The US Auto Crisis

[Hurricane]

The US Auto Crisis
by: Gino Lattarulo

American auto manufacturers are in a world of hurt. I am talking about a beating of epic proportions. Is this the result of a sluggish economy and awful fuel prices? Well, yes of course it is; but only to a point. Let's face it, American manufacturers have been in a free fall since May of 2000, long before our current fuel crisis. Although Chrysler has been at the forefront of design (how can you not love the '09 Challenger?) it just hasn't been able to keep one foot out of the grave. Having worked for Chrysler and GM (GM) during last 15 years I can tell you that Chrysler in particular is probably a walking corpse.

American companies are their own worst enemy and just plain guilty of "too little too late" tactics to rejuvenate their bottom lines. Yes, they have made great strides in initial design quality over the last 10 years but the area in which they continue to fail is long term mechanical reliability (oh the horror stories I could tell you) which is the most important criteria to their most important customer base; women, women, and women.

Women make up somewhere in the area of 65% of all car buying decisions. Reliability is everything to this category of buyer. Everything. Any husband who has gotten the call from his wife that her car has broken down on the highway while driving the kids to school will tell you: Hell will follow like a plague of ravenous locusts. In this day and age, public perception is that Toyota (TM) and Honda (HMC) are the most reliable vehicles. Even if it isn't true. That is correct. Not true.

Please do not mis-understand me here. There really is no particular manufacturer that has a superior product. Toyotas and Hondas break down with every bit as much frequency as Fords (F), GMs, and Chryslers. Every manufacturer from the elite down to the sub-compact tin box has its own quality issues. After all, how many parts manufacturers do you really think there are in the world? Ask any Honda technician about Accord transmission failure rates. Or a Toyota technician about truck ball joint issues or your beloved Camry's steering knock and engine stalling issue. It is all built with parts manufactured by the lowest bidder so we can buy our tin coffins for less money.

The difference in the stock price is what the public perceives is quality and what is does not. There is a reason why you will never see a new Mercedes behind a tow truck and it is not because they are God's gift to quality. It is because Mercedes mandates that all vehicles are to be towed to the dealer under a covered transport to avoid the unsavory sight of such a high class vehicle being dragged behind a tow truck. Which, by the way, is usually a GM or Ford. Oh the irony of politics. Perception my friends, it is all about perception over reality.

I am sure there will be many scathing comments from my readers about how their Hondas are the greatest cars in the world and that they have never had a problem in the one million miles they have been driven. They have had nothing but problems with their former American cars which is why they switched, and blah blah blah.

You are wrong wrong wrong. You are simply one of the lucky car owners that has had little issues. There are equal amounts of American car owners who have had nothing but trouble from their previous foreign cars and are thankful for their GMs or Fords. I have heard the same story form both foreign and domestic owners so please spare me any comments about this issue. They will fall on deaf ears.

Though, I will say that Chrysler takes the cake with poor quality during the last 20 years. The mini-van 604 transmission was a catastrophic failure, costing an average of $1500 to $2000 to repair, right around the time the warranty expired. If it failed after 50k miles you were out of luck with any factory assistance. The Intrepid / Concord 2.7L engines sludged up after 40k miles at a cost of $5000 with zero factory assistance of any kind. Was there a recall? No way. The other problem was that the re-sale value of a one year old Intrepid or Concord was 50% of the retail price. Now you have a repair bill that is 50% of the value of the car. The Dodge Neon head gasket blew if you breathed on it and truck differentials simply grew noisier with each mile.

With Ford, GM, and Chrysler, the reality has been mostly about poor decisions. They have always been the Johnny come lately in doing what is necessary to thrive in a current market. During the fuel crisis of the 1970's they kept churning out land yachts when the public was turning to more economical compacts from Toyota and Datsun. By the time they realized their mistake they were so far behind the curve that they made twice as much work for themselves. In the 80's and 90's when the foreign market really exploded because people started to realize that a car could go more than 100k miles without the transmission blowing up, American manufacturers thought it might be prudent to follow along. Again, they scrambled too late and lost.

But I digress.

So now we are in another fuel crisis. Replace the 70s land yachts with today's SUVs and we are still dancing under the same disco ball. Of course it is not all bad. The program that gave the Chevy Malibu new life was brilliant. Perform a part by part comparison to the Toyota Camry and manufacture it at a considerable cost savings to the consumer. I love it.

Unfortunately there are not enough good ideas to outweigh the bad. GM's lame attempt to make a Hybrid SUV is just tragic. I would love to meet the people responsible for designing a Hybrid vehicle that gets 20 MPG fuel economy so I could punch them in the mouth. The fact that it was ever allowed to be released is so ludicrous that I thought I was dreaming at first. They are scrambling and losing once again... and again.. and again. To GM's credit, it has really started to take care of its current customers with any issues they may have. It is to be congratulated for that. But it still is not enough to stabilize a dark and uncertain future that is currently ruled by Exxon (XOM) and BP (BP).

American manufacturers need to produce more cars like the up-coming Chevy Volt concept very soon because the likes of Nissan will be cranking out its own versions within the next two years. They need to drop this E-85 flex fuel nonsense and concentrate on electric now, but more importantly the potential of compressed air and solar power for the future because the next crisis after oil will be electric energy shortages. When that happens, how will we be expected to charge our electric vehicles cheaply? By Natural Gas generators? Are you starting to understand the proverbial urinating into the wind concept? It won't matter what the energy source will be because as long as we dictate that automobiles be fueled with energy reliant on natural resources, there will always be another fuel crisis down the road.

Final fact: With or without American auto makers, alternative energy vehicles will be here in a 100 foot tidal wave in five to seven years. Do not doubt it for a second.

American manufactures have this one rare opportunity to emerge the heroes of a new energy revolution as long as they can get out of their own way and give the masses what they want, when they want it. Which is right now.

More here: http://seekingalpha.com/article/8591...s?source=yahoo

[eurohazard]

Long post, I read it all though. I agree with just about everything, you're a smart fellow.

I'd like to defend the Tahoe Hybrid though. Was it in the best interest of GM business wise or financially? Maybe not, but at least DMC and BMW helped foot the bill for research and development. As a person who needs a full-size SUV, and gets 14 mpg....I gotta say, the prospect of getting 20 mpg (a 35% increase) is very appealing. GM F'ed that whole thing up is by making them too expensive. I also think GM should not ditch the E85 capability. How much more cost does it add to each car?

[ksr]

I agree with the above comment. Making the hybrid SUVs that improve fuel economy by such a significant percentage is not a "lame attempt." Like it or not, some people are always going to need SUVs, while others just want them whether they need them or not. A 35% increase in fuel economy is pretty damn good.

I'd also question Chrysler being at the forefront of design. They have had some hits to be sure. And I love the Challenger too. But is it really groundbreaking to do an extremely faithful copy of a 35-year old design? I'm all for copying that design, but I wouldn't exactly call it groundbreaking.

[44 mpg by 2010]

Here is an idea that is worth consideration, particularly since Ford and GM/Opel/Vauxhall currently have over 70 machines in Europe rated by VCA between 42/51 and 58/69.6 mpg(US/Imperial) combined cycle.
http://www.vcacarfueldata.org.uk/sea...lConSearch.asp

I think everyone agrees that OIL IMPORTS ... are a NATIONAL SECURITY ISSUE.

Those oil imports take about $600 BILLION out of the US economy annually at current oil prices (increasing the US "imbalance" of trade).

Just suppose:

The Det3 would/could petitioned the President (and/or Congress) to waive import, tariffs, safety, and emissions restrictions for a period of 24 (to 36?) months to allow them to IMPORT and DOMESTICALLY BUILD production vehicles that achieve 44 mpg(US) and GREATER combined average fuel economy while meeting Euro Step IV Emissions Standards and current Euro Safety Standards for a period not to exceed the waiver duration. During the waiver the auto company's participation in the program is contingent upon a requirement that all SALES after waiver expiration will be US compliant for both emissions and safety. All vehicles sold under the waiver prior to expiration will be "grandfathered".

Note, that since Oil Imports are a NATIONAL SECURITY ISSUE ... the President could do this with an Executive Order under the War Powers Act for extremely quick action. Or, a less expedient option would be to go through the Congressional process.

Once approved, should immediately trigger imports and domestic retooling/production switch-over.

Emissions/safety problem resolution SHOULD ALREADY BE UNDER WAY!

The consumer begins getting access to radically lower fuel consumption rate vehicles (thus providing "fuel cost relief" and operating experience) while giving auto manufacturers visibility to consumer preferences at no (or very low) development/implementation cost.

This should immediately reduce the "speculation adder" in both the US and world oil markets in the face of a functioning plan to reduce long term oil consumption in the US (and the World)!

As these vehicles went into use, oil demand should be reduced at a rate related to degree of market penetration and the relative fuel economies of the specific vehicles being displaced (and how they were used).

This, in turn, returns funds to the domestic economy proportional to the reduction in oil imports.

Further, as soon as DOMESTIC auto production facilities start to retool and begin "new" product production, there should be an increase in US employment. If demand is high for these very low fuel consumption machines, then manufacturing should expand generating more jobs.

Pent up demand could possibly generate sales over 20 million units per year ... IF ... they are not over priced and provide above average quality and reliability.

Note that $600 BILLION currently spent on oil imports would buy about 30 million vehicles PER YEAR .. HOPEFULLY ALL DOMESTICALLY BUILT!


You will notice that this is NOT framed as a CAFE issue ... but rather as providing the opportunity to choose based on cost of fuel. However, this does NOT preclude use of incentives and disincentives IF appropriate!

Note that funds returned to the economy from oil imports ... should generate almost an equal amount of new Federal and State tax revenue. Simply put, increasing oil import costs have been reducing Federal and State tax revenue since 2002 and is probably over $600 billion per year today.


Keep in mind that if this concept is executed by Executive Order ... it could be signed immediately after the 2009 Inauguration ... before leaving the podium.

[2002 Caddy]

^ Another "why didn't I think of that" idea...

Pure genius...

My guess as to why this will not happen...
Sadly there are more than a few "big 3" executives who "believe" that small efficient cars will never sell in America. And while they are right there is a block of the population who will never drive one of these (I'm on that list) we need to recognize we are in the MINORITY... and this group is shrinking fast.

On the other-side of this partnership.. Politically the Conservatives will say that we are forcing people into small cars that they don't want and on the Liberal side they will complain about the loss of safety standards...

[RamJet502]

44mpg by 2010 - That is an excellent idea.

[BryceStrong]

This is just some guy with rudimentary knowledge of the auto market and an anti-oil slant. He's written some stupid, uninformed comments about each topic and weakly linked both together. Better advice has been given by members of this forum.

[eurohazard]

Originally Posted by BryceStrong

This is just some guy with rudimentary knowledge of the auto market and an anti-oil slant. He's written some stupid, uninformed comments about each topic and weakly linked both together. Better advice has been given by members of this forum.

I am more inclined to agree with you Bryce. 44_mpg_by_2010 has an interesting idea, but it's not plausible. How the heck are oil imports affecting national security? That's ridiculous to me.

I'll simply counter by saying imported oil helps keep America free. How else can we fuel our C-130's, C-5's, C-17's, KC-10's, F-16's, F22's, helicopters, naval aircraft and ships, tanks, HMMWV's, CIA Suburbans, FBI Tahoes, Border Patrol Expeditions, Police cruisers.................

[2002 Caddy]

Originally Posted by eurohazard

How the heck are oil imports affecting national security? That's ridiculous to me.

I'll simply counter by saying imported oil helps keep America free. How else can we fuel our C-130's, C-5's, C-17's, KC-10's, F-16's, F22's, helicopters, naval aircraft and ships, tanks, HMMWV's, CIA Suburbans, FBI Tahoes, Border Patrol Expeditions, Police cruisers.................

I sense a note of sarcasm here...

You can add to your list the fact that most of the 9/11 terrorists can trace their source of funds directly back to oil fields in the middle east.

I think just about everyone, left, right, centre, agrees the faster we can get off of foreign oil, the safer we will all be.

[eurohazard]

Originally Posted by 2002 Caddy

I sense a note of sarcasm here...

You can add to your list the fact that most of the 9/11 terrorists can trace their source of funds directly back to oil fields in the middle east.

I think just about everyone, left, right, centre, agrees the faster we can get off of foreign oil, the safer we will all be.

Really, directly? (bolded)

[2002 Caddy]

Yup... Take a look
17 of the 19 were from oil exporting countries

15 of the 17 were from Saudi Arabia...

The US commission on 9/11 determined that the $800,000 needed to conduct the attach came from Al Qaeda which got the money from several benefactors in Saudi Arabia and the UAE. Including some "senor member's of the Saudi royal family"

I would ask... Other then the sale of oil... How did the Saudi's get the money?

[PMC the 1st]

Originally Posted by 2002 Caddy

I sense a note of sarcasm here...

You can add to your list the fact that most of the 9/11 terrorists can trace their source of funds directly back to oil fields in the middle east.

I think just about everyone, left, right, centre, agrees the faster we can get off of foreign oil, the safer we will all be.

You've misspelled 'center'.

[PMC the 1st]

Originally Posted by 2002 Caddy

Yup... Take a look
17 of the 19 were from oil exporting countries

15 of the 17 were from Saudi Arabia...

The US commission on 9/11 determined that the $800,000 needed to conduct the attach came from Al Qaeda which got the money from several benefactors in Saudi Arabia and the UAE. Including some "senor member's of the Saudi royal family"

I would ask... Other then the sale of oil... How did the Saudi's get the money?

Most of this is correct; the price of oil is indeed a national security issue.
If the elader of Iran can say he wants to wipe Israel off the map, that means his beloved oil will rise more per barrel, thus yielding him more profit$!

If GWB can counter taht by saying, "We're gonna nuke those Iranians," that means the price of oil will go up even further, yielding GWB's oil friends more profit$!

Both have happened. Both have benefitted tremendously. We, however, have been raped.
With the increase in oil profits for our enemies in the middle-east, their will be the commensurate increase in the procurement of weapons by these enemies to be used against us. For this reason, the price of oil turns into a national security issue.

[PMC the 1st]

Originally Posted by eurohazard

Really, directly? (bolded)

The Arabs aren't actually getting any of their GDP from manufacturing things or doing other constructive activities. You do know this, right eurohazard?

[BryceStrong]

Originally Posted by eurohazard

I am more inclined to agree with you Bryce. 44_mpg_by_2010 has an interesting idea, but it's not plausible. How the heck are oil imports affecting national security? That's ridiculous to me.

I'll simply counter by saying imported oil helps keep America free. How else can we fuel our C-130's, C-5's, C-17's, KC-10's, F-16's, F22's, helicopters, naval aircraft and ships, tanks, HMMWV's, CIA Suburbans, FBI Tahoes, Border Patrol Expeditions, Police cruisers.................

It wasn't a reply to 44 mpg by 2010.