With the U.S. economy in slow-growth / no-growth mode, domestic demand for autos has been low, as predicted. However, almost on cue, demand for smaller vehicles has been robust.That cue is $4 gasoline, The New York Times reported Friday. Or, as one Harrison, N.Y. resident called her monthly gasoline bill, "My car payment in addition to my car payment."
A 60-70% increase in gasoline prices in the last two years has led to a large increase in demand for small cars and hybrids, The Times reported, with limited supply of some of the most-preferred models creating further frustration for automakers and purchasers alike.
The more things change...
Economist Glen Langan said a great deal has changed during the time between the last oil shock in 1979-80 and today's oil shock: long hair for men is out, as are bell-bottom pants, and album-oriented rock (mainly because there are no more record albums). One thing hasn't changed: U.S. automakers, once again, "were dramatically under-prepared for the high gas price era."
An example: Ford (NYSE: F) is running its Focus assembly plant in Wayne, Mich. on overtime and on Saturdays but still cannot meet demand for the higher-mileage Focus, The Times reported.
"U.S. automakers are using phrases like 'seismic shift' in the market place and 'events out of nowhere to disrupt our production plans,' but the reality is oil and gasoline prices have been trending higher for more than eight years. I mean eight years," Langan said. "What were they thinking when gas prices were rising with rising gasoline demand, and China and India entering global commerce? That gasoline would drop to 25 cents a gallon?"
Langan said the consequences stemming from Ford's and General Motors' (NYSE: GM) latest production failure will be fewer jobs in the U.S. and less spin-off economic activity from that job reduction, in addition to not nearly enough high-mpg cars to meet U.S. demand.
Auto Sector Analysis: In fairness to Ford, General Motors and Chrysler, foreign automakers are also straining to meet demand for fuel-efficient vehicles, on all continents. Still, that does not blot-out the fact that there are objective events that demonstrate why the right side of GM's and Ford's stock charts are lower than the left.
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Reader Comments (Page 1 of 1)
6-20-2008 @ 12:34PM
jpdr1100 said...
And Detroit will again complain that the foreign companies have a head start because they have been building more small cars longer. This of course ignores that GM and Ford already build very fuel efficient small cars for elsewhere in the world.
6-20-2008 @ 1:56PM
william lindblad said...
The smaller vehicles are all fuel efficient, both domestic and foreign. GM has been building them for years, I know, I have an Impala with the small six and it can get 36 mpg at 65 with the air on. Considering size, this is damn good. I also get 24 town, that's stop and go with two occupants. Every maker has an electric, but they have limited range and mass production of lithium ion batteries is still a yet. When that happens (and it will) the price will come down and electrics don't need the gas pump. The problem with hydrogen is that the "fill up" source is limited and these are wishful thinking for years ahead. Same goes for ethanol, see how many stations you can find that sell it. It would take years to change the infrastructure, but minutes to find a plug.
6-20-2008 @ 1:59PM
william lindblad said...
The smaller vehicles are all fuel efficient, both domestic and foreign. GM has been building them for years, I know, I have an Impala with the small six and it can get 36 mpg at 65 with the air on. Considering size, this is damn good. I also get 24 town, that's stop and go with two occupants. Every maker has an electric, but they have limited range and mass production of lithium ion batteries is still a yet. When that happens (and it will) the price will come down and electrics don't need the gas pump. The problem with hydrogen is that the "fill up" source is limited and these are wishful thinking for years ahead. Same goes for ethanol, see how many stations you can find that sell it. It would take years to change the infrastructure, but minutes to find a plug.