This is a good change:
The Ford Motor Company, which devoted itself for nearly 20 years to putting millions of Americans into big pickup trucks and sport-utility vehicles, is about to drastically alter its focus to building more small cars.
The struggling automaker, reacting to what it sees as a rapid and permanent shift in consumer tastes brought on by high gas prices, plans to unveil its new direction on Thursday, when it will report quarterly earnings.
Among the changes, Ford is expected to announce that it will convert three of its North American assembly plants from trucks to cars, according to people familiar with the plans.
And as part of the huge bet it is placing on the future direction of the troubled American auto industry, Ford will realign factories to manufacture more fuel-efficient engines and produce six of its next European car models for the United States market.
1.) Isn’t this long overdue? Wouldn’t a responsible company that was actually concerned with the long-term health of the organization have made a shift like this a long, long time ago? If companies were concerned with long-term stability and profitability, rather than focusing on the rather short-term earnings reports, it would seem to me they would have, but as they are beholden to the shareholders who demand a dividend every quarter, they probably produced their cash cow trucks and SUV’s for far longer than they should have. Possibly a situation where capitalism works against itself.
2.) If Congress had acted responsibly over the past few decades and raised CAFE standards appropriately, rather than modest changes pushed off for decades in to the future, would this change have come earlier and left Ford in a much better position on the global market?
3.) Is it too late for Ford? Have they spent so much money marketing SUV’s and big trucks, creating an artificial “need” for giant vehicle penises so ingrained in the American public that the consumer is not going to be willing to make the shift to smaller vehicles as readily as they might have been otherwise? Or are gas prices enough to get people to shift quite quickly and happily?
Just some thoughts.
I remember years ago, I guess the last time we had a bump in gas prices and the market became temporarily interested in fuel efficiency, Ford had an ad campaign that promoted one of their small cars (the Escort perhaps?). The line in the commercial angered me so much, it said “we’ve been making fuel efficient cars for the roads of Europe for years…”.
Gee, thanks guys. Good think Eurpeans had fuel efficient cars and we had tanks.
Absolutely. 4 co-workers in 2 months traded in their SUVs for Hondas/Hybrids. 3 of the 4 took HUGE hits in terms of trade-in value, cuz the dealer cant move SUVs at all, but the savings in gas was enough to do it anyways.
Also seeing a huge uptick in the number of bicycles on the road. Lovin it.
This is a subject (raising CAFE standards) that gets me so pissed off. In a sane world years ago the government would have been raising the standards. This is a perfect example of why you have a government and don’t leave everything to the market, because the market does not necessarily plan for the better good of the country.
Can you imagine how much better shape GM and Ford would be today if CAFE had been slowly raised over the years to account for better technology.
In my humble opinion:
1) Probably. I suspect Ford, like the other US automakers were already in a bit of a financial bind by they time they saw the hand writing on the wall. So to bankroll the changeover to smaller cars they hoped the larger profits from SUVs would give them a boost in both their bottom line and stock price. That gamble didn’t pay off.
2) SUVs were a loophole around the original CAFE standards (since they were “light trucks”), a new set of CAFE standards might have worked but at least one automaker would have found another loophole and the rest of the market would have followed. Right now the market is demanding cars with excellent mileage and that will drive the change in the product lines, the newer CAFE standards will (hopefully) cement that change into place so that when gas prices drop a bit there won’t new a mushrooming of SUVs again.
3) Hard to say, the market is fickle at best. America is the land of the big car and I’m not sure if that will ever chance. I suspect the marketing will go along the lines of a “cheap car for the week, big car for the weekend” sort of thinking. Detroit, Ford especially, has a huge resource of design and engineering talent that can be tapped from MSU, UofM and other local sources. If they can draw some good innovation from there they might be able to pull this off.
BTW, only tangentially related. The American Solar Challenge race is currently underway. (Go Blue!)
Long-term health is for suckers, John! Who needs that when you can get a bailout relief from the completely unforeseen trauma that has befallen you?
Gah. It’s so goddamn simple when you put it that way. And yet so many people fail refuse to see it.
It’s certainly going to be challenging. The top business story on the CBC National News this morning was new numbers predicting that the best-selling personal automobile in Canada for 2008 is likely to be a car rather than a truck. For the past 5 years it’s been the Ford F-Series. This year, it’s going to be the Honda Civic.
This is kind of a big deal. Ontarians (40% of the population of the country) tend to be almost as devoted to the North American automakers as Michiganders, given the amount of auto production that spills over the Great Lakes and happens here. If Ford loses Canada, that’s a really bad sign for them.
What is sad is that enthusiasts have been begging for Ford to do this for years. Ford of Europe has great cars. The Euro Focus puts ours to shame (and is the best selling car in Europe). The Fiesta would be a great alternative to a Honda Fit. The Mondeo is awesome. The S-Max and C-Max are practical efficient people movers.
The one plus side that Ford has over GM and Chrysler is that at least they have great small cars to bring over. GM and Chrysler have to build them from scratch. The only question now is whether they will bring over some of the smaller engines and the diesels. Usually car makers tend not to offer the smallest world engine in our “more power” culture.
What you said. It seems to me that for a company like that, considering all the design, production, etc. that goes into their product, that a quick change would be like trying to do a u-turn with the Titanic. And, our gluttonous (sp) public wanted the gas guzzlers. Not an easy situation.
I think Alan Mullaly has been good for Ford; I think they’ll pull it out.
Ford is in good shape relative to GM, but mostly for financial reasons. GM has a wide variety of passably decent small cars that they could bring over from other markets. Chrysler’s product mix is a true disaster.
Probably not. I think GM is the company that is more fucked in the long run.
We have a client that is a Cadillac/Hummer dealership. Needless to say, things are bad for them. To make matters worse, it seems highly likely GM will be discontinuing Hummer in the near future. That wouldn’t be so bad if GM hadn’t forced the dealership to build a brand new $4 million Hummer facility only three fucking years ago. It is rumored there will be many lawsuits coming from all the dealerships in a similar predicament.
Nobody is more shortsighted than GM.
Ford canceled dividends about two years ago, and even then it was paying about 2.2% yield. (10 cents a share). From my quick research it seems like the automobile sector pays pretty good dividends historically.
In any case John, corporations are a lot easier to understand if you replace “shareholders” and “dividends” with “top management” and “bonuses”.
Funny, I sent the Ford story to my brother who use to work at Ford after I saw it here, and his response was similar.
1) It was long overdue 20 years ago, when Halberstam wrote about American car makers in The Reckoning;
2) Ford’s shareholders are all those State Teachers’ Pensions Funds and whatnots that depend on higher dividends every year to support their retirees.
The demographics are against any permanent changes in car makers’ products.
1) Yes. And capitalism often works against itself.
2) CAFE is stupid. Gas tax.
3) Possibly, but F has the best chance of the 3. GM has about 5 brands too many (Pontiac, Buick, GMC, Saab, Hummer) and can’t consolidate without spending billions in cash to buy out dealers. C is in freefall because the corporate raiders at Cerberus have no idea what when it comes to running a terribly complex manufacturing business.
Also, GM has Opel in Europe and Daewoo in Korea, so it already has small cars. The Saturn Astra is an example of an Americanized Eurocar (if a poor one).
1) Companies should have been doing this on their own years ago. Automakers should have learned from the 1970s that they need to maintain high fuel efficiency standards, they could have spent the last 20 years making engines that gave us 35 MPG or higher, knowing full well gas/oil is a limited resource…
2) Congress should have been setting and maintaining standards for better cars as well, but hey gas was always under $2 per gallon so who cared about long-term policies?
3) It may be too late for Ford and other automakers in the short-term, but I guarantee the companies will be begging for a large bailout like the ones the airline industry got… and the S&Ls… and the banks… and the oil companies… and the pharmaceuticals… and everyone else making over $2 million a year in inflated and undeserved salaries…
About CAFE–while Congress deserves a good chunk of the blame for not raising standards, don’t overlook the auto industry’s hand in this. They have one of the biggest lobbies in DC, and have had one for a long time. They spread around a lot of cash to lower CAFE standards and keep the SUV loophole open. They did a lot of this to themselves.
Bill In OH
At least a partial explanation for 1) is that Ford (according to my cousin who’s worked there for 20+ years) became a very conservative, reactionary company in the ’90s. They only wanted to market vehicles that they thought would be guaranteed winners and didn’t want to take any chances with innovative products that might not sell. This seems to have translated into big SUVs and pickups, and retro design a la the Mustang. Unfortunately, this also put them in the position of being market followers.
I find this ironic, given that in the ’80s Ford gave us the Taurus, which almost single-handedly brought aerodynamic styling into the mainstream and ended the era of ugly, blocky Detroit cars.
The good news is, as a commenter said above, Ford does have Ford of Europe to draw on for more fuel-efficient, forward-thinking vehicles. I know I would buy a Mondeo if they sold it here.
b. hussein canuckistani
I’d say Ford is doomed because they don’t have a good reputation for small cars in North America. When people think Ford, they think Explorer and F-Series. People are turning to Honda and Toyota for their fuel efficient vehicles, and they (and the other Asian brands) will be eating the Big 3’s lunch for years to come.
Andrew nails it. Ford is in pretty good shape (both strategically and financially), while GM is fucked. All the American automakers have been living off their Canyonero-style SUVs for the last 5-10 years, and the hole in the CAFE standards for SUVs encouraged them to do it (and is also why there hasn’t been an American-made station wagon since 199X?). However, Ford has a strong foreign business and, at worst, has the technology and designs to make fuel efficient cars for the American market. GM does not have the ability to streamline development of good, fuel efficient cars (or, some would say, good cars of any kind), plus they’re completely screwed financially.
My question is why GM didn’t take the lead in “socializing” American health care in 1994 when they had the chance. If they’d backed Hillary, they’d be in pretty good shape right now, instead they helped fund the “Harry and Louise” ads. And people think New Coke was an example of bad management…
What is this “responsible company concerned with the long-term health of the organization” of which you speak? In the US, CEOs and boards only care about exceeding the next quarter/annual target so they can get their enormous bonus. If it all comes crashing down the day they leave/retire, it’s officially someone else’s problem (assuming they don’t commit obvious fraud and end up in the can, but remember, Ken Lay’s family made out with >$300 million even after he was found guilty, thanks to a well-timed heart attack).
The Moar You Know
But they aren’t, and not only that, they can’t be. Shareholder liability lawsuits await the owner of any publicly-held business that dares to make long-term decisions that don’t also maximize short-term gain.
If you argue that things shouldn’t be that way, you’re not seen as a responsible citizen, you’re a goddamn pinko socialist who hates both the troops and America.
Cap and Gown
I don’t understand why you pose this question. Of course the public will shift its preferences. It already has. That is why Ford (and GM) are moving in the direction they are. Their SUV and Truck sales have crashed in record time. Resale prices for used SUVs and Trucks have also crashed. Meanwhile, hybrid car makers are unable to keep up with demand.
Instead of CAFE standards, we should have raising taxes on gasoline years ago to encourage higher milage vehicles and using the money to support public transportation and alternative fuels. Christ, if we had followed through on Carter’s proposals we might not be where we are now.
Yes, capitalism is incredibly short sighted when it comes to externalities. And here I don’t just mean global warming, but the inevitability of peak oil that was long ago forseeable, but only recently has begun to affect pricing.
We messed up really badly in the 80s. I remember disucssing with a friend back then that our country should be investing big time in windmills and electric autos. Not only would this have addressed our energy needs, but it could have created millions of new jobs. Instead, the wind farms out in west Texas are buying their wind mills from GERMANY! This is nuts. Here is a great new industry being created, but the jobs are not going to Americans, all because of our short-sightedness. Stupid.
I got to take lots more photos of suv and monster truck jammed highways. That way in a few years I can take them out and be thankful that I’m able to see around the cars in front of me again. Hopefully we’ll soon look back on the late 90’s and the oughts as the pig car times, just like late 60’s and early 70’s were.
The Other Steve
I just want to point out, that I believe this is a perfect example of the Free Market working.
CAFE was always a pretty moronic way of changing fuel consumption behavior. It relied on modifying the supply of cars, rather than the demand for cars. It would never work. Consumers weren’t consuming more just because the car companies made big SUVs, they were consuming more because gas was cheap.
You have two changes that are taking place now. People are either driving less, or they have to drive that distance they’re finding ways to make it more cost effective. When gas was cheap, it wasn’t unusual to see people using their car for entertainment and driving just for the sake of driving. So fuel economy didn’t matter anyway, as people were putting on more miles.
I see no reason to get upset about the government. They couldn’t do anything except add taxes to gas to make it more expensive, which wouldn’t have flied either.
And the companies like Ford who failed to plan, well the market will punish them. I’d be mad at their leadership, and I do think there is an overall problem with the way Wall Street focuses on short term profits over long term results. I don’t know how we solve that, but I’d like to see a change.
I knew Ford had a good lineup in Europe. I did not know how good until I started looking.
I’d buy the Mondeo as well. Nice looking car.
The only issue Ford has is with quality. They put a 5+ year 100k mile warrenty on the car and it would be a a top seller.
I also concur that GM is fucked and I’m not going to miss them. They have been a classic example of poor management for 20 years now.
As for CAFE standards, it would have been nice to see them raised, but the market is doing a much better job of realignment and forcing fuel efficiency.
Abso-fucking-lutely. My sister, in 2001, traded in a Honda Accord for a Tahoe and never looked back. She proudly proclaimed that she would *never* buy a car again because she loved trucks that much. The upgraded to a newer Tahoe in 2004. Last year this time, she was eyeing the Dodge Charger and loved the way it drove, but didn’t buy it because she said she thought people would see it as a “downgrade” from her Tahoe when she wanted to ‘upgrade’. Needless to say, she bought a new car last month. Guess what she is now driving….
A Honda Accord… and she’s loving it. She is a high mileage driver and she had to fill up her truck every 2 days at $75/tank. Now she fills up her Honda every 4 days or so at $55/tank.
The Other Steve
GM wasn’t behind those ads, it was the insurance industry.
But my understanding of Hillary’s plan was that a handful of insurance companies would be extremely profitable, and the rest would be out of business. Thus she created strange bedfellows and enemies. You can’t really villify insurance, because her plan worked with them, but you can’t really sell a plan by saying “Those guys are bitter because they’re not getting a piece of the action.”
GM has a huge bet riding on the Volt, which in turn will only succeed if they can figure out the batteries. If the Volt fails GM could go the way of the old Soviet Union. Their market cap is already down to pitiful levels.
If GM does go, it’ll be poetic justice for a company that has long been both evil and stupid. But it’ll also impoverish millions of people who had nothing to do with the bad decisions that brought the company down, and who didn’t benefit from all the funny money the shenanigans generated.
The Other Steve
It was called the Ford Contour.
It was an unreliable piece of shit.
I am from England. When I finally got round to learning to drive at the grand old age of 28 in 1988 (never felt the need prior to that with the brilliant public transportation system in the UK) I bought myself a used little green Ford Escort. It was a sporty little car and got 44 mpg around town and 55 mpg on the motorways. Granted the US gallon and the UK gallon differ slightly (I believe the UK gallon is equivalent to 1.2 US gallons) but that should not have made such a difference in the mpg. When I moved to the US in 1991 I was gobsmacked to see they were selling Ford Escorts that only got 20mpg I couldn’t fathom it at all. I agree with everyone else however, Ford with its European side is better positioned to cater to the new fuel efficiency needs of the public.
I wonder which major car company will be the first to make authorized engine replacements to make their cars fully electric, hybrids, diesel hybrids, or something other than gasoline-powered cars? Selling complete cars is the goal of the big car companies, but such conversions are going to be a big way to make money over the next few years with all the otherwise-useful vehicles using the wrong types of fuel. I’m planning to convert my second car to be a plug-in electric and would love to be able to have a dealership handle that and service it in the future, but I guess that aspect of the market is going to be left to the DIY crowd.
Their loss, I guess.
CAFE is the worst possible solution to fuel overconsumption except for all of the others.
A substantial gas tax increase is the most economically efficient method for reducing consumption but it also the least politically possible mechanism.
CAFE and other regulations hide the costs in the purchase price of the car, which is something consumers think about every 3-5 years. Gas prices smack us all in the face almost every day, and for minutes at a time while we pump it.
I’ve seen the Volt. It looks great as a concept car and I’d buy one if the production model looks even remotely like it.
The problem is the concept cars look great then the production models end up looking like Geo Metros.
I’d not count on GM pulling the rabbit out of the hat with the Volt.
If we’ve learned anything in the nearly 8 years of Bush… “shift happens”.
1. Define “better.” More comfortable, maybe – the market doesn’t give you something you want until you know you want it. But that doesn’t mean “better.”
2. Echoing Napoleon’s comment, the third or fourth on this thread, some things should not be left to the market. Oil and gas prices are tied to so many issues, including national security, that the next quarterly report should not be making the rules on this. The market is the best way to regulate stuff that people don’t absolutely need as an essential of life. Gas and oil, regrettably, have become necessities.
Ford is in good shape relative to GM, but mostly for financial reasons. GM has a wide variety of passably decent small cars that they could bring over from other markets. Chrysler’s product mix is a true disaster.
Almost all of GM’s small cars are here. The problem is they aren’t that good. Saturn is made up almost entirely of rebadged Opel’s at this point. The rest of GM’s small cars are rebadged Daewoo’s which frankly aren’t good.
Most people don’t realize that the spread on those SUV’s and trucks was huge. Ford paid almost all of their bills with profits on the Explorer. That easy money keep the lights off at the R & D department for many years even though the ivory tower knew the 8-cylinder orgy was coming to a close. Their short-term debts were being paid by trucks and SUV’s and any early transition to Euro-style vehicles would delay this and incur massive debt as competitors continued churing out Tahoes/Escalades at a ridiculous rate and high profit margin. Somewhere in the burbs of Detroit, there are massive parking lots that were created just to hold the unsold Excursions. You cannot see these lots from the highway as they are obscured by a massive fence, but it is similar to an airplane boneyard. 1000’s of new vehicles worth scrap pricing.
Here in Atlanta, the Hapeville Ford assembly plant was their most productive plant for years, building the Taurus and Sable. At peak productivity, they could produce upwards of 1200 Taurus autos per day. When the consumer tastes shifted away from the Taurus, Ford found a buyer in the rental car market and kept producing for Hertz and Enterprise. When the rental car market lost a taste for the Taurus, the Hapeville plant kept on plugging that line anyway as it was cheaper to keep on building than it would have been to shutter the plant.
My college roommate held a job in QC at Ford and they knew five years ago that the gig was up. It was the top tier management that wouldn’t let go because of #1. He also told me that Ford/GM bought any technology that threatened the gasoline engine and locked it in a safe…
Speaking of CAFE loopholes, that is all that E85/flex fuel is for the automaker. They used that loophole to get credits for CAFE standards while not really changing the composite MPG for their fleet. Try to find an E85 fuel station in Atlanta…there are a total of THREE.
It would probably have been more comfortable to ease in higher mpgs over a decade rather than the sudden shift in the last 6-12 months.
With CAFE standards, there are always loopholes. With $4 gas, there are no loopholes.
Honestly, in this case, I hope oil prices plummet when the little euro cars start popping out of the factory. Then Hyundai can take over whatever is left.
If its and buts where candy and nuts…
We can only hope.
If you give up your SUV, the terrorists have won.
Ford is still shooting itself in the foot (or the front tire). The gas price crisis accelerated problems, but it is not just that Ford was making big trucks and SUVs, it is that buyers strongly preferred vehicles made by Toyota, Honda and other companies for a host of reasons (reliability, style, performance, etc.) There is nothing in Ford’s announcement that suggests that they have found a way to deal with this.
Actually, I think I saw somewhere that Ford was doing well in some foreign markets. And in India, for example, Tata Motors is making news with its promise of a super-inexpensive car for the Indian market (World’s cheapest car goes on show)
But you’re right that Ford and other US auto makers have hurt themselves, and the American economy by fighting against higher CAFE standards. And unfortunately, the Republicans won’t budge on this issue. I listened to a radio program about energy issues in which a California Congressman deflected questions about higher mileage standards to a defense of offshore drilling in California, and when asked whether his staff used fuel efficient vehicles, sternly replied that he did not dictate what type of cars his staff used.
Have you been reading the news lately? Sales of SUVs have plunged recently. From a May Washington Post story (SUV and Truck Sales Plunge):
It’s just wrongheaded to assert that consumers are somehow conditioned to only want big cars. And notice here how Ford executives were blind to consumer preference, seeing themselves as an SUV company even though people were happily buying the smaller, fuel efficient Ford Focus. Note also how GM was more responsive to changes in consumer buying habits.
But this is why capitalism is actually pretty good. It punishes stupidity.
Not. If gas taxes where higher, it would be the first thing politicians would promise to cut. You don’t instill desired behavior with something you can turn on and off at will.
Nobody is yet talking about the other bigger problem. We aren’t going to have anywhere near enough money to pay off all those highway contractors/projects. Some states are already trying to switch from gas taxes to distance taxes.
Well, as is the usual practice with GM, they mishandled the introduction of their overseas models here. The Korean cars are just horrible. The Opel-Saturns are okay, but not priced competitively and there is a very limited selection — the Corsa would be a useful model to have right about now.
The single smartest thing in the world for GM would be to spend ever single lobbying dollar for universal health care.
The next best things would be to consolidate brands and sell off some marques to overseas investors.
didn’t they start building smaller, more fuel efficient cars after the LAST FUCKING OIL CRISIS! Jesus H Christ, American car companies are just like the fucking republicans,
1. Bloated and inefficient
2. Out of Date
3. Out of touch
4. Never learned from their mistakes.
Re: gas tax. There is a good discussion on the subject at the Becker-Posner blog.
Was thinking the exact same thing.
…and Ford, where’s my electric or hybrid Mustang?
If American 5’3″ suburban soccer moms didn’t purchase these tanks with seat warmers and cup coolers we wouldn’t be in this mess. Trucks used to be classified as working vehicles, until Lincoln started building designer trucks for yuppies.
I think Ford was hoping that CAFE standards, being inevitable, could be used as an excuse for a big fat government handout to “help them with the transition”.
But, if it wasn’t too late for Nissan then it’s hard to write off Ford. Management sucks there–swallowing decades of great ideas from the grunts–and only a true crisis will fix that.
American car companies have long ignored the working models of Honda and Toyota, which is building cars that run for ever with very little maintenance and having a feel for the changes in the market and adapting accordingly. Smart strategies for whatever reason have eluded these companies and have led to their current doom.
This is an interesting article, but it also points out how easily some economists swerve from reality when trying to match economic theory to actual behavior:
I’ve read this a number of times and am still trying to figure out how a passenger riding in a car “decides” to have an accident. I kinda know what they are getting at, but it is still a fundamentally stupid perspective.
Apart from this, I agree that the discussion, which covers the pros and cons of gas taxes, is very interesting.
Thanks for the link.
thetruthaboutcars.com has ongoing sections devoted to the death watches they have declared for the remaining big three American auto makers.
After reading stuff on these death watches for the past year, you have to wonder just how much longer these behemoths, who continued to totally ignore the coming or peak oil and the reality facing internal combustion engines and the environment, instead opting to push their high profit pickup drugs masquerading in drag as SUVs, will last.
GM Death Watch
Ford Death Watch
Chrysler Suicide Watch
Just because Americans elect politicians that pander doesn’t mean higher gas taxes are a bad idea. Also, note that CAFE was “turned off” ie kept at the same level for almost two decades despite advances in engine technology.
It’s a lousy discussion since they don’t once mention the defense costs associated with keeping the Middle East ordered to our benefit, and otherwise they are covering old ground.
It’s been said that when the US government, decades ago, started mandating gas mileage and emissions standards, the Japanese and American automakers responded in radically different ways. The Japanese hired more engineers, while the Americans hired more lawyers. The Japanese saw the future and planned for it, while the Americans planned to fight against it.
That Toyota is kicking General Motors’ ass is no mystery. IN fact, they methodically planned it that way.
P.J. O’Rourke, no liberal he, commented in his essay about flying over the US Army staging area in Kuwait and seeing war machines stretching as far as his eyes could see, that it sure seemed like it was a lot more expensive to steal oil than to simply buy it.
Even at today’s prices, a trillion dollars buys a whole hell of a lot of oil.
The implosion of the big-car market has me laughing for tangential reasons. I use the AFA’s mailbots against them to plead for gay rights and other causes they can’t stand. They’ve been sure as can be that their anti-Ford boycott is what drove the company into the dirt. Sucks to be them should this conversion process pay off.
I’ve been driving a Ford Fusion (intended to replace the Contour) for a couple years now and I’ve been really quite happy with it. For people who aren’t six feet tall, even it might be overkill, too.
I had to rent a Chevy Aveo once (which is a converted Daewoo) and that was a disaster.
My very limited experience lines up with those who say Ford has the best chance of surviving.
Anyone familiar with the subject is already sufficiently informed to know what the externalities of the oil business. becker at least raised the subject of the externalities inflicted on Americans by the use of gas guzzling SUVs.
Secondly, the existence of huge defense costs are an externality of American capitalism itself. i.e. they exist because they exist – cold war, hot wars, terrorism – all are justifications for boondoggle defense expenditures.
Otherwise, what ‘new ground’ is there in proposed increases in gas tax other than what they mention?
IIRC Ford did try to go “green” some years back, and got hammered in the market. It was, unfortunately, a clumsy move. If they’d moved more incrementally, starting from then, they’d be sitting in the same position as Toyota, if not Honda.
Ford tried to do green, because of Bill Ford and only Bill Ford. Unfortunately, the best he could do was the Explorer hybrid. He had to fight tooth and nail with the rest of Ford’s management to even get that. They were absolutely wedded to the BIG car back then.
Ford in four words:
Well, it would be nice to sit back and say I told you so..for, oh say, 30 fucking years…actually I’ll do that.
BUT…Americans bought up those gas guzzlers, they wanted them, and I had to listen for years to “rice burner” jokes. I had an 89 Camry that got 39.66 MPG on a trip once…and that is the reason I loved that car. That and it was a comfortable dependable automobile. Though now I own a Saab, not quite as good MPG, but I have grandkids to protect and it still gets 30 +/- on the highway. Ironically, for me, GM owns Saab (for now) and it’s weird to see Saab commercials on TV…though now a neighbour bought one, a stationwagon..guess it’s working..they used to have a truck.
The only bonus now is that we might be able to pick up a cheap 4WD for the family hunting trips into the bonndocks of eastern Oregon. Our work truck is no longer a 4WD, but we do need a big engine for towing the trailer of fishing gear…tons of gear. But we decided to forgo the 4WD, because it wasn’t needed…except in eastern OR. Loved the little F-150 short box 4WD we had for years. But she died in service of our kid.
And by “big engine” I mean a Dodge 1500, not one of the monsters.
Describes the American response to Peak Oil, too, if you substitute “bought more guns” for “hired more lawyers”. It also explains why we have war in Iraq and not solar shingles roofing every US home.
The fat cats at Ford (and GM and Chrysler) are like the fat cats at Bear Stearns, they knew exactly what the the consequences of what they were doing would lead to. They were there to take the money and run. They knew they were shitting in their own hat, they also knew they wouldn’t be the ones who would have to wear it.
Ford will soon to be just like their most of their products: Found On Road Derelict.
While I agree in theory, in practice, the current spending is to protect the Notional Security State – in the sense that this war is a proxy war over control of resources and protecting a special state. The state thinks it has no other play wrt to constraining China and India.
There is a real disconnect here between “capitalism” (ie, Wall Street) and self-perpetuating “industries”. Military spending and the war are crippling other industries and this hurts the “capitalists”. I don’t understand how this can keep going.
Saudi Arabia starved the Iran/Iraq war by dumping oil. I’m wondering if these prices are really a controlled response to starve the war.
fuck, ford already builds tons of small, efficient cars. they just get sold in other countries.
Capelza is right when he says it’s easy to sit back and say I told you so. Americans did indeed want, and buy, the big gas guzzlers.
Call it the ugly side of capitalism, if you wish.
Big SUVs have been a cash cow for the Big Three. And with Wall Street’s obsession w/ quarterly earnings, big companies do indeed become shortsighted.
GM, Ford and Chrysler also work at a disadvantage over the Japanese imports in that they have to deal with the UAW.
The price of each GM car, for instance, is inflated (if that’s the right word) by abbout $1,000 to account for health-care costs of its workers.
Try asking the UAW to give back their hard-earned concessions. Those union jobs gave many Americans a very, very good middle-class life.
Full disclosure: I work at a Chevy dealership. But I fully recognize GM’s problems — as a salesman, I will make $50,000 this years versus last year’s $75,000.
I was watching Charlie Rose the other night and he had an economist on who predicted that one of the Big Three would delcare bankruptcy by the end of the year and it wouldn’t surprise me a bit.
Finally, for the open-minded, if you need a car and don’t want to pay the Honda or Toyota premium, give the Chevy Cobalt or Malibu a chance.
Well, it would be nice to sit back and say I told you so..for, oh say, 30 fucking years…actually I’ll do that.
BUT…Americans bought up those gas guzzlers, they wanted them, and I had to listen for years to “rice burner” jokes.
But of course, there were plenty of Americans buying Camrys and other similar cars. And this is not just a Ford problem. Even Toyota is taking a hit (Toyota May Cut Global Sales Goal):
A neighbor works at the Toyota/GM joint venture NUMMI plant in NorCal. They build the Corolla, Tacoma truck and Pontiac Vibe (which is just a Toyota Matrix with a different label). Unlike Ford/GM, Toyota won’t have to completely retool their plants or shut down truck/SUV only plants. They’ll just build more Vibes and Corollas and fewer Tacomas.
I’ve been driving Nissans/Hondas for nearly all of my adult life. Maybe the big 3 will shift some of their Euro small cars over here, but it will take a lot to get me away from my Acura — 10 years old, still gets about 30 on the highway.
John C: they are beholden to the shareholders who demand a dividend every quarter
Major corporations don’t care about shareholder dividends (think you and me), but greatly care about quarterly/annual earnings growth, earnings per share, and revenue growth. Why? Their stock price (and executive bonuses) DEPENDS on the analysts, hedge funds, mutual funds, et. al. believing that they are ‘growing’ and ‘very profitable’. No one ‘invests’ for the long term except retirement plans, and they don’t count in decision making – making dividends a minor issue compared to growth in the share price, which is what Wall Street cares about. The myth of ‘stockholder’ as everyman dies hard, but it has been a zombie for decades.
Related to that, I was trying to buy a reel mower the other day and was told by the True Value hardware guy that the company was backordered — the demand was 50% greater than the company expected.
I’m sure the surge of interest in push-mowers is not due to a sudden fitness craze in my area.
The problems of American car companies go beyond gas mileage, and are caused by the stupidity of their North American based management and the low regard they have for American customers. For example, the European Ford Focus is an excellent small car, based on the same design as the Mazda3 and Volvo S40. But Ford kept the old design for the American Focus and then did a horrible redesign that made it look even worse.
When I was in China last year, one of the most common cars I saw were Buicks, they love them there. Holden in Australia makes some kick-ass rear-drive performance cars.
Problem is, US auto manufacturers have treated the small car section of the market with so much contempt and disdain that it’s doubtful that they ever get over the historical and cultural hurdles they created. What GM still in its heart of hearts believes is that a Real Car MUST be a huge chunk of Detroit iron with big squashy seats and AC, suitable to handle those trips to Upper Michigan or Wisconsin to go camping with the family.
GM will only design small cars having been dragged to it kicking and screaming, and the knee-jerk reaction for production of “upscale” models will continue to be making them bigger and more powerful. (The fact that “upscale” could mean simply “more comfortable, more efficient, and higher quality” never seems to pass through their tiny little minds.)
And the fact that we’d like to see a US car that doesn’t require getting dragged into the shop weekly after it hits 70K miles? Dead silence….
GM, Ford & Chrysler will all come out with small cars,..
they will have 8 cylinder engines, be made of the cheapest possible components, and when you buy one, the dealer will try and cheat you before you sign on the dotted line….. 1month later the car will be back to the dealer for extensive repairs resulting from a world wide recall.
We have a 2002 Saturn station wagon, our second, replacing the 1994 (IIRC) Saturn wagon we bought after Volkwagen decided to stop selling Rabbit wagons. Hardest thing about owning these wagons has been finding one on the second-hand market… people who bought them didn’t give them up easy. And car dealers (understandably, given how commissions work) absolutely reject, denounce, and denigrate the very idea of buying a “mere” station wagon when there are so many Giant Gas-sucking Boxes still on their lots.
Bill In OH
I don’t think you can compare the Contour of the nineties to the current Mondeo (or even to the Mondeo of the nineties). But that’s beside the point. Obviously, if it’s a piece of shit no one in their right mind is going to buy one. My point was that the Mondeo is a good looking, reasonably well-appointed, reasonably good handling car that also gets pretty decent gas mileage. I would buy that car. There are about 10 other cars I would also consider buying, but by buying a Ford I could help keep several members of my family employed. That also seems like kind of a good idea to me. YMMV, however.
Grumpy Code Monkey
Ford is going to have an uphill battle with reliability, or at least perception of same; my Ranger’s been a tank (176,000 miles and still going strong), but every Ford car I or my family has owned has had more than its share of electrical and mechanical problems.
If they can address that, though, I think they’re relatively well positioned to recover (compared to Chrysler and GM, anyway).