Filed under: Industry, Competitive strategy, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM), Oil
With the U.S. economy in slow-growth / no-growth mode, domestic demand for autos has been low, as predicted. However, nearly on cue, demand for smaller vehicles has been robust.
That cue is $4 gasoline, The New York Times reported Friday. Or, as one Harrison, N.Y. resident called her monthly gasoline bill, “My vehicle payment in addition to my vehicle payment.”
A 60-70% increase in gasoline prices in the last two years has led to a huge increase in demand for small vehicles and hybrids, The Times reported, with limited supply of some of the most-preferred models creating further frustration for automakers and purchasers alike.
The more things change…
Economist Glen Langan said a great deal has changed during the time between the last oil shock in 1979-80 and today’s oil shock: long hair for men is out, as are bell-bottom pants, and album-oriented rock (mainly because there are no more record albums). One thing hasn’t changed: U.S. automakers, once again, “were dramatically under-prepared for the high gas price era.”
An example: Ford (NYSE: F) is running its Focus assembly plant in Wayne, Mich. on overtime and on Saturdays but still can’t meet demand for the higher-mileage Focus, The Times reported.
“U.S. automakers are using phrases like ’seismic shift’ in the market place and ‘events out of nowhere to disrupt our production plans,’ but the reality is oil and gasoline prices have been trending higher for more than eight years. I mean eight years,” Langan stated. “What were they thinking when gas prices were rising with rising gasoline demand, and China and India entering global commerce? That gasoline would drop to 25 cents a gallon?”
Langan stated the consequences stemming from Ford’s and General Motors‘ (NYSE: GM) latest production failure will be fewer jobs in the U.S. and less spin-off economic activity from that job reduction, in addition to not almost enough high-mpg automobiles to meet U.S. demand.
Auto Sector Analysis: In fairness to Ford, General Motors and Chrysler, foreign automakers are also straining to meet demand for fuel-efficient cars, on all continents. Still, that does not blot-out the fact that there are objective events that demonstrate why the right side of GM’s and Ford’s stock charts are lower than the left.
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