AutoNews: Lutz Says US Buyers Won't Embrace Small Cars At Today's Gas Prices

[megeebee]

AUTOMOTIVE NEWS WORLD CONGRESS


Lutz: U.S. won't embrace small cars at today's gas prices


Jamie LaReau

Automotive News | January 23, 2008 - 10:48 pm EST


DETROIT -- General Motors sees E-85 and biofuels as the best near-term solution to lowering U.S. usage of petroleum.

But new federal fuel regulations will only mean higher vehicle prices, slower new vehicle sales and continued consumer resistance to smaller cars.

“We refuse to let the price of fuel rise gradually in the United States and therefore we fail to induce change in consumer behavior,” Bob Lutz, GM’s vice chairman of global product development, said at the Automotive News World Congress on Wednesday evening.

Lutz said while GM is working diligently on alternative solutions to gasoline such as the lithium-ion battery powered Chevrolet Volt, consumer behavior is very difficult to change. And it takes a long time. New federal regulations requiring a 35-mile-per-gallon national average by 2020 will not inspire consumers to purchase more fuel-economic vehicles.

European prices

Only gas prices at the level that Europeans pay will cause Americans to rethink their vehicles, Lutz said. Current European gasoline prices are the equivalent of about $8 a gallon, he said.

“If for the last 15 years we’d had a slow but sure rise in federal fuel taxation of, say, 15 cents a gallon per year -- that would have gradually put the customer in the equation,” he said.

Over time and without any federal fuel economy regulation, the markets could have naturally and gradually transitioned Americans into smaller and more diesel-oriented vehicles, Lutz said.

“I’m not advocating tax hikes or calling for higher fuel prices, I’m just explaining the difference between the European fleet and our own,” he said. “In America, instead of raising fuel prices, we’ll end up having to raise new vehicle prices, because of the increased use of lightweight materials and fuel-saving technology.”

That will cause more people to hang on to the vehicles they have longer, slowing down new sales growth, “which is exactly counter to the intended effect,” Lutz said.

“Europeans, at their fuel prices, are willing to pay premium prices for premium small cars that deliver terrific fuel economy. That is not the case here in America, land of the big truck and big horse” and, he added, “the big American.”

The new federal regulations will also fail to lower the U.S. dependency on petroleum and imported oil, Lutz said. The best near-term solution to doing that is to adopt more E-85, ethanol-burning vehicles.

“It’s just common sense,” Lutz said. “You don’t roll over the whole fleet at once. It takes decades -- and the bigger the price disparity between the old ones and the new ones, the longer it takes.”

Making a dent

GM’s goal for electrically driven vehicles is attainable, but Lutz said it will take many years for those vehicles to be on the road in volumes to really make much of a dent in petroleum usage.

He argues a faster solution is E-85. There are already more than 6 million flex-fuel vehicles on the road right now in the U.S. alone. Those vehicles could be running on ethanol if it were more readily available, Lutz said.

If all the flex-fuel vehicles that GM, Ford Motor Co., and Chrysler LLC have committed to have on the road by 2020 were to run on ethanol, that could displace 29 billion gallons of gasoline annually, Lutz points out. That is roughly equivalent to 18 percent of America’s projected petroleum usage in 2020, he said.

He said other benefits of E-85 include that it’s better for the environment, it doesn’t have to be imported and it requires little change in consumer behavior.

On the other hand, he said with diesel fuel at the same price as gasoline in the United States, there won’t be many Americans willing to pay a “$3,000 to $4,000 premium” for diesel vehicles unless GM is willing to eat that cost.

Lutz also reiterated GM’s stance that electrically driven vehicles powered by lithium-ion batteries are the long-term future of the automobile industry. He argues that naysayers don’t understand that not all lithium-ion technology is created equal.

“It’s like beer. Some people say beer tastes bad. But there are many different types. U.S. beer, imported beer. You’ve got pilsner, ale, stout, wheat beer,” Lutz said. “Some beers are better than others. Just because somebody said one particular lithium ion technology is a little bit aggressive and it’s been known to cause thermal problems, does not mean they all do. The technology is advancing every day.”

SOURCE: http://www.autonews.com/apps/pbcs.dl...plate=printart

[Butz]

It's the 70s all over again, and before you know it more and more people will be driving smaller cars.
Why take a risk, instead of developing small cars just in case?
They have the imported Saturn Astra, but what about the Cobalt and G5? What about something smaller and better than the Korean Aveo?
The Corsa is going to be build in the USA but when?

[t-rex]

Oh that's LUTZ speaking!

Once again, I thought my stupid, drunk Uncle Shmooey opened his big mouth...

[Butz]

Originally Posted by t-rex

Oh that's LUTZ speaking!

Once again, I thought my stupid, drunk Uncle Shmooey opened his big mouth...

Seriously, sometimes it seems as if GM's management are out of touch with reality and the customers.

How expensive does the price of fuel has to get before the realize that quality small cars are a must!

[Elk]

Originally Posted by t-rex

Oh that's LUTZ speaking!

Once again, I thought my stupid, drunk Uncle Shmooey opened his big mouth...

Ok genius tell me what’s wrong with what Lutz said?

[Andonis]

Great find Megeebee!!!

[AMERICA 123]

Originally Posted by Butz

It's the 70s all over again, and before you know it more and more people will be driving smaller cars.
Why take a risk, instead of developing small cars just in case?
They have the imported Saturn Astra, but what about the Cobalt and G5? What about something smaller and better than the Korean Aveo?
The Corsa is going to be build in the USA but when?

Butz , Honest to Good , Its NOT going to be the '70s all over again.' Parts of it ? YEP.

The worst of the worse was from 1973/1974 thru ..... depending how you look at it....... 1983 - 1988 - 1990.

There will be some similarities - for some people. And yes you are right more people in 'more smaller' - but not all. (Independent of cafe the markets going to polarize anyway.)

Just a few of the big negatives from back then we won't have this time around . (Also no mention of todays relative advantages.)

1.) Bumper standards.

2.) Safety standard improvements - including no joke , a two thirds 'done' 55mph frontal impact standard that threatened to end production.
This is important - the cars from certain Euro makes and the Big three had already started to change for accommodation and had started putting on much of the weight. Japanese had no choice - basically gambled it wouldn't pass -and it didn't.

3.) Emission Standards - including the previous 'last minute' add of NOx

4.) Labor Contract/COST/COLA/RULES.

5.) High Inflation.

6.) The two massive and UNPLANNED for '73/'78 oil shocks , esp. the second one .

The other reality is that if present trends continue with the busting of the remnant middle class , small 4/6s purchase pricewise will be the affordable preference anyway, never mind all the rest.

[AndrewGS]

In all honesty, if the people of Japan and Europe had our large roads, cheaper fuel prices and low vehicle taxes they'd flock to larger cars too. People do not like to be uncomfortable, so if there's a way around it, like buying a cheaper, larger used car instead of a smaller new car, people will do it. The reason large used cars aren't more popular in more dense countries is taxes.

I rode with my parents and sister to my aunt's house for Christmas in a rented Impala. My father is about 6'2" and I'm just about 6'. Riding in the back seat behind him got very uncomfortable after about 45 minutes on this ~180 minute drive. It was uncomfortable, so my parents have crossed the Impala off their list of cars to consider. If the "full-size" Impala is too small, do you honestly think the Corolla or Fit still have a chance? My parents will either consider a larger new vehicle or buy used if the new car doesn't make financial sense considering fuel economy. This is why SUVs and crossovers are so popular, you sit further from the floor and your legs have more room.

There is a market for small cars though, especially for commuting where people have a larger car in the household. There have to be economical benifits though, unlike with most of the subcompacts we have available now in the States. If GM could sell the little $9,600 (w/ A/C), 40MPG Chevy C2 (Corsa B) here they'd have a hit. Premium small cars could also be popular in urban areas where parking is a priority, but you still want something stylish and well-equipped.

[MCGARRETT]

Gas taxes or CAFE.... hmmm

Kind of like choosing between kick in the nuts or a kick in the nuts....

How about neither?

[Butz]

Originally Posted by AMERICA 123

Butz , Honest to Good , Its NOT going to be the '70s all over again.' Parts of it ? YEP.

The worst of the worse was from 1973/1974 thru ..... depending how you look at it....... 1983 - 1988 - 1990.

There will be some similarities - for some people. And yes you are right more people in 'more smaller' - but not all. (Independent of cafe the markets going to polarize anyway.)

Just a few of the big negatives from back then we won't have this time around . (Also no mention of todays relative advantages.)

1.) Bumper standards.

2.) Safety standard improvements - including no joke , a two thirds 'done' 55mph frontal impact standard that threatened to end production.
This is important - the cars from certain Euro makes and the Big three had already started to change for accommodation and had started putting on much of the weight. Japanese had no choice - basically gambled it wouldn't pass -and it didn't.

3.) Emission Standards - including the previous 'last minute' add of NOx

4.) Labor Contract/COST/COLA/RULES.

5.) High Inflation.

6.) The two massive and UNPLANNED for '73/'78 oil shocks , esp. the second one .

The other reality is that if present trends continue with the busting of the remnant middle class , small 4/6s purchase pricewise will be the affordable preference anyway, never mind all the rest.

What meant by 'It's the 70s all over again' is the Big 3 are ignoring small cars just like they did in the 70s.
If the Big 3 had small cars then, they wouldn't of been badly hit, and now it's the same thing! None of the Big 3 offers best in class small cars, I'm not saying the offerings are awful, but they need to be better than what they currently are.

[AMERICA 123]

Originally Posted by MCGARRETT

Gas taxes or CAFE.... hmmm

Kind of like choosing between kick in the nuts or a kick in the nuts....

How about neither?

You're so right in a very real sense . Any solution is going to be a kick in the nuts and not doing anything is also going to have a kick as well.

The main real difference is you have the potential for a healthier auto Industry as Mr. Lutz lays out so well - with the tax .

I 'like' CAFE (different then what passed) as a Domestic Industry safety net , with an imported energy tax (not gasoline/diesel - why just autos/transportation ?) - as the main driver and as always with a complementary income tax reduction for low and middle income .

Wish we'd started some of this in the late '50s.

Wish biofuels had been allowed to develop as they could've from the 1890s forward.

Really wish the Titanic had had a real different passenger list.

All this may sound like I don't support your idea of leaving it up to a true market driven solution. I do - even in more than theory , but the problem with that is the operating environment can change faster than the auto industry , and its our big three that get smacked by that the hardest IF they're producing for the only major low cost fuel market in the world .... and you allow import entry.

In essence , we're going to be paying for the fact we've never truly allowed a real free market solution to the energy question right from the beginning of so-called 'petroleum' oil.

[megeebee]

Originally Posted by Andonis

Great find Megeebee!!!

'bout time, huh?

[big swede]

What Bob Lutz said is absolutely correct. People love to whine an complain about gas prices but the simple fact is that for most people the gas prices are not nearly high enough to make people choose a smaller platform car because of it. At the very most if someone was shopping a Malibu they might decide to get the 4 cylinder instead of the 6 but very few people will drop down in size.

I have said many times that the gas prices and how it relates to car choices are blow way out of proportion on this site because we have a large amount of young guys who don’t have much extra money or the family needs of a midsize or larger car so a smaller car makes perfect sense to them and seemingly it should for everyone else.

I fill up my tank once a week and it gets the wife and I to work and to any activities we do outside of work. Right now it cost me $40 dollars a week driving a V8 everywhere I need to go. If gas prices doubled to $6 dollars a gallon it would cost me $80 dollars a week in gas which still wouldn’t be nearly enough to sway me on any type of car purchase. There are other reasons where I would want to save gas but cost is not one of them, certainly not at $3 dollars a gallon.

[zabolots]

I agree with Luts. I just don't see a big market for timy cars like the Beat/Groove/Trax here in the US. Yes, some people will buy them, primarily in congested urban areas, but for the most part, consumers here want larger cars. That's why nearly every time a model is refreshed it is larger than it's predecessor. Bigger=better in the minds of most consumers.

Ideally, manufacturers would focus on reducing the weight of new vehicles and making them able to run on E85/diesel along with moving forwards with expanding the availability of technologies such as stop-start, DI and HCCI and dual clutch trannies.

This would help reduce our dependence on foreign oil while still allowing us to buy the types of vehicles most of us want. Yes, they'll cost more, but that's the price of innovation.

[paul8488]

I drive much less than I used to now that I live in Europe because of the price of gas. It's simple... a tank of fuel costs more than double what it used to... I have basically the same car with the same engine and transmission that I used to have in Canada, so it's a direct comparison. I just can't stomach filling up for 75 euros (110 CAD), so I've modified my driving habits.

I look at the total cost of being a driver (not just gas but also the cost of switching vehicles) so I'm not going to trade my car in for a more efficient one right now... but when the time to get a new daily drive it will be without question a dinky little 1.1 L something or other.

I'm a born and bred North American, and agree 1000% with Lutz... we arn't going to embrace baby cars until we're drastically hit in the wallet.