Cars and Gas

Cars and Gas

By Tim Holland

It seems to me that anyone who believes the financial problems surrounding the American brand automotive industry in the United States can be solved with a $2.00 gasoline price is severely mistaken. There is definitely more at work here than just the price of gas and any automotive executive who doesn=t understand that simple fact should be looking for work elsewhere.

You might have also noted that I referred to American brands and not American manufacturers. It is well documented by now that BMW, Honda and Toyota are American automobile manufacturers just as Ford and GM are Canadian, European and Asian automobile manufacturers. Where Chrysler fits into anything at this point is that brand=s biggest problem. It=s an orphan of the worst kind: an American brand owned by a European company. The concept is not unlike Ford owning Jaguar and Land Rover and GM owning Saab - it just doesn=t work out. Culture counts.

Cars are a very personal item and it seems there are three main inducements to buying them: price, pizazz and performance. If you can find a car with all three you have a winner that will endure for a long time and you will go back to the brand again until it begins to disappoint. That latter point is the real key. It doesn=t seem that most people will buy a car because of performance (reliability) but they will certainly avoid the brand if they had a bad experience.

The April issue of Consumer Reports is their annual automobile issue and it should be digested slowly and carefully by every executive of GM and Ford and I=m sure it is. It should not be dismissed or down played by anyone in the business. The section that is the most telling for American brands is the one that poses the question of buying your current car again. American brands performed dismally which portends a difficult road ahead for them. It could be that many of the people who are unhappy with their current vehicle jumped at all those price incentives and discounts that have been offered over the past two years and purchased a car they might not have done otherwise. In an attempt to move inventory, manufacturers have cannibalized future sales. A customer with an unsatisfactory experience will stay away from a brand for a long time.

There have been a lot of cars in my garage over the years: Oldsmobile, Pontiac, Citroen, Ford, Plymouth, Audi, Saab, MG, Chevrolet, Honda, BMW, Toyota. Some of the brands I=ve had two or three models. What I find interesting is that I=ve never been surveyed by an American brand about what I liked or disliked about the car I bought and there seems to be a disconnect between sales and service. I have received surveys about the service that was performed on my car, although I also recall the GM service manager advising me that if I had a complaint not to fill out the survey but to call the service department and they would correct the problem. I filled it out anyway as well as complained.

One of the things the American brand manufacturers haven=t quite come to grips with is that automobiles are not really a Acommodity@ they are different. Price is not everything. Offering the best Adeal@ is probably not the best long term strategy. Overloading on price and pizazz to mask performance reliability will hurt in the next fiscal year, and the next, and the next. That statistic on American brand car owners being unhappy with their current vehicle is going to hurt for a long time.

The two dollar gallon of gas is long gone so betting the farm on super sized gas hogs because they offer the best dollar return for the bottom line is a sure fire recipe for long term financial disappointment. That=s not to say prices will not drop in the short run should the middle east stabilize - they most certainly will. And watch out for ethanol as well, it has been reported to have some negative environmental issues and costs built into it that are starting to drift to the surface. It is also very obvious the oil companies have no incentive to build alternative fuel pipelines or provide unique pumping facilities around the country. Nobody ever said that building personal automobiles in this day and age was going to be easy.

The truth is that anyone who believes oil dependence is going to be solved without the direct involvement of the U. S. Government is very, very mistaken. Think higher taxes, higher fuel prices regardless of the fuel that is used. There are three elements at work here: oil dependence, environmental pollution and global climate change. Solving one doesn=t really solve the total problem without dealing with the other two and there is no one company or industry that can do it alone. This time there is goin to have to be some pain to achieve the gain.

Note:

This opinion/essay is the property of the author. It is offered for use by individuals who are also free to copy and make it available to other individuals as they wish. Anyone wishing to make use of the material for commercial purposes must seek permission of the author, who can be reached at Impressions@Tim-Holland.com. Such permission will not be unreasonably refused.