By on June 19, 2008

m_29mw_b6_ford.jpgAnalysts are predicting auto sales in June will drop below 13m units for the first time since 1992. The Detroit News reports the shift from trucks to fuel-efficient cars is hitting the truck-heavy Big 2.8 the hardest (ya think?). Ford market analyst George Pipas provided the auto industry understatement of the year: "Unfortunately, the consumer demand for [trucks and SUVs] is very low." Equally disturbing, "The inventory for products which are in high demand is very low." Even the transplants are feeling the pinch; their production can't keep up with demand for fuel efficient cars from buyers willing to all but give away their gas-guzzlers. What happened to those pre-May prognostications from the D2.8 that the sun will come out in September? *crickets chirping* Meanwhile, even as American automakers struggle to shut off truck production, they still don't have desirable small cars and hybrids anywhere near the production end of the pipeline. It's 1973 all over again. 

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33 Comments on “June Declared Auto Industry Dead Zone...”


  • avatar

    Unfortunately, the demand for condoms made from goatbladders is likewise at a historic low.

    It’s 1973 all over again only to a point. Back then, the oil manufacturers decided to turn off the spigot, in order to get to what they considered would be a fairer price for their product. But no one wondered whether there was enough product.

    Today, we all know (and should have known) that the product itself was in question, and that supply was not endless — GM, Ford and Chrysler (plus all the other fools who have been building needlessly large cars) should have known better.

    I’m very disappointed by Toyota’s Tundra – they knew better, and still went ahead with the stupid.

  • avatar
    fisher72

    I have been noticing wolf packs of new scooters on my way to work though…

  • avatar
    dwford

    Many people who would be in the market – truck and SUV owners looking to trade – are realizing that they are trapping in their rides by the depreciation of the last 3 months. It’s common to see truck and SUV owners $10k flipped in their trades. The bottom has fallen out of the auction values of these vehicles. I don’t think the current incentives on new trucks and SUVs has priced in the hit to the used market. It makes no sense to buy new right now when a used 07 or 08 can be had for 1/2 price. I see huge incentives coming on new this summer.

    Oh, and don’t be an idiot and come in asking for a discount on a 4 cylinder car, we are selling them for full sticker.

  • avatar
    geeber

    Stein X Leikanger: Back then, the oil manufacturers decided to turn off the spigot, in order to get to what they considered would be a fairer price for their product. But no one wondered whether there was enough product.

    I would have to disagree on that; I remember plenty of speculation in the 1970s on when we would “run out of oil,” and quite a few people said that we were near the bottom of the barrel.

  • avatar
    prndlol

    Oh, and don’t be an idiot and come in asking for a discount on a 4 cylinder car, we are selling them for full sticker.

    No problem, i’ll just hit five other dealerships. One of you will cave in this down market…

  • avatar
    RobertSD

    Well, actually, Toyota thought Q4 was going to be bright and cheerful too, so I don’t think it was just the Detroit manufacturers.

    As much as you don’t like the Focus, I think its sales of 32,000 in May probably qualify it a desireable small car. Its marketshare has grown over 2 points this year and is now limited by manufacturing capacity. Ford also has a hybrid Fusion coming in about 6 months. I’d say that’s pretty close to production.

  • avatar

    @prndlol

    Yes, and they were ignored.
    Peak Oil Theory was proposed before the embargo.

    Jimmy Carter was laughed out of town when he suggested it might be wise to go easy on oil, and he was influenced both by the embargo and by reality. But neither made much impact on car manufacturers or consumers. :-)

  • avatar
    menno

    When my wife’s 2007 Sonata four cylinder lease runs out next year, they locked in a $10,500 purchase price, which I considered very reasonable.

    I was kind of hoping to get another 4 cylinder car, but if the prices are still being “padded” by then by some of the dealers, and we can’t get the deal we want even from our honest Hyundai dealer, we’ll go ahead and buy the 2007 out from the lease.

    31 mpg on cruise control at 70 mph, through the mountains (ok large hills) of Tennesee and Kentucky, I consider very good. Also, it exceeded the (pre 2008 reduced) EPA number (30), too.

  • avatar
    dwford

    No problem, i’ll just hit five other dealerships. One of you will cave in this down market…

    … and the next person desperate for mileage will come in right after you leave..

    Dealers can’t make up for sucky truck sales by giving away low margin compact cars. They are discounting themselves into bankruptcy.

  • avatar
    SupaMan

    Man, at this rate not even the fire sales of summer are going to help offload the millions of trucks sitting on dealer lots. Oh by the way, if anyone wants to buy a very fuel efficient four cylinder car, I’m willing to sell….above sticker that is.

  • avatar
    jwltch

    Here in Central IL I’m seeing a lot of inventory and sales, but little in the way of extra discounting. It seems, from my perspective, to be business as usual. It might be where I live, though. We aren’t seeing the economic downturn and housing crisis much. And, here where the truck/SUV is king, it doesn’t seem to be losing it’s throne any time soon.

  • avatar
    P71_CrownVic

    But no one wondered whether there was enough product.

    They shouldn’t be wondering now. There is PLENTY of oil…right here in the US. In fact we have more oil that the Saudis. Look up the Bakken oil field to learn more.

    And, on top of that, scientists in California of all places, have genetically engineered bugs so that their waste product is oil.

  • avatar
    truthbetold37

    History is truly repeating itself. I prepared for this ahead of time. Our family always had 1 suv and 1 fuel efficient car. Even 5 years ago. I knew this would happen eventually. The big 3 is again “caught off guard”, but were just too arrogant to admit the truth. I repect the Japanese manufacturers, but always wanted the home team to win. The home team is just too dumb to win.

  • avatar
    carguy622

    Ford has one desirable hybrid in the Escape and Mariner, trouble is the marketing for it is nonexistent (probably because they can’t meet demand right now). If only they could get that hybrid powertrain in the Fusion yesterday.

  • avatar
    Robstar

    I am really wanting a Minivan or pickup truck for $10k OTD new. Anyone think there is any hope for this?

  • avatar
    geeber

    Stein X Leikanger: Yes, and they were ignored.
    Peak Oil Theory was proposed before the embargo.

    Jimmy Carter was laughed out of town when he suggested it might be wise to go easy on oil, and he was influenced both by the embargo and by reality. But neither made much impact on car manufacturers or consumers. :-)

    The only problem is that, after peaking in March 1981, the price of gasoline began a long-term DECLINE in price, both in real terms, and in failure to keep up with inflation. If end of oil was just around the corner, as people were saying in the mid-1970s this would not have happened. And 2008 is not “just around the corner” from, say, 1975.

  • avatar
    carlisimo

    It could be peak oil, or it could just temporary political instability, or speculation… it doesn’t matter. The Big 3’s business plan depended on gas prices staying low and that was a stupid bet to make. It’s not like they’re too small to be effective full-line manufacturers.

    To be fair, their cars are better than they were five years ago, and their actions in the last year or two suggest that GM and Ford are actually learning, slowly. Oh so slowly. But they had 30 years…

  • avatar
    ronin

    Ha ha, I’m seeing plenty of inventory on 4-cyl vehicles in the midwest, and plenty of discounting (if newspaper ads and emails for quotes are any indication).

    I’m sure car sellers would like to convince buyers otherwise. But sales are down and many car stores will be lucky to stay in business. With plenty of inventory, any incremental sale at a profit point is a plus; heck, at break-even is a plus, since inventory carrying costs are avoided.

    Just like real estate people will try to convince you that now is the best time to buy, whether the market is soaring or collapsing, so will all salesmen attempt to create a sense of urgency.

  • avatar
    Kevin

    Don’t blame me, I just bought a new car.

    Of course, to find an attractive small sedan that’s fuel efficient I DID have to buy Japaneses.

  • avatar
    folkdancer

    There may be plenty of oil but does that give the current inhabitants of earth the right to dig it up and burn it up as fast as possible?

  • avatar
    netrun

    @Stein X Leikanger

    Carter got laughed out of office because of his Mr. Rogers sweaters, the Lebanon bombing fiasco, giving away the Panama Canal, 18% mortgage rates, and .. and .. and

    His answer to the oil embargo and the entire energy crisis was to encourage everyone to wear sweaters. While I like sweaters, leaders find real solutions to problems not mousy little slogans.

  • avatar

    @geeber and netrun

    Well, Carter served under Rickover and studied nuclear power generation with an intent to serve as a captain on nuke subs.

    He knew his energy quotients and relationships.

    Sweaters work a treat in damp Scottish castles, and would probably have helped Americans turn down the thermostat a notch.

    Geeber – you should read the post I replied to.

  • avatar
    Theodore

    I was in a Saturn dealership this morning (kicking the tires on a Sky) and a lady with an infant came in to look a Vue. There are still some people out there who want trucks.

  • avatar
    Verbal

    P71_CrownVic: “There is PLENTY of oil…right here in the US. In fact we have more oil that the Saudis. Look up the Bakken oil field to learn more.”

    Not.

    http://www.cnsnews.com/ViewBusiness.asp?Page=/Business/archive/200806/BUS20080618a.html

  • avatar
    Geotpf

    Theodore :

    The Vue is a little different than a Yukon or a Expedition. But there will always be some market for the larger SUVs as well. It’s just that that market will be about 25% the size of what it was just a couple years ago.

  • avatar

    @Verbal

    Didn’t even bother to respond to the Bakken Oilfield bla-bla. It’s amazing what amounts of oil are there, just for the taking, if you buy into the far out claims being made.

    Thanks for bothering, though. Of course, it would be pretty smart of the US to spend everybody elses’ oil before you spend your own, but that equation is the other way around, I’m afraid.

  • avatar

    War in the Middle East…

    Dollar worth 60% of its 2000 value…

    no crystal ball was needed to figure that oil prices would increase, and once on the increase, the scum-sucking speculators got in on the action to help the price climb precipitously.

    Whether or not there are lots of reserves out there it is costing more to get it out of the ground and to transport it. The loss of dollar value means that we in the U.S. will be hit even harder as the real price for oil increases.

    If there were anyone in Washington who was truly intersted in “national security”, they would be all over the economic impact of high oil prices and the trickle-down effect on the world economy. The war we should be waging is on our own government. We might have been preparing for the capricious pricing of oil, but we were too busy spending money on war toys that then just have to be used.

  • avatar
    John Horner

    “His answer to the oil embargo and the entire energy crisis was to encourage everyone to wear sweaters.”

    Bull. He pushed through tax credits for solar hot water heaters which set off a boom in that field until Reagan shut it down. Carter also pushed for synthetic fuel development, higher fuel economy requirements for new cars, etc. etc.. Yes, he suggested that people to do simple practical things like put on a sweater in the winter and turn the furnace down a few degrees. A simple, cheap and practical suggestion which was lampooned for political points making by uninformed and/or who-me-care guys and gals.

    Feel free to criticize Carter’s energy proposals if you like, but first take the time to find out what they really were instead of just repeating a punch line. It isn’t like subsequent administrations did anything better or even equal to what Carter tried to do.

  • avatar
    kjc117

    American OEM’s are only focused on high profits vehicles.
    They loose money on small margin cars and hybrids. Their executives are only number guys focused on finance than actual automobile. Honda has to sell 200k Civics to make a profit on them.
    The key for American OEM’s is market share. Even if they do produce a decent small car and hybrid will they gain back their market share lost to the Japanese and Koreans.

    It is a buyer’s market both in automotive and housing market.

  • avatar
    50merc

    edgett: “If there were anyone in Washington who was truly intersted in “national security”, they would be all over the economic impact of high oil prices and the trickle-down effect on the world economy. The war we should be waging is on our own government.”

    Gee, edgett, do you really think the bloody overthrow of our government is justified by $4 gas? It’s still cheaper here than most anywhere else.

    John Horner: “[Carter] pushed through tax credits for solar hot water heaters which set off a boom in that field until Reagan shut it down. Carter also pushed for synthetic fuel development, higher fuel economy requirements for new cars, etc. etc.. .. It isn’t like subsequent administrations did anything better or even equal to what Carter tried to do.”

    I was doing tax work back then and I remember well how people rushed to install storm windows and add more insulation in the attic, the cost partly offset by tax savings. One client got a solar water heater. It cost thousands and it was prone to leaking, so I doubt he came out ahead. But it’s true that there was a better response to the second oil price shock than to the first. Carter’s greatest failing was not understanding that Iran had commenced an undeclared war on America and western civilization. (Even now he can’t admit that, but of course neither do many others of his ilk.) Apart from a few helicopters that crashed in a sand storm, he could not bring himself to deal forcefully with Islamofascists. We are still paying for that mistake. Carter was the butt of jokes for his cardigan sweater, but the real problem was the hair shirt he donned and has worn ever since.

  • avatar
    Under_the_Bus

    “Bring out your dead”

  • avatar

    50 Merc: Gee, edgett, do you really think the bloody overthrow of our government is justified by $4 gas? It’s still cheaper here than most anywhere else.

    Actually you hit the nail on the head. Not because gasoline is $4.30 a gallon, but because we the people have allowed a group of cheat and liars to manipulate us into creating a new upper class as clueless as the English House of Lords. This bunch is no less villanous than those from whom we decleared independence (for good reason) 230 years ago.

    And the price of gas has little to do with what I am advocating. It is symptomatic of those who would pretend to protect our “national security” and in fact do the opposite whilst lining their own pockets well for their efforts.

    So, thanks 50merc, for your succinct analysis of my post. I happen to believe that Jefferson understood a great deal about the human condition, and intrinsically understood that tyranny grows when the populace is reduced to quibbling over the price of tea. The American revolution had little to do with the price of tea, but fortunately for those of us who live here, there were some who saw this as endemic to the behavior of thugs. They did something about it then, and I think we need to do something about it today.

  • avatar
    rtz

    Local Kaw dealer reports all 2008 250 Ninja’s are sold out. Waiting list for `09 models has 9 people on it.

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