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As the U.S. gas-price trajectory trends above 2008’s peak levels, small-car sales are following suit, according to Ward’s data. But this time the industry appears ready.
The last time pump prices spiked, auto makers, particularly the Detroit Three, were enamored with high-margin light trucks. So when American consumers began abandoning SUVs in search of savings, the industry was caught off-guard.
Toyota slashed production of its Tundra fullsize pickup, GM increased its car output and Ford Group Vice President Jim Farley said he was “shocked” one month after the Blue Oval’s passenger-car lineup accounted for 62% of the auto maker’s sales.
Fast-forward to today. “We have much more flexibility than we have had previously, and we’re more dedicated to small cars,” says Jim Tetreault, Ford vice president-North America manufacturing.
And there is every indication Ford and its competitors will need flexibility to quickly adjust their production schedules.
Against a backdrop of political strife in the oil-rich Middle East and North Africa, U.S. average regular-grade gas prices rapidly are approaching the per-gallon record of $4.11, set in July 2008. Regular unleaded was selling for $3.56 this week, according to the American Automobile Assn. This time three years ago, it was $3.24.
The U.S. Energy Information Admin. is projecting prices in the range of $3.70 from April through September, peak driving season. The agency also says there is only a 25% probability the national average will exceed $4.00 this summer.
But Darin Newsom, a senior analyst with Omaha-based Telvent DTM, a commodity-information service provider, says pump prices could well eclipse 2008 levels. The reason? Prices started higher in 2011 than they did three years ago, $3.10 vs. $3.04, according to AAA data.
