By on December 16, 2010

Ed Niedermeyer is too humble to say it, so it’s left to me: Ed just had his second third op-ed piece in the New York Times. Required reading.  Two core sentences:

“In particular, what Mr. Obama called his “one goal” — having Detroit “lead the world in building the next generation of clean cars” — is nowhere near being achieved. While the idea of improving G.M.’s and Chrysler’s fuel efficiency was doubtless a politically popular justification for the bailout, American consumers have not embraced the goal with equal fervor. Sales of fuel-sipping compact and subcompact cars have actually dropped this year, while pickup and sport utility vehicle sales grew by double-digit percentages.”

Honestly: Trying to tell customers what to buy fails. You have to make what they want. If they want dualies, give them dualies. It (still) is a free country. The mind-altering abilities of advertising are vastly overrated.

“And if Detroit’s slipping into bad old habits wasn’t distressing enough, the bailouts have created a perverse new dynamic. With G.M. stock now being publicly traded on Wall Street, taxpayers have every incentive to cheer on the bailed-out automaker as it overproduces vehicles and pushes cheap credit. After all, the sooner G.M.’s stock hits a certain level — likely around $52 per share — the sooner the Treasury can sell its remaining equity and get taxpayers out of risk.”

True, very true.

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59 Comments on “TTAC In The New York Times...”


  • avatar
    HoldenSSVSE

    Hey TTAC editorial gods, the link to the story jumps to page two of the oped, don’t know if that was your intent or not. – edit – thanks for fixing!
     
    I guess I’m confused by this.  Yes, the data shows that American buyers are still addicted to gasoline, but I don’t get how this is “Detroit’s” fault.  Prius inventory has swollen to over 90 days while sales continue to decline.  Honda can’t sell a hybrid to save their lives (never mind that the CR-Z and Gen II Insight are both steaming piles of crap for different reasons).  The Fusion hybrid is doing OK, and well the Volt…well who knows but between General Electric, power utilities and the government production is largely spoken for for the next two years.
     
    I just don’t see how anyone can blame an industry for providing what consumers – wait for it – want to buy.  Look at Nissan’s line up and the naming of their products Armada and Titan, and neither of them sweet hearts at the pump.  Toyota has given us the Land Cruiser, Sequoia, Tundra, and the FJ Cruiser.  None of them, until the FJ Cruisers latest tweaks were sweethearts at the pumps; the Sequoia and Tundra are about as bad as you can get, not even able to find 20 MPG.  The FJ Cruiser had Hummer H3 grade fuel economy (now improved).  The now defunct Honda Element was 20/25 if memory serves me, for a lightweight vehicle with a 2.4L 4-banger under the hood; deplorable.  The Toyota Sienna AWD minivan gets worse MPG than many more capable from a towing and bad weather capability standpoint CUVs.
     
    Americans have been very clear, they don’t want econoboxes.  Even if you chafe out the enthusiasts (guilty as charged) and distill it down to the people who see a car/SUV/CUV/truck as an appliance to get you from point A to point B (probably 95% of Americans), for most buyers, cars like the Fiesta, Yaris, Versa, Fit, Aveo (ugh), Accent, aren’t high on the list, especially if they can afford more than the list above. Americans want more sheet metal around them (right or wrong) and want more luxury in their vehicles, and Americans, even in this craptastic economy want to keep up with the Jones above all else.  Nothing says WTF like the 2011 Aveo parked out in front of the McMansion, the Jones next door just got a Nissan Armada – we need an SUV too, didn’t you see the DVD players in the back seat!
     
    I would go one further and say the automotive press is one of the biggest contributors to this problem of providing more than buyers need.  You can’t have your cake and eat it too.  Vehicles like the Cruze and Fiesta, which have both made significant investment in their interiors and premium features in a compact solution with good MPG are roundly criticized because of their price.  Look at the now very primitive Toyota Corolla in comparison (ya I get it Corolla vs. Fiesta isn’t on the same plane, but the sticker prices are).  The utilitarian Corolla is getting growing criticism for bad driving dynamics, cheap interior, lack of premium features, and a primitive 4-speed automatic.  Sure, its reliable, so is a GM W-Body with a 3.8L under the hood too, but equally primitive compared to better offerings.  So Detroit is supposed to build smaller cars with the features American buyers want but then they are supposed to give them away? Or do they build the primitive Focus or the crappy Cobalt and Neon and sell on price and still lose money?  Or is Hyundai the answer, just until the Chinese or Indians do it better – and then phooey on the Japanese?
     
    As for fleet buying I really think this is a red herring, Chrysler excluded.  Major fleet buyers have pushed off buying and capital expense and in 2010 ramped up these purchases, the increase in truck, panel van, and fleet sedan data really supports this.  Have you been to a Hertz or Avis lot lately?  Hertz is filled with Toyota products now, and my latest trip to the counter they offered me a Honda Accord.  What?  Honda does fleet deals?  I had no idea they even played the game!  You fail to mention that GM’s fleet sales are actually down, and when TTAC did their analysis on fleet sales you took the fleet queen Panther Platform Crown Vic out of the mix, well, because.  Ehem – if you waterboard statistics long enough they will confess anything you want to hear.  For now, fleet sales I see as being OK – and Toyota’s dependency in particular has grown to about 10% of their sales, with some models like the Camry creeping up past 13%.  Sure, the Impala is at 54% but many of those are taxis and police cruisers, or should GM give that business to Ford because, well just because?  As corporate America gets their fleets updated, purchases deferred for 12 to 24 months, the numbers across the industry in theory should stabilize.
     
    But the last thing I can’t understand is why all of this ire directed specifically at GM.  We’ve since learned that Ford, Toyota, BMW, VW, and Nissan all got bailout money and/or TARP money, with Ford getting close to $16 billion.  We also know that Toyota got emergency loans from the Japanese government in excess of $2 billion (US).  But worst of all, I simply cannot understand someone that says, “I’ll never buy a car from Government Motors,” while walking into a Chase Bank branch, or a Bank of America branch, etc. etc. etc. to do a deposit and pay their credit cards.  How can the outrage be directed at a bailout that kept parts suppliers afloat to the benefit of the entire auto industry, and kept American unemployment rates down about 4/10%, by the most conservative estimate; and the ripple effect that could have had.

    The banking bailouts sure don’t seem to be a “success” for the American taxpayers.  The same morons that collapsed the banking system (and almost took the whole auto industry beyond Detroit with it) then rewarded themselves with billions in combined bonuses on the taxpayer backs – well they earned it.  We’re still seeing real estate prices falling, the foreclosure mess is growing, we can’t even figure out who owns the debt and who holds the title on many American homes. Real regulations that were gutted haven’t been put into place to reign this in and Wall Street is already starting up with subprime loans, FHA is only requiring 3% down, and you can buy a shiny new car with a FICO as low as 540 again. We’ve clearly learned nothing.
     
    I get this is the Truth About Cars, not the Truth About Banks.  As a taxpayer I was against bailouts in general, but looking at what has shaken out in all of this, I’m very pleased with my decision to walk away from Chase Bank and go with a Credit Union for my personal banking (and credit cards).  The taxpayers are on their way to getting paid back from the automakers, the screwing we got from the banking industry, that hurt every other industry, could last for a generation or more.  That is the real tragedy.

    But I guess when I read this oped the real answer is Detroit shouldn’t build what consumer and business want to buy, they should build instead what consumers don’t want to buy, and then go out of business anyway -at least then there can be an I told you so punch line. The data is undeniable that efficient cars like the Malibu and Fusion still lag behind in sales behind the Accord and Camry; but lets look at the trend. Even with dealers gutting prices by 9% on average, the worst in the auto industry, despite free 2/25 maintenance plan, despite with an average of $2,600 on the hood, the Toyota Camry sales are dropping, the Prius has driven off a cliff, and the Corolla is falling well to the back of the pack in the C Segment. The trend supports the view that Ford, Hyundai and GM, in that order are the new darlings, and the renaissance at Ford and GM isn’t just all about gas guzzlers; and Hyundai is beating Japan at its own game.

    • 0 avatar

      Link fixed. Thank you.

    • 0 avatar
      pgcooldad

      One word – BRAVO!!
      Well said, Thanks!

    • 0 avatar
      designer

      i agree, well said, and you cant count the cruze and volt yet, since they are just now coming out and you should give it a year of sales until you critisize them as being passed over for trucks and SUV’s.
      You have to remember…to the vast majority of people, vehicles are a lifestyle choice. I dont care if gas is $3.50/gal… people with kids and a busy life, contrators  or someone working on their house themselves cant get by with a compact or sub-compact car.
      You have carry drywall and 2×4′s in a civic or focus.
      I’m a mountain biker and skier, and am always working my house, there’s no way i can drive compact car…its doesnt fit my life and carry all the things i need to carry.
      People in Washington, new york and california like to tell the rest of the country what to drive.
      Well guess what TTAC… most people in the midwest have to commute to work.
      Stop slamming Detroit and it’s automakers.. toyota has just as many SUV’s or more as everyone else, and guess what…they dont get any better gas mileage! 
      SUV’s are NOT responsible for global warming! vehicles only produce about 20% of the worlds carbon output and the US has the strictest emissions standards of ANY country!  

    • 0 avatar
      Jimal

      Well said. I don’t understand why the goal to “lead the world in building the next generation of clean cars” and building products to satisfy the wants and (perceived) needs of the market need to be mutually exclusive. While I prefer smaller cars I also begrudgingly accept that most others do not. If GM or Chrysler can lead the industry with full-size pickup fuel economy or full-size SUV tailpipe emissions, isn’t that a win? Would it be easier to fill the road with smaller, fuel efficient vehicles? Not if people aren’t going to buy them.

    • 0 avatar
      findude

      Give this guy a column. . . .

    • 0 avatar
      PeregrineFalcon

      “Give this guy a column. . . .”

      I second this motion.

    • 0 avatar
      geozinger

      +1!

    • 0 avatar

      Awesome counterpoint, but I am really tempted to write a counterpoint to your counterpoint.

    • 0 avatar
      geeber

      You get the basics right – you can’t blame GM for building what the customer wants, and most customers do not want subcompacts or even smaller hybrids. But, unfortunately, you torture a fair amount of facts to get there. Let’s not make up our own narrative because we don’t like reality.

      HoldenSSVSE: Look at the now very primitive Toyota Corolla in comparison (ya I get it Corolla vs. Fiesta isn’t on the same plane, but the sticker prices are).  The utilitarian Corolla is getting growing criticism for bad driving dynamics, cheap interior, lack of premium features, and a primitive 4-speed automatic.  Sure, its reliable, so is a GM W-Body with a 3.8L under the hood too, but equally primitive compared to better offerings.

      No, the W-bodies are not as reliable as a Corolla (let’s talk about clunky intermediate steering shafts and faulty intake manifold gaskets), and, more importantly, they are no more refined than a Corolla, while competing in the next higher size and price class. Let’s compare apples to apples, please.

      If you are honestly comparing a Corolla to an Impala…well, that’s a big part of GM’s problem right there.

      HoldenSSVSE: What?  Honda does fleet deals?  I had no idea they even played the game! 

      They sell a few, through their dealers, to rental car lots, but fleet sales for the Accord are nowhere as high as GM’s fleet sales. 

      HoldenSSVSE: For now, fleet sales I see as being OK – and Toyota’s dependency in particular has grown to about 10% of their sales, with some models like the Camry creeping up past 13%. 

      Again, let’s compare apples to apples, please. The relevant comparison is to the Malibu, and it is at 39 percent fleet, which is triple the level of the Camry. That’s hardly anything to crow about.

      HoldenSSVSE: But the last thing I can’t understand is why all of this ire directed specifically at GM.  We’ve since learned that Ford, Toyota, BMW, VW, and Nissan all got bailout money and/or TARP money, with Ford getting close to $16 billion.

      That wasn’t “bailout money.” in the sense that they needed it to keep the lights on, as GM and Chrysler did. The federal government provided credit to the finance arms of several companies because the banking sector was facing a crisis. All of that money was promptly repaid, unlike the money given to GM and Chrysler. 

      The money you reference was not a bailout, and it actually earned the federal government real profits. Big difference from pumping money into a bankrupt GM and Chrysler.

      HoldenSSVSE: We also know that Toyota got emergency loans from the Japanese government in excess of $2 billion (US).

      That’s an issue between the Japanese government and Japanese taxpayers. I really do not care what the Japanese government does or does not do for Toyota.

      HoldenSSVSE: The banking bailouts sure don’t seem to be a “success” for the American taxpayers. 

      The federal government made money off of that one, and a working financial sector is vital to any economy. So I’d term it a success at this point.

      HoldenSSVSE: We’re still seeing real estate prices falling…

      Good. When a bubble collapses, prices fall. This is Econ 101. This is a good thing. Sky-high housing prices hurt consumers in the long run, forcing them to devote an inordinate amount of income to shelter.

      HoldenSSVSE: Real regulations that were gutted haven’t been put into place to reign this in and Wall Street is already starting up with subprime loans, FHA is only requiring 3% down, and you can buy a shiny new car with a FICO as low as 540 again. We’ve clearly learned nothing.

      And GM has been one of those companies pushing to get into subprime loans for new automobile companies. In that sense, the company learned nothing from the recent collapse of the auto market, so bailout critics on on target when they call GM to the carpet on that one.

      HoldenSSVSE: The data is undeniable that efficient cars like the Malibu and Fusion still lag behind in sales behind the Accord and Camry; but lets look at the trend. Even with dealers gutting prices by 9% on average, the worst in the auto industry, despite free 2/25 maintenance plan, despite with an average of $2,600 on the hood, the Toyota Camry sales are dropping, the Prius has driven off a cliff, and the Corolla is falling well to the back of the pack in the C Segment. 

      Most of the rebound in sales this year has been with sales to fleet customers - corporate clients, governments and rental car companies. GM, Ford and Chrysler dominate in this area – many governments and companies still have a policy of “Buy American,” which means “Buy GM, Ford or Chrysler.” So there is less there than meets the eye, except that demand among retail customers remains weak. Given the strength of Honda and Toyota with these more desirable sales, it is understandable that their sales wouldn’t rebound in this type of “recovery.”

      Holden SSVSE: The trend supports the view that Ford, Hyundai and GM, in that order are the new darlings, and the renaissance at Ford and GM isn’t just all about gas guzzlers; and Hyundai is beating Japan at its own game.

      I’d like to know in which universe GM is experiencing a full-scale renaissance. It still relies heavily on fleet sales and sales of big trucks, SUVs and crossovers. Its compacts, family sedans and even entry level luxury cars are also-rans, at best. The Cruze is a big deal to someone used to a Cobalt, but to everyone else…it’s not that big a deal.  

      That sounds a lot like the old GM. A few Volts to high-profile customers don’t change these dreary facts today, anymore than a considerable number of sales of Corvettes to enthusiasts could change those facts during the 2002-08 timeframe.

    • 0 avatar
      moneyandwheels

      Well played sir, well played.

    • 0 avatar
      SVX pearlie

      The op-ed is weak, IMO.

      Fleet sales, in particular, are a poor factiod presented without context.

    • 0 avatar
      Sinistermisterman

      Bam. It’s this kind of tete a tete debate that got me reading TTAC in the first place.

    • 0 avatar
      Gone4Day


      Holden, you sound like Barry Ritholtz at The Big Picture. Its a financial blog and he even credits TTAC in a few posts, such as: http://www.ritholtz.com/blog/2010/11/banks-prepackaged-bankruptcy/
      He actually wrote the book, “Bailout Nation” and seems to know what he’s talking about. Good stuff

  • avatar
    shaker

    Kudos on the counterpoint.

  • avatar
    OldandSlow

    It’s a called a recession people, lead by the pop of a credit bubble.  A lot of us no longer can waltz into a dealership and whimsically sign on the dotted line with little or no money down for a 20K to 25K purchase.
     
    My major worry is when the next shoe falls – the popping of a bubble called sovereign debt.

  • avatar
    windswords

    If you take out the minivans (come on they aren’t trucks and we all know it), and the PT Cruiser, how many “truck” sales does Chrysler have as a percentage? I put truck in quotes because the EPA’s idea of what a truck is is not our idea. For me it’s body on frame pickups, SUV’s, vans and unibody rwd SUV’s (Grand Cherokee, Durango), not fwd minivans and fwd CUV’s created off a car platform. Is the Dodge Caliber a “truck” or a car? If it’s a car, then why is the Compass and Patriot a “truck”? Because it’s awd? Then what do you call a Caliber with awd? Is a CUV trucklet a “truck” because it has some storage behind the rear seats but a station wagon is a car when it has even more storage behind the seats?
    .
    Bottom line is that the definition between car and truck has become blurred. Americans are not buying more “trucks” than cars, the cars that they are buying are just not as easy to classify as they once were. Station wagons didn’t die out in the marketplace they just evolved to CUV’s.

  • avatar
    Zackman

    I also agree with Holden. Knock it off picking on GM. I believe that the “hate” for GM goes back to the 1973 models when the industry was turned upside-down and the car styles we took for granted really turned us off, but they were all guilty of this. Well written rebuttal!

    • 0 avatar
      daviel

      zackman is right – that’s why I don’t like GM – I associate them with those awful cars – especially the small cars.  I had never realized that but it’s true. Just curious – what type vehicles are selling in China? I bet their car buyers are just like us.

  • avatar
    findude

    Here’s another important phrase from the op-ed piece: “a plan to deal with a possible gas price shock.”
    I remember the BIG 3 getting burned by this when the first “energy crisis” happened in the 1970s. Then it happened again a couple of years ago when oil spiked to $150/barrel. They absolutely must have some econobox options in the ol’ back pocket ready to roll out of factories and compete with the best offerings by Asian and European manufacturers.  A Chevrolet Vega or Ford Pinto equivalent will not cut it.
     
    It’s tough for a manufacturer to juggle between what people buy at one moment and what they will buy when they become sensitive to the cost of fuel. There will be gas price shocks again because the reality of our world (geologically and politically ) is that the price of energy in any given place will be volatile.
     

  • avatar
    NN

    From a taxpayer point of view, the bank bailouts actually were a massive success.  Witness the $12b profit taxpayers have seen from bailing out Citigroup.  The remaining debt owed to TARP is practically all from the automakers and AIG.  Sure, real estate is still terrible, these guys paid themselves handsomely, etc.  Finance is a liquid world, and can come back much faster than tangible things like housing, where massive overproduction will take years to sort out.  At least having that part of the economy fixed so they can lend will help support everything else.
    I’m not saying that I agree with any bailout from an idealistic point of view.  But if you look at straight dollars and cents, the bank bailouts worked for our government more than the investments in GM and Chrysler.
    That said, I agree that it doesn’t make sense to hold anything against GM, either. I bought a 2010 Malibu this year and I think it’s a fantastic car.

  • avatar
    caljn

    Ed: how does one go about having an op-ed published in the NYT?
    Do they throw out a topic and solicit your expertise directly or do you just pen your opinions, send it in and hope for the best?
    And why would an (oxymoronic) young, right winger such as yourself not target the WSJ instead? 
    (I realize you have been on Faux a few times.)

    • 0 avatar
      JJ

      OT: yeah, in some of these pieces your right wingness really shines through, especially on pieces about gubment motors. Slightly too much I think sometimes but not in this piece IMO hence the OT.

      I sorta understand cause I’m considered right wing too in my country (and as a business student, you tend to like/understand the benefits of a free market), but it’s the Netherlands, so yeah…Let’s just say I’m at least as confused by Faux news as the Stig is by stairs.

      I like some political debate on TTAC as much as anyone and it’s way more fun if the writer picks sides but if it’s too obvious it works counterproductive IMO (again, not in his article per se but I remember another one were a couple of democrats were singled out for taking cash from GM for instance, felt that was a little out of place at TTAC).

    • 0 avatar

      They asked me.

    • 0 avatar
      caljn

      Ed: thanks for the reply but more info please.
      Why would they ask you specifically, when the pool of auto writers is rather large and varied?
      Have you cultivated relationships with editors over there? Do they know you from TTAC only?
      And do they give you a topic and a deadline or allow you do the choosing?

      Just curious…I am fascinated by the inner workings of the mass media.

    • 0 avatar

      I’m too busy sitting here in my pajamas, reading and writing for you all, to be cultivating relationships with other media outlets. About a year ago, I got an email from the op-ed editor saying he’d been reading TTAC and wanted a piece on GM’s payback claim, a topic I’d already been writing about. That’s been the pattern ever since: they ask, I write.
      The media may run on relationships, but TTAC is about hard work and truth-telling. If another outlet likes what we do and wants to solicit our opinion, they need only drop us a line at our contact form.

    • 0 avatar

      First off, when people used silly, pregnant terms like Faux News, they’re not showing their sophistication, they’re showing their intellectual sloth. I’d like to believe that I’m capable of self-reflection and one of the things that annoys me most is when a cause that I believe in is poorly represented. So I pay attention to my own side’s weak arguments and propaganda. Also, Orwell, a man of the left, btw, said that good writing should avoid cliche and Faux News is by now a hackneyed cliche.

      When I see people use “Faux” instead of Fox, there is a strong tendency to immediately dismiss anything they have to say.

      The truth is that Fox News is probably closer to the majority of America that is center-right than CNN and definitely closer than MSNBC. Fox also does at least as good a job in terms of balance as the New York Times does (that is a deliberate understatement – even the NYT admits it tilts left). Fox also has fewer chuckleheads than CNN. Some of CNN’s anchors just strike me as not very smart. Which is ironic in light of how folks like you think that you’re smarter than those on the right, those dolts who watch Fox against their own economic interests.

      It seems to me that some people on the left have little perspective. If anyone is at the very least right of center, they’re characterized as some kind of right wing wacko. Forget about RINOs, I know of conservatives that think Michael Medved is a squish, but you probably think Medved is a flaming right winger.

      So it doesn’t surprise me that you fail to distinguish between the players on the other side.

      TTAC, it seems to me, has always had a libertarian, rather than conservative, point of view. Farago’s a 2nd Amendment supporting libertarian without a doubt. Baruth is no fan of police. The Newspaper is libertarian.

      But there’s no political litmus test that I can see. I’m probably the most right wing writer on the site. David Holtzman is left of center. Steve Lang is probably about where Ed is.

      In any case, though, I try pretty hard to keep my own politics out of most of the formal pieces I submit here. I think the other writers do as well, even when touching on politics. We’re transparent, we don’t hide our own outlooks, but we don’t use our venue here as a political soapbox. I save my political stuff for PajamasMedia.

      TTAC’s libertarianism is more of a right wing rather than left wing libertarianism (left wing libertarians came from hard core marxist backgrounds but have come to embrace the concept of the market and wealth – kind of confusing to me but at least they understand that economic growth and enterprise is a good thing).

      As for Mr. Niedermeyer’s political position, I’d characterize it as moderate libertarian of the right wing variety. I can’t recall if Ed and I have ever discussed our own personal politics, but we have discussed the politics of our readers and we’re in agreement that there are people who comment here that we disagree with politically who are still thoughtful and informed commenters.

      Despite its biases, the Times is still the paper of record in the United States. That Ed’s been invited to be on their op-ed page is evidence of how seriously TTAC is taken by the automotive and general media.

      Wow, Ray Wert commenting at TTAC and Ed getting on the NYT’s op-ed page all in one week. TTAC rulez both old and new media! <-note to critics, the use of the internet/txt slang z in rulez is intended to convey irony and slight sarcasm.

    • 0 avatar
      caljn

      Thanks again Ed and congratulations.  Getting that kind of space in the NYT op-ed is quite an achievement and testament to your reputation.
      It is very likely the Pres himself read your words this morning.
      Keep up the good work!

    • 0 avatar
      JJ

      @Ronnie Schreiber

      I think the term faux news is just a way to deal with the reality of Fox being so succesful for people who don’t necessarily think it’s desirable for society for it to be so succesful.

      I actually kind of like libertarianism myself, I just think Fox sacrifices (compromises?) too much in order to get some of their economic libertarian views enough support among the people in forging a pact with the ‘patriotic’ religious lobby (IMO glaringly obvious anti-libertarian). I feel like people who want to forbid me from having euthanasia are literally trying to control my life and that doesn’t jibe well with my idea of freedom. I guess as a libertarian you might agree.

      So when Í’m talking about ‘Faux’ news personally, I am talking about Glen and Sarah and co and not so much about Fox’ economic policy (which I tend to agree with, broadly speaking, in terms of as low as possible taxes and subsidies, only with the exception of the health care issue, cause I think access to health care for everyone makes sense not only socially but also, ultimately, economically).

  • avatar
    JJ

    I kind of agree that not building economical cars but instead pushing SUVs again is not the ‘big trey’s’ problem. They just give the people what they want given the oil prices at this time. Whether those oil prices are a true reflection of the cost of oil is very difficult to say. I tend to think it isn’t, but then again in my country gas is taxed to the max and I hate that with a passion. Where the pricepoint should be seems impossible to say, in which case I would usually say let the free market decide.

    To get back to the cars, the problem of the big three before wasn’t that they focussed on pushing SUVs, but that they didn’t seem to need to offer good quality cars (trucks) in that market if they only were big and powerful enough. Most of these SUVs had pretty poor efficiency, crappy cheap plastic interiors etc, but they were big, American and relatively cheap so that was enough to get by. Unfortunately for them, when the SUV market tanked, they couldn’t come up with competitive products in lower segments because they never bothered to build a nice interior, package a product nicely to make good use of the available space, have a very efficient engine etc etc.

    Point being; it’s not a problem if the big three make tons of (short term) cash by building trucks and SUVs, as long as they don’t neglect the things that make them able to produce competitive smaller cars when the time requires it.

  • avatar
    Zackman

    Awesome counterpoint, but I am really tempted to write a counterpoint to your counterpoint.

    Sajeev, Please do. The more info from those “in the know”, the better.

    • 0 avatar

      @Zackman Sajeev, Please do. The more info from those “in the know”, the better.
      geeber much made my counterpoint unnecessary, but I will add one data point:
      Like I said on our Facebook page (HINT HINT) look at the incentives on GM trucks, SUVs and the Malibu right now: 0% APR, NO Payments Till Spring, $1,500 Holiday Allowance. Saw it on TV and here: http://www.autotrader.com/nvs/nvs_detail.jsp?dealer_id=1359393&special_id=16061262&special_type=new&nvs=false
      While the Camry isn’t far behind (0%, 1500 rebate, 500 bonus rebate) only their “bonus” cash is available if you opt for 0%. So there’s $1000 more dollars in rebates on the 0% Malibu.  And Toyota requires immediate payment, none of that deferred B.S. we all know and remember from “Old” GM. Expect a one time write off of bad debt sometime in 2011.
      Again, that incentive spend is one data point, but there are plenty more where that came from.  But we probably stopped the Death Watch chronicle for good reason.
      Too much of New GM is like the Old one.  Not surprisingly, look at the lack of a shakeup in management. The President was the only person to actually get someone fired.Ok, now I’m just ranting…

  • avatar
    philadlj

    Sigh…I love Portland, Ore….

    • 0 avatar
      Philosophil

      “American consumers have not embraced the goal with equal fervor. Sales of fuel-sipping compact and subcompact cars have actually dropped this year, while pickup and sport utility vehicle sales grew by double-digit percentages.”

      This may be less a function of consumer ‘wants’ as a variation on the old ‘tragedy of the commons.’ Once enough people begin driving SUV’s and Trucks then everyone else feels they have to drive an SUV or Truck as well for the same kinds of reasons. To say that it’s solely a matter of ‘keeping up with the Jones’ is far too simplistic. All things being equal, there may actually be more people who would prefer to drive a smaller car but choose not to: 1) So they can ‘see’ as well as everyone else with a higher vantage point, and 2) So they can feel relatively safe on a road filled with SUV’s and Trucks (there’s nothing like the feeling of a bumper aimed at your head to make you rethink the virtues of a Mini).

      If you put all your cows in the pasture, then I may feel compelled to do the same thing, even though it may not be what I would really prefer to do, all things being equal…
       

  • avatar
    jaje

    CAFE is exactly the influence – force the automakers to make cars that people don’t want to buy (not the best business case).  But with the various lobbyists CAFE gets loopholes big enough to drive SUVs through them.  Then we had C4C which in turn decimated the used car market taking out good reliable transportation (the most environmentally friendly vehicle to drive is one that was already built) and compacting I’d say a years worth of future sales into a summer.  This costs us billions of dollars in taxpayer money and did very little to stem the tide of their demise.
     
    I do feel the bankruptcy did not do enough and that was sever all the union agreements giving GM more flexibility (the world’s changed drastically when the UAW was needed to actually protect the workers).  Now the UAW is just another level of management that seems less interested in protecting the long term rights of their members.  There has to be give between both sides here and there is very little making it hard for GM to hire non-union workers for temporary work, slowing production or shutting down plants to right side its burgeoning inventory.  Bad habits are hard to shake when GM’s “new” management is just younger “old” GM management.  The market should have dictated the terms of GM’s bankruptcy and not the Gov’t.

  • avatar
    philadlj

    Congrats on getting in the NYT again. I don’t always agree with their opinion section, but I do always read; and it’s always nice when moderate contributors’ voices are heard.

    “Despite rolling out the much-hyped Cruze compact and the Volt plug-in hybrid, G.M. still sells half again as many trucks and S.U.V.’s as it does cars.”

    Emphasis on “rolling out”; The Cruze just went on sale, and the Volt was shipped to select dealers like… yesterday. It still isn’t available nationwide.

    You can’t really blame brand-new product that isn’t in its stride yet for not making a proportional dent in truck sales. And with gas prices on a slow but steady rise, demand for that product will come…then go again when prices go back down, et cetera.

  • avatar
    Philosophil

    <em>”American consumers have not embraced the goal with equal fervor.  Sales of fuel-sipping compact and subcompact cars have actually dropped  this year, while pickup and sport utility vehicle sales grew by  double-digit percentages.”</em>

    This may be less a function of consumer ‘wants’ as a variation on the old ‘tragedy of the commons.’ Once enough people begin driving SUV’s and Trucks then everyone else feels they have to drive an SUV or Truck as well for the same kinds of reasons. To say that it’s solely a matter of ‘keeping up with the Jones’ is far too simplistic. All things being equal, there may actually be more people who would prefer to drive a smaller car but choose not to: 1) So they can ‘see’ as well as everyone else with a higher vantage point, and 2) So they can feel relatively safe on a road filled with SUV’s and Trucks (there’s nothing like the feeling of a bumper aimed at your head to make you rethink the virtues of a Mini).

    If you put all your cows in the pasture, then I may feel compelled to do the same thing, even though it may not be what I would really prefer to do, all things being equal…

    • 0 avatar
      Philosophil

      Sorry about the double post, but as you can see I’m a new member here, and while I may be approaching the back end of middle age, I still don’t have a lot of experience on sites like this. Patience is appreciated.

  • avatar
    Motorhead10

    prior to banktruptcy, GM didn’t want us to buy small cars. Cost structure wouldn’t allow them to sell cars at a competitive price. And you can’t make it up in volume (sorry, old accounting joke). So they became “lose as little as possible on cars” and market trucks like mad and hope it never ends. For a while, and thanks to affordable fuel and inflated real estate prices providing the illusion of wealth, Americans bought the hype – and bigger trucks than they needed. Then it ended and it was all exposed. In my opinion, the govt pushed GM overboard (with CAFE) and then threw the life preserver (bailout). If GM was allowed to ignore money-losing cars for all those years and just build bigger (profitable) trucks, would there be a reason to bail them out? They’d either have enough capital to ride out the storm until truck sales recovered, or they’d be a sad american bankruptcy story with glaring reasons for the failure.

  • avatar
    JMII

    The problem is people associate small = cheap. Thus they buy the biggest car they can afford, even if the can’t really afford it (thanks to the silly banks and wacky credit systems). If someone gets in a car and its feels “small” its automatically off their list. When you get in an SUV its like being in your living room – its big and comfortable. It was only when the gas hit $4 a gallon that people starting to think “wow this stupid thing is costing me a fortune each week”.
     
    I still can’t figure out why the Ford F150 sells so many units, as a basic truck its too high off the ground for daily errands yet home owners that only buy one bag of mulch per year seem to think they need one. Since the F150 sells so well I’d love to see the demographics of its buyers, clearly it fits the average US buyer while a compact, sporty hatchback is more typical of European buyers. I sure can’t explain it, but that is how it works until a gamer changer like gas prices causes a shift in the mind set. Given how quickly people get new cars (like every 3 years?) trends are short term. The Prius is common place now so its not popular… everyone is waiting for the next, new great “thing” whatever that might be. However in the mean time they buy what is comfortable, and that happens to be trucks and SUVs.

  • avatar
    Domestic Hearse

    “Sales of fuel-sipping compact and subcompact cars have actually dropped this year, while pickup and sport utility vehicle sales grew by double-digit percentages.”

    1. The comparisons pit this year’s sales against last year’s.
    2. Last year, we had this little federally-funded program called Cash for Clunkers.
    3. C4C gave generous trade-in-and-we’ll-crush-it bonus cash only when the consumer bought a considerably more economical vehicle than the old one being traded.
    4. This caused an artificial jump in small, economical car sales last year.
    5. The ’09 C4C program came on the heels of the summer of ’08 gas spike panic, which further artificially inflated small car sales last year.
    6. This year, gas prices (while slowly sneaking back up) have remained relatively stable, and we do not have a federally-funded incentive to buy small cars.
    7. Which is reflected in small car vs. truck/SUV sales — as those figures slowly return to ’07 and previous years’ percentages.

  • avatar
    DC Bruce

    Let’s assume the GM/Chryco bailout is a fact — because it is.  It might or might not have been smart .  . . but that is really a question for academics, for voters if they want to vote out (or in) their representatives on the basis of whether they supported the bailout or not, and for all of us if one or more of the car companies come hat in hand to Washington again seeking a bailout.
    Some of the problems of the big 3 they can control; others they cannot.  One problem they can control is building poorly assembled, unreliable vehicles.  Based on all the evidence, they’re doing quite well on that one.  Newly-introduced models from Ford and GM seem to be quite reliable.  And, as recent reviews of some of the post-bailout GM and Chrysler products show, things are looking good on the assembly quality, perceived quality score as well.
    One problem the big 3 can’t control is the nature of their home market, where they get most of their sales.  The US is the only affluent large market for cars that has cheap fuel.  That means that, if the big 3 meet the demands of that market, fuel efficiency is not going to be a particularly high priority.  It also means that market demand is more vulnerable to swings in fuel price (which are naturally volatile) because US drivers drive a lot (that cheap fuel again), which means that the fuel component of the operating cost of a car is relatively larger for a US owner than for an owner in some other market.
    In the past, the consequence of this problem is that the big 3 take a big sales hit when fuel prices spike — because the fuel-stingy offerings of US manufacturers were not competitive with similar offerings by foreign manufacturers.
    Recent roll-outs of small cars by Ford and GM appear to be addressing that problem.  People aren’t buying them in large numbers because fuel prices haven’t reached the $4 threshold of pain.  But, if they do, there’s a reasonable hope this time that purchasers will switch to the thrifty offerings of GM and Ford, rather than to those of overseas manufacturers.
    So, for that, the “domestic” companies ought to get some credit.  Sure, anyone who is disappointed at the poor market penetration of “green cars” because they expected sellers to be able to drive market preferences stopped thinking 53 years ago after he read Vance Packard’s “The Hidden Persuaders.”  But, I do think the domestic companies should get credit for bringing their cars up to date in terms of features, technology, build quality and reliability; and they also (at least Ford and GM) should get credit for positioning their product line to try and retain customers who are motivated to switch to less thirsty vehicles in response to a jump in fuel prices.
    Chrysler is still a work in progress, but the reviews of their latest offerings are encouraging on the perceived quality front.  The open questions are long-term reliability and what kind of fuel-sipping products are available from Fiat to round out the fuel-stingy end of the product line . . . and those of us of a certain age remember Fiats in the US without fondness, unless we were in the car repair business. Fiat= “Fix It Again, Tony.”

    • 0 avatar
      jgoods

      Amidst all the noise here, DC Bruce gets it right, I think. The biggest factor in all this is the price of gas, and it’s interesting to me that so few of these commenters have mentioned it. I wrote some other reactions to Mr. Ed’s piece today at http://www.cargurus.com/blog/2010/12/16/blaming-detroit-for-not-being-green-enough.

  • avatar
    MikePDX

    I’m reading the paper, checking out the op-eds, and hey, I know who that is! Excellent work, Ed, thanks.

  • avatar
    jj99

    An excellent article.

    However, I have a comment.  Concerning the demand for efficient CUVs, Detroit is failing.

    Fact is there will always be a demand for family vehicles that carry 6 people.  However, Toyota has shown us a CUV that carries a family can be efficient.

    The 2010 Toyota Highlander 4 cylinder carries 7 and gets 20/27 EPA rating.  Furthermore, this Toyota actually hits those numbers in the real world.  How do they do it?  Engineering.  It is the lightest vehicle in it’s class.

    Then, there is the new 11 Explorer.  Weighs in at nearly 5000 lbs.  Perhaps the heaviest vehicle in it’s class.  Why is it so heavy?  Because they cut corners in engineering.  It requires little engineering to make an overweight vehicle.  It requires a lot of engineering spend to get the weight out.  We will see if this vehicle achieves the EPA mileage rating.  So far, I have seen one test by a major auto magazine, and it missed. Possible the blue oval boys think Sync, which appears to be mostly a cell phone screwed into the dash, will excite the public such that they don’t notice the weight problem.

    This is the problem with Detroit.  They cut corners on engineering, and we get gas guzzlers with big price tags.  Furthermore, this engineering cheapness by Detroit contributes to it’s underperformance in Consumer Reports long term reliabilty rankings. It is possible this is being done so Detroit can afford the UAW wage and benefit bill.

    American families need efficient CUV sized vehicles with world class reliability.  Toyota has shown this can be done. American families do not need gas guzzling CUV vehicles.  As long as Detroit continues to cut corners in engineering spend, Detroit will not be competitive.

  • avatar
    j_l_liebenthal

    What Niedermeyer is doing is called in the recovering alcoholic community “enabling”.  All the pickup and SUV buyers can say “Detroit made me do it.  If it weren’t for Detroit and Obama, I would buy a Chevy Volt.”  Start preaching to the people who buy these cars or stop preaching.

  • avatar
    fincar1

    I might add that I’m having a hard time seeing what the big problem is with fleet sales. An auto manufacturer who has the capacity to build hundreds of thousands of cars and trucks would be extremely foolish to ignore a buyer who wants to buy vehicles by the hundred or by the thousand rather than one or two truckloads at a time like most dealers do.

    • 0 avatar
      jj99

      It is possible that heavy fleet sales to the federal and state governments amounts to a backdoor bailout that distorts the true health of Detroit.

    • 0 avatar
      geeber

      It’s true that not all fleet sales are bad.

      Too many sales to rental car companies erode resale values and brand images, because they tend to be the cheapest version of a particular model, and rental car companies will dump them back on the market within a relatively short time. If a large percentage of a model’s production is going to Avis, Hertz or Alamo, it’s a pretty good indication that it does not have much appeal to retail buyers.

      Sales to government agencies or corporations do not have those disadvantages. Those buyers tend to keep the vehicle until it is worn out from use.

      BUT – most corporations only buy vehicles from the domestics (GM, Ford and Chrysler). For virtually all local, state and federal government agencies, this is the law. For example, when the Pennsylvania Department of Environmental Protection (DEP) wanted to buy a Toyota Prius a few years ago, it discovered that the state had to amend the law to allow the department to do this.

      If most of the increase in sales this year is because of sales to government customers or corporations, it’s not fair to use said sales as “proof” that Toyota and Honda are somehow lagging in appeal, or that GM, for example, is undergoing a resurgence. Given that those entities either will not, or cannot, consider anything BUT a domestic vehicle, the playing field is hardly level. If sales of the Malibu increase, but it’s because state and federal governments are buying them, it doesn’t prove that the Malibu is now “better” or more appealing to customers than a Camry or Accord. It just proves that the government is responding to political pressure to buy a vehicle from GM, Ford or Chrysler. We can debate whether it is appropriate or not – if you don’t like that policy, vote for people who promise to change it – but don’t use those sales figures to show that the appeal of the Accord or Camry is slipping compared to a Malibu.

  • avatar
    fincar1

    The fact that most car rental outfits resell their cars on the used car market in a relatively short time means that if they’re keeping good track of their money they will buy vehicles that are not only attractive to their customers but will be attractive on resale.
    While I have no doubt that there are plenty of bottom-feeder cars in the rental market, having rented more than one myself, it isn’t always the case. I live in (well, next to) a Navy town, and have rented cars from Hertz there that were not bottom-line at all. The last one was a Sentra that was the medium or top trim line; other cars on the lot were a Prius, an Odyssey, a couple of Fusions…with plates from half a dozen different states. The Mustang we rented there, although a V6. was well equipped, and the G6 Pontiac was a GT model.

  • avatar
    bomberpete

    Once again, excellent work EN! I don’t always agree with your POV but I think you hit it right on target this time. Detroit started to high-five itself before the heavy lifting had even begun.
     
    Let’s hope that the Feds get us out of GM at $52 a share. I think the whole IPO is nothing but a sham set up by the big money boys, and someone’s going to be left holding a bag full of steaming sh…..well, you know.

  • avatar
    djoelt1

    Thanks for the update on Uncle Sam’s patients.

    It’s important to note that what you describe is good for the bottom lines of these companies.  Unfortunately these companies don’t operate in a vaccuum.

    The trend back to gas guzzlers by consumers is bad for our trade deficit (half oil).  The trend is bad for the future of these companies, since the possibility exists (it has happened before) that the US will become a country with expensive fuel simply due to market forces, while other countries become cheap fuel countries has zero probability.  So these companies are limiting their market.  There are numerous other reasons this trend is bad both for the companies (lack of technical development, overreliance on high margin low tech vehicles) and the country.  But people rarely do things that are good for the country, yes?  We’ve been picking at the carcass so long that it is almost bare.

    For those that think you can’t build a house with a compact car, you are wrong.  I built a house with a compact car and a trailer which replaced a full size pickup truck – because the car was better in every respect for the purpose.  Knack box built in – check (the trunk).  40mpg – check (cheap to operate, more profit in my pocket).  Carried one ton – check (trailer, tilting, 12 inch load height, can be dropped at the site).  Carried 4 workers – check (four door).  Sold for more than I bought it 3 years later - sell a compact in 2006 and you make money.

  • avatar
    Gardiner Westbound

    GM hasn’t produced what customers want for 50-years. They wanted good, safe, reliable cars. GM gave them poo-poo on a stick.

  • avatar
    Dr Lemming

    The first rule of automotive journalism is that the more “independent” (re: critical) the coverage of individual automakers, the more important it is to show your unwavering support for the industry’s knee-jerk opposition to environmental, safety and pro-labor policies.
     
    Yes, there are exceptions, such as Dan Neil.  But their rarity proves the rule.

  • avatar
    fred schumacher

    As a past newspaper editor, I had serious problems with the inconsistencies in Niedermeyer’s NYTimes Op-Ed and would have sent it back for rewrite.

    He selects Detroit as being at blame for consumers’ rejection of fuel-efficiency, while acknowledging that all manufacturers are primarily moving gas guzzler vehicles. Foreign manufacturers are not criticized for their behavior, and it’s not really “Detroit” that is the focus but GM and Chrysler, the bailout twins, since there is nary a mention of Ford.

    One would think that an editor-in-chief at TTAC would understand the lead time required for the development of new automotive product. Today’s product was developed during the Bush administration, not Obama’s. One does not move the world in 18 months.

    There is no mention of Fiat’s involvement in Chrysler, and that Fiat leads European manufacturers in fuel efficiency or that Fiat has developed new technology for spark ignition engines that will revolutionize that segment as it did for diesels with its common rail injection. We all know Daimler turned Chrysler into a truck company, that it left Chrysler with a horrible non-truck product line, and that Cerebrus was clueless.

    For an editor from a website which believes in consumers’ right to freedom of choice, it’s quite remarkable that Niedermeyer should take the opposite tack and now blame Detroit and Obama (indirectly) for not forcing more fuel efficient cars on buyers.

    The more interesting question the op-ed did not address is the socio-economic class of today’s new car buyers. Who are they? Who has the money, in today’s economy, to invest in expensive product? Are we looking at a non-standard cross-section of the buying public? Are we perhaps seeing primarily higher income buyers participating in the market, and are lower income buyers, for whom fuel efficiency and lower purchase cost are primary considerations, sitting it out?


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