How the car industry killed itself (and who helped it along)

Written by Eric Peters

June 22, 2009

There's an optimistic lull right now characterized by cautious happy talk about "green shoots" and "signs of recovery." Don't believe a word. Two trillion dollars' worth (more or less, depending on whose numbers you use) of people's net wealth has just - poof! - disappeared since the whole seedy debt-financed, over-leveraged house of cards collapsed last fall. You don't just snap your fingers and "recover" from something like that. It will take years of gradually clawing our way out of the pit - if it ever happens at all.  Which is why the car industry as we know it is done-for.  For one thing, most new cars are too rich for the bleak future that lies ahead. Anything with a sticker price over $30,000 is going to be a tough sell as a mass market vehicle. Forty and $50,000 vehicles? Forget it. The middle and working class is priced out of this market, both bottom line-wise as well as psychologically. It's one thing to indulge when your home's value has just kicked up another 20 pecent and the store will write you a loan with a wink and a nod if you look even halfway respectable. Maybe even if you don't. But now? They are eyeballing everyone and getting a decent loan is virtually impossible - unless you don't really need one. That rules out about two-thirds of the people who, in good times, were "buying" new cars.  For two, not many people really need a new car anyhow. It is a discretionary purchase, unlike food and shelter. Most can do without - by nursing along the car they have or by purchasing a much lower cost used car, of which there gazillions. In a vicious twist of fate, the auto industry is going to suffer horribly for having made cars so good that most will go for 15 years and 150,000-plus miles before they begin to become unreliable pains-in-the-ass. Say what you want to about "planned obsolescence" and cars that were worn out in half that time (and mileage). They kept the wheels of commerce humming.  For three, there are just too damn many cars. In the space of about 40 years, the population of the United States has roughly doubled, from around 160 million to around 305 million. But the number of makes and models of cars has probably quadrupled - at least. Too many cars are chasing too few buyers. It makes it much more of a struggle to eke even a slight profit out of each sale. Yet the presence of so much competition makes competition ever more intense as each car company wrangles endlessly to outdo the other guy(s) with ever more "improved" this, that or the other thing - which is by the way damn hard to do in any meaningful sense after 100 years of refining the thing we call a "car." The basic concept is pretty much perfected. What else is there, really, to do? Add overdone electronics and various things we don't really need - but which can be used to justify the "new models" - and, of course, the new price that goes with it.  Fourth and finally - they all still have their heads up their alimentary canals. GM still wants to sell its cars four different ways - as if it were 1969 and not 2009. Chrysler has just restarted production of winners like the Sebring and Avenger - cars they could not give away pre-bailout but which, courtesy of taxpayer financing, Chrysler-Fiat (or whatever it is to be called) will make-work another couple tens of thousands of.  Nissan seems to be the only company that gets it. It is saying sayonara to the untenable Titan pick-up and just launched a version of its excellent little Versa sedan that stickers for just over nine grand. That's the sort of car America needs right now. So why aren't more of them being built?  Your guess is as good as mine... Comment?

 

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