Gas Prices Catch up with Detroit

The always provocative Jamie Kitman, columnist for Automobile magazine amongst others, has a piece in the September issue calling out the Big Three automakers (or The Moderately Large Three, he demurs) for their decades long lack of responsiveness on the issue of fuel economy.

Game over. After almost half a century of fighting battles, America’s Big Three have at long last lost the war. Yes, it’s official. From this day forward, fuel economy matters… Too bad Detroit carmakers weren’t prepared. They only had fifty years to get ready.
Detroit didn’t have to encourage profligacy, it chose to. And some will argue that the power of advertising dollars could and should have been used to encourage efficiency. The American industry could have planned the same patriotic card it deployed following 9/11 to advocate fuel conservation instead of throwing around billions of dollars to make sure there were large SUVs in every garage. It didn’t have to spend some four decades fighting safety, emissions, and fuel-efficiency standards.
Clearly this is not just a down year, it’s a total paradigm shift… Cars that seemed like pretty good ideas suddenly seem less inspired. Cars that appeared bad ideas before now seem like the worst ideas ever. The Hummer brand, for instance, is on target to sell fewer than 35,000 units this year, or about twelve percent the number of Oldsmobiles GM was selling when it decided to shut that venerable brand to concentrate on…Hummer.

Strangely enough, while typing this up I’m listening to a Tivo’d recording of Charlie Rose’s interview with GM CEO Rick Wagoner. It’s a good interview, but obviously he gives quite a different perspective than Kitman (who points out that Wagoner got a 64% raise to $15.7M in 2007, despite GM’s heavy losses). And I can’t say that I can entirely blame the automakers for the large trucks. People bought them, and they didn’t buy small cars, for the most part, so the financial imperative in the near term was fairly clear.

But one thing Wagoner just said jumped out at me: he thinks the US government should get behind funding the startup costs for new energy sources, such as fuel cells and batteries, in order to kick-start the growth and innovation. But 15 minutes before he was bemoaning the role of governments outside the US supporting their domestic auto industries because it makes it unfair for competitors (i.e. GM) to compete. Seems to me that you can’t have it both ways though - either government intervention in helping domestic manufacturers get rolling in a new industry is OK, or it isn’t.

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