Big Three "Fighting The Winter Retreat From Moscow"

[hatrack]

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The individuals who bought those gas-guzzlers have been pawns in a big marketing game. GM, Ford and Chrysler knew a good thing by positioning the large vehicles as status symbols with big price tags and profits over $10,000 per unit. They co-opted the American and Canadian government CAFE standards to allow large vehicles and SUVs a pass on fuel economy. The big three automakers are now fighting a wintertime retreat from Moscow. They are getting massacred by Honda and Toyota among others, who have had a better strategic vision over the years.

GM's results have varied from a high of $10 billion in 1984 to a loss of $38 billion in 2007. In the last 10 years, they've lost money overall. Recently, GM's VP Bob Lutz indicated that it would cost an average of $6,000 more per vehicle to meet the new CAFE standards. If that is the case, GM has a problem, as consumers will have less disposable income for cars in the future. Toyota indicates that it will meet the 35-mpg standards well before the required date of 2020.

The CAFE standards will soon be the least of the American automakers' problems. Higher gas prices will make the standard irrelevant, with consumers demanding vehicles giving 50 to 100 mpg, no matter what kind of silly marketing schemes Detroit comes up with. What has been the "butterfly effect" of GM on the U.S. and world economy? Obviously, GM is no butterfly, but a recent film by the same name or the 1947 film "It's a wonderful life" with James Stewart illustrates the concept that a relatively small action can have a great effect in the future.

One can only wonder what would be the alternate future if GM had embraced fuel efficiency for both small and large vehicles (SUVs). Supposing that the world gas usage was 2 million or 5 million barrels a day less than it is today. This would have been a real possibility. Supply would be greater than demand and the price would still be at $55 per barrel or less. The world's oil bill would be $2,300 billion less in 2008. These are large sums by anyone's standards, as the Canadian federal budget is $550 billion per year. This is equivalent to the entire cost of the Iraq war until 2017. GM, in turn, would be profitable today.

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http://telegraphjournal.canadaeast.com/opinion/article/333861