Brad Plumer has a well-reported article about the domestic auto industry’s comeback, and how it derived from ending the failed business model of selling more and more gas guzzlers, and responding to consumer desires for lighter, more fuel-efficient cars. It’s a good in-depth piece, here’s an excerpt:
“The economic recovery and a deep bench of fuel-efficient cars and crossovers have been driving our sales for more than a year, but the combined impact has never been stronger than it was in March,” Don Johnson, vice president of GM’s U.S. sales operations, said in a statement. “Since the last time fuel prices spiked, both the economy and GM’s product portfolio are undeniably stronger.” [...]
But there’s a more subtle reason that the Big Three are succeeding. With gasoline prices topping $4 per gallon in many parts of the country, Detroit needed to offer reliable, fuel-efficient vehicles that Americans would actually buy. And, unlike when they faced this situation in 2008, the Big Three are well prepared this time around.
“The Big Three are in a far better place than they were in 2008,” said Michelle Krebs, a senior analyst at Edmunds.com. “They’re all producing really good mid-sized cars, compact cars, subcompact cars. Back then, they often didn’t even have a player in some of those categories. There wasn’t a Ford Fiesta [in the United States]. There wasn’t the type of Ford Focus we have now. There wasn’t a Chevy Cruze, a Chevy Sonic.”
I could see this story getting spun into a theory about how businesses need to be allowed to succeed. No Administration should take credit for the auto industry comeback, in this telling. Only the titans of industry who responded positively to market wants and needs should take the credit.
But of course, those same titans must be put in a position to succeed. And that’s where the government came in with its bridge loans. Without them, no private investor would have kept the auto industry going through bankruptcy because of the uncertainty looming on the other side. Without the kind of investment the US provided, particularly for ancillary industries, the supply chain could have evaporated, particularly if one or more of the Big Three sank. Detroit would not have been in the position to make better cars without the largesse of the federal government, largesse which has been paid back, not only in the raw dollar amount, but in the boost to the domestic economy.
Most important, the rescue provided the time necessary for the automakers to land these new products and bring them to market, given the push provided by new fuel efficiency standards. It takes years to get cars from concept to conclusion, and even a stripped-down industry wouldn’t have been able to capitalize on the success of these new models, because they wouldn’t have had the ability to introduce them.
I hope it doesn’t get lost that the story of the auto comeback is a story about government creating the conditions for success. It’s also a story about union sacrifices, added with the ability to share in the upside. And it’s all working for the moment.




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Thanks, DD.
“bridge loans”
is that what we call bailouts now?
Too bad about 750,000 of those smaller, more fuel efficient vehicles GM will sell will be made in China and imported here to replace vehicles made by union members in domestic plants now shuttered and abandoned.
Thanks, and big “Fuck You” to “car czar” Steve “Hedge Fund” Rattner.
That Ford Fiesta is one ugly car. They’d have to pay me a lot of money to park that anywhere near my house.
Union “sacrifices?”
What BeachPopulist said (#3)… x 10…
My 1988 GMC pickup only gets 10 mpg. But I haven’t had a car payment in 20 years.
Sorry big three. I can’t put a half ton of mulch in your Ford Fiesta.
I like it better the old way.
In the second oil crisis (1979ish), we bought the house & the biggest used car gas guzzler we could find. A simple calculation said that even at the higher gasoline price, it would years (I forget how many, but maybe 3-4) to make up the price diff. And that is before you consider all the energy embedded in mining metals, mfg, etc. that goes into making a new car.
At the time we tried out that argument on an otherwise smart friend who’d just bought a new car which got higher gasoline mileage. He looked at us like we had 3 eyes.
The funny thing about that is alot of the 2012 pickups get like 11 mpg.
gm’s FIRST thing being getting rid of a global warming denier in lutz
While “job shops” that make parts for the automakers bring in people from India by the hundreds, if not thousands, to (nearby) Detroit to work in their factories while Michigan has one of the largest unemployment rates in the country. And their is a language problem with these people. But on the bright side, they get to rent the houses the banks stold from Americans.
I have used the same logic in thinking I could get a hummer for a steal which would pay for it’s excessive gas useage
Who’s success? Different cars, same business model.
What happened during the restructuring is that a lot of the self-perpetuating deadwood at the top of the company were eased out. Most of them should have been fired outright and their ill-gotten gains of driving the companies into the ground taken back from them.
Crony capitalism breeds incompetence in management.
The big three LOL. Chevrolet, Ford and Fiat.
Emma nem is a snotty little welterweight compared to this knock-out.
Outline the business model. I think that you are exactly right here. But I think it is more than the product line that changed. My sense is the bean-counters have lost some power internally and engineering has gained a little.
It’s a pretty simple calc. I’m trying to remember the numbers. I’m about to embarrass myself here bc I know I’ll make some obvious & huge mistake but here goes.
I think that friend paid $9000 for a new VW, we paid $2000 for used Chevy station wagon. I think our mileage was maybe 12 miles/gallon and his was around 20 (it was a long time ago). Average car gets driven 12,000 miles/year. That means that instead of using 1000 gallons/year, he would use 600/year. If the price had gone up by $2/gallon, he would be saving $800/year the 400 fewer gallons purchased, taking him almost 10 years to make up the difference.
And that is before you consider the energy embedded in making new car, not to mention Alan1tx’s point about the carting incapacity of small cars.
Who the hell carries a load of mulch to and from the office every day?
Only if it’s manufacturing.
Great idea up until all those car batteries end up in landfills somewhere, leaking and corroding and creating nice little septic pools.
Besides, I’m a home DIY type of person and I would have to make 50 trips in one of those econoboxes to haul the same load of plywood or Quikrete that I do in my old pickup; not much of an overall energy savings.
Volkswagon has been making TDI diesels for 20 years now. It will out accelerate most 6 cylinders and gets 48 miles to the gallon. I’ve had one for 7 years and I love it.
Supporting an antiquated infrastructure with the excuse “it costs to change” is one of the lamest short-term excuses I can imagine.
Why haven’t we had more fuel-efficient cars? The simple answer is there is too much money in the sale of gasoline. States get more revenue the more that gets sold. As eCAHN points out, there is no incentive to conserve because the real costs are hidden.
If your business is building stuff, buy a truck. If you’re commuting 30 miles into the city everyday to go to the office, why do you need an SUV? The honest answer is, “Just ’cause I want one, and nobody can tell me I can’t have it.” That’s absolutely right, I can’t tell anybody what to do, but waste is waste, and our appetite for oil is what is feeding war and polluting the environment.
Cut back, feel good. Pig out, make excuses.
Can we point out here that it was the ‘titans of industry’ who pushed the Big Three to the edge of collapse in the first place, by not responding to ‘market wants and needs’?
Toyota, Honda, and Nissan were kicking the shit out of American auto makers for years. Not because they were cheaper. Because they offered a product with more initial quality, better gas mileage, and more standard features.
A 2005 Dodge Neon has all the amenities of a Ford fucking Gremlin, while a 2005 Honda Civic came standard with AC, 4 wheel ABS, airbags, power locks, etc…
Then there’s Volkswagen, who have been building beautiful, high quality, power-amenity loaded cars for more than 10 years. Offering base models with power windows, locks, AC, 4 wheel disc brakes, 6 air bags, etc. TDI, too.
These ‘titans of industry’ built essentially the same damn car for 30 years, while the world passed them by. So much for responding to ‘market wants and needs’.
Toyota Prius now includes a battery that is recyclable. And since when did you care about the environment? Oh, only when it suits your argument? kthx.
Nothing stopping you from driving a hybrid or TDI for 29 day out of the month, and renting a pickup for a couple of days. You can do that for less than $40 through Enterprise or Avis.
I have read recently that although engine performance has been drastically improved vis a vis mileage in the past 10 years, something on the order of 75% of that improvement has been wasted simply by making the car itself heavier and larger.
In any case, what passes for “better gas mileage” also seemed to me to be pretty lame. There are pickups out there now that are “boasting” they get 21 mpg. Big deal, 10 yrs. ago they were getting 19 mpg.
The real hidden costs are the cost of the U.S. military to keep control of our oil that happens to be inconveniently located on their property. (Carter Doctrine, BTW.)
Amazing really, when you consider the widespread switch from steel to aluminum in manufacturing the cars/trucks, and also the use of plastic body cladding vs. stamped steel.
The cars/trucks should really be much lighter.
Back in the first (1973) or second oil crisis, an American who was the chief economist in the U.S. for a Japanese bank, averred that the Japanese auto mfgrs had technology that could, 30-40 years ago, produce a car that got 70-80 mpg. I didn’t know him well but he didn’t appear to be a flake.
Suppose he was accurate. I ask the follow up Q: whatever happened to that HC saving technology, huh huh huh?
That’s a symptom rather than a cause, but yep.
I think I’ve shared this story here before, but –
7-8 years ago I was selling VWs. I had a DFH couple come in to my store looking for a new Jetta TDI. They had an early 90s TDI that had (IIRC) around 300k miles.
We settled on a car and took it out for a test drive. During the ride, they informed me that they manufacture their own bio-diesel from vegetable crop and food scraps. In their early 90s TDI they were getting about 55-60 MPG on this fuel. The husband calculated/estimated that in the newer, more efficient system, they would get between 60 and 70 MPG with the bio-diesel.
Righto. The prime movers are the oil corps, keeping them in biz & profitable.
To do that, they can’t produce too much, bc they make higher profits thru higher prices than actually drilling for oil. So the perpetual recycling of the peak oil story (which, according to Greg Palast, was invented by the oil corps in 1952 to get the price up), and other bogus techniques for upping the prices, like in kahoots with Wall St to speculate.
And, bc oil in the ground is their asset, can’t do HC saving technology bc then their asset would become worthless.
Every story about HC efficiency, near as one can judge their veracity, is that it could have been done much better, a lot sooner, if it weren’t for the fact that the oil corps control D.C., and a lot of other govts around the world.
On edit: The huge efforts of oil corps to discredit global warming is yet another symptom.
Heh. Stranglehold.
That’s what the oil corps have on the global economy, and the med ins & PhRMA corps on the U.S. economy. Both in a literal use of the word strangle.
I rented a Ford Fusion in Portland, OR recently. It was a great car, comfortable in both the front and back seats, maneuverable, good looking and well-designed except a bit of an issue with the dashboard, and good gas mileage.
I will certainly look at one the next time I need to replace a car.
Don’t need to haul mulch every day. Some days I need to tow a bass boat.
Nice office you’ve got there.
The Big 3 are attempting to regain market share with better products. Fiat makes better small engines and cars than Chrysler did. Nissan is partially owned by Renault. Which in turn is partially owned by the French gov’t. So, I think the playing field is multi-level and quite varied from country to country. Honda and Toyota are scared by the Korean companies. And on and on it goes. But the job losses in America have been partially offset by all the plants opened by foreign companies here. Robotics killed the majority of jobs in Detroit. That will continue. Where the real money is being made today is in the service depts. and the repair shops in every community in the country. 1 out of 7 people employed is in some facet out the auto industry and it’s giant tentacles. Cars and trucks are way too much fun to be objective about. I love my Jeep and it’s nice to know lots of people can’t get to where I hang out. But I’m of two minds on the future of transport because I really like Portland’s public trains, etc. It’s great not to have to deal with traffic jams and walk and ride your bike, too.
Corporations and banks have moved passed the ideas of nationality and patriotism a long time ago. The auto industry bailout and any other bailout is usually for an international conglomerate. However we get Clint Eastwood playing the cheerleader on a pseudo- secular national holiday talking about America’s second half and Americans ate up this propagandist tripe. Until enough humans across the world realize how they are being played against one another by these multinational conglomerates; war,hatred,greed and poverty will continue as part of the human experience for the majority of the world.
Retirement = Six Saturdays and a Sunday.
Most people have never experienced the fun of driving around all weekend in 4L at two miles per hour.
BMW has had a hydrogen powered car available for years. You make your own hydrogen with solar panels on your house roof, which generates electricity used to crack hydrogen from water. During the day the system stores up hydrogen, when you get home you hook up and refuel.
That’s about as subvervise as it can get.. Sure glad GM Ford and Chrysler aren’t messing with that sort of frivolous hippy dippy stuff..
I’ve heard about this setup from solar geeks. I’d loved to have a BMW. That would mean I won some sort of contest or game of chance. I like driving fast on race tracks, etc with somebody else’s car, of course. If you don’t believe me just as my former insurance carriers.