Filed under: Industry, Ford Motor (F), General Motors (GM)

Today, in a headline ripped from the 1970s, the front page of The New York Times announced: “As Gas Costs Soar, Buyers Flock to Small Cars.” In the immortal words of Yogi Berra, it’s deja vu all over again.

A lot of people moan and wail about the tough times in Detroit, but it’s not as if the American automakers didn’t have plenty of time to prepare for the current market. They were warned, over and over again, that they needed to develop better small cars and more efficient vehicles. But they did nothing. Instead, they focused on wasteful but high-margin SUVs. Well, now the time has come to pay the piper.

The Times reports that in April, 20% of new vehicle sales were compacts or subcompacts. That’s the first time this has happened in the American market. In another first, more cars with four cylinder engines were sold than cars with six cylinders. Clearly, as gas approaches $4 a gallon, Americans are looking for more efficient cars.

There is no doubt that high cost gas puts General Motors (NYSE: GM) and Ford (NYSE: F) at a disadvantage. Honda (NYSE: HMC) and Toyota (NYSE: TM) offer more fuel efficient vehicles, and their cars have a better reputation for quality. Sales of Toyota’s tiny Yaris and Honda’s Fit are setting records, while shiny new Ford Explorers and Chevy Tahoes sit on dealer lots. As a Daimler Smart driver said in the Times piece, “I had to smile the other day when I filled my tank for $18 and the guy next to me had a Ford Explorer and the pump was clicking past $80.”

The weird thing though is how this has all happened before. Here’s a line from the Times report: “Once considered an unattractive and cheap alternative to large cars and S.U.V.’s, compacts have become the new star of the showroom at a time when overall industry sales are falling.”

Except for the reference to SUVs, which hadn’t yet been marketed by Detroit as basic transportation, that could have been written in 1974. Or 1979. Too bad GM and Ford didn’t learn their lessons back then. If they had, they probably wouldn’t be hemorrhaging money today.

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This entry was posted on Tuesday, May 6th, 2008 at 9:13 am and is filed under Industry News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.