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GM is betting big on small cars like the Chevy Cruze.

Ford's European-bred Fiesta is also coming our way.
"If we suddenly went to $1 or $1.50 a gallon, that would be really bad" -- GM vice chairman Bob Lutz

It seems as though automakers just can't catch a break these days. The rocky economy and credit crunch resulted in a horrible month for auto sales in September. Every single automaker posted sales losses for the month. Even perennial overachiever Toyota witnessed a sales decline of 31.8% while Chevrolet and Ford witnessed drops of 11.2% and 33.8% respectively.

Compounding the dreadful state of the auto market were the record high fuel prices witnessed over the past six months. In May, we saw the Honda Civic, Honda Accord, Toyota Corolla, and Toyota Camry surpass the Ford F-150 in sales as Americans scrambled for more fuel efficient vehicles.

In late June, General Motors suspended the development of its next generation full-size pickups and SUVs. The company also announced plans to close four of its truck plants by the end of 2010 in order to focus on small vehicles like the upcoming Chevrolet Cruze.

Ford also felt pressure from lagging truck sales and idled its Dearborn truck plant and announced plans to convert its Cuautitlan Assembly Plant in Mexico -- which currently builds full-size trucks -- to build the sub-compact Fiesta.

So one would think that all is well now -- the automakers saw the changing trend in consumer demand, so they pivoted. Well, it's not quite that easy according to the Los Angeles Times.

With fuel prices now dropping at record levels -- 35 cents in two weeks -- auto manufacturers are wondering if they made the right move to make drastic changes to the lineups/production levels. "Do you hope for gas prices to go down so you can sell a lot of trucks again, or do you hope for them to remain high so you can justify your investment in fuel economy," questioned auto industry analyst Aaaron Bragman.

Outspoken GM vice chairman Bob Lutz seemed quite worried about the sudden change of events. "We may hate high fuel prices, but they've been driving us in the right direction when it comes to fuel economy. If we suddenly went to $1 or $1.50 a gallon, that would be really bad."

GM and Ford announced their production changes when gasoline was forecasted to top $5 a gallon in the near future.

Toyota too has cut production of its full-size Tundra pickup in response to sharply lower demand and dropped plans to introduce a diesel variant of the truck. However, Toyota spokesman John Hanson said that the company would be able to adjust to customer demand should the need arise, "If consumers start demanding trucks, we think we can still make as many Tundra pickups as they need."

This is most definitely a turbulent time in the auto industry. Plunging profits and falling sales sometimes call for desperate measures. Just over the weekend, it was announced that GM and Chrysler are in talks to merge, while Ford is considering selling its 33.4% stake in Mazda. One thing is certain, however, this is just the beginning of a huge shakeup in the automotive landscape.

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I think
By Spivonious on 10/13/2008 11:04:25 AM , Rating: 5
I think that people won't go back to trucks, since they know fuel prices won't stay low forever.




RE: I think
By krotchy on 10/13/2008 11:08:29 AM , Rating: 5
I think "Intelligent" people wont go back to trucks because they know fuel prices won't stay low forever...

However the general population has very little memory for the long term and is easily swayed by a "what can I get now" philosophy. Its half the reason for the sub-prime mortgage crisis and the massive amount of consumer credit debt.

I wish you were right, but I know that the general population will likely never be smart enough to think long term.


RE: I think
By othercents on 10/13/2008 11:47:12 AM , Rating: 5
I don't think this article is just about trucks, but really the big picture. People are just not buying new vehicles. Many people are getting smart and buying a decent used low mileage vehicle or keeping their current vehicle and saving themselves from having a large car payment.

The overall financial market (because of those over spenders) is making it hard for individuals to get loans for anything. I would expect the auto industry to have had their worse sales month in September.

Other


RE: I think
By Cypherdude1 on 10/13/2008 12:24:45 PM , Rating: 5
You're right. Judging from the posts on this thread, I can tell few people are realizing just how bad the economy is. It is true the credit markets are freezing up . I hear that there are few customers even showing up at the car lots, new or used, because they can't get any credit. If a car buyer, new or used, can't get credit, there won't be any deal at all. That's the real reason why ALL the carmakers are posting lower sales. BTW, the price of gas will NOT drop to $1 a gallon. I don't know where that GM exec. got that figure but it's ridiculous. In order for gas to drop that low, you'd need oil to drop to $10-28/barrel and that's not going to happen. Doesn't anyone remember the Clinton years when this happened? Gas dropped to $1/gallon because oil dropped to $10/barrel.
quote:
The overall financial market (because of those over spenders) is making it hard for individuals to get loans for anything. I would expect the auto industry to have had their worse sales month in September.


RE: I think
By Mitch101 on 10/13/2008 12:30:44 PM , Rating: 5
I cant speak for other areas but the used car lots by me (North Charlotte) are loaded with BMW, Hummers, SUV's, and Corvettes. All late models too and it appears they aren't selling either. The used car lots are looking more upscale than the regular dealerships in the area.


RE: I think
By lotharamious on 10/13/2008 3:26:50 PM , Rating: 5
quote:
BTW, the price of gas will NOT drop to $1 a gallon. I don't know where that GM exec. got that figure but it's ridiculous. In order for gas to drop that low, you'd need oil to drop to $10-28/barrel and that's not going to happen.

Everyone knows (Lutz, too... I know it's amazing he knows anything intelligent) that gas will not drop down to $1/gal unless there is a SERIOUS recession worldwide. What is possible is oil at $40-$45/brl until early 2010, before it spikes to $200 because of the exiting of the global recession. This would correlate to about $1.90 at the pump average for the entire US. It's very possible. And that scares the autos because they bet the wrong way, essentially wasting their money.

I do think the autos made the correct decision however. They're looking long-term, and oil, long-term, will skyrocket, even though it should drop another $30/brl in the next 6 months.


RE: I think
By Solandri on 10/13/2008 3:55:16 PM , Rating: 2
The pre-OPEC oil embargo price of gas of about $0.35/gal corresponds to about $1.65/gal now after you adjust for inflation. So it's highly unlikely we'll see gas get down to those prices.

Even though gas prices are going down, I think the experience has permanently changed how Americans think about the variability of gas prices. Previously, a big increase in gas prices was going from $2.20 to $2.65. Now everyone knows it can go from $2.65 to $4.50. When thinking of buying an SUV, people ask themselves, "well how much could gas go up?" The answer back then used to make them more comfortable with buying a gas guzzler. The answer now will leave them uncomfortable even if gas drops all the way back to ~$2/gal.


RE: I think
By Nik00117 on 10/13/2008 4:24:51 PM , Rating: 2
I agree, the market is indeed different then it once was. The car makers need to keep on the path they are now cause truth of the matter is fuel effiecent cars are the way to go.
\
GM is run by a bunch of morons anyways I work in a career field that directly interacts with GM on a yearly basis and each year I come out thinking how dumb GM is when it comes to business.


RE: I think
By lotharamious on 10/13/2008 5:36:48 PM , Rating: 1
quote:
GM is run by a bunch of morons anyways I work in a career field that directly interacts with GM on a yearly basis and each year I come out thinking how dumb GM is when it comes to business.

I don't have personal relations with GM, but the dozen or so people I do know that work for them say the whole company is a shit show. Bad PR, bad image, bad everything.

That's just what I've been told. Take that as you will.


RE: I think
By crleap on 10/13/2008 7:27:35 PM , Rating: 3
You hit the nail on the head. It takes 3 weeks for it to trickle down to $2.99 a gallon here right now, but I'm waiting for the morning I wake up and it's jumped back up to $4.19 overnight. It's going to happen, and I figure soon.


RE: I think
By Mitch101 on 10/13/2008 12:27:41 PM , Rating: 5
Totally agree with you there. Our focus over the next year is to remain employed and pay down debt while trying to squeeze another 2 years out of our current vehicles because of all the talk of what should be arriving from car manufacturers in 2010.

I am not a tree hugger but I certainly don't want gas prices to effect my income if I can help it.

Our new president may also play a role in whether alternative energy vehicles may be an option to consider going forward.


RE: I think
By JediJeb on 10/13/2008 12:30:07 PM , Rating: 2
Maybe people are starting to realize that a car can last more than 3-5 years and are starting to hang on to them longer. My truck is 12 years old with almost 200k miles on it and is still as good as when I bought it. One dent and a couple scratches isn't reason enough for me to trade it. If people start treating houses and cars as long term investments instead of fashion statements that need to be updated every few years then the sales are really going to fall off.


RE: I think
By The0ne on 10/13/2008 12:50:08 PM , Rating: 2
I plan to keep my 2nd for another 10 years. I'm not sure why some people don't have this train of thought. I still have my first car after 10 years and it's still running. I only bought the new one because I...could. But it's not a DD, the old one has twice the mpg. 10 year old technology that gets better mpg, go figure :/ Sad really.


RE: I think
By Spuke on 10/13/2008 12:56:31 PM , Rating: 3
quote:
Maybe people are starting to realize that a car can last more than 3-5 years and are starting to hang on to them longer.
The only realization here is that your average person can't get a loan to buy a new car. You CAN still get loans though as evidenced by California's 50%+ increase in home sales in the last 4 months (over 400k homes sold each month). It's not totally dried up just a lot more difficult than it's been in the last 10 years. Which, to be honest, may not be all that bad considering that EVERYONE could get a loan before.


RE: I think
By masher2 (blog) on 10/13/2008 2:22:34 PM , Rating: 4
> "Which, to be honest, may not be all that bad considering that EVERYONE could get a loan before"

That's the point most people (including our government) seems to miss. The best thing for the economy right now is a short-term decrease in credit availability, to allow overheated sectors to return to normal, and to allow rates to equalize with market risks. What people are seeing as the disease is really the cure.

The Fed kept interest rates far too low for far too long, and Freddie Mae made far too much money available to people who could afford their home financing only as long as the market was rising. Even now after the crash has hit, those organizations are taking just the opposite action that they should (FM just lifted the charge for mortgage insurance fees, to "keep housing affordable for low-income applicants").


RE: I think
By Spuke on 10/13/2008 4:09:16 PM , Rating: 2
quote:
Even now after the crash has hit, those organizations are taking just the opposite action that they should (FM just lifted the charge for mortgage insurance fees, to "keep housing affordable for low-income applicants").
If they keep messing up, they're going to end being a sub to Bank of America or Wamu/Chase.


RE: I think
By FITCamaro on 10/13/2008 2:58:48 PM , Rating: 1
I am approved for the GTO I am buying once I sell my Cobalt. And with an even lower interest rate.


RE: I think
By zombiexl on 10/13/2008 4:17:36 PM , Rating: 1
You have a cobalt? why, oh why? Two of my friends have those and like them, but i think they are too small. Of course I have 2 kids and usually at least one extra kid tagging along.


RE: I think