Rabid Rick Wagoner stepped up to the microphone and raised the stakes on Maximum Bob's bluff. GM’s new(ish) pickups are “the most important part of our North American turnaround plan.”

If that statement doesn’t send a shiver down Detroit’s collective spine, nothing will. Last month, GM’s pickup truck sales slumped thirty-two percent. While that’s a year-on-year comparison against last summer's Fire Sale For All program, it’s clear that GM’s second string cash cow is being gored by gas prices and, less obviously, a downturn in the housing industry. A SMALL company called BIGresearch says over 50% of pickup truck drivers planning on buying a new vehicle in the next six months are considering a more fuel efficient sedan or… wait for it… a hybrid.

Shrinking market? You betcha. Less profitable market? Uh-huh. Ford’s dropped the price on America’s best-selling pickup (the F150) by $1400. Toyota is about to enter the fray with its keenly priced, full-sized Tundra. Bottom line: the pickup truck market is contracting even as margins are being squeezed. At best, GM is about to make a great landing at the wrong airport. At worst, it’s missing the boat.

In today’s market, small cars are where it’s at. If GM thinks the Cobalt and Aveo can carry the corporation through another gas price escalation— even as Toyota, Nissan and Honda flood the market with their latest fuel-sipping econoboxes— they’ve got another thing coming. I reckon it starts with a “b.”

But even if you dismiss the possibility of Chapter 11, why do GM watchers grant the company turned around status when its leaders [continue to] refuse to provide a timeline or targets for a return to profitability? Mark LaNeve’s and his supporters may hide behind vague claims that they can see the light at the end of the tunnel, but they fail to understand that the beckoning light in the distance is… death.

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79 Comments on “General Motors Death Watch 86: Pickups Stick...”


  • avatar
    tom

    I actually don’t believe that LaNeve honestly believes that GM is on the right rebound.

    Those guys must have tons of studies about how the market will develop in the years to come. Except of course they are surrounded by yeasayers…”Of course people will get used to 3$ per gallon, you’re absolutely right about that, and they won’t even have problems with 5$ per gallon. No need to be concerned. Everything is going to be A-OK!”

  • avatar
    nweaver

    Remember, there are two options for a GM manager:

    A: Believe that this time “The new product and changes will save us”. So you make such statements.

    B: Don’t believe it, but you say it anyway, because you benefit from postponing the inevitable as long as possible.

    The cobalt, frankly, SUCKS. GM has gone backwards in the small car business. My SC1 Hamstermobile still gets 30/40 MPG in PRACTICE. The cobalt gets, what, 25/35? ICK.

  • avatar
    stanshih

    I agree that 3 or 4 or 5 years ago GM’s development priorities were misplaced.
    They should have developed more compacts (a G5 distinct from the Cobalt would’ve been nice; at least different sheet metal or different gauges and knobs…something!) and midsize cars (where’s a Malibu refresh?).
    Instead they’re stuck “making a great landing at the wrong airport” recently unveiling new huge SUVs and these full-sized trucks.
    You can’t blame them for releasing them, though, since they were already almost finished by the time $3 gas rolled around.
    Also, despite the shrinking market for the full-sized trucks, they still should sell in large volume. In July the (old) Silverado approximately equalled Corolla and Civic sales COMBINED. And while the profit margins on these trucks are shrinking, they are still cash cows.
    If anything, GM made the most of releasing these trucks now about 2 months ahead of schedule. They will get some cash flow from these trucks earlier than they otherwise would have. And we all know that they need cash desperately…

  • avatar
    noley

    What I wonder is how many pick-up trucks actually work for a living.
    The boom in pickup trucks seems to be from people who wield tools only on weekends and use trucks as commuting vehicles. OK, some do tow a boat or camper a few times a month, but given the number of pristine pickups you see with nary a dent, scrape or other signs of working for a living, most, even here in New Hampshire, seem to be used in place of a car.

    The guy who owns a contracting company may be able to buy a new truck every three or four years and write it and it’s fuel costs off, but his employees and the guys who drive their Magnerado 150 to an office every day can’t do that. And if they can’t justify it by towing a boat with some regularity those trucks will wind up getting traded for cars before long.

    GM’s fantasy that people will adjust to $3/gallon gas is accurate, but they won’t adjust the way GM (and Ford and Dodge) hope. They will dump the fuel-thirsty trucks in favor of something else. Especially since gas prices are only going to keep rising. Some people will buy a more fuel efficient vehicle for commuting and use the truck only for hauling, towing. Others will get a smaller truck. Others will do like I did and get a utility trailer for hauling stuff. Even some contractors are having second thoughts. My contractor neighbor, for example, has a Dodge Magnum V8. He only needs the truck as a truck one or two days a week. So he bought a turbo diesel VW Beetle that he uses the rest of the time. How long does that take him out of the market for a new truck? I know another builder in Maine who does exactly the same thing, only using his Hummer pickup when he needs its capabilities.

    The connection to towing boats relates to this by more than the weight being hauled. People with power boats are using them less as gas prices have risen. At some point–my guess is north of $4/gallon–boat usage will also drop and that could further impact demand for trucks.

    Another scenario is that trucks could shrink. Most people with trucks can really live just fine without a “full-size” truck, just like they do with cars. For most practical purposes, the mid-size truck of today–a Ranger, Colorado, Tacoma, etc.–is the about size of a full-size truck not all that long ago.

  • avatar
    kasumi

    With news of increased gas prices today – I can’t imagine it is a good day at GM. I wonder if they are just trying there best to put a good face on (remember the Enron press conference where the employee asked if Kenny-boy was smoking crack) I hope the Ivy League schools these guys attended at least openned their eyes to their upcoming future?

    When someone at GM said on the release of the new Escalade that its buyers won’t be affected by high gas prices, it was over. No matter who you are it still looks pretty scary to be filling up your SUV and it hits triple digits. No one goes to the gas pump and thinks – quite a bargain! It hurts everyone and when those people decide to get a new car it will be a much bigger issue than before.

    Every car manufacturer must have seen this coming years ago – and that is their fault.

    K.

  • avatar
    montess

    If GM built more cars like my Monte with displacement on demand (a V8 that runs on 4 cylinders when coasting) instead of putting all their eggs in the SUV and truck basket they would do fine. I’m averaging close to 20 mpg (mostly stop and go) but I still have 300 HP under my foot, obviously GM is still capable of great things when they put their R + D in the right place. I realize a coupe may not appeal to the mainstream but if that’s the case go for an Impala which has the same powertrain.

  • avatar
    ctowne

    Oh they’ll be comfortable with 3.50/gallon gas. They’re just not going to be buying that much of it to fill up their smaller, more efficient commuter cars.

    No one, ever is going to be comfortable with 3 digit fill ups on a weekly basis when they don’t have to.

  • avatar

    I’ve set my fuel strike price at $4 a gallon. That is where I get off the oil company roller coaster (that only goes UP by the way) and start playing amateur chemist. At the moment I’m filtering WVO and mixing it 20% to 50% with #2 Diesel. That has cut my costs to $.75-1.50 a gallon. At $4 a gallon I’ll finish the fuel and run 100% home brew, or maybe build an SVO conversion.

    I’m driving a 2002 Jetta TDI, and the wife drives a 2006 Jeep Liberty CRD. I spent the late 90s living in Europe and saw the writing on the wall back then. I look like a genius in hindsight, but really I’m just, simply, cheap. I’ll keep the old Jag roadster in the barn and fork out big bucks for Premium for weekend rides, but my time home brewing (takes me about 2 hours a week)is far less expensive than $4 a gallon fuel. It could be my Scots heritage as our combined family income just exceeds 6 figures, but I’ve just about had enough with big oil and moronic car manufacturers. One is making obscene profits, using excuses to jack prices in order to test pain thresholds. The other is just absolutely clueless as to what people NEED in a vehicle, and instead delivers the same old crap year on year.

    I have NO IDEA how the average middle-class family can afford to drive a gasoline sucking SUV, but somehow they all do. These guys in Detroit are only putting their ignorance and advanced state of denial on display when they make statements like this. They’ve literally squandered decades building SUVs and crappy cars when they should have been focussed on good cars and fuel saving technologies – like the European car companies and Diesel tech. They are about to get their clock cleaned.

    –chuck goolsbee

  • avatar
    crazyaboutcars

    I think that part of GMs problem is that the demand for their SUVs and trucks are by those people who already own an aging old GM SUV/pickup. Look at the Chevy and GMC dealers used car lots and you don’t see large inventory of Honda’s or Toyota’s. You only see older GM SUV/pickups. The fact of the matter is that one year after all the current GM owners get the updated SUV/pickup, that the incentives will come back and the sales will level off. GM has nothing new and or exciting outside of Cadillac. SAAB should be shut down, and Hummer should eventually become a GMC model. Buick needs to go away and GM should settle on Pontiac/GMC dealers along with Chevy/Cadillac dealers. They need to get serious and put a long term plan into place that has a clear product direction.

  • avatar
    dhathewa

    Trucks *could* shrink but how long will it take GM and Ford to shrink them? It seems to take quite a long time for GM and Ford to get a new vehicle to market. And will they shrink the trucks? Ford is closing the Ranger plant in St. Paul, MN. I don’t know of a pickup with better fuel economy but Ford would rather build F-150s to deliver to regional long-term storage facilities (we used to call these facilities “dealer lots”).

  • avatar
    dhathewa

    “If GM built more cars like my Monte with displacement on demand … they would do fine. I’m averaging close to 20 mpg (mostly stop and go) but I still have 300 HP under my foot…” – montess

    DoD is nice and I guess it’s worth a couple mpg on the highway but what do you need 300hp “under your foot” for? You’re doing “mostly stop and go.” Do you burn rubber at each light or close every gap and make sure nobody gets a fender in front of you when merging? 90% of my travel is on roads that are at least moderately congested and/or the speed limit is 50 or less and the top speed limit in most of the US is just 70mph. I haven’t found a situation where my 127hp daily driver (21lbs/hp) is at any kind of disadvantage. I’ve owned several vehicles with worse power-to-weight ratios and I still got where I wanted to go.

    Toyota and Honda discovered that they can “do fine” with Accords and Camrys equipped with 160hp 4-bangers that will actually hit mid-30s for fuel economy. Since they’re making lots of money, I suggest GM take a closer look at that.

    PS: 300hp in a FWD car is ridiculous, anyway.

  • avatar
    Togo

    I tend to agree with your point. GM, as it is contructed today, is finished. At the same time, I want to point out that I believe your analogy with Tet is flawed. Other than propaganda, the Tet Offensive was a colossal failure for the North Vietnamese. They gained nothing, and the Viet Cong infiltrators in South Vietnam revealed themselves and were destoryed, ending their threat in the South.

    Tet did get Walter Cronkite to declare the war ‘unwinnable’, but that’s the only sense in which the offensive was a success.

    So, I believe Tet would be a better analogy for what GM is trying to do than what’s happening to them. GM is putting on a good show which will net some good ink, but it won’t affect what’s happening to their bottom line.

  • avatar
    carguy

    GM is afraid of small cars as they are notoriously unprofitable. Some manufacturers sell tham at cost just to avoid CAFE fines on their profitable large vehicles. While many in the TTAC community are forward looking enough to see what is coming, many consumers are not and still equate small with economy. Its the car you have drive not want to drive.

    When the Audi A3 and the BMW 1 series are best sellers in the US (an hold their resale values like their larger siblings) then maybe that will be an indication that market perception has changed but until then most small cars in America will be low cost and low profit for their manufacturers. Ford and Toyota’s neglect of the Focus and Corrola is no coincidence.

    And now that the E85 compatibility magic bullet is solving a large part of GM’s CAFE headaches, why bother with no/low profit small cars?

    Unless the US consumer changes their perception of smaller cars GM is doing the right thing to focus on high profit vehicles that enable them to maximize their income (or maybe minimize their loss).

  • avatar
    montess

    dhathewa-
    you said- PS: 300hp in a FWD car is ridiculous, anyway

    Why is that, torque steer? I’ll admit that’s a factor at slower speeds but on the highway its negligible and that’s really the only place I like to go fast. To me 20 mpg is just fine, that translates into one trip to the gas station a week.

  • avatar

    Togo-

    As you correctly point out, the Tet offensive was more of a psychological nadir than a strategic one. But it soured America’s stomach for the conflict– or at least made it cool for the media to be anti-war (thanks Uncle Walt). It marked the beginning of the end of US involvement.

  • avatar
    Robstar

    I love driving my 2005 STi at 20-22mpg per tank once a week for some fun, and/or on weekends, but I try to use my 200 neon (28-34mpg over a tank) much more. I’m now inclined to start using my rather “piggy” bike (gsx-r 600) at 38mpg average on a tank…I have even thought of getting a ninja 250 (65mpg city/75mpg highway I’ve heard) as the ENTIRE cost of the bike new is less than the premium for a hybrid car over the non-hybrid version. For summer travel, it’s definately a gasoline “winner”.

    I really wonder when/if the US will switch to more diesel cars/econoboxes like europe (I’ve been looking for a diesel for ages and am not a fan of VW). Why don’t the manufacturers really offer ANY choice as far as diesel goes? I still haven’t figured that out.

  • avatar

    …any US authority figure announcing an angle exceeded instantly reveals themselves as a master of unintended irony, and sets themselves up for an ignominious defeat.
    The CEO of Nortel spoke those words right before their stock took their first nosedive…. :S

  • avatar
    Glenn

    I’ve been struggling to think of why Toyota was bothering to build the San Antonio truck facility to manufacture more full sized pickups when they are the same smart group of people who began development of the Prius when gas was a buck a gallon in the US.

    It suddenly occurred to me that if (when) GM and / or Ford (or both) go belly up, there will be a production gap in pickup trucks in this country, even if the market is 60% smaller.

    Toyota probably cannot say it, but they may well be aware that BOTH GM and Ford are doomed, and are setting themselves up to be able to sell trucks to those who actually need them or are rich enough to still use them as toys / everyday vehicles.

  • avatar
    Terry

    Hello!! As I see it(as a dealer tech):
    People dont desire GM’s small cars…they SETTLE for them. I challenge ALL those opposed to my statement to test drive a Mazda3, Toyota Corolla, Subaru Impreza, and a Honda Civic and then drive a Cobalt. Unless youre a Yankee-Doodle MORON, the differences in the driving experience will become painfully clear. I wont even get into the domestic vs import service experience.
    Kinda ironic, isnt it that GM put all their eggs in the truck/SUV basket and basically sells passenger cars for those that just HAVE to have one. Meanwhile, Toyota, Honda et al sell passenger cars up the yang and offer trucks and SUVs for their customers that just have to have them too.
    What’s wrong with THIS picture!

  • avatar
    Don Whitefield

    Come on. I know you are reading these posts after work when you are bored in your hotel room. I know you are with GM a long time and have seen the “new” plans and “new” visions coming and going for too long. I know that you have a pretty accurate picture of how fragile GM’s positon really is. I know that you have your own ideas on what has to change.

    Come on. Share a bit of your insight and knowledge. Does anyone of them really believes what they say? Maybe you will make a difference going public. Maybe they will listen. Maybe, just maybe you know exactly how much time is really left!

  • avatar
    jjdaddyo

    A “turnaround” at GM is just the same as a “turnaround” anywhere else, except they call it “La Turnaround”

  • avatar
    Martin Albright

    My only quibble about this article would be the assumption that Americans won’t get used to $3+ gallon gas without making some major changes in their buying habits. While the psychological impact of either the $3/gallon or the $100 fill up might be significant, I think it’s also likely to be short lived.

    What’s needed here is some serious number crunching, and I’m not even sure whether the data is widely available. We need to know:

    Family Average income
    Family Average annual fuel spending in $$
    Family average discretionary income in $$
    Family average annual miles driven (total on all vehicles owned)
    Average MPG for family vehicles

    Once we know this, we’ll be able to figure out that, for example, an increase to an average of $3.50/gallon will eat up an average family’s discretionary income, forcing them to make sacrifices, but that under that figure, they’ll be able to absorb it (however much they may hate to do so.)

    Also, if GM is offering killer financing and deep discounts on gas guzzlers, then some buyers may conclude – correctly – that buying a gas guzzler with cheaper payments is more beneficial to them in the long run than buying a more economical car at a higher price and without all the “gimmes.”

  • avatar

    It’s not all about gas price per se. I believe Americans are turning away from gas guzzling SUV’s and pickups as part of a sea change in their perception of what’s socially acceptable.

  • avatar
    KingElvis

    When the longest ever Plymouth Fury, riding on a 122″ wheelbase, debuted in the fall of ’73 it landed smack dab in the middle of the OPEC oil embargo. The embargo came about as a result of the ’73 war with Israel (Hey, wait a minute – Israel’s at war again…uh oh).

    Forget about high prices – in many areas gas couldn’t be had for any price, and some stations imposed WWII type rationing, allowing people only to buy 5 gallons. It was indeed a real live, no kiddin’ “crisis.” It makes today’s high demand market look pretty darn good by comparison.

    Ironically, by the end of ’74, as people “got used” to 65 cent gas instead of 35cent gas, the high demand for small cars seemed to level – helped along by a sputtering economy and even more “interesting times” with Nixon’s troubles.

    (Super obscure footnote: in ’73 GM planned to produce a “J” platform ((no, not the J we saw in ’81)) with transverse front drive and multiple bodies, including, yes, a minivan and unit body 4×4 pickup. At first concieved with a Wankel engine, later it was planned with 4s, 6s and even the 350 small block. These plans were scrapped by the end of ’74, ironcially because GM wanted to turn attention to re-vamping large C/B body cars, which the market had already
    re-embraced.)

    You’d think with the ’74 crisis you could’ve stuck a fork in Detroit and called it “done.”

    Granted ’75 was a recession year, overall car sales were way down – except for a few brands and models – know what they were?

    Lincoln. Cadillac. Chrysler (thank the Cordoba) and Chevy’s Monte Carlo. In the middle of one of the US’s worst recessions, Detroit emphasized high profit luxury cars and their sales were higher than ’74.

    I’m not really disagreeing with the essay, only pointing out that often exigencies of the market shift with the wind. A 3 year development cycle is still considered pretty quick, but compare 2000 to 2003. Consider how our glorious leader’s fortunes have shifted from 70% approval in March ’03 to 30% approval in May ’06.

    It also doesn’t change one irrefutable fact: Mark LaNeve can’t predict the future. Mr. Farago’s primary point is that, at best, he’s whistling in the dark.

  • avatar
    starlightmica

    I really wonder when/if the US will switch to more diesel cars/econoboxes like europe. Why don’t the manufacturers really offer ANY choice as far as diesel goes?

    Uh, when Honda does it in 3 years?

    Anyway, perceptions, emissions, & cost: people remember the 5.7L & 4.3L GM diesel, and not in a good way. Emissions: only the M-B 320CDI Bluetec is certified for 50 state sale in the US for 2007; VW has no Jetta TDI’s for MY2007 due to tightening rules. Diesel engines are more expensive by design, although cheaper than a full hybrid.

  • avatar
    noley

    crazyaboutcars–

    You note above that “SAAB should be shut down.” It could happen, but while the brand continues to struggle under GM’s inept management, Saab turbocharging and engine management technology could be a real aid to other GM lines.

    The new 2.3 liter 4-cylinder BioPower engines Saab has just brought out in Europe run on E85 and have substantially more horsepower and torque than the company’s same size gas-only engines (310 bhp vs 260 and 325 vs 258 lb-ft). The station wagon has 0 to 60 times under 6 seconds. Not bad for a family car.

    Hell, I get 28-30 mpg at 80 mph in my 10-year old Saab 9000 and have as much passing and hillclimbing poke as most V8s. My wife’s ’03 Saab 9-5 wagon gets 30-32 mpg at the same speeds with 4 people and their luggage. All this on regular or mid-grade gas. These both have 2.3 liter 4 cylinders. And I often tow a 2000 pound load in a trailer with the 9000.

    But then this technology wasn’t invented in Detroit, so why would GM pay any attention to it?

  • avatar
    geozinger

    Let’s see, it takes about 3 years to bring a vehicle to market, correct? I’m assuming that planning started in 2003, maybe even earlier…

    What were we paying in 2003 for gas? Approx $2/gal. Sales of SUV’s and trucks were humming right along. Even ‘Yota started investing big bucks to build more pickups in the ‘States.

    Fast forward to 2006. Katrina has happened, never ending war in the Middle East, Hugo Chavez in Venezuela, India, China et. al. all competing for oil. You’ve had these vehicles in development for all of this time, what are you supposed to do? Not release them? To what end? To lose any advantage to your competitors when they release their new trucks? To somehow recycle the effort and resources applied to the trucks and somehow apply it hybrids?

    I’m not a huge fan of using the slogan ‘staying the course’ because of it’s association with recent presidents, but honestly what choice would they have?

    On another note, why does it surprise people that the leaders in a particular company are upbeat about their company? What do you expect them to say? Were you in their shoes, what would you say?

    I’m not really a GM shill, but be realistic, folks. I can’t imagine anyone is more acutely aware that they need to change their lineup as the folks at GM (and Ford).

    FWIW, I am adjusting to the $3/gal prices. I’m waaaay less than happy about it. We (as a family) have curtailed as much driving as possible. Since my old beater Cavalier gets the best mileage out of my three cars, it’s seeing the most usage right now. My wife and I are commuting as much as possible even though our offices are 10 miles apart. But I figure one car driving 40 miles a day is better than 2 driving 40 miles a day.

  • avatar
    Schmu

    Tet, as you say, was a military success for us. What it did do was make everyone in the US realize that we can’t take the government’s workd afor anything anymore. I wasn’t around, but I have been researching this most of my life. The Pentagon and administration were telling everyone we were winning, that they were not capable of any significant military activity. Tet shook the public’s confidence that the Government had any clue what it was doing. With No Confidence, the public pulled away, which combined with the handling of the war in teh first place, lost us that one. A parallel could be drawn with GM here as well (minus the whole death and destruction thingy). GM could start building what is needed, but with the public’s confidence gone, can they still win?

  • avatar
    geozinger

    Let me correct my post about the distance we commute. It’s 10 miles further for our combined commute… It should be 2 cars driving 30 miles per day…

  • avatar
    jar527

    I’d like to see some numbers on how many Americans are actually buying new cars. It seems to me that at some point the number of cars/suvs/trucks/etc. being produced would exceed the number of buyers available. Millions of new vehicles are produced every year, outside of fleet sales is there really a market to support these numbers, especially as the “baby boomers” retire and spend their money on other things. Also, I think lots of people are turning to used cars. Higher interest rates and fuel costs means that there is less money available for the car payment. If I know I can only afford 500.00 a month toward auto expenses (including gas) and I really “must” have an SUV or a truck, then a used one looks mighty attractive. Especially when you consider how much they have depreciated from when they were new.

  • avatar
    Schmu

    dunno, it seems everyone buys a new one when the payments are up anymore. Even the poor folks I know trade up. I know I am going to pay off some credit card debt when my car is paid for. Its a honda, so I know I can run her into the ground for a while. I put 25k on the car a year though, so it will have to last a while so i can make a dent in my debt.

  • avatar
    tom

    KingElvis:

    Good post, but there is one major difference to 1975: This time there is much more competition!

    In 1975, there were no Toyotas, Hyundais, Hondas & so on. There just were no large scale low price alternatives to the Big Three.

  • avatar
    mdanda

    I drive 1,000 miles per month in an SUV. Here’s the math:

    1,000 / 17 MPG * $3/gal = $176 a month in gas

    1,000 / 17 MPG * $4/gal = $235 a month in gas

    1,000 / 17 MPG * $5/gal = $294 a month in gas

    If I replace it with a Corolla or Scion at 30MPG, it would cost me thus:

    1,000 / 30 MPG * $3/gal = $100 a month in gas

    1,000 / 30 MPG * $4/gal = $133 a month in gas

    1,000 / 30 MPG * $5/gal = $166 a month in gas

    The “tipping point” for me to sell the SUV is about $4.00/gallon.

  • avatar
    2006300c

    In Pittsburgh where I live, gas is $2.89 per gallon. Since us unwashed masses in between NY and LA buy most of the domestic steel, and we have the lowest prices the effect of pricier fuel on GM will be bad, but not fatal. Outside my window I see 2 escalades esv’s, an impala ss, maxima, grand marquis, a Tahoe, a 545 and an S90. This talk aboutI4 diesels, Yarises and Fits and Versas is all very well and good. But, your average middle and upper middle class American will never drive a pregnant roller skate. The real make or breakers for GM will be the Retro Zeta cars. The Roadmaster, Camaro, Impala, G8 and DTS will be the true test. The Germans will never give up beer, the Japanese won’t give up seafood, and Americans shall not relinquish our big cars, what should be done is to make those big cars as efficient and capacious and possible.

  • avatar
    Lesley Wimbush

    Clever headline, sure wish I’d written it. :)

  • avatar
    noley

    mdanda’s tipping point—

    I have a friend who used to only look at the delta between prices and costs and justify the difference. Or he used to. Now he does his 108 mile daily round trip commute in his BMW 530 (29 mpg) instead of his Yota Tundra (18 mpg). The tipping point for him was closer to $3/gallon.

    I don’t recall the source of the research, but I seem to recall some studies done by Ford or GM that found $4/gallon to be the point at which consumers are predicted to make a major shift in what they buy and drive. Being less than optimistic about oil prices, I think this point is going to be here in 12 to 18 months.

  • avatar
    kken71

    Lutz’s prediction that people will adjust to high gas prices (and presumably will not demand fuel efficient vehicles) reminds me of a stament by a AOL executive several years ago that stuck in my memory. The AOL exec said its customers were not interested in broad band internet access. We all know what happened to AOL’s market share.

  • avatar
    KingElvis

    Hello TORN,

    My Dad’s first brand new vehicle was a ’73 Toyota Hilux pickup. Subaru came out with their first “American sized” sedan in ’70 – the same design that later underpinned the famous 4×4 wagon in ’77.

    But yes, there weren’t Tundras and large sedans from Japan like we have now.

    I suppose the short version of my musings is two pronged

    A: Often, the conventional wisdom is wrong – causes have effects we would never expect. The exigencies to which RF points might not have much cachet in as few as 18 or 24 months.

    B: LaNeve is not the Delphic Oracle – He’s just talkin’ happy, happy talk, and in this Farago is right on the money.

  • avatar
    dhathewa

    “But, your average middle and upper middle class American will never drive a pregnant roller skate.” – 2006300c

    But many of them already do and more switch every day. Look at the Scion xB. What do you think Wagoner would have said about that car if you’d shown him a picture a couple of years ago and predicted Toyota would sell 100K or so of those a year? To Americans? He would have laughed you out of his office. But there they are, out on the street, lots of ’em.

    Sometimes, the fundamentals change. Gas prices are pushing these changes. The Retro thing worked really well the first time when Chrysler did it well. Friends have PT cruisers and they like the looks but they really love the utility. I can’t stand the retro look, myself; I want my cars to look like the future. GM can try the retro thing again but they’re going to have to offer value and utility when they do it or their next retro-mobile will have all the sales volume of the SSR.

  • avatar
    qfrog

    Two years ago I drove my rather modified cammed ported and tweaked A4 sedan to work. I was getting 15mpg mostly due to my lack of restraint. Today I have my 400lb heavier A4 avant to drive to do the 70mi daily deed now. The Avant averages 22 mpg because I don’t drive it like a sociopath… there is no reward for beating up a bitchstick 2.8.

    I’ve gotten better with limiting my use of the go pedal. I apply skills carried over from tracking such as carrying speed through turns and smoothly using as little brake pedal as possible. If I want to consume less fuel I just have to slow it down a little bit from 70mph to say 65 as my top speed.

  • avatar
    sleepingbear

    qfrog-

    I’d agree with those pedal dynamics-

    I’ve been practing diligently on my 2006 Grand Cherokee 6cyl –

    This past weekend i averaged 20.4 miles per hour on a trip from NYC to PIB, Ohio and back – with an avg speed around 70+

  • avatar
    PsychoBueller

    So I can pay an extra $128 per month in fuel costs with gas at $5 per gallon and drive an Escalade/Yukon/Tahoe/Expedition/Silverado/Sierra instead of a Corolla or Scion? I can have 300-403 hp, V8 torque, AWD, cargo capacity, towing capacity, and comfort? All for $128 per month extra with gas at $5 per gallon? Sign me up!. It’s worth it. LOL!

  • avatar
    tom

    Of course there are some tricks to save fuel: Use your engine to break and not the pedal, always drive in low rev, don’t drive faster than 65 mph…but to be honest, I usually don’t do it, just because it’s no fun.

    The problem is, cars that are extremely low on gas are that way, because they are set up to do the things stated above automatically, which means they are – per definition – no fun to drive.

  • avatar
    2006300c

    What car is loved by more people, The Camaro or the Ford REFLEX? Retro rules. Those xBs are bought by seniors on a budget and high school students, that’s it. The SSR did not sell because it was a stupid automobile, a 2 seater pickup with no usable bed? Please. When people say “modern” design they usually mean Japanese or Bangle.(if they represent the “future” I’m buying a 59 Buick and a Jaguar mark X right NOW) The problem is people who want a car that looks Japanese or European will buy…guess what? The American makes must appeal to people like me (19 BTW) who want a three box profile, an upright hood and trunk and acres of bling. American brashness, European engineering sensibilities and Korean warranty will lead them through the dark night to a brighter day.

  • avatar
    jerry weber

    I am not a conspiracy history proponent. However, as GM is about to unveil it’t biggest chance to make money in a decade this fall with a huge new array of pickup trucks, BP has shut down the Alaska pipeline for an undetermined amount of time. This is 8 % of all our gasoline. Now if I were a toyota, honda, hundai, kia, volkswagen agent I would of course had this occur just before the gm new trucks come out. (so that those that might want to order one off the pictures now circulating get the fuel shock now)At $4.00 per gallon, GM is going to replace worn out pickups that need to be used for the carriage trade. As for attracting trades of second car pickup trucks, the one to two mpg being offered on the new trucks is nothing compared to a new 25% increase in gas prices. I would after causing gas to rise $1.00 per gallon in Sept, then ask the foreign companies named above to pay me $1.00 for every extra car they sell this year and next. I could give half of it to BP to keep the pipeline closed and get me a condo the size of an airplane hangar in Florida. But I’m not a consipiracy buff.

  • avatar
    dhathewa

    “So I can pay an extra $128 per month in fuel costs with gas at $5 per gallon and drive an Escalade/Yukon/Tahoe/Expedition/Silverado/Sierra instead of a Corolla or Scion?” – PsychoBueller

    Actually, no. Add a healthy dose of depreciation. Your final costs will be higher. At 1K miles/month, figure on $330/month more (Edmunds TCO).

    That’s $3960/year. You keep the fancy ride. I’ll take the cash.

    By the way, 2006300c, the typical Scion xB buyer turns out to be about 40, to Toyota’s surprise. It’s basic, reliable transportation and it’s a hit with people that have decided there are things more important in life than shelling out a lot of money for an image projected by your automobile.

  • avatar
    stryker1

    Just got out of my GM plastic panel purgatory, and into a 2006 civic. I can’t stop smiling, whereas the saturn depressed me with its constant vibrating and sponge-wire seats. I just took it on a 1000 mile road trip through the windy country roads of upstate pennsylvania. I’m going to assume a BMW drives and handles better, but I’ll be damned if I could believe it is much better, and at 33 mpg no less.

    long story long, I am never going back. Not until Honda owns Chevy.

    (and yes, I realize those last couple sentences sound like f*cking ad-copy. Just ignore it if you don’t like it.)

  • avatar
    Martin Albright

    Dhathewa: Just curious, but is it Toyota that’s saying the average Scion Xb driver is in his 40’s? Because I know that’s true of the Honda Element, the other boxy utility vehicle that’s marketed to 20-somethings, but I don’t see many Xb’s on the street and most of them are driven by younger folk. For all their outward similarity, the Xb is quite a bit smaller and less useful overall than the Element (my next vehicle purchase, BTW, and I’m 44.), The Element has features like the low-maintenance interior, flexible seating options and AWD, none of which are offered by the Scion.

  • avatar
    2006300c

    The parents buy them and the kids drive them. There is even a more reliable and basic form of transportation….. The bus!!! Like it or not your car says something about you. If you drive an unkustomized scion what you’re saying is that you’re only concerned with the bare essentials of life, you’re a socialist who yearns for the repulsive minimalism of the original beetle, and you’re tighter than two coats of paint.

  • avatar
    Claude Dickson

    I’ve probably said this before, but anyone who knows anything about oil understood 3 years ago that gas prices would go up. It was only a question of when, not whether, and how fast they would rise.

    Which isn’t to say GM is wrong in milking the SUV/truck wagon as long as they could, but you clearly needed a Plan B. As best I can tell, the GM approach is “we’ll deal with it when we get there.” Well, we are there and things will only get worse for GM. Oil prices will continue to rise and a 3-year product cycle will not allow for a quick response.

    Also keep in mind that Americans are being pinched by energy costs in general. For example, electric utility rates in Maryland just went up by 70%. The discretionary income to keep a SUV is rapidly vanishing from many household budgets.

  • avatar
    nweaver

    I can tell you this: If gas prices were $3/gallon two years ago, and if the Fit was available then, I would have gotten the Fit instead of the Mazda6. Or the new Civic…

    The new econoboxes are selling well. Gas prices DO matter: my friend with the LS430 and lots of money switched to the beater MR2 as his daily driver when gas hit $2/gallon. Everyone has their tipping points, and it is getting closer and closer for many people every day.

    If I want to burn up the road, thats what my VFR is for.

  • avatar
    dhathewa

    “Dhathewa: Just curious, but is it Toyota that’s saying the average Scion Xb driver is in his 40’s?” – Martin Albright

    I can’t remember where I read it on-line but the salesguy also mentioned to me that he thought the Scions were for the youth market but most of his buyer of the xB were my age. I don’t think I’ve personally seen one driven by a 20-something. I don’t think I’ve seen an Element driven by a 20-something, either.

    The Element is certainly bigger and may have other useful features of which I’m unaware but the Scion is, I believe, cheaper and gets better fuel economy. So, it’s similar styles at different parts of the market. Choice is often good.

    I did get a ride in an Element, once. It certainly seemed pleasant enough, although there was a moment’s confusion operating the doors.

    In this particular area (MN), I probably see an equal number of xBs and Elements.

    I like the xB and was thinking about puchasing one, recently. My spouse vetoed that.

  • avatar
    ktm

    “I like the xB and was thinking about puchasing one, recently. My spouse vetoed that.”

    dhathewa, funny, my wife vetoed me as well. In November 2005 I was looking to sell my 2002 S4 for something more reliable and more fuel efficient. I recently switched jobs and went from driving 15,000 miles per year to 35,000+ miles per year. I really liked the xB and the Element and looked at both.

    The Element, while slightly larger than the xB, has one serious design flaw which eliminated it immediately from my list: no third passenger seating in the back seats. That’s right, you can not sit a third person in the back seats as the seats are split 60/40 (IIRC) and the shared middle portion is a hard plastic.

    We went to look at the xB and my wife said that it did not look like something a ‘professional’ 35-year old would drive. This is the same woman who denied me a Subaru STi when I sold my 350z (we needed a sedan for our at-the-time expectant daughter) because the wing and hood scoop did not look like something a ‘professional’ 35-year old would drive. So, in the end, we would up getting a FX35.

    I still like the xB’s, but I would have better luck getting GM to change its strategy than changing my wifes mind.

  • avatar

    Between the ’73 and ’79 gas crunches, American consumers mostly bought vehicles weighing around 4000 to 5000 pounds and getting about 15 MPG.

    Prior to the Katrina price shock, American consumers were mostly buying vehicles weighing around 4000 to 5000 pounds and getting about 15 MPG.

    Lutz may be on to something, because apparently we all want to drive two-ton, 15 MPG vehicles.

  • avatar
    Captain Tungsten

    Sorry, but after reading this article, and at least skimming the 54 comments, I come to the conclusion that no one here actually trying to figure out what GM is doing. We’d rather than having a happy little group grope, Steve-Dahl-at-Comiskey-Park-let’s-burn-disco-records-and-whoop-like- wildmen experience.

    So, what would you do in this situation? The market for your most profitable and most capital-intensive products is very likely going to shrink (you think GM doesn’t know this?) You just give up? Or do you take your precious capital and try to apply it as efficiently as possible to take this product, the key to your survival, and make it the best in the industry? “New(ish)”, Bobby? Sounds like they are going to keep the best of the truck and try to upgrade the rest (like the interiors). Wow….awful lot like how Toyota built the Camry up to be the best selling car in the country, isn’t it? Now it can’t be THAT crazy to invest like that in pickup trucks, hell, isn’t Toyota investing a couple billion to finally take a real swing at this market? Think they expect to make a few more sheckels on the new Tundra than on a Corolla? I thought you did….

    But, that market ain’t going to be growing much anytime soon, and if $3/gallon gas doesn’t do it, that $4/gal gas we may very well see next year will really stick a knife into the market…..except that’s about the time the dual-mode hybrid will hit the market. Most of the readers here probably think the likelihood of that actually happening is about the same as Cobalt outselling Corrolla…..except that the technology has been in production for the past two years, in transit bus powertrains that are selling as fast as Allison can build them, the economics are THAT compelling, and believe me, local transit lines aren’t buying them for the fashion statement, but because its a financial winner. You don’t think a hybrid pickup will sell in the wake of $4/gal. gas? Bobby’s pet research firm does. I bet the thing that REALLY keeps the GM execs up at night is how the predicted penetration rate for the hybrid pickups is spiralling right along with the price of gas, and getting the quantity of components might be, well, a bit tricky.

    However, that mid-size full frame SUV market has REALLY taken a dump, and a well deserved one at that. Do we really need another full frame truck that is within inches of the size of the full size? Of course not. So, GM now has car-like, body-frame-integral “crossovers” (who thought that name up, anyway?) coming out this fall, the first of a wave of mid-size vehicles that will eclipse both the Trailblazer/Envoy and the long-hated minivans. I’m betting that T-blazer and Envoy have two years max in them, they are dead trucks rolling, just like the vans.

    OK, but what about those pesky small cars. Anyone notice that GM has farmed out it’s engineering of small cars to Europe and S. Korea? It’s not like the boys and girls in NA engineering didn’t get enough whacks at that ball, they just didn’t manage to knock any out of the park. I agree that Civic is the gold standard of small cars, and Cobalt just doesn’t stand up to it. But that Opel Astra……that’s a pretty sweet little car, isn’t it? And once they can figure out how to get it over here and make a profit on it….. And that engineering center at GMDAT in S. Korea. Bet the GM brass has them working nights and weekends on some new products for the new world of small cars and pricey gas. Has anyone noticed that in addition to the Fit, Versa and Yaris, there will be an all-new Aveo for 2007, launching this fall? It was at the NAIAS….but no one seemed to notice. That will likely change once the new car is ready, and Chevy bothers to tell someone about it.

    And that whole pricing strategy thingy that makes you guys lafff and lafff, well, the Freep reports that incentive spending is down by $1100/vehicle so far this year, residual values are up significantly and..gasp…market share for July was 27.5%. Perhaps that 2nd quarter operating profit wasn’t from cooking the books after all.

    I think the gang down at the tubes has more fight left in them than this community gives them credit for. Time will tell. But, does it really sound like “we’re gonna do what we’ve always done better than we’ve done it in recent years? My god, how wrong can you be?

  • avatar
    Terry

    nweaver:
    August 7th, 2006 at 5:39 pm
    “If I want to burn up the road, thats what my VFR is for.”

    I’ll see your VFR and raise you my ZRX, lol

  • avatar
    jerry weber

    captain tungsten: You miss the point with GM and Ford, it’s like a recovering alcoholic telling all he will sin no more. What about the thirty years of lost time when they were on the golf course and letting the store on auto-pilot. The business World is not going to excuse this past performance. More importantly they have no credibility in either brands or name recognition. That’s why they keep this insane trashing of old brands and re-inventing new ones. If this were a race and I left several minutes before you decided to get engaged, you would need me to faulter to get close. Trust me the competitors in the auto business are not faultering, they are building on their name, reputation, and using the time GM & ford gave them to stay ahead. In fact by changing models almost twice as fast as the domestic companies, they keep distancing themselves. Also they build on their strengths, Camry, Accord, Jetta, etc. these names are not retired, they franchise is too strong, and their used pieces command top dollar because they are not orphans. hese names represent the bedrock of the car business to millions of people, and rightly so.

  • avatar

    Captian Tungsten

    It isn’t crazy for GM to invest in pickup trucks. Far from it. In fact, The General’s pickup trucks (and SUV’s) could’ve used some MAJOR investment, particularly in the areas of fuel efficiency and packaging. I mean, an extra mpg or two isn’t very much, is it? And have you seen how cramped the back seats of a GMT900 SUV are? Of course, sorting out those areas should’ve been done a couple of years ago. As for the future…

    A dual-hybrid truck? Even if GM could knock one out of the park, NOW’s the time to do it, not next year or the year after or the year after that. As always, GM is a dollar short and a day late. And when it finally gets there, their vehicles are only nearly right (e.g. Solstice’s production delays, lack of trunk space and over-complicated roof).

    Crossovers? Hardly a proven market, and GM’s look very SUV-like in both mileage and [non] utility. New Aveo? You seriously think it’ll kick the Versa, Yaris and Fit’s collective butt? Even if the product is superb, GM dealers and crap cars have pissed-off so many people for so long they won’t give ANY GM small car the time of day.

    GM’s second quarter “profit” was mainly from stuffing dealer lots with new products and making bad loans.

    And yes, it’s more of the same at RenCen. How many times have we heard that the next car, SUV, pickup, minivan will be The One? How many times has GM released a good product and failed to keep it fresh? How long will you continue to believe that these intelligent, well-intentioned people are just about to put things right? When will you realize that GM is a deeply flawed not-to-say corrupt organization?

    To paraphrase Frank Sinatra, GM depends on tomorrow though tomorrow never comes.

  • avatar
    Captain Tungsten

    Mr. Farago:

    An extra mpg or two isn’t very much, except that it’s an extra MPG or two on top of industry leading fuel economy for full size pickups. Who loses the market share in that case?

    And if you think the back seats of the 900’s are cramped you should be making real coin starting for the Pistons, not writing this stuff… I’m tall enough to at least ride their bench, and I’m quite comfortable back there.

    And, no, the dual-hybrid truck isn’t ready now. Whose full size hybrid pickup is? And I suppose you want to dis’ the Vue Green Line too. But, it’s here now. And will actually save some $$ for it’s buyers during the life of the vehicle. (Yes, I’m waiting to see how it launches too…)

    And Outlook? you pay’s your money and you takes your chances, but Outlook will deliver 50 extra HP over Highlander, with the same fuel mileage. And lower price (no other way to conquest Toyota these days). You have to at least admit they are in the ballgame.

    Aveo? Why not? Gen 1 was developed by a Korean company with little knowledge of the market, and delivered a car that, though flawed, sold well and has proven to be quite reliable. They now have the benefit of deeper understanding of the market and the competition. But we’ll see, i’ll look forward to the TTAC review.

    I think the second quarter was more “real” that you think. From what I see at dealers, GM is stuffing Trailblazers and Envoys down the dealers throats, and the last of the 800’s (which they did crank out of a lot of at the end), but that’s about it. Lower incentives and better residuals (enabling more competitive leases) were also part of it. GM is seeing top line improvement, been a long time since that has happened.

    And sure, GM depends on tomorrow. So does Toyota…but we’re seeing a few cracks in the armor there, now, aren’t we? When Micky Maynard has to start dissing her hero company….well, that causes you pause, doesn’t it? And we’ll see how that 2 billion dollar sinkhole in San Antonio performs. And Nissan depends on tomorrow, and the rest as well.

    GM is flawed. GM has made mistakes, some real whoppers. But GM is still in the game. And the fat lady hasn’t even found the stadium yet.

  • avatar
    rudiger

    The psyche that the domestic manufacturers’ marketing taps into is the uniquely American attitude that they both need a large vehicle and that, as Americans, they’re ‘entitled’ to it. Somehow, many Americans have gotten it into their heads that it’s ‘un-american’ to drive one of those tiny powered rollerskates that the rest of the planet has to drive.

    When the last GM automotive land-barge finally went out of existance in 1996 (the last year for the full-size, rear-drive, V8 Chevy Caprice), Americans had already begun the switch to the even more inefficient and larger full-size SUV and pick-up.

    Sense of entitlement, clever marketing, and big profit margins are what have kept the domestic full-size pick-up market thriving for decades. How else is it possible to explain Detroit producing something like the 2006 Dodge Ram SRT-10, a V10-powered, short-bed pick-up truck that costs $50k and gets 9 mpg city?

    With ingrained American attitudes as they are, I just don’t know if the hot-selling, large, inefficient vehicle is ever truly going to go away permanently (even with fuel prices at or above $4/gal).

  • avatar
    dhathewa

    “I think the second quarter was more “real” that you think. From what I see at dealers, GM is stuffing Trailblazers and Envoys down the dealers throats, and the last of the 800’s (which they did crank out of a lot of at the end), but that’s about it. Lower incentives and better residuals (enabling more competitive leases) were also part of it. GM is seeing top line improvement, been a long time since that has happened.” – Captain Tungsten

    Actually, GM’s givebacks reportedly rose about $1500 to $4600 per car in July.
    Source: Market Watch, Shawn Langlois, “Toyota Climbs Ladder as Sales Plunge for Big Three,” August 1, 2006

  • avatar
    tom

    Another big problem is psychological. I mean who will ever believe the All-American Econobox? For too long, the big three have marketed the big, bold and bling cars/trucks.
    There are just no American brand that traditionally builds well thought of small cars.
    The know-how is there: GM and Ford both have been building those small hatchbacks in Europe for a long time and the image Ford and Opel have in Europe is exactly that of manufacturers of small, cheap cars with great milage.
    At least GM has the chance of transforming Saturn into that kind of a brand. Alas, it doesn’t look as if they’re capable of doing that…

  • avatar
    jerry weber

    In 1949 packard had their first major redesign since the war. Its was the pregnant elephant look and a bust for sales. Harley Earl was asked by someone how it could happen, the gm design garu quipped, “when you change so rarely you forget how to.” Gm and Ford with their cars have changed so rarely they forgot how, and more importantly those technological improvements are incremental not watershed. Thus each honda toyota and nisssan new model is incrementally better then the last one. GM used to fine tune with annual model changes. The Asians have 4 and 5 year major retooling cycle that incrementally take out the worst of their problems and introduce new technologies. You don’t just hit it out of the park as GM and Ford philes think, you fine tune it out of the park. If you can change twice as often as your competitor, yours stuff keeps pulling away from them. Thus, after say 25 years of camry’s and accords, these products take on a burnished luster but never quite a finished enterprise. The American way is like the Chinese roman candle. It shoots up burns brightly and returns to earth never to be seen again ex. taurus, bonneville, caprice etc. I seriously doubt if the Americancompanies have enough brain power left to keep the intellectual side of the design going, not to mention the money to retool.

  • avatar
    Glenn

    Major, major problem for GM. At Williams Chevrolet here in Traverse City, Michigan there are probably 400 new Chevy trucks and SUVs just sitting there, and when I looked just for laughs, there were 6 or 8 Malibus (some of which were even 4 cylinder), maybe 10 Impalas, and a handful of Cobalts and Aveos.

    Now, if GM were to “insist” that GM dealers take an alottment of trucks and or SUVs in order to get their alottment of economical cars, if I were the GM dealers, I’d be starting a revolution.

    Or, since Williams also has Hondas next door (and not a Civic Hybrid in sight – all sold – there were 3 on the lot a month ago) I’d be ordering more Hondas.

    Not to mention that Williams Kia opened about two years ago and is now the largest Kia dealer in the state, they brag. So, instead of having 400 Chevrolet SUVs on the lot costing me a friggin’ fortune on floorplan, I’d simply be ordering tons more Kias.

    Guess what the dealer’s been doing? I think there must be 300 Kias on the lot, small cars included.

    Hence, GM (and Ford and DCX) are going to be in even deeper do-do than they realize. The dealers are going where the money is because they must.

  • avatar
    Glenn

    I should add that the Kias are selling like proverbial hotcakes while the huge oversized SUVs are obviously not selling well at all, to put it mildly.

    The local Hyundai dealer (owned by the Bill Marsh group which sells Chrysler, Jeep, Dodge, Pontiac, Buick, GMC and Saturn as well) has moved a lot of Hyundais over the last 4 years in the area, too. There seems to be a glut of GMC SUVs just siting on his lot as well, but not nearly as many as at the local Chevy dealer (which makes sense given the prior market sizes of the two brands).

  • avatar
    nweaver

    Captain Tungsten:

    I think at this point, GM needs Chapter 11, its just unwilling to admit it.

    The legacy costs are too high. Even IF GM could design a car which could match the Camry or Civic, they couldn’t make money selling it.

    GM’s plants and platforms are out of date. A Honda Civic plant can switch from Civics to CR-Vs to Elements to RDXs on nearly a car-by-car basis. GM doesn’t have anything like that, either as a platform or plant. The Element was hardly the hit Honda wanted (they do make money selling the Re-Tirement, but they wanted to sell more), but it doesn’t hurt Honda too much because they can shift between cars at will.

    There’s no GM plant like that, which can produce such diverse vehicles from a common platform at will.

    GM’s labor contracts are out of date. Not only does it take more labor per car, but the cost per hour is simply stratoshperic.

    Most of the high-volume vehicles are perceived or actual SuckMobiles. I hate the Camry (I’ve rented too many of em, the WonderBread of cars), but I’d take it in a hot second over a Malibu. The Cobalt was obsolete before it rolled off the line, 5 MPG worse than the previous gen Civic. The GMT900s look to be GREAT SUVs, but they drink gas like a fish. (Ohh, 10% better gas mileage. 110% of crappy is still crappy).

    And finally, I don’t believe GM is really cutting incentives as much as they claim. By switching to 0% financing, and being much more liberal with who they accept, these discounts can be pretty hefty while hiding the true cost from the books, and delaying the true cost until tomorrow.

  • avatar
    Steve_S

    The driving experience is too important for me to suffer in some kind of econobox. I’ll budget the extra $$ for 20/MPG and enjoy my drive then have a Yaris or Fit as a commuter car. If you have two you need to added in the additional maintenance, insurance and depreciation on two vehicles.

    I think Americans will buy slightly more efficient cars in the future or hybrids but the easiest way is instead of getting a 30k car just get a 25k car even if it gets 10 MPG less you’ll be ahead.

  • avatar

    Like a few others have already mentioned, I came up with the solution to gas costs back in ’98 when I’m moved south to VA – I just started commuting my motorcycle on a day by day basis, probably ride 49 weeks of the year.

    My 900cc Triumph gets me 36mph (it’s the gas hog of the garage). My evo Harley is mid 40’s easily, 49-50 on a good day when I’m being quiet. As long as I’m riding something that’ll get me 10k on a rear tyre (double that on the front) I’m beating car costs – which means I’ll never own a Japanese sport bike.

    But it’s not all money: The cell phone is off, how could you answer it with a helmet on, anyway? There’s no radio, no obnoxious morning DJ or politicized talk radio. There’s just me and the highway, and I arrive at the Honda shop relaxed and ready to go.

    More importantly, if the day’s been crap, the ride home insures that the old lady won’t have to listen to it – 22 miles down the road, it’s forgotten.

    Dump the cars, guys. There are better alternatives.

    Syke
    Deranged Few M/C

  • avatar
    Captain Tungsten

    nweaver:

    “A Honda Civic plant can switch from Civics to CR-Vs to Elements to RDXs on nearly a car-by-car basis. GM doesn’t have anything like that, either as a platform or plant.”

    Lansing Grand River plant builds CTS, STS and SRX, rear and all wheel drive versions. Sequencing is quite flexible. New GM car plants have the capability, but have a mix of products that keeps them full without a lot of flexing. Older GM car plants will either get the investment next time around, or they will close (the reason that Oshawa will lose some capacity, even though it’s GM’s highest quality plant). Manufacturing technology is not where GM is lagging. When you are fighting with your right hand tied behind your back, you develop a really wicked left hook.

    “GM’s labor contracts are out of date. Not only does it take more labor per car, but the cost per hour is simply stratoshperic.”

    Higher, cost per hour, yes, but better take a look at the Harbour report before knocking GM’s labor per car. And the labor contract will get fixed in ’07, or else…

    “The Cobalt was obsolete before it rolled off the line, 5 MPG worse than the previous gen Civic.”

    No argument there. Civic is the gold standard of small cars today. And Cobalt is the main reason you will never see another GM small car engineered in North America again.

    dhathewa:

    “Actually, GM’s givebacks reportedly rose about $1500 to $4600 per car in July.”

    GM incentive spending is up, as it is for all manufacturers right now. But the fire sale is still being resisted, and at the same time, GM car inventories went from 59 to 40 days supply, and truck from 89 to 65, accoriding to Wards Automotive. Still higher than the Asian makers, but a nice move in the right direction, and done without a fire sale. Signs of sanity are breaking out in the Tubes. Game far from over.

  • avatar
    geozinger

    Captain Tungsten:

    What about the new Delta Township plant? Isn’ t that one flexible manufacturing also?

  • avatar
    Glenn

    Just heard a radio ad this morning on the commute in to work, carpooling with my wife in my Prius. (Hey, whatever it takes, right? We get better mileage than most motorcycles, and have AC if we want it, can actually get – and carry – groceries for us or for the food pantry my wife volunteers for at church).

    The radio ad was from the local Chevy dealer. New Chevrolet Silverado pickups “from only $12,990”.

    I ask you, one and all. How do GM or the dealers expect to make a profit on full-sized pickup trucks built by the UAW in antiquated plants, with materials costs going up faster than inflation (is being reported), when priced less than a Accent small car built by South Korea’s Hyundai? What does a Silverado weigh? 4500 pounds?

    Never mind the quality, feel the width, as the haberdashers used to say in the low-rent districts of cities, trying to sell their wrong-sized cheap suits.

    Maybe the Chinese should set-up factories in our country, buy up the huge inventory of Silverado pickups for cheap, melt them down and make two economy cars to sell – for $13,990 each. (OK I’m being facetious, but you surely get the point).

  • avatar
    pixarwolf

    I drive a Cobalt and HATE it – what a friggin plastic piece of #$#^. Anyway, wait a while, it gets better, see oil will hit $4+ and by 2007 when GM needs to “renegotiate” the contract with the UAW, That is when the #^%^ will hit the fan. GM will say goodbye to the UAW, and anonuce bankruptcy – and all the pieces of GM will be sold off and all the dealers will start selling “other” brands. The local Pontiac dealership is finally closing, all that’s left is a bunch of Torrents! the Ford dealership closed years ago. I can’t wait for GM to close shop! but I will never drive a foriegn car, and why would I when gas will be $10 a gallon…

  • avatar
    2006300c

    wow……o.k.

  • avatar

    Oh yeah, one advantage of a motorcycle over a Prius: I’m not straitjacketed into driving like a nice little politically-correct milquetoast, moving along only as traffic ‘should’.

    If the devil should move me, and I decide to let it howl, I have that option. All the A/C, CD players and satellite navigation in the world ain’t gonna replace that. Or roofs and windows, for that matter.

    Oh yeah, I’m legit for the HOV lanes, too.

    Syke
    Deranged Few M/C

  • avatar
    jerry weber

    New news from GM, they are slowing down the suburban lines, after having thought they could go full boar for a year with the new product. Wagoner was quoted as saying, he’s not worried because GM now has a larger segement of this shrinking market. Let’s get this straight, GM will be the last and largest maker of this obsolete product. The last carriage maker and buggy whip supplier, is still gone. As for the permanence of this fuel situation, it is my opinion that there will always be a new crisis real or manufactured by our petro industry to justify why prices will never retreat. In other words, be ready to pay World prices for oil, because we will no longer be given special favors in pricing. Back to Wagoner, he said he can also change the suburban line to pickups, (but not cobalts) if the heavy V8 continues to lose sales. So, I don’t want to go 12 mpg in a suburban, but I’ll settle for 14mpg in a silverado. That won’t happen in this millenium.

  • avatar
    espo19047

    The Cobalt outsells all three Scions combined. The Scion cost more so the money you say in gas will still take the lenth of the loan to get back. The HHR is also from the cobalt platform and is also very successful.
    Just a little “truth.”

  • avatar
    jerry weber

    espo, the scion is the “fringe yuppie car” for toyota, not their main ride for small cars. Compare sales of chevy cobalt with say corolla their high volume small car. Then add the scion sales to the mainstream cars and you see that toyota is far out in front on small car sales. But the important thing is that toyota will make a profit on every small car gm will lose money on them.

  • avatar
    stanshih

    http://biz.yahoo.com/ap/060816/the_new_subcompact.html?.v=7

    In summary: Release of the New Silverado/Sierra reflects a lack of strategic foresight by GM. However the earlier-than-planned release is a solid tactical maneuver to capitalize as much as possible in a shrinking, but still large pickup truck market.
    Early release of the new Silverado/Sierra will further smother Ford’s F-150 (which had been beaten in sales by the old Silverado/Sierra of late). Also, early release of Silverado/Sierra will sell thousands more units than if it had gone on sale later when it would have gone head-to-head with Toyota’s new Tundra.


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