Morons in Detroit
Leafing through the Boston Globe-Rag, my eye spies an article with the tagline: "Pickup, SUV sales fall as gas cost soars...." Duh.
In this blog about 18 months ago, I opined that sooner or later, Detroit was going to wake up with a huge backlog of unsold trucks and SUVs. And that "Mom behind the wheel" of her huge senseless SUV would suddenly find that she doesn't want to pay for the gas required to make her mobile office/limo run. Sooner or later, America and Americans would discover why Europeans covet small, fun-to-drive, efficient cars.
Then $4.00/gallon gas came along. I have been ranting on about how good the small Euro-diesels are, and how a Ford Focus (Euro-version) is a brilliant car ... but friends went and bought Tahoes and Suburbans. Now, they can't sell them. After all, who wants a used pile o' crap which needs a refinery to operate? "Ken Thompson never had much trouble selling Silverado pickups at Classic Chevrolet in Grapevine, Texas, the largest US truck dealership. Now, at the 23-acre, 2,000-vehicle lot near Dallas, customers walk away from deals at $16,988, a third off the sticker price, he says." -- (Boston Globe).
Industry sources predict that GM/Ford/Chrysler will sell 1 million fewer of these vehicles this year ... at the cost of $10 billion less pre-tax profit. And since that is the lifeline that has been keeping these fantastically mis-managed companies afloat, it is time to buy "puts" on these stocks. Because they still try to sell (mostly) crap small cars. Sure they are better than before, but so is Smucker's preserves better than toe-jam. Still wouldn't want to slather up some toast with either of them.
GM is shutting pickup and SUV plants to cut 700,000 in production and increasing small car production by 200,000. The cut is a good idea, but it implies that they will be able to cover the expenses of "turning on the lights in the morning" by selling small cars. Unless they bring over and build the designs for small cars from Europe (where each of GM and Ford sell loads of excellent small cars), they won't be able to con enough people into their wheeled crap to fund a Bar Mitzvah in Lebanon.
Yesterday, I saw my first Chevy Tahoe Hybrid driving along the local roads around my house. It gets about 20 mpg. As opposed to less than 10 mpg that they really get in their regular SUVs during lead-footed city driving. Will that be enough to save the GM Pension Fund? No. Not even close.
What I am getting at is this: I suspect that GM et al. have placed so many eggs in the basket of SUVs and pickups that they will not be able to wriggle their way out of this mess. Essentially, short-term greed and lack of realistic planning just may have conspired to kill off the great American auto manufacturers this time around. Sales of full sized pick-ups fell 36% in May and SUVs by 42%. Those numbers are staggering. Sure, I think that oil prices will fall back under $100 -- but maybe they will and maybe they won't. But the change in car purchasing habits is not so much as a fuel-related sticker shock, it is also related to a growing recognition that just wasn't there in earlier oil price shocks: there is only limited oil to burn and there are other people who want it just as bad as we do ... we might not be able to get all we want at anything remotely resembling a reasonable price.
In other words, we American have just realized that we have to change our habits -- because we can't afford to do otherwise. And that is what Americans understand: money. You won't wean the average soccer-mom or bubba redneck off of their land-yacht by appealing to their sense of civic duty, because they don't have one. You won't convince them that driving a frugal little car is better for the environment because they will tell you ten reasons why they are different, why they need their vehicle, why they should be exempt from all that applies to others. After all, hasn't the American educational system spent the past 50 years telling everyone that they are different, that everyone is special, everyone needs personalized care and treatment? One of the striking attributes of the "Greatest Generation" was that they did not whine about how life is unfair to them, or why nobody listens to them, or why the Government needs to take care of them. What the current 20-50 year old really understands is ... money. And how much of it can they spend. That's it.
Heck, people are dipping into their 401(k)s to fund their current spending habits, rather than cut back and save. Consider how stupid is that? They bought the damn SUV with money "made" by refinancing their house at a lower rate, and based on the "increased" value of that asset. Now that the house is worth less, the mortgage rate going up, monthly available income declining ... why save? Let's go to Disneyworld! We are living in a fantasy world anyway. Put it on our credit card.
Of course, I could also froth away at the stupidity of the American quarterly reporting system creating the need for short term thinking at the expense of long-term planning and performance ... but the average auto exec probably wouldn't even be able to understand that either. Nor that they are now an endangered species.
Morons....
In this blog about 18 months ago, I opined that sooner or later, Detroit was going to wake up with a huge backlog of unsold trucks and SUVs. And that "Mom behind the wheel" of her huge senseless SUV would suddenly find that she doesn't want to pay for the gas required to make her mobile office/limo run. Sooner or later, America and Americans would discover why Europeans covet small, fun-to-drive, efficient cars.
Then $4.00/gallon gas came along. I have been ranting on about how good the small Euro-diesels are, and how a Ford Focus (Euro-version) is a brilliant car ... but friends went and bought Tahoes and Suburbans. Now, they can't sell them. After all, who wants a used pile o' crap which needs a refinery to operate? "Ken Thompson never had much trouble selling Silverado pickups at Classic Chevrolet in Grapevine, Texas, the largest US truck dealership. Now, at the 23-acre, 2,000-vehicle lot near Dallas, customers walk away from deals at $16,988, a third off the sticker price, he says." -- (Boston Globe).
Industry sources predict that GM/Ford/Chrysler will sell 1 million fewer of these vehicles this year ... at the cost of $10 billion less pre-tax profit. And since that is the lifeline that has been keeping these fantastically mis-managed companies afloat, it is time to buy "puts" on these stocks. Because they still try to sell (mostly) crap small cars. Sure they are better than before, but so is Smucker's preserves better than toe-jam. Still wouldn't want to slather up some toast with either of them.
GM is shutting pickup and SUV plants to cut 700,000 in production and increasing small car production by 200,000. The cut is a good idea, but it implies that they will be able to cover the expenses of "turning on the lights in the morning" by selling small cars. Unless they bring over and build the designs for small cars from Europe (where each of GM and Ford sell loads of excellent small cars), they won't be able to con enough people into their wheeled crap to fund a Bar Mitzvah in Lebanon.
Yesterday, I saw my first Chevy Tahoe Hybrid driving along the local roads around my house. It gets about 20 mpg. As opposed to less than 10 mpg that they really get in their regular SUVs during lead-footed city driving. Will that be enough to save the GM Pension Fund? No. Not even close.
What I am getting at is this: I suspect that GM et al. have placed so many eggs in the basket of SUVs and pickups that they will not be able to wriggle their way out of this mess. Essentially, short-term greed and lack of realistic planning just may have conspired to kill off the great American auto manufacturers this time around. Sales of full sized pick-ups fell 36% in May and SUVs by 42%. Those numbers are staggering. Sure, I think that oil prices will fall back under $100 -- but maybe they will and maybe they won't. But the change in car purchasing habits is not so much as a fuel-related sticker shock, it is also related to a growing recognition that just wasn't there in earlier oil price shocks: there is only limited oil to burn and there are other people who want it just as bad as we do ... we might not be able to get all we want at anything remotely resembling a reasonable price.
In other words, we American have just realized that we have to change our habits -- because we can't afford to do otherwise. And that is what Americans understand: money. You won't wean the average soccer-mom or bubba redneck off of their land-yacht by appealing to their sense of civic duty, because they don't have one. You won't convince them that driving a frugal little car is better for the environment because they will tell you ten reasons why they are different, why they need their vehicle, why they should be exempt from all that applies to others. After all, hasn't the American educational system spent the past 50 years telling everyone that they are different, that everyone is special, everyone needs personalized care and treatment? One of the striking attributes of the "Greatest Generation" was that they did not whine about how life is unfair to them, or why nobody listens to them, or why the Government needs to take care of them. What the current 20-50 year old really understands is ... money. And how much of it can they spend. That's it.
Heck, people are dipping into their 401(k)s to fund their current spending habits, rather than cut back and save. Consider how stupid is that? They bought the damn SUV with money "made" by refinancing their house at a lower rate, and based on the "increased" value of that asset. Now that the house is worth less, the mortgage rate going up, monthly available income declining ... why save? Let's go to Disneyworld! We are living in a fantasy world anyway. Put it on our credit card.
Of course, I could also froth away at the stupidity of the American quarterly reporting system creating the need for short term thinking at the expense of long-term planning and performance ... but the average auto exec probably wouldn't even be able to understand that either. Nor that they are now an endangered species.
Morons....
posted by Zaphod at Friday, June 06, 2008
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