[HoosierRon]

As everyone studies, analyzes and comments on this month's sales figures, consider the following:

1. It appears obvious that we are in the middle of a permanent, market-driven shift in the types of vehicles American consumers want to buy. On an historical scale, this shift has been incredibly quick.

2. The shift in consumer preferences has been driven by the price of gasoline. As this chart shows, the price of oil in 1999 was $10/barrel. In 2002, it was about $17. As recently as last year, it was $50/barrel. Two years ago, nobody was predicting $5.00/gallon gasoline in the United States. Today everyone is resigned to it.

3. No automaker was "prepared" for this dramatic shift. For example, look at the billions of dollars Toyota has spent in the last 4 years on the new Tundra, 4Runner and FJ. Sales of those vehicles are down -34%, -40% and -50% respectively. In fact, the ONLY cars that Toyota makes that are up this month are the Yaris, Corolla and xB (every Lexus is down). Toyota has always made small cars for the rest of the world and sold them here. It did not make these cars in anticipation of $5.00/gallon gasoline in the U.S.

4. Notwithstanding this dramatic shift, we have every reason to be optimistic about GM's future. Unlike in years past, where GM has had no plan in response to changes in the market, GM has rapidly set itself up for the new realities of the car business:

-- The Beat was a hit. GM listened and (while perhaps not official), we all know that it will be in U.S. showrooms within 2 years.

-- The new Aveo (sales up 44% this month) will be here this fall, and it will be made in America. Rebadge issue aside, giving Pontiac a B-class car will result in more sales.

-- GM did not wait for Delta II. The Cobalt XFE has the best mileage in its class.

-- GM is putting 4 cylinder engines in top of the line trim levels and 6 speeds in base models.

-- Notwithstanding all the naysayers (including Toyota's CEO), we will see the Volt in showrooms within 2 years.

-- In 1-2 years we will see the 1.4L DU turbo with reported mileage of 40 mpg.

-- In 2 years we will see the Vue plug-in hybrid.

-- In 2-3 years we will start seeing the BAS+.

Most importantly, as we have seen with the Malibu and CTS, GM can make cars that people want. From a design standpoint, GM is in the process of steamrolling the competition. Compare interiors of the old and new Malibu. As these new small, efficient cars make it into the showrooms, they will want to buy them. No one wants to buy a Yaris.

Yes, GM has been dependent on truck sales in the past. That is because GM has made billions on those sales and the market has demanded them. The market is changing and GM is ready for the change. It is not filling lots with unwanted trucks. Rather, it is closing four truck factories, and opening up small car factories.

This is the kind of responsiveness that GM fans have been hoping for.

 

[AMERICA 123]

Excellent post, HR.

This May basically had surprises in it for everyone and the industry as a whole .

You have managed to capture the essential spirit of the situation in regards to GM's position.

 

[mgescuro]

As everyone studies, analyzes and comments on this month's sales figures, consider the following:

1. It appears obvious that we are in the middle of a permanent, market-driven shift in the types of vehicles American consumers want to buy. On an historical scale, this shift has been incredibly quick.

That's been obvious for about 2 years.
Not even on a "historical scale." Buyers preferences are quick to change and are immediate. This is based on trends and fads.

What GM is saying when it says a "permanent shift" is that they no longer believe that this "fuel efficiency" and "green" movement is a fad. It is a trend.

2. The shift in consumer preferences has been driven by the price of gasoline. As this chart shows, the price of oil in 1999 was $10/barrel. In 2002, it was about $17. As recently as last year, it was $50/barrel. Two years ago, nobody was predicting $5.00/gallon gasoline in the United States. Today everyone is resigned to it.

People on the West and East Coast were predicting $5 in 2008... 2 years ago.
The over all trend for oil prices has been "Up" for over a decade.

3. No automaker was "prepared" for this dramatic shift. For example, look at the billions of dollars Toyota has spent in the last 4 years on the new Tundra, 4Runner and FJ. Sales of those vehicles are down -34%, -40% and -50% respectively. In fact, the ONLY cars that Toyota makes that are up this month are the Yaris, Corolla and xB (every Lexus is down). Toyota has always made small cars for the rest of the world and sold them here. It did not make these cars in anticipation of $5.00/gallon gasoline in the U.S.

No. Automakers were "prepared." They knew in 1990 that there was an oil supply problem, when a similar situation occurred in 2002-3. They knew the potential consequences.
Yes, Toyota built the Tundra and others. But it also expanded use of the Synergy Drive to other Toyotas and into the Lexus line.
Toyota was aware of the overall trend in the market, but as a business, they would be remiss not to try to attempt to gain a share of the truck market in the US.
Hondas have also always been fuel efficient. They did not follow the "truck trend." And they were laughed at for half-assed attempts like Ridgeline. Look who's laughing now. And they're still the most fuel efficient car company in America.

4. Notwithstanding this dramatic shift, we have every reason to be optimistic about GM's future. Unlike in years past, where GM has had no plan in response to changes in the market, GM has rapidly set itself up for the new realities of the car business:

Optimistic? Yes. But GM is moving too slow.

-- The Beat was a hit. GM listened and (while perhaps not official), we all know that it will be in U.S. showrooms within 2 years.

Beat should not have been the only car to be greenlighted. GM should ahve greenlighted all the Triplets.

-- The new Aveo (sales up 44% this month) will be here this fall, and it will be made in America. Rebadge issue aside, giving Pontiac a B-class car will result in more sales.

It's a rebadge. That's the most convincing reason to NOT do it. GM's reverting Pontiac to being a rebadge of the Chevy line.
Either stick with the plan of performance, RWD automobiles, or kill the damn brand.

-- GM did not wait for Delta II. The Cobalt XFE has the best mileage in its class.

Best mileage in class... but still outclassed by the Corolla.

-- GM is putting 4 cylinder engines in top of the line trim levels and 6 speeds in base models.

And GM completely dropped the ball with Saab -- a lineup devoted to high performance Turbo 4's.
GM had the solution in their lineup, but they didn't know how to realize its potential.
GM still has no idea how to manage niche brands.

-- Notwithstanding all the naysayers (including Toyota's CEO), we will see the Volt in showrooms within 2 years.
-- In 1-2 years we will see the 1.4L DU turbo with reported mileage of 40 mpg.

Yup.

-- In 2 years we will see the Vue plug-in hybrid.
-- In 2-3 years we will start seeing the BAS+.

Still remains to be seen. And the BAS system could have been implemented thru the Epsilon line 2 years ago.

Most importantly, as we have seen with the Malibu and CTS, GM can make cars that people want. From a design standpoint, GM is in the process of steamrolling the competition. Compare interiors of the old and new Malibu. As these new small, efficient cars make it into the showrooms, they will want to buy them. No one wants to buy a Yaris.

2 cars out of 3 dozen isn't a success. It just show potential. But GM's ability to get the product out the door is still a major question mark.

FYI... Sales of Yaris are up 46%.

Yes, GM has been dependent on truck sales in the past. That is because GM has made billions on those sales and the market has demanded them.

That's debatable. If you do a product analysis of the trucks, GM made them because they were high margin. They were GM's cash cow. Low investment, high return.

The market is changing and GM is ready for the change. It is not filling lots with unwanted trucks. Rather, it is closing four truck factories, and opening up small car factories.

Actually, I don't believe GM's ready for that change. I believe what we've heard today was a substantial amount of spin.
Perhaps GM is now ready to move forward. But it comes 3 years too late. And while the competition, for the most part, already have a headstart, GM has put all its eggs into one basket and hoping for a game changing miracle.

But all of that is made on the assumption that the Volt will be the only game in town. Which of course, we all know, will not be the only game in town by end of 2010.

I'm hoping for the best. I put my money where my mouth is and bought 100 shares of GM. But I still think GM can move faster than it is, and make deeper and more deliberate cuts.

 

[Titanic]

3. No automaker was "prepared" for this dramatic shift. For example, look at the billions of dollars Toyota has spent in the last 4 years on the new Tundra, 4Runner and FJ. Sales of those vehicles are down -34%, -40% and -50% respectively. In fact, the ONLY cars that Toyota makes that are up this month are the Yaris, Corolla and xB (every Lexus is down). Toyota has always made small cars for the rest of the world and sold them here. It did not make these cars in anticipation of $5.00/gallon gasoline in the U.S.

I respectfully don't buy that.

GM makes small cars for the rest of the World and chose not to sell them here (until the Astra happened, anyway).

This isn't new. This is EXACTLY what happened in the 1970s. The Oil Embargo hit and suddenly GM couldn't give away a Cadillac, while Toyota, Honda, and Datsun suddenly were the toast of the country due to their more frugal offerings. It happened AGAIN with the second fuel crisis. And then again, to a lesser degree, following the 2005 Hurricane season.

General Motors failed to learn the lesson. They failed to have strong enough economy cars ready to soak up buyers during both poor economic times and during energy crunches.

So, yes, Honda and Toyota were prepared for this. They expanded SUV and Truck sales, sure, but they never let their cars play second fiddle. They kept MPGs up--even in the face of rising horsepower, vehicle size, and added weight.

Gas prices have been steadily increasing since the late 1990s, this isn't something that just happened in 2008. GM failed to learn the lessons of the past, and this is the consequence.

But beyond that quibble, thanks for trying to keep everything in perspective. Hysteria is a disease that spreads quickly on the interwebs.

 

[AMERICA 123]

As everyone studies, analyzes and comments on this month's sales figures, consider the following:

1. It appears obvious that we are in the middle of a permanent, market-driven shift in the types of vehicles American consumers want to buy. On an historical scale, this shift has been incredibly quick.

2. The shift in consumer preferences has been driven by the price of gasoline. As this chart shows, the price of oil in 1999 was $10/barrel. In 2002, it was about $17. As recently as last year, it was $50/barrel. Two years ago, nobody was predicting $5.00/gallon gasoline in the United States. Today everyone is resigned to it.

See, that number #1 doesn't quite do it for me. ( Close )

#2 is the driver.

The rapid shifts in fuel prices are accounting for some huge part of the preference shift and a smaller part of the total sales volume so if you postulate a never ending series of flat or increasing oil prices than yea, its OK.

Thing is current prices ( in real dollars ) are not sustainable over some undefined interium period of time.

Its amazing how much commentary blithely assumes that its a done deal for all time going forward.

(Thats not in reference to you and your post here.)

When, not if, we have a sustained period of lower fuel prices and buying preferences and volumes feel that effect - will conventional commentary label that yet another structural shift - back ??

Its this simple. The large majority of people don't want to give up their higher fuel consuming choices - they just want to keep their fuel expendatures in a certain range.

Just as they ran in '74 and '78-'81 they're running away now, and if in the same way fuel prices in real dollars wind down like they did in most of the '90s they will run back the other way - again.

Sure some stuff and definitely certain groups of buyers - have changed for the long run - including CAFE - but its an overstatement to declare a structural change based on sales patterns primarily driven by three months or three years of questionable oil price increases

It may very well be, but its too early to say it is so - so definitively.

The real test of a structural preference change not driven by oil speculation/fuel prices is when relatively speaking, fuel prices drop for a decent length of time and these new buying preferences don't revert - at all.

There is a huge difference between a 'forced' structural change legitimate or not, and a 'choice' driven structural change.

If we didn't have these fuel prices of the last 4-6 weeks while the total sales volume would still be down some unspecified amount from all the other factors buying preferences would be evolving much more slowly.

Just look at segment sales data thru April 2008 - while fuel prices increasing.

 

[HoosierRon]

That's been obvious for about 2 years.
Not even on a "historical scale." Buyers preferences are quick to change and are immediate. This is based on trends and fads.

The American motor vehicle industry has never seen a collapse in truck sales as it now is experiencing. Two years ago, when oil was $50 a barrel, Toyota was building a new truck factory in Texas and Nissan was planning to enter the HD truck market. Audi was getting ready to roll out the Q7. If the collapse of the truck market was "obvious", then a lot of CEOs needs to be fired.

People on the West and East Coast were predicting $5 in 2008... 2 years ago.
The over all trend for oil prices has been "Up" for over a decade.

And in response to these alleged predictions, what have automakers been doing for the last two years: Mercedes Black Series, Honda abandons the Accord hybrid and markets an Accord coupe that gets 17 mpg city. We get the Tundra and FJ. Lexus obviously did nothing to increase sales in light of this prediction.

No. Automakers were "prepared." They knew in 1990 that there was an oil supply problem, when a similar situation occurred in 2002-3. They knew the potential consequences.
Yes, Toyota built the Tundra and others. But it also expanded use of the Synergy Drive to other Toyotas and into the Lexus line.

Prius sales are down over 39% this month. Hybrid sales have not done anything for anyone else. Honda has abandoned the Accord hybrid. The LS hybrid is a joke. Hybrid technology will show its worth -- not with Brad and Jennifer pulling up to the red carpet for the paparazzi -- but when it is mainstreamed in every vehicle.

Toyota was aware of the overall trend in the market, but as a business, they would be remiss not to try to attempt to gain a share of the truck market in the US.
Hondas have also always been fuel efficient. They did not follow the "truck trend." And they were laughed at for half-assed attempts like Ridgeline. Look who's laughing now. And they're still the most fuel efficient car company in America.

Acura sales down 9.9%
Odyssey down -18.0%
Pilot down -19.7%
CR-V down -1.5%
Element down -18.8%
Ridgeline down -16.5%
MDX down -10.9%
RDX down -34.5%

Best mileage in class... but still outclassed by the Corolla.

There are cars that outclass the Cobalt (3, Rabbit, Euro Focus). The Corolla is not among them. If it were not a Toyota, you never would say it outclasses anything.

FYI... Sales of Yaris are up 46%.

FYI... Sales of Vibe up 71.6%.

 

[HoosierRon]

General Motors failed to learn the lesson. They failed to have strong enough economy cars ready to soak up buyers during both poor economic times and during energy crunches.

I think the following shows that GM has learned its lesson. (Yes, I wish it had learned it earlier, but I am talking about reality today, not woulda coulda shoulda):

-- The Beat is greenlighted for the U.S.: GM gets it.

-- Giving Pontiac a B-class car will result in more sales. Boo hoo all you Pontiac purists. You cannot demand RWD performance cars and then say GM still does not get it.

-- Cobalt XFE: GM gets it.

-- Malibu 4 cyl/6 speed: GM gets it.

-- Volt: GM gets it.

-- 1.4L DI turbo: GM gets it.

-- Vue Plug-in: GM gets it.

-- BAS+: GM gets it.

 

[mgescuro]

The American motor vehicle industry has never seen a collapse in truck sales as it now is experiencing. Two years ago, when oil was $50 a barrel, Toyota was building a new truck factory in Texas and Nissan was planning to enter the HD truck market. Audi was getting ready to roll out the Q7. If the collapse of the truck market was "obvious", then a lot of CEOs needs to be fired.

Collapse of trucks sales? I saw that coming for sometime.
Besides that, trucks aren't going to go away. They'll be reduced significantly in sales. So, where is GM's compact and mid-size trucks? And who leads that segment? That's right. Toyota.

The actions of GM in this segment are right in front of your face.
GM continued with full sized trucks BECAUSE IT WAS A CASH COW. GM doesn't "care about trucks." They cared about the money!
Otherwise, Colorado and Canyon wouldn't be allowed to remains as POS's for so long!!

Toyota built Tundra to claim a piece of the fullsized truck pie. THey already owned the compact truck pie. It's smart business srategy.

The wise thing for GM to do was to improve Colorado and Canyon -- if GM cared for trucks. So now that GM has essentially lost its cash cow, who will consumers turn to?? Toyota. Because GM failed to invest in the compact/midsized trucks.

I don't know why you're missing that.

And in response to these alleged predictions, what have automakers been doing for the last two years: Mercedes Black Series, Honda abandons the Accord hybrid and markets an Accord coupe that gets 17 mpg city. We get the Tundra and FJ. Lexus obviously did nothing to increase sales in light of this prediction.

Mercedes issued a statement saying that they would proceed with their linup as is. They're not going to shift their entire lineup due to market shifts in oil. Anyone who wants a Mercedes will get a true Mercedes, not a watered-down excuse for a Mercedes. That's how you build a brand!

Besides, their hybrid systems are a year out anyways.

Honda abandoned Accord hybrid. but they also issued a statement saying that they are engineering a better solution, which goes along the grain as honda as the best car engineers on the planet. Oh yes... and they also have a hydrogen car en route.

We might get Tundra and FJ... but we also get Matrix, Yaris, Prius, Corolla, Synergy Drive, and the entire Scion lineup.

GM makes entire lineups of the GMT-800/900's across 4 brands.... but we also get Cobalt and Aveo. See the difference?

Prius sales are down over 39% this month. Hybrid sales have not done anything for anyone else.

Hybrids are still 2.3% of the US market; however, Toyota is incapable of meeting Prius demand. They have sold more than 1M Priuses already, with sales increasing 67% worldwide.
The only reason Prisu sales would be down is because Toyota is incapable of meeting demand for the car.
What we have is a constrained product due to demand.

Acura sales down 9.9%
Odyssey down -18.0%
Pilot down -19.7%
CR-V down -1.5%
Element down -18.8%
Ridgeline down -16.5%
MDX down -10.9%
RDX down -34.5%

Why did you respond with sales numbers when I'm talking fuel efficiency?

There are cars that outclass the Cobalt (3, Rabbit, Euro Focus). The Corolla is not among them. If it were not a Toyota, you never would say it outclasses anything.

Corolla is the standard bearer for the class. If you don't top Corolla, you're screwed. It's the ultimate in automotive toasters.
Why would anyone buy a Cobalt over Corolla? 1mpg? Corollas reputation alone will sell the car.

 

[supermoto]

That's been obvious for about 2 years.
Not even on a "historical scale." Buyers preferences are quick to change and are immediate. This is based on trends and fads.

What GM is saying when it says a "permanent shift" is that they no longer believe that this "fuel efficiency" and "green" movement is a fad. It is a trend.


People on the West and East Coast were predicting $5 in 2008... 2 years ago.
The over all trend for oil prices has been "Up" for over a decade.


No. Automakers were "prepared." They knew in 1990 that there was an oil supply problem, when a similar situation occurred in 2002-3. They knew the potential consequences.
Yes, Toyota built the Tundra and others. But it also expanded use of the Synergy Drive to other Toyotas and into the Lexus line.
Toyota was aware of the overall trend in the market, but as a business, they would be remiss not to try to attempt to gain a share of the truck market in the US.
Hondas have also always been fuel efficient. They did not follow the "truck trend." And they were laughed at for half-assed attempts like Ridgeline. Look who's laughing now. And they're still the most fuel efficient car company in America.


Optimistic? Yes. But GM is moving too slow.


Beat should not have been the only car to be greenlighted. GM should ahve greenlighted all the Triplets.


It's a rebadge. That's the most convincing reason to NOT do it. GM's reverting Pontiac to being a rebadge of the Chevy line.
Either stick with the plan of performance, RWD automobiles, or kill the damn brand.


Best mileage in class... but still outclassed by the Corolla.


And GM completely dropped the ball with Saab -- a lineup devoted to high performance Turbo 4's.
GM had the solution in their lineup, but they didn't know how to realize its potential.
GM still has no idea how to manage niche brands.


Yup.


Still remains to be seen. And the BAS system could have been implemented thru the Epsilon line 2 years ago.


2 cars out of 3 dozen isn't a success. It just show potential. But GM's ability to get the product out the door is still a major question mark.

FYI... Sales of Yaris are up 46%.


That's debatable. If you do a product analysis of the trucks, GM made them because they were high margin. They were GM's cash cow. Low investment, high return.


Actually, I don't believe GM's ready for that change. I believe what we've heard today was a substantial amount of spin.
Perhaps GM is now ready to move forward. But it comes 3 years too late. And while the competition, for the most part, already have a headstart, GM has put all its eggs into one basket and hoping for a game changing miracle.

But all of that is made on the assumption that the Volt will be the only game in town. Which of course, we all know, will not be the only game in town by end of 2010.

I'm hoping for the best. I put my money where my mouth is and bought 100 shares of GM. But I still think GM can move faster than it is, and make deeper and more deliberate cuts.

Doom and gloom people always predict something bad on the horizon. The main reason we are seeing such high prices is the lower value of the dollar. Take that away and we have gas for $3 - $3.50/gal.

If Toyota could sell 300k Tundras they would, but not enough people would want then even with $3/gal gas. The Corolla got a modest update when it's an important vehicle for Toyota, when more money was spent of the FJ Cruiser, Tundra and Highlander. Luck bailed them out on that decision.

If you think that the Cobalt is outclassed by the Corolla, you have serious vision problems.

Where has GM put all of it's eggs in one basket? Do you not pay attention at all to other products that have come out recently and those on the horizon?

Honda doesn't make the most fuel efficient vehicles, they make more smaller vehicles or rather people don't buy enough of their mistakes, like the Ridgeline.

 

[Michael_S]

2. The shift in consumer preferences has been driven by the price of gasoline.

I would also factor in the slower economy and drop in housing prices.

The move of gasoline from $3 per gallon to $4 per gallon may only add an extra $500 or $1000 to a family's household gasoline budget. For most families with the money to buy new cars, that's not a substantial problem.

However, you have to couple that with job uncertainty. You may lose your job and lose income. You may need to change jobs and deal with a longer commute.

And couple that with housing uncertainty. Now you may not be able to sell your home for more than you owe. Now you may not be able to pay off extra fuel expenses with a quick home equity loan. Now you also may not have the home equity to purchase a $35,000 vehicle and may need to set your sights lower.

 

[AMERICA 123]

What GM is saying when it says a "permanent shift" is that they no longer believe that this "fuel efficiency" and "green" movement is a fad. It is a trend.

No and yes.
Study after study here there and everywhere has shown repeatably that a vast majority of buyers are not willing to pay to be green when given the real choices.
Sure they want greener - but they do not want to pay for it.

Most of whats going on here is about green all right - as in the green in your wallet.

What this move by GM says amongst other things, is that they do not see fuel prices dropping by useable amounts anytime soon - and this is undoubtably being pushed along by the new CAFE rules and the concurrent need for funding this that and the other - including a profit - in a down market period of time.

Looking below, how do you charactorise the trends and trend rates - up 'till 1 MAY 2008 ???

http://www.autoobserver.com/2008/05...s-rocks-us-market-edmunds-analysis-shows.html

Large SUV sales share plummeted by more than 20 percent for 2008 to date, to just a 4.1 percent market share compared with a 5.2 percent share in 2003. This segment also saw the most dramatic dropoff in share of any segment from 2007, when large SUVs held 4.6 percent of the U.S. market.

NOTE : In this chart, 2008 YTD includes all data up thru 1MAY2008 ie - INCLUDES APRIL 2008

Seismic Shift to Smaller Segments Rocks U.S. Market, Edmunds' Analysis Shows
May 28, 2008
By Dale Buss

American car buyers have been flocking to small cars, crossovers and hybrids so massively -- and so quickly -- that they're threatening to tip the auto industry on its axis.


They're leaving behind trucks, large SUVs and, to a lesser extent, luxury vehicles of all kinds in favor of more fuel-efficient and less-expensive segments. An Edmunds analysis shows that this shift has precipitated dramatically over the last two months, both in terms of actual transactions as well as in shopping trends measured on the Edmunds.com site. Until March, this pattern of segment migration had been accelerating markedly but rather gradually.

But a 10 percent increase in U.S. gasoline prices in March and April alone, to the realm of nearly $4 a gallon, appears to have provided the catalyst for a shift that is bigger and faster than any ever tracked by Edmunds.com

 

[mgescuro]

Doom and gloom people always predict something bad on the horizon.

Since when have "Doom and Gloom" people ever seen flowers at the end of the tunnel?

The main reason we are seeing such high prices is the lower value of the dollar. Take that away and we have gas for $3 - $3.50/gal.

You can't be that naive, can you? You don't think the increased demand from India and China don't play a part as well??

If Toyota could sell 300k Tundras they would, but not enough people would want then even with $3/gal gas. The Corolla got a modest update when it's an important vehicle for Toyota, when more money was spent of the FJ Cruiser, Tundra and Highlander. Luck bailed them out on that decision.

Corolla is a global car. They don't need to depend on the US to measure success. And Corolla is to the point where it can receive incremental updates and still be popular. Well... popular for a toaster anyways.

Remember, Toyota gets a lot of heat for its dichotomous attitude between large trucks and fuel efficiency.

Where has GM put all of it's eggs in one basket? Do you not pay attention at all to other products that have come out recently and those on the horizon?

The bet is on EFlex. I see the other cars coming. But everything is on EFlex to succeed.

Honda doesn't make the most fuel efficient vehicles, they make more smaller vehicles or rather people don't buy enough of their mistakes, like the Ridgeline.

Honda is the most fuel efficient automaker in America.... by the sheer fact that they don't make trucks.

 

[paul8488]

If fullsize truck and SUV sales drop to zero tomorrow, Toyota loses a bundle on their new truck plant. Which they retool to build more Priuses (new version coming in January I believe) and Camry hybrids. Expensive lesson, but they'd survive it.

If fullsize truck and SUV sales drop to zero tomorrow, Honda shifts a few lines of production around at their flexible plants to build more cars (they sold over 100,000 units of just two models last month). They could probably find they money they'd lose in the sofa cushions in head office.

If fullsize truck and SUV sales drop to zero tomorrow, GM goes bankrupt and closes for good.

I admire your optimism HoosierRon, but Toyota and Honda can stomach dropping truck sales much more easily than GM. Nissan is willing to admit their Titan wasn't a success and are canning it. It won't put them out of business. Similarly, Hyundai and Mazda and BMW and Mercedes don't care all that much about falling truck sales, as they either don't have any or haven't tied their fortunes to them.

As they are organised today GM (and Ford and Chrysler) can't survive without healthy large truck and SUV sales. I hope GM can wait two years until all the good products you mention (and they ARE good products) get to market and start making money.

 

[mgescuro]

I hope GM can wait two years until all the good products you mention (and they ARE good products) get to market and start making money.

That's the $1 billion question isn't it?

Can GM sustain 18 months of essential "product starvation" in order to get the new breed of fuel efficient cars out to the public?

Can GM survive on Malibu, CTS, and Lambda for 18 months?

And how will GM's beancounters reconcile the fact that GM now has to operate in an environment where they lose a significant amount of high margin truck sales? Asked another way, "How many cars does GM need to sell to equal the revenue generated by 1 full sized truck/suv?"

A Cobalt, at best, gets GM $2-500 (usually break even). A truck can be upwards of nearly $10,000 or more.

Do the math.

 

[Ming]

-- The new Aveo (sales up 44% this month) will be here this fall, and it will be made in America. Rebadge issue aside, giving Pontiac a B-class car will result in more sales.

I'm glad someone else sees this. No one bats an eye when the truck portion of B-P-G dealers get Chevy rebadges, but Pontiac gets singled out for a small car rebadge. So truck rebadges are OK for "sales" and GMC gets a pass for having so many re-grilled Chevies, but the Wave would impact Pontiac's image negatively, or so they say.

BPG dealers cannot survive with SUV and Truck heavy lineups, so unless people want Buick to offer a gas sipping subcompact, then the job is up to Pontiac. BPG is not a niche brand like Saab and has to sell cars and offer something for people hit by this recession and looking for an inexpensive economy car. The Vibe, unfortunately is too expensive and offers too few incentives by virtue of being a reskinned Toyota.

 

[paul8488]

Sorry Ming... as much as I see the need for more small GM fans... and despite the fact that I actually like the Aveo adn think that the G3 looks even better... I don't see this as the saem situation at all. GMC has always been trucks. It's GM's second best selling division. While I don't get why GM needs to have Chey trucks and GMC trucks, they've existed for a long time and until and both sell tons of highly profitable trucks and SUVs. Obviously that's not going to last, but for the time being it's the case.

Look at the numbers for May:

26,702 Cobalts... 2,516 G5s.
7,842 Aveos... how many G3s?

Are they going to sell more than 1000 G3s per month? Is there that much pent-up demand for a smaller Pontiac? Are Pontiac fans somehow more inclined to buy more G3s than G5s (relative to Aveo versus Cobalt buyers at Chevy)? I have a very tough time believeing that Pontiac can move even 1000 of these things of they can't do more than 2,5000 per month with the G5 coupe and sedan.

Now you might say that even if they can move 1,000 a month, GM can add 12,000 units per year to their Aveo totals. That might be enough for their business case... but then I don't get why Pontiac is still around. One of the arguments to keep Pontiac going is because of the 'brand image' they maintain. If Pontiac fans want G3s then Pontiac doesn't have a performance image anymore. If that's the case then why are the 'frugal' G3 and 'not so frugal' G8 GXP sharing showroom space? What is the gameplan for Pontiac in the long term?

I want more small, economical GM vehicles too, Ming... but I don't get why Pontiac is the place for them! They either need to use their performance image or morph into a more eco-oriented brand... but I don't see how they can do both!

 

[HoosierRon]

I admire your optimism HoosierRon, but Toyota and Honda can stomach dropping truck sales much more easily than GM. Nissan is willing to admit their Titan wasn't a success and are canning it. It won't put them out of business. Similarly, Hyundai and Mazda and BMW and Mercedes don't care all that much about falling truck sales, as they either don't have any or haven't tied their fortunes to them.

As they are organised today GM (and Ford and Chrysler) can't survive without healthy large truck and SUV sales. I hope GM can wait two years until all the good products you mention (and they ARE good products) get to market and start making money.

I'm not denying that GM is facing serious problems. And I am not denying some of the other business model issues pointed out by mgescuro. My point is much narrower: GM is in a position to rapidly address high gas prices. It is not denying the problem, and it is not trying to offer the public a halfassed engineering solution like Olds diesels and Vegas.

If you don't think GM can survive as a car company, just consider these two facts.

(1) The average selling price of a new Malibu is around $4,000 more than the average of the old model. (I'll bet the same is true for the CTS, Enclave vs. Rendevous, G8 vs. GP, Corvette; and you know it will be true for the Cobalt replacement.)

(2) Ford is even more reliant on trucks than GM. I don't know why, but retail sales of Foci are up 105%. And look at what is coming: Fiesta, Superman Taurus and the MKS.

 

[PMC the 1st]

I respectfully don't buy that.

GM makes small cars for the rest of the World and chose not to sell them here (until the Astra happened, anyway).

This isn't new. This is EXACTLY what happened in the 1970s. The Oil Embargo hit and suddenly GM couldn't give away a Cadillac, while Toyota, Honda, and Datsun suddenly were the toast of the country due to their more frugal offerings. It happened AGAIN with the second fuel crisis. And then again, to a lesser degree, following the 2005 Hurricane season.

General Motors failed to learn the lesson. They failed to have strong enough economy cars ready to soak up buyers during both poor economic times and during energy crunches.

So, yes, Honda and Toyota were prepared for this. They expanded SUV and Truck sales, sure, but they never let their cars play second fiddle. They kept MPGs up--even in the face of rising horsepower, vehicle size, and added weight.

Gas prices have been steadily increasing since the late 1990s, this isn't something that just happened in 2008. GM failed to learn the lessons of the past, and this is the consequence.

But beyond that quibble, thanks for trying to keep everything in perspective. Hysteria is a disease that spreads quickly on the interwebs.

Most of this is incorrect.
In 1990, Honda didn't even offer a V6 in the Accord. In 2000, 35% of all Accord sales have been V6's, and that has been climbing since. The fact that Honda has been promoting their V6-powered cars rather than prohibit such sales tells me Honda was concerned with moving units in a country that sells gas cheaply.
Honda recently introduced a V6-powered truck that gets 15 MPG. In 1994, Honda didn't even offer a truck, let alone one that got mileage less than 20MPG.
I recently did extensive research on Consumer Reports's history and come to find out that Toyota economy cars were once regarded as the worlds-best. Not just from them, but from most of the automotive community. Now we have the redesigned Corolla, and even then there's no new ground broken there. The Cobalt is better than the Corolla (because of options like the XFE and SS), and the Cobalt is like an old, old car. So indeed Toyota has been playing second fiddle in that area.
I'm going to end this reply because I can't stand replying to posts that are infested with cliche's ("Second fiddle", "GM couldn't give their cars away", "economy cars ready to 'soak up' buyers", etc.).

Since when have "Doom and Gloom" people ever seen flowers at the end of the tunnel?
Well... popular for a toaster anyways.
Remember, Toyota gets a lot of heat...
The bet is on EFlex. I see the other cars coming. But everything is on EFlex to succeed.

GAAAAAAAAAAAA! More cliche's! I can't stand it!!!
Wrong ones, too. "Flowers at the end of the tunnel?" Isn't that supposed to be "Light at the end of the tunnel?!"
GAAAAAAAAH!
AAAAHHH!
Aaaaahhhh.

Doom and gloom people always predict something bad on the horizon. The main reason we are seeing such high prices is the lower value of the dollar. Take that away and we have gas for $3 - $3.50/gal.

If Toyota could sell 300k Tundras they would, but not enough people would want then even with $3/gal gas. The Corolla got a modest update when it's an important vehicle for Toyota, when more money was spent of the FJ Cruiser, Tundra and Highlander. Luck bailed them out on that decision.

If you think that the Cobalt is outclassed by the Corolla, you have serious vision problems.

Where has GM put all of it's eggs in one basket? Do you not pay attention at all to other products that have come out recently and those on the horizon?

Honda doesn't make the most fuel efficient vehicles, they make more smaller vehicles or rather people don't buy enough of their mistakes, like the Ridgeline.

I'll agree with some of this. While it's true the dollar is partly responsible for the high price of oil its' untrue that the implication is that by strengthening the dollar we'll see $3 gas again.
Seeing $3 gas by strengthening the $ is unrealistic. GM's spokesman agrees with me, which explains the elimination of certain jobs and possible Hummer sale. He knows oil will be expensive, probably indefinately.

 

[PMC the 1st]

I think the following shows that GM has learned its lesson. (Yes, I wish it had learned it earlier, but I am talking about reality today, not woulda coulda shoulda):

-- The Beat is greenlighted for the U.S.: GM gets it.

-- Giving Pontiac a B-class car will result in more sales. Boo hoo all you Pontiac purists. You cannot demand RWD performance cars and then say GM still does not get it.

-- Cobalt XFE: GM gets it.

-- Malibu 4 cyl/6 speed: GM gets it.

-- Volt: GM gets it.

-- 1.4L DI turbo: GM gets it.

-- Vue Plug-in: GM gets it.

-- BAS+: GM gets it.

Totally, totally agree.
GM gets it; why can't the haters get it?

 

[mgescuro]

GAAAAAAAAAAAA! More cliche's! I can't stand it!!!
Wrong ones, too. "Flowers at the end of the tunnel?" Isn't that supposed to be "Light at the end of the tunnel?!"
GAAAAAAAAH!
AAAAHHH!
Aaaaahhhh.

No because the "light at the end of the tunnel" adage wouldn't make sense in the context of my reply.