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Backseat Driver: A time for change, not pandering

The writing is off the wall and on the page.

I just hope presidential hopefuls Senators Hillary Clinton and John McCain get to read it. Their proposal to suspend the federal excise tax on gasoline this summer sends confusing signals about U.S. energy policy to both consumers and manufacturers.

The facts are these: Auto industry sales in April were down to an annualized rate of fewer than 14.5 million vehicles, according to Autodata, mainly due to a big drop in gas-guzzling pickup truck and SUV sales.

That hit Detroit’s Big Three especially hard. General Motors’ sales were off 16.2 percent compared with last April, while Ford’s were down 12.1 percent and Chrysler’s off 23.5 percent.

The top three Asian manufacturers – who missed the boom in truck and SUV sales during the 1990s – reported sales increases: Toyota up 3.4 percent while Honda and Nissan were both up six percent.

In fact, sales of small, fuel efficient cars were up quite dramatically, largely due to rising gas prices. Gasoline may not consume a major part of the average family’s budget, but you sure know what you pay at the pumps each week and regular is now running at about $3.60 a gallon.

Sales of Ford’s Focus, for example, were up 43.5 percent; Ford recently upped production of the car by 30 percent. Meanwhile, its SUV sales were off 36 percent.

Likewise, sales of Toyota’s Yaris were up by 46 percent while truck and SUV sales were off 12 percent.

Nor can we reasonably expect gas prices to come down anytime soon. U.S. demand is increasing as the summer driving season approaches and the price of oil is now well over $100 a barrel, with the new benchmark around $120. That’s due in part to the weak dollar but more importantly to the soaring demand from the fast-growing economies in mega-nations like China and India.

Unfortunately, the proposal by Senators Clinton and McCain to suspend the 18.4 cent federal excise tax on gasoline would make it cheaper to fill up, but goes against all the "energy saving/independence from foreign sources of oil/addiction to cheap oil" arguments we have been hearing lo these many years.

It also goes against the intent of the new mileage standards outlined by the National Highway Transportation Safety Administration (35.7 miles per gallon by 2015) just last month.

Indeed, it is interesting that many in the auto industry itself are coming out against the idea, with Chrysler CEO Bob Nardelli arguing it would affect sales of small fuel efficient vehicles, and giant auto dealer Autonation CEO Mike Jackson telling the Detroit Free Press it gives confusing signals.

These are sobering times, with prices rising on everything from gas to food and a slowing economy forcing everyone to take stock of their personal and business finances. Let alone the ongoing emotional and financial drain of George Bush's War in Iraq.

As much as we all might welcome paying less at the pump, it is not the time to sacrifice the long term interests of the nation by pandering to the immediate gratification of cheaper gas prices this summer.

- Peter C.T. Elsworth

Posted by Peter C. T. Elsworth  at 3:13 PM to commentary | Permalink | Comments 0

Small cars post gains, trucks fall as gas prices rise

DETROIT -- Small cars were the big winners in April, as high gas prices accelerated U.S. consumers' rush away from trucks and sport utility vehicles and makers of fuel-efficient models scored gains despite the weak economy, according to the Associated Press.
General Motors, Ford and Chrysler all saw double-digit U.S. sales declines compared to last April. But Nissan's sales were up 7 percent on the strength of its car sales, while Toyota's sales edged up 3 percent. Honda's sales figures were delayed because of a technical problem, but the automaker said April sales were likely to be up at least 6 percent.

Pickup sales have been falling for months because of the slowdown in housing construction, and the trend away from SUVs began several years ago as Baby Boomers aged and roomy but more fuel-efficient crossover vehicles gave consumers more choice. But automakers and industry watchers said gas prices are speeding the trend.

Posted by Peter C. T. Elsworth  at 11:03 AM to Auto industry | Permalink | Comments 0

York: Ford should unload Volvo and Mercury brands

Less than a week after stressing that billionaire Kirk Kerkorian's Tracinda Corp. would remain a passive investor in Ford Motor Co., a top adviser for the casino mogul, Jerry York, is already recommending changes for the Dearborn automaker, according to The Detroit Free Press.

In an interview with the trade magazine Automotive News, York said he thinks Ford should sell the company's Swedish Volvo brand, which lost $151 million through March, as well as the Mercury brand, which has been languishing for decades. U.S. sales of Mercury have fallen from 528,033 to 168,422 last year.

Posted by Peter C. T. Elsworth  at 10:28 AM to Ford | Permalink | Comments 0