Overconfidence is a danger. GM and Chrysler are not out of the woods.
Long-time contributor Jerry Flint died suddenly Aug. 7, shortly after filing this column. He was a fine journalist and dear friend who will be sorely missed. Read more about his life and career on p. 8.
Let's think a dangerous thought: The days of 16-million and 17-million annual vehicle sales are not coming back for a long, long time.
The economic doldrums are continuing; growth is slow and many of us are scared. And scared people do not buy new cars and trucks.
Average vehicle prices are climbing, up past $32,000 now. New technologies that improve fuel economy and reduce emissions add still more cost. The government pressure to build smaller cars and get away from SUVs may work against what buyers really want.
Consumers may decide they would rather spend their disposable income on smart phones and other consumer electronics than cars; or maybe just pay down their debt. Auto makers may decide it's better to make money on fewer sales.
Competition continues to get tougher., Subaru and all are coming on strong.
Overconfidence is a danger, too. Some believeand are out of the woods. Even President Obama seems to think so. But it's not so. GM's market share still is slipping in the U.S.
Improved Chevrolets, Buicks and Cadillacs have not made up for the loss of sales from Saturn, Pontiac, Saab and Hummer. GM is enjoying booming sales in China, but it's in trouble in Europe.
GM andmay be bringing in a lot more cash, but why shouldn't they? Both have billions of dollars from U.S. taxpayers in the bank, with debts written off and liabilities dumped into disappearing boxes.
Others have cut costs, too, and the weakening Euro helps the Germans become more cost-competitive in the U.S.
And there's still the danger of reverting to old habits: Building too many vehicles that dealers don't need; pushing up giveaway deals and leases; and creating designs that are “safe” but boring.
This criticism isn't just about Detroit.is losing market share. Can it fight back with something besides incentives? And that goes for , too. Its growth has stopped and many of its promising new models have ended as duds.
And there may be fewer millionaires in the future. What does that mean for the growing number of luxury brands?
Of course, there is a plus side to the ledger. Auto makers have downsized. Factories have been shut, older workers have retired, new workers will be hired with lower pay and benefits.
Designs and quality have improved, and hopefully we won't be seeing any new Pontiac Azteks.
Profit-robbing incentives also have been chopped. But what if U.S. sales do not start increasing by a million units a year, as many analysts are forecasting?
The plan for coping with that scenario should be simple. Auto makers need to create exciting designs that make consumers want to ditch their current vehicles. They need to keep a leash on incentives. And they need to tell the United Auto Workers union “No.” Detroit can't go back to the old ways, even if profits improve.
And auto makers need to stay focused on making conventional gasoline engines better. Hybrid-electric vehicles, plug-ins, EVs all still are problematic.
Business may not get better. The market may not get bigger. So run scared.