Last 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 $1400. Toyota is about to enter the fray with its keenly priced, full-sized Tundra. Bottom line: the pickup truck market is contracting even as margins are being squeezed. At best, GM is about to make a great landing at the wrong airport. At worst, it’s missing the boat.
In today’s market, small cars are where it’s at. If GM thinks the Cobalt and Aveo can carry the corporation through another gas price escalation— even as Toyota, Nissan and Honda flood the market with their latest fuel-sipping econoboxes— they’ve got another thing coming. I reckon it starts with a “b.”
But even if you dismiss the possibility of Chapter 11, why do GM watchers grant the company turned around status when its leaders [continue to] refuse to provide a timeline or targets for a return to profitability? Mark LaNeve’s and his supporters may hide behind vague claims that they can see the light at the end of the tunnel, but they fail to understand that the beckoning light in the distance is… death.
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I actually don’t believe that LaNeve honestly believes that GM is on the right rebound.
Those guys must have tons of studies about how the market will develop in the years to come. Except of course they are surrounded by yeasayers…”Of course people will get used to 3$ 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!”
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.
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…
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.
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.
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.
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.
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
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.
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”).
“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.
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.
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).
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.
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.
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.
The CEO of Nortel spoke those words right before their stock took their first nosedive…. :S
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.
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!
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!
A “turnaround” at GM is just the same as a “turnaround” anywhere else, except they call it “La Turnaround”
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.”
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.
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.
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.
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?
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.
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?
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…
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.
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.
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.
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.
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.
Clever headline, sure wish I’d written it. :)
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.
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.
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.
“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.
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.
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+
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!
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.
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.
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.
“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.
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.)
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.
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.
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.