Some hopeful news for the awakening of US industry...?

http://www.cnn.com/2005/AUTOS/08/29/...eut/index.html

Would be more amusing if it turned out to be a 400h, or even a Prius.

 

Only if he wanted an angry mob at his door. :-) I don't expect he'd get away with anything other than his Escape... :-)

 

It seems he really likes it too. Being a Detroiter, that's been almost the sound bite of the day, and he goes on about it and how great it is.

Heh.

 

So Garbage Motors (GM) won't have a hybrid until '07, and then only a big SUV. And they wonder why they're losing money (on top of poor quality).

The Not-So-Big 3 can't keep those employee discounts going forever, so they'd better have some economical cars in the pipeline if they want to survive long-term. Chrysler stubbornly refused to do that in the '70s and avoided extinction only with an ill-advised federal bailout.

 

Hi All:

___Can anyone find out what his wife drives or has driven in the past? That would be the telling tale …

___Wayne R. Gerdes
___Waynegerdes@earthlink.net

 

They paid it back if I remember correctly and early. It saved jobs and people were able to keep paying taxes and keep a good quality of life!Kevin

 

Ill-advised my foot. That was one of only a few brilliant moves the Federal goverment has ever made. The tax base alone of the employees of the company and the secondary suppliers would have made a small, but signficant, impact on the government if lost.

Ill-advised would have been if the money had not been repaid.

 

Ok, my reply is a bit long and bridges to a new topic (maybe it should be moved to a different message forum), but I've gotta try to change the mis-conception that the auto-industry can choose to do anything they want and yet they actually choose to build big gas-guzzling SUVs.

The big 3 actually LOSE money on all their small fuel-efficient cars. Ford loses money on every FEH they sell. They didn't build it to make a profit, they built it as a learning experience (it *is* a limited-production vehicle after all) and Bill Ford actually *IS* an environmentalist (no kidding folks... he doesn't like big gas guzzlers, he runs the company because it's the family business. Unfortunately CAFE standards COMPELL the auto-industry to build and push gas-guzzlers (shocked?!).

I'll try to shed some light on why CAFE standards are bad for America. It's a long read, but if you bear it out, it'll probably change the way you think about the industry & energy problems and explain why the industry seems to be going in a irrational direction.

Now... imagine this scenario. You're a politician and you know it's the "responsible" thing to encourage the public to buy a vehicle that they wont naturally be inclined to buy. So you want to "incent" them to buy it anyway. You need to penalize them if they don't choose responsibly. If you directly charge them a special tax on the gas-guzzler, then they'll be at your throats and you'll be tossed out of office on your ear. BUT... if you can find a way to skew the price so that it doesn't look like YOU are the one imposing the penalty, then you'll have your cake and eat it too.

What they did was imposed fuel economy quotas on the auto-industry. (see: http://www.ita.doc.gov/td/auto/cafe.html )

The CAFE standard is 27.5mpg.... actually, that's not *quite* accurate... it WAS 27.5. It's been substantially compromised and for the 2005 model year it was a mere 21.0 (pathetic). The entire fleet of vehicles manufacturered by the car company is averaged together (although some vehicles are exempt... vehicles with high gross-vehicle weights or vehicles with limited production don't count.) Hummers, I'm told, are an example of an "exempt" vehicle (I haven't personally verified that fact). The 2006 year standard increases to 21.6.

At this point you *should* be thinking, "what's wrong with this? it seems to incent manufacturers to make fuel efficient vehicles".

What's wrong is HOW they do it. Let's face it folks, Joe Average Consumer doesn't actually WANT to buy a Ford Focus, now do they?? It turns out that although the window sticker price varies quite a bit from a Ford Focus to a Ford Mustang, it doesn't really cost *substantially* more money to produce the Mustang. Yes, some of the components are higher quality (some... not all), but manufacturers get these parts at extremely attractive rates. Most of the cost of a car is in the "overhead" of indirect materials, labor, real-estate, vehicle engineering, production engineering, support, vehicle testing, etc. etc. it takes a plant of about the same size to build both cars, a comparable amount of labor, a comparable amount of engineering, crash-testing costs just as much, etc. You see what I'm getting at?

So... why *does* the Mustang cost so much more on the window sticker?

The Mustang is sold at a "profit". The Focus is ACTUALLY SOLD AT A LOSS! Note that I'm not picking on Ford... I just need any example of a car company that made a gas guzzler and an economy car. They all do this. The problem is that the car company must somehow "incent" the consumer to buy a Focus when they know the consumer would rather drive the Mustang. The manufacturer will pay a huge fine if they miss their CAFE numbers.

So here's the numbers (window sticker price ranges):

Ford Mustang Coupe: $20-30K
Ford Focus Sedan: $14-19K

The Focus is between $6-11K cheaper (depending on vehicle configuration -- but I'm comparing the low end Focus to the low-end Mustang and the high-end Focus (an oxymoron, yes I know) to the high-end Mustang.

If I sell each Focus for, say, $1500 less than it really costs me to make it, it will give me "license" to product another Mustang, which I can THEN sell for, say, $4500 - 9500K more profit. So it's well worth my while to sell the Focus at the loss, and if I fail to incent the consumers to buy enough Focuses to balance the CAFE equation, I'll pay enormous fines.

CAFE essentially creates at least 2 problems:

1) The auto-industry is incented to MEET the CAFE standards, but the fact that they had to sell the economy cars at a loss actually DIS-INCENTS them from exceeding CAFE (do the minimum required, but no more).

2) Now that consumers are actually starting to think about fuel economy, they're slowing down their appetite for gas-guzzlers and buying more economy cars. In other words, the vehicles that are selling are the ones that the auto-makers LOSE MONEY selling. This forces the auto-makers to do everything possible to encourage consumers to buy the gas-guzzler despite the price of fuel (the choice is that they either do that or face bankruptcy).

Why not just stop building gas guzzlers completely so consumers have no choice but to buy the economy car? Nice in theory, let's say you do that. Unfortunately you are now a company who only makes economy cars and the competition sells those comparable cars at a loss while you need to post a profit. How do you plan to be competitive and profitable? Also... the consumer's choice isn't limited to just your company. If you don't offer the consumer a gas-guzzler then the consumer will just buy one from the competition. So... if Bill Ford agrees to file for bankruptcy and close down the Ford Motor company, he can stop producing SUV, just sell economy cars, and see his creditors in bankruptcy court and try to sleep at night knowing he just put at least a 1/2 million people out of a job. The auto-industry has been check-mated by the government. They MUST somehow convince consumers to buy that gas-guzzling high-end car anyway.

I live in Detroit and have worked in and around the auto-industry for 16 years. I don't work for them anymore (I work for a tech company), but many of my friends here work for the auto-industry. I can tell you that pretty much everybody who understands CAFE standards hates them. It doesn't matter if they're white or blue-collar or which car company they work for. CAFE doesn't do what it was supposed to do, it's screwed up the industry, and all so that chicken-@#$* politicians don't have to face the music of telling the consumers directly that the government will be imposing the penalties instead of hiding behind the auto-indsutry.

Most consumers don't know much about CAFE and have the idea that auto-companies just wanna build gas-guzzlers; they are shocked when I tell them Bill Ford is actually an environmentalist. This is the illusion that CAFE creates to the consumer while allowing the politician to duck responsibility and get away with NOT doing what they should be doing.

What politicians *should* have done was impose a penalty DIRECTLY on the consumers that buy vehicles that burn too much fuel or produce higher levels of pollutants. My personal opinion is that it shouldn't be a fee they pay gradually as a per-gallon tax at the pump. That doesn't work because (a) a stiff tax which is merely paid in very small increments doesn't "seem" very painful to consumers (take the sin taxes on cigarettes or alcohol as examples) and (b) people who buy responsible cars should be exempt from the tax. Rather, I think that a HUGE annual whammy tax-bill that annoys the @#$@ out of them would be more effective. E.g. when you go to the DMV for plates/tags, if your vehicle gets better than X mpg your plates are subsidized -- maybe even free. If your vehicle does within 1mpg of X then you pay the normal rate. If your vehicle gets worse than X, then the cost of your license plates your old fee (lets say it used to be $300/yr) is multiplied by the difference between your window-sticker enonomy vs. the target standard (say 27.5 mpg -- which is about what it used to be), and then I'd probably multiple that by 2. So go ahead and buy that Hummer H2 with a whopping 9.6mpg. Of course it'll cost you a mere 17.9 x 2 x your targert fee of $300/yr = $10,740 a year (not a one-time fee... EVERY YEAR when it's time to renew your plates). If they did that, we'd QUICKLY see the consumers change their buying decisions and massively cut back on the amount of oil we need.

 

Wow. See, I learned something today.