It's Not the Greens, It's the Greenbacks
- It's Not the Greens, It's the Greenbacks
By Warren Brown
Sunday, June 8, 2008; G02
U.S. auto executives are crunching numbers, trying to figure out which
trucks to keep and which to junk. Their counterparts in Europe and Asia are
reviewing product plans, looking at the possibility that North America might
now be hospitable to micro-cars that have long been popular overseas.
The global car industry is topsy-turvy. Fuel conservation is in. Horsepower
for the sake of horsepower is out -- at least, for most of us.
It is the world Hummer-haters said they wanted. It is the one for which
legions of environmentalists and believers in the corrective powers of
regulation lobbied. But here's suggesting that they had little to do with
the current situation.
When it comes to change in a capital-intensive industry such as the car
business, money talks, and politics walks. And money, particularly the
increasingly large amounts spent by consumers on motor fuels, has been
talking loudly lately. It has turned into a bully, pushing automobile
executives to cancel some products in favor of others.
Here's the deal:
Conventional wisdom about the way automobile companies think and work is
wrong. Car companies are not wedded to any given products, not betrothed to
any sacred strategies.
tid=informline> , Ford and Chrysler
formline> are not truck companies, as they often have been portrayed in the
d=informline> and Honda
formline> are not environmental enterprises.
GM, Ford and Chrysler will make and sell small, fuel-efficient cars if they
think they can do so profitably. The proof is that GM and Ford have been
doing exactly that for years in foreign markets. One of the best-selling
cars in Russia today is the little Ford Focus
Toyota will sell gas-guzzling trucks, and Honda will sell sport-utility
vehicles, whenever and wherever they think they can sell them profitably --
in the United States, for example, where Toyota until recently has been
pushing its massive Tundra pickup truck
e> and where Honda until recently has been celebrating strong sales of its
Acura MDX and Honda Pilot SUVs.
Toyota and Honda are small-car experts by default, because their home
markets, long beset by fuel-supply and pricing woes, have always demanded
They have, therefore, a temporary advantage over GM, Ford and Chrysler in
the current market shift from trucks to cars. But "temporary" means just
that. Domestic car companies are adjusting to fuel-price-induced changes
much more quickly than vehicle sales numbers or media reports indicate.
GM, for example, is dropping the Hummer H2 SUV
just as it jettisoned its original Hummer, the H1, in 2006.
The GM-Hummer relationship was never meant to be permanent. It was a
marriage of convenience, sustainable only as long as it remained profitable.
GM executives now are examining the prenuptial clause of that agreement,
trying to determine whether they should drop Hummer altogether, or keep it
with a smaller, more fuel-efficient group of products. What will happen
depends on what can be sustained profitably -- and what can be done with the
least amount of harm to GM's Cadillac dealers, some of whom have invested
millions of dollars to turn their dealerships into Cadillac/Hummer
superstores, GM sources said last week.
What is certain is that GM will sell more small cars in the U.S. market,
including models obtained from its foreign subsidiaries, such as Opel
> in Europe, and those built in North America. Ford is employing a similarstrategy, pulling in models such as its little Fiesta from overseas and
planning to build more fuel-efficient cars at its North American plants.
Chrysler, according to Robert Nardelli
> , the company's chief executive officer, will partner in the developmentand acquisition of more fuel-efficient cars.
Nardelli offered no specifics on that prospect in a recent interview. But
for several months now, Chrysler has been flirting with Nissan
nformline> with an eye toward procuring more small cars.
It's all about the money -- what consumers are willing to pay for in what
markets for what reason. Thanks to high fuel prices, the chance to make
money selling small cars in the United States is beginning to look good for
a variety of players, including Italy's Fiat Group
which is studying the possibility of manufacturing small cars in the United
States beginning in 2010.
None of this means that all big trucks and SUVs will disappear. Many people
need trucks. As long as they need them, there will be companies to design,
develop, manufacture and sell them, albeit with more fuel-efficient engines
Nor does any of this portend an end to supercars manufactured by companies
such as Lamborghini
ing+SpA?tid=informline> or Ferrari. Remember, money talks. People with lots
of money often enjoy speaking loudly. As long as they are willing to do it
in a Lamborghini or Ferrari, those companies will be around to serve them.
None of this is rocket science. It isn't philosophical. The car companies
will give consumers whatever they are willing to pay for. Right now, the
companies are betting that high fuel prices are here for the long term and
that many consumers are willing to pay more to get more mileage out of a
tank of gas. It's just that simple -- really.
-Charles C. Primas
Save on travel and travel related services at: http://cprim72.travelfhtm.com
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