By on March 2, 2011

I don’t think the industry learned a lot of lessons from 2008—they will this time around

…said GM CEO Dan Akerson at the Geneva Auto Show [via the WSJ]. But which “lesson of 2008” is Mr Akerson referring to? Overproduction? Incentive and fleet sale dependency? There were so many lessons to be learned in 2008… right Dan?

It would not be a good thing to see $5-a-gallon gas right now.

Oh, he’s talking about getting caught flat-footed by gas price spikes. Fine, let’s ignore the other “lessons of 2008” and hash out the truth behind Akerson’s comment: is the industry ready for $5 gas? Remember, consumer choice tends to exaggerate changes in the price of oil. Or, is it possible that some OEMs are “too ready” for high gas prices? After all, if automakers overcorrect for high gas prices, profits will suffer when the spike subsides. Or is, as BNET’s Matt Debord suggests, Akerson just trying to get the market to price risk into GM’s stock value?

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46 Comments on “Ask The Best And Brightest: Has The Industry “Learned The Lessons Of 2008”?...”


  • avatar

    the stock won’t take off until after the banks have it back from the government rinse.

    meanwhile, management has not learned as evidenced by the continued incentive madness. last month if you had a GM vehicle you got a $1,000 loyalty rebate on any GM product, buy or lease. simple and easy (and right from my Return to Greatness plan), and it worked nicely. this month if you have a Buick, Pontiac, or Olds and buy a LaCrosse, you get a $1500 loyalty rebate, if you have a non-GM vehicle you get $1500 conquest rebate. if you have a Chevy or Cadillac, you get squat.

    the management at General Motors has not changed, they don’t possess the knowledge or experience to effectively and profitably sell autos in the United States.

    see The Buickman on FaceBook
    visit http://www.GeneralWatch.com

  • avatar
    Domestic Hearse

    I’m curious as to what personal automotive lessons Akerson was learning in 2008. Because he was nowhere near GM at the time (named to the board in 2009).

    What was he doing in 2008? Oh, yeah. Carlyle Group. Leveraged finance investments. Mortgage backed securities. Defaulting on $16.6 billion.

    So yeah, you tell us what went wrong in the car business, Dan. Seeing as you were doing your part to blow up the world economy at the time.

  • avatar
    mazder3

    Correct me if I’m wrong but didn’t Bob Lutz say that $2.00 per gallon gas would be bad Circa 2009? If you wanted to sell new Cruzez and Volts wouldn’t you want $5 gas?

    • 0 avatar
      gslippy

      If you wanted to sell new Cruzez and Volts wouldn’t you want $5 gas?

      Yes, but that $5 gas starts to make a big (although probably temporary) impact on high-margin truck sales, and hence, profits.

      And while the Volt may make economic sense for a consumer at $5/gallon, GM is still losing money on every one, which won’t be made up through volume alone.  It’s still a car with a very expensive drivetrain that requires a subsidy to sell.  And that subsidy evaporates if they sell more Volts.

  • avatar
    Beerboy12

    The auto industry has a lot of catching up to do. Firstly they need to fix the reasons they fell over in the first place. Reasons which may include weak products. Then, they need to get over the whole embarrassing bankruptcy issue and all the time wasting crying and shouting that went along with that. They can do this to, but they do need to stop all this warm, fuzzy and emotional bleating and get on with it…

  • avatar
    Jerome10

    Why, all of a sudden, are we talking like $5 gas is a given?  Just 1 month ago nobody was discussing it.  Now suddenly we’re back into “2008 mode”?  Give me a break.  And you can’t tell me that the unrest in Libya is at fault here.
     
    The economy is still weak.  Demand I don’t believe has spiked at all.
     
    Its almost like investors say $5/gallon oil and suddenly it is considered a given?
     
    And I love how it also crosses $100 and suddenly everyone is in a panic.  Really?  OH NO!  We must make this a headline every day, give everyone some poor SOB story about how much it costs to fill a gas tank.  Maybe we should tap into the strategic oil reserves, because America thinks gas prices are too high, I’ve gotta cancel my big summer vacation because its going to cost me $30 more in gas than it did last year, we need a gas tax holiday that saves us all $20 over 3 months and on and on and on.  Boo hoo.  Do I like cheap gas?  Yes.  Will I cry when it is expensive, no.  Its a product.  If you don’t like paying for it, then dont buy it.  Buy less.  Consolidate trips.  Buy cheaper cars.  Live closer to work.  Spend less on a home.  It is another product we all use, and we all know the price fluctuates.  Plan ahead.  Adjust when necessary.  Is it really that hard?  That big a deal?
     
    We complain about these prices, but we seem to have no problem borrowing and spending and inflating ourselves into worthless oblivion in almost every other area of our lives.  But that increase in prices by 10% is simply unacceptable and must be stopped and we’ll talk about it every last passing second?  Really?
     
    Ok, rant over.

    • 0 avatar
      redmondjp

      Well, we’re talking about $5 gas because the Global Powers That Be (GPTB) have already telegraphed their intention for it using their media mouthpieces.  Two days ago on the way to work, listening to the national news on the radio, they said it could be this high by the summertime.  Not $4/gal (which we are now closing in on where I live, up to almost $3.60/gal for the low-grade), but a whopping five dollars per gallon.

      If this happens, we’re going to see a quantum shift in the types of vehicles that are on the road, even moreso than we have over the past ten years (during which people have migrated away from the larger and heavier truck-based BOF SUVs to the unibodied car-based ones).  Not to mention the damage it will do to our economy, that’s another topic altogether.

      Back to the original question – I really don’t see how things are being run any differently now.  The now-standard model of promoting only financial types up to the top levels of management hasn’t worked out very well for a whole lot of organizations besides GM and Chrysler.

    • 0 avatar
      akatsuki

      It could just be that the Middle East is throwing off US-backed despots who supply cheap oil to the US…

    • 0 avatar
      gslippy

      @Jerome10: You’ve said it better than I could.

      And I still believe Americans will pay anything for a gallon of gas.

    • 0 avatar
      joeveto3

      If the price of a gallon of gas goes much higher, we should sell more bonds to the Chinese.  Then, we should take that money and divvy it out among anyone who can cough up a gas guzzler in trade for a more fuel efficient car…say something that gets better than 21mpg.  Doing this will stimulate our economy and reduce our dependence on foreign oil.

      Our great, great, great, great grandkids can worry about working off the debt.

      We should definitely give this program a catchy name….

    • 0 avatar
      NulloModo

      Jerome –
       
      There are a few problems with that.  In this economy it isn’t feasible for most people to just ‘live closer to work’.  A large chunk of the country is living in homes that are worth less than they owe, so they can’t sell them without trashing their credit in a short sale, and finding a new job isn’t exactly easy right now either.
       
      Gas is a necessity, it isn’t like a cable TV package, golf club membership, or new suit that you can just decide to cut off or not buy – you need it to get to work, get groceries, etc.
       
      The US government has also historically been very friendly with the oil companies.  Those same oil companies are making huge profits while paying no federal income taxes.  When the price of oil goes up they jack up the prices at the pump, protecting their own profit margins while saddling the working people of the country with the financial hardship, and that I have a problem with.
       
      I’d be all for nationalizing the oil industry, the government can then set a fair price and prevent a lot of the current fluctuations, and use the income derived from it to help pay down the deficit.

    • 0 avatar
      OldandSlow

      Please don’t suggest nationalizing anything at this time.  A nationalized oil industry won’t eliminate international commodity traders – which compared to Wall Street are the Wild West of financial trades.
       
      Mexico has a state owned oil company.  Gasoline prices are only about 20 cents cheaper per gallon than they are here in Texas.  PEMEX is only game in town down South.  Gas stations are much fewer and further between than they are here in the US.  Be prepared to line up in a queue.

    • 0 avatar
      aristurtle

      It wouldn’t even work anyway. Even in theory (nevermind practice), a nationalized oil industry can only result in lower gas prices for a country that produces more oil than it consumes, and we haven’t been in that club for a long, long time.

    • 0 avatar
      snabster

      Well, as Ed says people overreact to gas prices. It’s the one commodity price that everyone knows.  Quick: ask someone what they pay for electricity, natural gas, milk or eggs.
      So maybe the answer really is just ban gas stations for displaying their prices.
       
      $5 gas is a topic because some big-wig talked it up in December, and then the entire middle east decided it would be a good time to throw out their rulers.
       
      I just did some calculations yesterday.  Assuming 200 million cars in the US, not driving 3 miles a day (21 miles a week) would take off about 10% of gasoline demand.  That is very incremental.  Also,  the same numbers suggested there is about 7M barrels of gasoline sitting in gas tanks right now.

  • avatar
    Russycle

    Well, judging from the article posted prior to this one–Karesh’s Lincoln Navigator review–I would say some people in the industry didn’t learn any lessons from 2008.   Nice juxtaposition, by the way.

  • avatar
    ajla

    It’s time to green light the Converj, Lt. Dan!

    • 0 avatar
      gslippy

      Remember, the Converj was killed because Cadillac determined that it could only travel 20 miles on battery, and would cost $60k.  That’s not a recipe for success – that’s Cimarron II.

    • 0 avatar
      ajla

      They could improve the Voltec itself. Or, it could be built using the eAssist 2.4L instead of the Voltec. They can make an eAssist 3.6L for the CTS while they are at it.
       

      Nearly anything would be better than the inevitable ULC.

    • 0 avatar
      SVX pearlie

      I doubt a 2.4 would give the kind of driving experience one would expect of a small Caddy coupe.

      I previously noted the Caddy ULC is within inches of a John Cooper Works Mini, which isn’t a bad benchmark. However, as I look futher, I now note that the ULC is within inches of a Lancia Delta Integrale / S4. I dunno about you, but ULC-V in the mold of a Lancia Delta Integrale / S4 would be one hell of a little car. I’d trade my Bimmer for one.

  • avatar
    Neb

    Shoot from the hip reply: Some things have been learned by some people in the auto industry.
    I think if any useful lesson has sorta percolated through the powers that be, it’s that product is actually really really important to making money in the car industry. This sounds obvious, but if you look how especially GM  has acted, you’d think making good products was priority #6 or #7 of a bunch of other things, most of which involved finance profits and marketing. Ford especially has (mostly) introduced a bunch of new products that sell because, well, they are really good. GM has cars now you might actually consider buying *over* some others. Dodge is the laggard. At least they finally axed that horrible sludge engine, which I think is at least a nod in the right direction.
    Also Ford at least has figured out that fuel economy matters, and spending money to get new drive trains that promote it pays off. I know not so long ago the big boys were the moneymakers for Detroit. Again. But now at least some people in Detroit understand that bet hedging is actually a good idea, and you should spend money on something else besides gaping giant trucks.

  • avatar
    Dieseldude

    Lesson learned from 2008:
    If we run this whole thing into the ground, the taxpayers will bail our asses out.
     
    ……any questions?

  • avatar
    Mike999

    – First, we know it’s speculation, based upon Democratic Revolts in the middle east.
    But, there’s also, US Oil companies selling assets to China, Peak Oil, the deepest wells ever drilled and finally we are living in the tail end of a population explosion from 1 Billion to 9 Billion in a 100 year stretch.
     
     

  • avatar
    seanx37

    Of course they didn’t learn the lesson. Not from 2008. Not from 1979. Not from 1973. Because we, as a people, didn’t learn the lesson. And we never will, until it is too late. Which, it probably was 40 years ago.

    • 0 avatar
      prattworks

      Agreed 100%.  I was naive enough to think that $5 gas followed by a global recession might snap people out of their desire for big, heavy, thirsty, overpowered and inefficent transport.  Nothing doing. We’re terminal

  • avatar
    ciddyguy

    Jerome10,
     
    Seems you may not have seen some of the gas prices here on the West coast. In Seattle, gas is already at some stations at $3.69, essentially $3.70 a gal and I bet it’ll continue to go up.
     
    Right now I’m thanking the Gods that my 19 Y.O. Ford Ranger gets 24-27 Highway, around 20 city instead of 19 highway as it’d have killed me by now.
     
    About 5.5Gal’s of gas goes roughly 77 miles of mostly freeway via rush hour traffic before I put in another $20 worth, or closer to 10Gal’s with $40 worth, I think the truck has a 16Gal tank and I’ve gone something like 300 miles on a full tank, which for a truck isn’t too bad, really.
     
    But as I said, gas is rising and 2 weeks ago, it was less than $3.40 a Gal.

  • avatar
    mikey

    Hmmm……I filled my Impala today $60 and it wasn’t empty. There, was a soccer mom type pumping $80 into an Avalanche. 1.23 a litre roughly converts to 4.70 a US gallon. Another guy was putting $20 into an old F150.

     Tonight is normaly my beer and wings night. Instead the money went into the gas tank.

    Jerome 10 is right. Ya gotta suck it up, you do what ya gotta do. people will pay it.

    • 0 avatar
      geozinger

      What? No beer and wings? That does it. This means WAR! (facetious remark concluded). Wifey and I had walleye dinners at Culvers, another equally healthy meal…
       
      I guess I can’t complain. Gasoline is $3.50 in Western Michigan as get ready for bed. I’ve got 3/8 tank in the Sunfire GT, and I should get another 100 miles out of her before I fill up again. That will probably be next week. By then who knows were fuel will be.

    • 0 avatar
      vbofw

      Tonight is normaly my beer and wings night. Instead the money went into the gas tank.
       
      Your arteries owe Colonel Qadaffi a beer!

    • 0 avatar
      aristurtle

      I know, I’m feeling it too. Filling my motorcycle’s tank yesterday morning cost me more than $10. I couldn’t believe it!

  • avatar
    highdesertcat

    Nah, I don’t think the American auto industry learned its lesson. Pickup trucks continue to be the best-sellers in America and still we have not seen any lightweight all-aluminum DOHC V8 engines in the American pickups, like those in the Titan and the Tundra. Weight reduction will result in better mileage. The same old antiquated thinking and engineering goes into American-brand cars and trucks unless they are developed overseas.  Even Australia engineers better cars than America’s automobile engineers.  Look at what a success the new Camaro is! A well-engineered car, developed and initially built in Australia.  Americans don’t care about the price of gas. Gas provides them mobility.  Obviously, the people who buy American brand cars today are willing to take a chance on the American car makers, but the majority of people still prefer the foreign brands, even if they are made in America, Canada and Mexico.  We won’t know for several years yet whether or not the American car makers have learned their lesson.  In five years we’ll know if the American cars are actually better than what they were in the past, and whether or not they hold their value and will last as long as the foreign brands do. Were that to happen, if the American cars are actually as good as the foreign-brand ones, we’ll see more people buying American, and fewer people buying foreign, actually reducing the demand for foreign-brand cars and trucks. Regular unleaded gas (86 octane) is $3.39 a gallon in my area, Shell Premium (96 octane) is $3.79. I use Shell Premium in both our vehicles.

    • 0 avatar
      John Horner

      “Weight reduction will result in better mileage”
      Weight reductions of a few hundred pounds here and there actually have minimal impact on fuel economy. Look at the Corolla vs. Camry fuel economy numbers sometime for an example.
       

    • 0 avatar
      gslippy

      @John Horner:

      I used to think that weight reduction was inconsequential until I towed a trailer across the country this summer.  The curb weight of my Sedona minivan nearly doubled with the load, and highway fuel economy was cut in half (12 mpg vs 23).  This was true on flat terrain as well as hills.  The trailer was nearly flat-faced, but it was almost totally concealed behind the cross-sectional profile of the van.  The engine and transmission were working substantially harder to pull that load even on the level at moderate speeds, much to my surprise.  I have seen this effect to a smaller degree even without pulling a trailer, but with the vehicle stuffed full with people and baggage.

      Another example is my un-aerodynamic Scion xB1, which gets 34 mpg highway due to its 2400 lb curb weight and 1.5L engine, in spite of it turning 3000 rpm at 60 mph.

      So I will respectfully disagree on the weight issue.  As you know, many factors play a role in fuel economy.  The Corolla 4-speed automatic is rated at 26/34; the Camry 6-speed automatic at 22/32.  If the Corolla had a 6-speed automatic, it would do much better on the highway.  But the Corolla weighs 2767 lbs vs. the Camry’s 3307 lbs – a 19.5% increase for the Camry, but when you consider a 180-lb passenger, the difference drops to 18.3%.  The Camry probably makes up for most of this deficit by having a 6-speed transmission.

    • 0 avatar
      vbofw

      Um, according to my friend (let’s just call him “Physics”), weight reduction has everything to do with fuel efficiency.  Got to look apples to apples, not platforms that are 5 years old.
       
      For example, new Sonata 35 mpg highway, new Elantra 40 mpg.  14-15% more efficient or a significant amount.

    • 0 avatar
      highdesertcat

      I believe that a couple of hundred pounds saved by using an all-aluminum engine instead of a cast-iron engine would also reduce weight and wear-and-tear in the suspension system. However, there is room for more than one point of view. For instance, while pushrod engines and cast-iron blocks and heads are dinosaurs that date back to the mid-20th century, there is a continuing need for them in Heavy Duty vehicles, like the 3/4-ton, 1-ton and heavier trucks, vans and busses. My take on the weight issue is that my 2011 Tundra 5.7 handles nicely because there is less weight over the front wheels. Gas mileage, though, is a matter of driving style. Since I was born with a right lead foot, my mileage differs radically from most people’s. I’m lucky to get 12-mpg on the highway in my Tundra. No doubt this is due to the Tundra’s excellent acceleration characteristics as I enter onto Hwy 54. Talk about haulin’!

  • avatar
    MarcKyle64

    I am so glad I had the foresight to buy an affordable car that gets 35 mpg with A/C when I drive it at 70 and averages 28 mpg per tank. I love my Hyundai Accent!  If gas goes higher, I’ll slow down and get 40 mpg at 60.

  • avatar
    Rod Panhard

    The forecasts of “gas at $5 this summer” were preceded by forecasts of “gas at $4 this summer.” Then revolutions broke out in the Middle East. Now, it looks like the revolutionaries understand the value of a barrel of oil and in Libya they’re keeping the taps open. So now we may be at $4.50 per gallon.
    Sure, it shouldn’t make a difference either way if we all live within our means and such. But if everyone lived within their means, bought sensible cars and lived in reasonably sized homes, then the economy would collapse.

  • avatar
    Zackman

    Now, now, now, (wagging finger) don’t you remember the old adage about “What’s good for General Motors is what’s good for the country”? It appears that was never truer than it is right now! Some more: “What goes around, comes around”.

  • avatar
    brettc

    Since I fuel up roughly once a month I had no idea what the prices were even at. So I just checked the MSN gas prices site and found that here in Southern Maine, gas is around $3.40 while Diesel is now at $3.99. So that means about $60 to fill up my car (15 gallon vented tank).
     
    Besides making me temporarily unhappy it doesn’t affect me too much because I only fill up about 12-15 times per year. I’m lucky that I live about 10 minutes from my jobs and my side job pays a decent mileage rate when I have to go to remote sites to do work. But I know that it really affects a lot of people because a lot of people don’t have the luxury of living close to where they work. But the upside of high fuel prices is that car manufacturers might be more willing to start selling more fuel efficient options that we don’t normally get in North America.
     
    So in answer to the actual question – no, most car manufacturers haven’t learned much of anything from 2008. I think Hyundai, Honda, Toyota, Ford, and VW are positioned well to do okay if prices spike and stay at a high level. The others will take a while to catch up. And for VW, that’s only assuming they can allocate enough TDIs to the U.S.

  • avatar
    akitadog

    Here’s a question: If everyone slowed down their driving speeds by 5% as a result of higher gas prices, how much would we as a country cut back on in fuel use?

  • avatar
    dzwax

    I am perhaps at the other end of the spectrum from many of you.  My company truck travels from job to job every day.   Gas mileage is everything to me.  A truck that got 30 mpg would save me almost $500 a month per vehicle at current gas prices.  All the small contractors and tradesmen around here are looking for relief from the high cost of hauling our tools around.  Guys who always went for the highest horsepower are now thinking about gas mileage.

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