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Thread: The future of the car industry

  1. #1
    Vulture of The Western World Eric's Avatar
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    The future of the car industry

    What's likely to happen to the car business over the next year? A great deal, of course. But much of the change that is coming is purgatory - and necessary. The events of the past six months have merely forced the issue.

    Here's how things are likely to break down:

    * GM will survive, but most of its divisions will not -

    Did you know that at one time Chevrolet, by itself, had more market share than all six of GM's current divisions - Chevy plus Pontiac, Buick, GMC, Saturn, Cadillac, Hummer - combined do today? It has already been announced that Pontiac is to be retired, Saturn and Hummer sold off. But arguably, GM should consolidate its remaining brands, too.

    GMC, for example, is superfluous. It sells rebadged and slightly higher-trimmed versions of the same trucks and SUVs sold through Chevrolet. A Yukon Denali is almost a Cadillac Escalade; the GMC Canyon is a tarted up Chevy Colorado; the Acadia is a slightly different Buick Enclave. Etc.

    It's not sustainable.

    * Chrysler will sleep with the fishes -

    The lesions are just too deep (and the market too unforgiving) to have any real hope for Chrysler's survival. It is the AMC of 2009. Remember American Motors? By the late '70s it was out of money - and its products were dated as well as plagued by shoddy workmanship. It was a vicious cycle. There was not enough money to "do it right" so corners were cut in obvious ways, which consumers quickly found out about. Which of course led to even worse sales.

    Which led to even less money to fix the original problems.

    That same cycle is bleeding Chrysler white today. It has models that are obviously out of date (PT Cruiser, Sebring, Pacifica) but it hasn't got the money to update them. It has a few others that are nice enough (300, Challenger, big trucks/SUVs) but which are totally wrong for the times and can't be given away. Sprinkle in crushing debt and union/pension obligations and ask yourself, who would want any part of this mess? Fiat to the rescue? No one - not the Americans, not the Japanese - can sell the cars they have here already.

    Do you suppose that Fiat - a brand with zero presence in the U.S. market - is going to succeed where even Toyota is having serious trouble getting a leg up?

    Sayonara, Mopar.

    * Everyone will scale back -

    GM has too many divisions, but it's far from being alone in having too many models. Several other car companies have far too many models - and sub-models of those models - too.

    Toyota, for example has no less than 17 separate models - not counting Lexus and Scion. Mercedes-Benz has doubled its lineup in the space of a decade and now sells (god help us) minivans. Honda, Nissan and the rest are similarly afflicted - and suffering, as a result. Everyone is trying to sell everything and it's just too much. It is very hard to make a sale (let alone a profit) when there is such a glut of offerings available.

    The herd must be thinned.

    Maybe we will see a return to the specialization that used to be such a successful business model. For instance, VW was much healthier when it focused on value-priced but high-precision/high-quality cars. It made a big mistake trying to be all things to all people - which only caused a shedding of its core customer base while failing to attract the higher-end buyers it wanted.

    Maybe trucks and SUVs should not be sold by everyone, either.

    And so on.

    * Overdone (and overpriced) cars are out -

    For openers, the distinctions that used to be obvious between "economy" cars and "luxury" cars aren't so obvious anymore - other than in terms of price. Yes, you can pay $40,000 for a car. But an $18,000 car will have most of the actually useful features and equipment that used to separate a luxury car from a car for the Masses - things like climate control AC, power windows, locks, cruise control; a nice stereo, etc. Maybe even GPS.

    The car companies have been desperately trying to re-establish the distinction (and justify the silly MSRPs they're asking) by incorporating more and more essentially useless equipment (high-powered engines that won't get you anywhere faster on today's traffic-jammed roads; comically overwrought electronic "aids" such as mouse controllers, etc.) into their middle and higher-end product.

    But people are not buying that anymore. It has dawned on them - via the blunt force trauma of economic collapse - that they don't need this stuff and can get by without it.

    More bluntly, the idea that average people can - or should - be driving around in $40,000 (or even $30,000) cars is headed for the same place that no-doc mortgages went. It was a Potempkin Parking Lot financed by pyramid debt that has since collapsed and which cannot be resurrected. Newsflash: The average family income in this country is under $50,000. Cars - if they are to be sold based on ability to pay off the loan - will have to have their MSRPs adjusted accordingly. Probably to around $25,000 (roughly half the average family's annual income).

    Either that or the spending power of the average American will need to be brought in line with the cost of new cars.

    Which do you suppose is more likely to happen?

    We should have seen it all coming, of course. But that doesn't mean we can do anything to stop it from happening.

    Not anymore, anyhow.

  2. #2
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    I wouldn't be surprised to see the "stripper" model cars of yesterday to return to the showrooms in this newly austere environment. I think we will see the reemergence of price leading cars with little standard equipment in order to put more people in vehicles.

    Options such as fancy radios, GPS, and even power windows will become optional equipment again on vehicles. The fancy stuff will be reserved for luxury vehicles costing more than $25,000.

    New cars have been too richly optioned for some time and the reemergence of stripper cars will be a welcome addition to those who are interested in basic, affordable transportation.

    I just hope that this cost cutting does not affect engine, transmission, supsension and tire choices that have made cars better over the years.

  3. #3
    Vulture of The Western World Eric's Avatar
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    "I wouldn't be surprised to see the "stripper" model cars of yesterday to return to the showrooms in this newly austere environment. I think we will see the reemergence of price leading cars with little standard equipment in order to put more people in vehicles."

    One's already here: The $9k Nissan Versa 1.6! It has pretty much.... nothing. Not even a radio. Manual roll-up windows, no power options (other than steering and brakes). But you can add an aftermarket stereo for less than $200 and if you want AC, the car still costs just a bit over $10k, brand new.

    "New cars have been too richly optioned for some time and the reemergence of stripper cars will be a welcome addition to those who are interested in basic, affordable transportation."

    I agree. I find many of the new cars I drive each week are completely over the top with electronics that I would never want (to pay for) myself.

    "I just hope that this cost cutting does not affect engine, transmission, supsension and tire choices that have made cars better over the years."

    It ought not to. The engine/running gear parts are probably the least expensive parts of the car to make! It's all the electronic (saaaaaaaaaaaaafety, especially) flapdoodle that has bloated the sticker price.

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