"If we suddenly went to $1 or $1.50 a gallon, that would be really bad" -- GM vice chairman Bob Lutz
It seems as though automakers just can't catch a break these days. The rocky economy and credit crunch resulted in a horrible month for auto sales in September. Every single automaker posted sales losses for the month. Even perennial overachiever Toyota witnessed a sales decline of 31.8% while Chevrolet and Ford witnessed drops of 11.2% and 33.8% respectively.
Compounding the dreadful state of the auto market were the record high fuel prices witnessed over the past six months. In May, we saw the Honda Civic, Honda Accord, Toyota Corolla, and Toyota Camry surpass the Ford F-150 in sales as Americans scrambled for more fuel efficient vehicles.
In late June, General Motors suspended the development of its next generation full-size pickups and SUVs. The company also announced plans to close four of its truck plants by the end of 2010 in order to focus on small vehicles like the upcoming Chevrolet Cruze.
Ford also felt pressure from lagging truck sales and idled its Dearborn truck plant and announced plans to convert its Cuautitlan Assembly Plant in Mexico -- which currently builds full-size trucks -- to build the sub-compact Fiesta.
So one would think that all is well now -- the automakers saw the changing trend in consumer demand, so they pivoted. Well, it's not quite that easy according to the Los Angeles Times.
With fuel prices now dropping at record levels -- 35 cents in two weeks -- auto manufacturers are wondering if they made the right move to make drastic changes to the lineups/production levels. "Do you hope for gas prices to go down so you can sell a lot of trucks again, or do you hope for them to remain high so you can justify your investment in fuel economy," questioned auto industry analyst Aaaron Bragman.
Outspoken GM vice chairman Bob Lutz seemed quite worried about the sudden change of events. "We may hate high fuel prices, but they've been driving us in the right direction when it comes to fuel economy. If we suddenly went to $1 or $1.50 a gallon, that would be really bad."
GM and Ford announced their production changes when gasoline was forecasted to top $5 a gallon in the near future.
Toyota too has cut production of its full-size Tundra pickup in response to sharply lower demand and dropped plans to introduce a diesel variant of the truck. However, Toyota spokesman John Hanson said that the company would be able to adjust to customer demand should the need arise, "If consumers start demanding trucks, we think we can still make as many Tundra pickups as they need."
This is most definitely a turbulent time in the auto industry. Plunging profits and falling sales sometimes call for desperate measures. Just over the weekend, it was announced that GM and Chrysler are in talks to merge, while Ford is considering selling its 33.4% stake in Mazda. One thing is certain, however, this is just the beginning of a huge shakeup in the automotive landscape.
DailyTech - Automakers Could be Rattled by Dropping Fuel Prices
