Is 10 million / year the "new normal" for the auto industry?

[FarCenter]

The market for cars is determined by the size of the fleet and the length of time that cars are kept.

There are about 235 million cars and "light trucks" in the US fleet. The median age is over 8 years and is going up.

It is doubtful whether the size of the fleet will go higher. There are already about 1.2 cars per licensed driver. With higher energy costs, more people will be living in higher density communities and depending more on public transportation.

Also, the quality of cars is now much better. Cars now rolling off the lines will still be running 15 to 20 years from now. While the long term reliability is best for cars like Toyota and Honda, the US brands have been forced by the competition to move away from the "three years, 30,000 miles and trade it in" approach to product design.

So it seems probable that the combination of stagnant or declining fleet size and greater life of recently produced vehicles will result in a permanently lower demand. Artificially low financing standards, like those provided by the captive finance arms of GM and Ford, will not be able to inflate demand through 0% financing or fancy leasing arrangements. And there is not a significant new product class in the works, since hybrid and other electric vehicles will be expensive and the price will lower demand.

If the market is 10 million vehicles / year, how many manufacturers do we really need?

[Township75]

1. Not this many.

The days of sprawl and everyone having their own gas guzzling SUV are hopefully over. It would be a shame if after finally getting a Dem elected his first act is to save something that was built on those values.

[ben_meyers]

5. The UAW didn't donate millions to the Democrats

for grins and giggles, they are expecting a return on their investment, and you can bet that a bailout is what they want.

GM alone has a 15 billion dollar payment due to it's retired workers health care fund in Jan. 09, and who do you think is going to pick up that tab? You and me baby!

[BeatleBoot]

2. The market for automobiles

is based on demand.

Demand is low due to petrol costs, tightening credit, and unemployment across industries.

[Idealism]

4. The problem was this demand wasn't real

it was inflated. People didn't 'need' a new car, there old one wasn't breaking down, they just wanted something new- something they couldnt afford in many cases- like so many others. The market will shrink for automobiles until we most likely will only need one company, but allowing that to happen means the government may have to nationalize the mega-automaker, or else it will surely violate anti-trust laws. There are obvious problems to this but it they are not worse than either continuing to prop up these automakers with billions of dollars or just simply letting them all go under then buying all of our cars from foreign countries.

[FarCenter]

8. Foreign car companies could build cars in US factories.

I don't have a problem with outsourcing management to other countries, so long as they use US labor to design and build the factories and products.

We should get our management from the most competent and cost-effective source.

[MadMaddie]

3. Well I would like to go back to a fine Repuglican phrase

To answer your question, "The Market will take care of itself", and rid itself of excess similar businesses. Whichever car maker didn't plan ahead will file banktruptcy and go out of business.

Another example is Linen's and Things is going out of business, that leaves Bed Bath and Beyond, the market is taking care of itself.

Just sayin...

[FarCenter]

6. I'd lean towards letting Cerberus Capital get out of its own mess with Chrysler

Cerberus Capital has deep pockets and can wind up Chrysler's affairs in bankruptcy court.

http://www.cerberuscapital.com/

Besides, Chrysler is the accumulated remains of a long list of failed US auto companies -- American Motors, Willys, Studebaker, Packard, Nash, Hudson, ... and maybe some I've forgotten.

If GM has walked away from Cerberus, maybe its a good thing.

[ben_meyers]

7. Linen's and Things is but a mote in a gnats eye

when compared to what Obama today called the "the backbone of American manufacturing ".

[Tektonik]

9. It's still important though, especially to me

My brother is going to be out of a job by New Years, and like hell is he gonna get saved by a federal bailout.

I think it's a dangerous path to take if the gvmt begins bailing out particular industries and ignoring others. Hell if I know what the final solution should be, but it should not ignore others' plights.

[FarCenter]

10. Letting Chrysler go bankrupt may be OK

It might be like letting Lehman Brothers go -- hard to clean up, but doable.

Besides eliminating industry overcapacity, it would eliminate the Chrysler dealer network. The oversized dealer network is another problem for the US brands. Merging or supporting them doesn't help solve that problem due to state franchise laws.

[MadMaddie]

11. True Dat