By Eric Peters, Automotive Columnist
The collapse of the U.S. auto industry would be easier to take if the cars were junk.
That’s how it was the last time one of the Big Three (Chrysler) went belly up back in 1979. If you’re old enough to remember the Cordoba, you know what I’m talking about. It was easy to comprehend the failure of late ’70s-era Chrysler because Chrysler’s cars of that period were junk. People tend not to buy junk — end of story. Simple relationship. Cause and effect.
Never have the products of the Big Three — especially GM and Ford — been as good as they are right now. The incidence of problems, recalls, etc. is actually lower for some American-brand cars than for Toyota and Honda. By any objective measure, parity, at the very least, has been achieved. The cars are damn good. But they’re not selling.
How do you fix a problem like that?
The cruel answer is, it’s not up to GM or Ford anymore. They have done almost everything they can, on the product side. What’s coming home to roost is a deadly trifecta of lingering buyer suspicion of American-brand cars combined with soaring gas prices and an economy in free fall.
You can fault the American car companies for the first item — the unpleasant legacy of Pintos past, so to speak — but the other two are completely beyond their control.
Some fault GM, Ford and Chrysler for building too many big trucks and SUVs. But that is what the market wanted — until quite recently. The car industry does not turn on a dime. It is not like making a candy bar or a plastic bucket. Millions of dollars and several years (24-36 months is typical) are needed to design a brand-new, wheels-up new car model and bring it from design sketch to production. The surge in gas prices came upon us — and the auto industry — suddenly.
Those who fault GM, Ford and Chrysler for not anticipating the uptick forget that every single major Japanese automaker was feverishly working on gigantosaurs of their own circa 2000-2004 — from the aptly named Nissan Titan to the monstrous Toyota Tundra. But they got to the party late — and their exposure was minimal as the feces began to hit the fan. It was relatively painless to throttle back (Nissan and Toyota may actually cancel their big trucks) and re-focus on what they have historically always done best — passenger cars.
But the backdrop issue is the collapse of the consumerist economy. What’s forgotten amid all the hair-pulling and gnashing of teeth is the simple fact that people, in the main, were only able to “buy” cars — irrespective of who made them, whether Americans or Japanese or Germans — by signing up for a big fat loan on the easy monthly payment plan.
Often, few, if any, questions were asked.
Credit and loans made it possible for even average middle income people to drive home in $45,000 vehicles (SUVs and cars). Now that credit has dried up, the party’s over. No one’s buying anything — because no one can afford to buy a damn thing. Gas mileage is a bogey. The truth is most of today’s middle-large sedans don’t deliver much better fuel economy than trucks and SUVs. About 5-8 mpgs or so better. Big whoop. If the car in question has a V-8, there is virtually no difference. Minivans are obnoxious pigs — with typical city mileage in the mid-high teens, as bad or worse than a new Escalade.
No, the problem is we’re tapped out. We can’t afford gas because we can’t afford anything. That includes cars.
Which is why the cars aren’t selling. Which is why the $25 billion bailout won’t do much except temporarily preserve the jobs of those unlucky souls working directly or indirectly for the industry.
Until the broad masses are once again in a position to buy expensive consumer goods such as automobiles, no amount of bailout boodle is going to solve the problem. Trillions in hopelessly unrecoverable debt is going to have to pass through the economy’s colon first. Then, incomes — and income stability — will have to rise, so that people not only have disposable income once more but feel reasonably secure in their jobs so that they’re willing to sign up for a big hunk of debt.
Do any of you see this happening in the near-term future? Me either.
So, we’re left with the cruel irony of an industry that has never built better products that is on life support — and not likely to recover.
Because for it to recover, we’ve got to recover first.
And no one’s offering us a bailout.
www.ericpetersautos.com (click on “Forum”)