Oil: A painful transition
In 63 years of selling cars, Johnny Londoff never has seen anything like it. Big SUVs — Chevy Suburbans and Tahoes — hot sellers just two years ago, now seem glued to the lot at his Florissant Chevrolet dealership.
Customers turn up their noses at $6,000 rebates. Meanwhile, itty-bitty Aveos and Cobalts are selling fast, but smaller cars mean smaller profits, Mr. Londoff said.
“We’re surviving,” Mr. Londoff, 84, says of his fellow St. Louis auto dealers and himself. “We’re not making any big money anymore. I tell my wife we’ll have to put water in the cornflakes.”
Auto dealers are among those being ground in the gears of the American economy as it downshifts toward energy conservation in an era of pricey oil.
In the long run, America will adjust to being a nation of gas-sippers. We’ll drive plug-in hybrids (both GM and Toyota have models in the works) and maybe even hydrogen-powered cars. Industry will adopt more energy-saving technology; computers and telephones will replace more business trips.
Those sorts of changes have been occurring anyway. Compared to the 1970s, America today uses only 58 percent as much oil to produce a dollar’s worth of goods and services. Today’s sky-high oil prices will throw that process into overdrive.
The problem lies in the short run. Over the next couple of years, lots of Americans will be hurt badly by the energy mess.
Auto and airline workers already feel the pain. Nationally, one out of five auto plant jobs has disappeared in the past two years; more layoffs and buyouts lie ahead as sales tumble for trucks and SUVs. GM’s Wentzville plant seems safe; it’s the only plant making work vans for the company. The fate of Chrysler’s Fenton plant is more difficult to predict. It makes minivans and big pickups, and sales of both are falling. Sales of the 2008 Dodge Ram pickup, a macho machine made in Fenton, are down 38 percent.
American automakers are on a crash program to build smaller cars. GM, for instance, plans to introduce its plug-in Volt in 2010, promising 150 miles per gallon of gasoline.
But the Big Three may find it difficult to survive the transition without a dip into bankruptcy or a bailout from cash-rich foreign investors. Virtually all their North American profits come from pickups, minivans and SUVs, and those are becoming dinosaurs in an era of $4 gasoline.
Faced with higher fuel prices, airlines are cutting flights, laying off thousands of workers and parking their older gas-guzzling jets. Five smaller airlines already have gone bankrupt. Continental, United and Delta plan to shed 9,000 jobs.
Analysts say airlines would have to cut their scheduled flights by 20 percent to break even at today’s fuel prices. On Wednesday, American Airlines announced it would cut 43 American, American Eagle and AmericanConnection daily departures out of Lambert International Airport. But American so far has been mum about job cuts. The airline employes 1,870 workers here.
The crisis has a few silver linings. Skyrocketing shipping costs should make American companies less likely to move production jobs overseas. And expect a boom in energy-saving technologies. The American economy is highly adaptable, but it doesn’t change overnight.
The good news is that the switch already has begun — Americans drove 1.8 percent fewer miles in April than a year earlier.
For the next year or two, however, a lot of Americans will be pouring water on the cornflakes.
Unless an acceptable foreign car maker totally overwhelms us with better fuel efficiency in the next year or so, my next car will come from Dave Sinclair, the only local dealer who constantly hammers home the “Buy American” idea. My American cars have been highly reliable and have met or beat the foreign competition for fuel economy. Keep on hammering, Dave, we’re proud of you!
Senior citizen you really have been duped. There are no American or foreign car companies anymore. Don’t you realize that there are many Americans who work for Toyota, Honda, and Nissan, and build “imports” right here in America? Also is the fact that companies you would consider to be foreign, like Mazda, are majority owned by “domestic” companies, like Ford. In fact for decades auto manufacturers have been sharing factories and building duplicate vehicles; your Ford Escape has the same platform as the Mazda Tribute.
Further, the MKX, MKZ, Grand Marquis, Milan, and Ford Fusion (all Fords) to name a few are all “American” cars assembled in Mexico and Canada. The parts for ALL cars come from all over the world. I can’t see how anyone today really thinks they are accomplishing anything by purchasing an “American” car.
May auto sales results have got to give a lot of dealers and automakers some pause:
The Ford F150 Series pickup, the best selling vehicle in the US for the past 17 years, has now fallen to 5th place, behind the Honda Accord and Civic and the Toyota Camry and Corolla.
GM sales are down 30%, while Chrysler sales are down 28%. (Honda sales were up 14% and Mini sales were up 47%.
My favorite stat was that Hummer sales have plummeted 62%.
Things are changing fast in the transportation world, and I hope that US automakers adapt quickly before they become irrelevant.
Senior citizen doesn’t get duped that easily. I’ve built untold thousands of GM cars with Korean seat adjusters and window lifts, and the soft trim didn’t come from Grand Rapids either. The cartons said El Paso, but that’s the border crossing. Still, as Dave Sinclair properly states, what counts is where the company is headquartered and where the money goes. You may not think of Sinclair as a financial expert, but he’s been a highly successful business owner and manager for many years, and he knows the car business as well an anyone.
Every American purchase of a car with a foreign logo devalues the dollar and puts you and your family and friends further in the hole, even it the car is built in Kentucky.
Senior citizen - by your analysis, Honda could sell all assets to an American holding firm, move 100% of it’s jobs to America, yet it would still be bad for America to purchase one because it has a foreign logo.
That actually sounds very racist.
Mike C’s “analysis” sounds pretty far-fetched, maybe a bit defensive over driving a Honda? He needs a broader and less nit-picking outlook, and I’d appreciate not being falsely accused of racism.
I began this discussion by mentioning the possibility of an acceptable car maker totally overwhelming us with better fuel efficiency. In my view that might be the existing Honda Civic hybrid, the coming Honda diesel, or Honda’s natural gas car. My retirement portfolio contains only two automotive stocks, Honda and Toyota. I own THEM, they don’t own me. If GM gets their act together and brings their Equinox or other practical natural gas or electric car to market at a decent price, I’ll still buy American, and am waiting to do so.