June 27th, 2008
Detroit auto industry going through shock therapy? As in electric shock? Sales numbers say this is real and this is do-or-die
Perhaps never has the Detroit auto industry faced such a challenge. Not from the small cool VW beetle in the 1960s. Not from the onslaught of Datsun and Toyota a decade later. Not from the Honda Civic in the Nineties. This time the challenge is not from another, more salable gas-powered vehicle. The challenge is from “other.” Something, perhaps anything, that doesn’t burn $4/gallon gasoline brewerd from oil imported from Canada, Mexico or the Mideast.
FIRST: A NUMBERS CHECK
A new estimate of AMERICAN auto sales this year: 12.5 million. Yes, that’s a tad lower than the 16+ million sold in 2007. And that was just last year. Actually that’s more than a 20% decrease year to year. That’s catastrophic to business plans, executive bonuses, assumptions at the base of any industrial business. That’s disruptive.
And that seems to mean American drivers are not only economically challenged right now, they’re waiting. Waiting to see what comes out next. What gets sixty or a hundred miles per gallon. There is some chance that eventual re-regulation of the oil futures market could drive prices back down to real market levels, not the current speculate-and-full-speed-ahead levels. I’ve seen estimates that the current crude oil price is 40% or more out of whack with simple demand. But it’ll take at least another year to re-regulate the oil markets, if it ever happens. Then you can bet there’ll be a sudden “shortage” as oil companies take their private tax on the system. Gas lines, reduced service station hours, etc. That won’t make people run back to the gas hawgs of 12 MPG, or even 20. So the dominance of the gasoline-powered auto may be waning. Forever. In Europe the diesel and the turbo-diesel reign already. That could even happen on the wide open roads of North America. Or US drivers could opt for some electric shock of their own.
Loading ...GM’S BIG RISK
No single corporation has more to lose, nor more to gain, in trying to be ready for next tech shift in car travel than General Motors. Long the world’s #1 car maker and seller. A huge financial corporation loaning money to milions of car buyers worldwide. Gm may not only be sliding along with the rest of the auto sales business in the US, it could lose its leadership to Toyota in June sales, falloing to #2 for the first time in many years.
GM is Detroit-based, of course, the heart of the US auto industry for a century. They have over a quarter-million employees, making cars from Chevy to Caddy. They are re-thinking their ownership of the Hummvee. Back at the start of 2004 GM stock sold at over $50 per share. The curve goes mostly downhill since then and now the stock is below $15 per share though the arc on the chart indicates it may not have hit bottom. How low can it go? The corporation is not currently profitable. Thus it is with great interest anybody with a eye toward the future of plug-in cars and the future of private transport will read the new piece on the “Atlantic Monthly” website. It is a thorough look at the politics and economics of the GM Volt, scheduled for launch in Model Year 2010, and the chief engineer who is trying to re-engineer one of the world’s largest industrial corporations. It is supposed the first mass-produced plug-in car with a hybird engine,the gasoline is to back up and re-charge the electric storage unit. The monster in the closet: if this Volt is not ready for serious launch in fall of 2009, or soon thereafter. Or if it launches and fails to perform. Another Corvair or Edsel. Then we will witness an ugly scenario that’ll make Enron look like a comedy cartoon. Anyone with a stake in the American economy should be pulling for GM and an engineer named Andrew Farah, Mr. Volt.
A newsman since 1969, Harry Fuller has worked for CBS, ABC, CNBC Europe, CNET and was founding news director at TechTV. See his full profile and disclosure of his industry affiliations.
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