There’s demand for cars, often lower priced. Abandoning them was an idiotic move to please Wall Street that’s now haunting the Big Three US automakers.
By Wolf Richter for WOLF STREET.
To please Wall Street and concentrate on the highest-profit margin trucks, SUVs, and crossovers, GM, Ford, and FCA have killed nearly all their sedan models. GM stopped taking orders for the Malibu in February. They kept their muscle cars, and Cadillac kept two models. But the whole mainstream lineup of sedans is disappearing.
At Ford, for example, outside of the Mustang, every car model got axed, from the entry-level Ford Fiesta that had a starting MSRP of $14,200 in 2019, its last year of production, to the Ford Fusion Hybrid, a large well-designed car that got around 40 mpg, which would be sorely needed at today’s gas prices.
It was a move, designed by some corporate idiot perhaps with the support of some lavishly paid recently graduated MBAs at some big-name consulting firm, to please short-termism-infected analysts on Wall Street.
And Toyota is having the last laugh. The former #3 in new vehicles sales in the US, and then the #2 after Ford walked away from sedans, is now #1.
Toyota was #1 for the first time ever on a quarterly basis in Q2 2021, largely because it still had access to chips, while others didn’t, and it blew everyone away.
But in Q1 2022, Toyota was #1 again. This time it also suffered from chip shortages and its sales were also down from a year ago. But it sold lots of those hated sedans, including lower-priced sedans that cost a lot less than SUVs and pickups, that the others have walked away from.
And Toyota is now rubbing it in publicly.
“A lot of our market share growth is really in the car side of the business,” Bob Carter, executive VP of sales for Toyota Motor North America, told reporters at a briefing Wednesday.
“Cars are still an important part of the market,” he said.
“Unlike other brands that have exited the sedan market, we’re choosing to double down,” he said.
Honda and other foreign automakers are still selling lots of sedans as well – many of them lower priced cars that get great gas mileage. Tesla is making the Model 3, its lowest-priced model. GM, Ford, and FCA just walked away from the market to please some analysts at Wall Street banks, which will likely go down as one of the stupidest decisions ever in automotive history.
Toyota’s sales in Q1 fell by 14.7% from a year ago, to 515,592 vehicles, but this surpassed the sales of GM (512,846 vehicles) and Ford (432,132).
Toyota’s sales included 142,523 cars, Toyota and Lexus models combined, with 47,501 Corollas at the low end and 78,151 Camrys at the higher end. Car sales were down 25% from a year ago, as Toyota cannot make enough of them due to the chip shortage, and it too is prioritizing high-profit-margin trucks and SUVs, whose sales also declined as dealers ran out of inventory, but there is enough demand for cars.
GM, Ford, and FCA just surrendered this business to Toyota, Honda, Tesla, and the other automakers that are still making sedans. And with gas prices where they are now – $6.15 a gallon of regular at my local gas station – those cars sure come in handy. GM, Ford, and FCA may never be able to fully recover from this monumental blunder.
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AGREE, like Totally dudes and dudettes re ” which will likely go down as one of the stupidest decisions ever in automotive history. ”
Thanks Wolf, for putting into words what WE, in this case ”the family WE” thought when recently trying to buy a sedan to replace one that has served us well for the last 13 years, but was getting seriously ”long in the tooth” as We used to say regarding our horses of the 4 legged kind…
I mean, all seriousness aside, how damn dumb can these folks formerly known as ”car people” get???
The Power of Positive Magical Group Think is very much in vogue.. That along with huge doses of Denial..
“Power of Positive Magical Group Think”
Likely this…once one of the domestic manufacturers announced this, the other one or two had the CYA to pull a (bad) trigger.
It isn’t like the history of gas prices is volatile or anything…
But ultimately, ZIRP and habitual financing attitudes provide a huge assist for overpriced SUVs in the US.
An extra $5000 in price is “only” about an extra $70 per month on a 72 month payback, never more so than when ZIRP is in effect.
Spreading payments out makes 85% of buyers a *lot* less price sensitive. Somehow “just” $70 per month sounds a lot less intimidating than an extra 5 grand.
Somehow it makes most buyers feel like the manufacturers are doing them a favor rather than overpricing their autos by $5k in the first place.
I find the 1 payment plan works best and puts ‘affordability’ into proper perspective
We always taught the Sales Org Chart:
Ms So and So…
For the cost of “A Cup of Coffee” a day..
You can have the upgraded.. SuckerSx..
With the leather interior!
You deserve a little luxury in your life.. don’t you?
:)
Educated Idiots.
I mean, all seriousness aside, how damn dumb can these folks formerly known as ”car people” get???
They think they will be selling lots of cars soon. EV cars that is. With the infrastructure for EV’s really vaporware at this point, good luck with that.
VintageVNvet and endeavor,
Watch the movie, “Ford vs Ferrari”. Stupidity at the top has a long and hallowed history.
VVNV-…would wonder about terming these folks ‘car people’. Maybe better (as in so many ‘Murican industries these days) to say what they really are: ‘financial people’ running an industry that they have spent not one actual spearpoint minute in, be it factory floor, engineering, logistics, or, perhaps most important, living among the masses that comprise their market (however, their obvious belief in the power of manipulation of that mass market via mass marketing could be their longterm strength).
Wolf hits it outta the park again, especially in referencing the entrenchment of ‘next-quarter share value’ thinking among those who one would think would know better.
may we all find a better day.
“logistics”
Harvard Biz School recruiting from Russian army these days.
That’s okay – Harvard’s been recruiting faculty from Russian political class for a lot longer…
Reminds me of where I used to work. They would promote people with little or no “time in the trenches”. They knew all kinds of theory (or had good connections), but never really got involved with the actual process. It was like childless me trying to tell someone how to be a parent.
91B20,
Case in point is Boeing. You got a company designing, engineering, building and selling airplanes.
Ford got an aerospace engineer and a manufacturing exec. when they got Alan Mulally from Boeing in 2006. An engineer running a company.
The Boeing 777 was created under Mr. Mulally, where he was director of engineering.
Boeing’s CEO is an accountant — literally. Virginia Tech, BS Accounting 1979; Boeing CEO today.
Never underestimate the stupidity of modern American car managers (or their unions)
Actually it is the stupidity of the American people at all levels of society. I once lived in the greatest country on earth – now my children and I call it what it is – a sh*thole.
And yet you stay here, with your children, in a place you call a sh*thole. The stupidity is more pervasive than you realize.
Didn’t we hand over the car industry when we let foreign companies manufacture in the US without union workers? I think Toyota had something like an extra 800 dollar profit per car. I think GM also tried to compete by setting up Saturn as a separate non union company but the UAW stopped that.
Then again the US companies don’t have to compete. Probably too big to fail and more bailouts on the way.
As Wolf pointed out “car people” aren’t calling the shots.
Think about how much of “GM” is in China now.. Design, Engineering..
manufacturing..
I was told by an senior exec a few years ago.. all the important parts of GM are in China now.. 60% headed for 70%
How many Vehicles does GM sell in North America..
How many in China?
Patents, Proprietary Tech.. mostly inChina..
Bailouts – Are still manufactured in the Good old USA!!
(Thank you Amurica!!)…
Bailouts have been so profitable..
GM has decided to make them an important part of the business model!!…
I was informed by a group of Design/Engineering folks.. (Cannot be sure if true)
That if USA goes to war.. (Big War) – they need core manufacturing capabilities.. so Auto manufacture provides a “Foundation” for that..
ESG did this
How stupid to think not 1 person who worked for these idiots had the foresight to see we were in a bubble, oil supply worldwide is dropping and the masses would still need less expensive, gas efficient transportation.
Not 1?
Yet I see these massive developments still being built even today. Can anyone see the future or at least be cautious?
Remember what happened with Boeing and their Magical Max? Those who don’t go along are left on the side lines or worse, just let go.
The CEO left with a potful of money and he blamed the engineers on the 737 Max issue.
Unfortunately govt /taxpayer bailed boeing to the tune of $42b i think.
Sickening. Covid papered over a lot of wrongs
Danno,
I will bet you that lots of Ford, GM, and Fiat/Chrysler workers knew their companies were making a big mistake. I am guessing upper level management is to blame for this mistake. Heck, even I couldn’t believe it when they stopped selling sedans.
Letting Wall Street decide your product mix based on a few month’s sales trends is lazy thinking at its worst. Wall Street will prod you to do whatever is hot and trendy and potentially makes the most profit or gooses the stock — in the short term. When the ruinous long term consequences inevitably show up, they’ll dump your stock in a heartbeat and find a new victim.
> the masses would still need less expensive, gas efficient transportation.
Even after EV becomes mainstream, if I ever need to buy a car, I’ll buy another Honda Civic. Fantastic car and much better looking than Teslas are.
Just be sure to buy a stick shift. The CVT auto’s suck.
Surely a go-kart transmission is built for the company bottom line, not the buyer. But gotta love that bling! I’ll never spend my W2 wages on anything with that crap system in it.
Danno,
If you have ever seen the movie, “The Big Short” (from the book by Michael Lewis) with many many Wall Streeters recognizing the subprime mortgage bubble….then you had the “Chief Economist” at the Fed complaining that they employ over one thousand “economists” and not one of them saw the subprime mess coming. Puts things into perspective.
Those economists knew not to risk their jobs pointing out an idea that antithetical to the party line.
Half of them were absolutely clueless, but the other half weren’t about to rock the boat and risk their livelihoods stating the truth, especially since the big money was still rolling in. That was also in the movie when Mark Baum went to Standard and Poor to find out why they were rating the crappy MBS as triple A only to be told if they didn’t, then Moody’s and other ratings agencies would do the same. Likewise, the Wall Street journal reporter got spineless and refused to report the truth on the big investment banks failing because of their investments in the crappy MBS because the editors were too cozy with the big banks.
Once the recession takes hold and auto sales totally tank I expect to see Ford and GM in DC looking for another bailout like in 2008.
And I hope they get the middle finger. Let these greedheads twist in the wind.
Ford will attempt to avoid a bailout like in 2008. One would mean the end of family control.
Ultimately though, without permanent government subsidies, what’s left of the Big 3 will ultimately disappear. All are shrinking their way to extinction.
GM filed for bankruptcy, as did Chrysler, and took their investors down with them. They then got a DIP loan from the government to emerge from bankruptcy. Ford squeaked through the crisis without filing for bankruptcy.
Mulally mortgaged everything in sight right away — including the blue oval logo — to borrow $23.6 million in 2006.
Billion
Oops & thanks ….
Ford at the time had a very intelligent CEO, I think he came from Boeing, it was Alan Mulally. He was smart enough to line up big lines of credit for Ford way before they needed to use it. That guy was smart. He also started redesigning several platforms way before regular “USA Car Guys” at the little 3 would have done. It’s too bad he didn’t stick around longer. Not all too sure if he was around in that time frame, but he was one of their best performers in that seat.
Yes, Mr. Richter, gasoline prices at that time also went to $4-5 dollars a gallon when they were in the midst of pumping out large numbers of full size SUVs and trucks. Very bad timing on there part. The abandonment of sedans and small cars that are fuel efficient may come back to haunt them and may be there undoing.
Ford was forced to take bailout $$$. They didn’t need it. I bot F Ford under 2 bucks
And they will probably get it…
Ford, GM, and FCA are now just truck companies with some trucks without open beds. Love our Toyotas, btw.
1) Ford and GM investors rotate to XOM
The ev dream is fading. For entertainment only :
2) XOM backbone : June 16/23 1997 : 32.56/ 29.81.
3) When USSR collapsed in Sept 1998 XOM visited it’s backbone.
4) When the dotcom collapsed XOM made a round trip from Sept 1998 to it’s backbone in July 2002.
5) In Mar 23 2020 XOM visited it’s backbone.
After a test in Oct 2020 XOM is approaching the 2008 highs and 2014 high
thanks to Ford and GM defectors.
For an old fellow could you tell me what XOM and backbone mean?
XOM is Exxon Mobile…
Backbone is a stock chartist term…
If American automakers get bailed out again from their own bad business decisions, christ….
At least take control of them if they fail. But nope. Losses will be socialized, profits privatized.
Wouldn’t it be nice if those who made the bad decisions were held responsible!?!??
Different rules for the elite than the rest of society..
Frankly, Toyota just makes the best and most reliable cars with Honda a close 2nd.
Unfortunately, they also make the most boring cars.
Toyotas and Hondas are boring, but they are reliable and available, which are two things that the American companies are not.
Roger that, BeenThere. I had Camry that went 15 years and ran like a champ until my son turned driving age and received it. That poor old Toyota could not survive a 17 year old.
Corolla Camry Accord Civic
What the hell else is there? Can’t go wrong, although Honda is going all in with CVT go-kart transmissions, a non-starter for this family.
GM will be saved again by the Gov. Unions will be protected. Stockholders will lose everything with the BK filing. Bondholders will be screwed again to protect the UAW. New GM Co stock will be reissued. Gov will hold most of the stock. New GM CEO and new “Buy American, Buy GM” slogans will be everywhere.
New GM models to be introduced…called “sedans”.
Rinse and repeat every 15 years.
Bond holders and stock holders generally don’t work for a living.
UAW DOES work for a living.
After all bond holders and stock holders are taking a risk with their capital. Sometimes you lose it.
Oh well.
Those who find that objectionable are invited to do what the rest of the population does. Get a job.
“Bond holders and stock holders generally don’t work for a living.”
That’s news to me.
Glad I can enlighten you.
Here’s another: The stocks and bonds are mostly held by the top 1% of the population.
It is true that some workers have a few thousand in a 401k.
That worker investment is so vanishingly small it is meaningless.
OTB-
Is your suggestion to curtail stock ownership? Bond ownership?
What about savings — prohibit that too?
It appears that most of the commenters on this sight mirror the general population in aspiring to a retirement some day that allows them to no longer work for pay, but also permits them a decent lifestyle during their waning years without becoming a burden on their families or the public trough.
Is that possible somehow without ownership vehicles mentioned above?
Nope
Investors typically are entitled to nothing although they think that only applies to labor.
The top 1% who by and large own everything feel entitled to big paydays always.
Everyone else can go to the devil.
The 401k and small investor crowd are so so small in comparison as to be nearly invisible. They ARE earnest but ultimately doomed.
Are you talking preferred stocks, or index funds?
“That’s news to me.”
OutsideInMyCardboardBox hates anybody who makes money. He also talks out of both sides of his mouth, making fun of tradesmen in one breath, while supposedly championing the UAW in the next breath. Can you say empty suit?
“UAW DOES work for a living.” Obviously spoken by someone who’s never been in a union shop. Between vacations, work rules, absenteeism, super seniority, etc., you’re lucky if you get 6 hours of work per week from the typical UAW employee.
America’s automakers listen to MBAs, and the FOMC listens to PhDs. I wish I had a funny punchline.
GM and Chrysler filed for bankruptcy and took their investors down with them. They then got a DIP loan from the government to emerge from bankruptcy. Ford squeaked through the crisis without filing for bankruptcy.
so execs came out well
stock owners destroyed
There was discussion on the poor shape of those firms (especially quite loud about GMC) before the shock tipped them over (the ’08 GFC happened). GMC was called a big bloated pension plan with a car company attached. Stockholders were warned if they were vaguely conscious. But there was so much euphoria, so much sense of something for nothing in those credit-bloated days. Sound familiar?
I made some nice cash on Lee Iacocca.
“If American automakers get bailed out again from their own bad business decisions, christ….”,
I’d want my student loan bailed out too if I had one!
The Big 3 walked from sedan sales in part because they weren’t profitable. It seems high-priced union labor and selling a large portion of these already low-margin cars at fleet prices to rental car companies isn’t great for the bottom line.
What they should do is sell their truck business to toyota and close down the rest. The toyota division makes the sedans, profitably as they have done for 40 years.
Gas prices will be back down in a year or 3. Then they’ll be selling lots of overpriced trucks again. Happens every time.
Hey I’ve seen this episode before…
I was waiting for them to come out with the hummer h4 though.
GM is going to make 65,000 electric Hummers. You can have one for $120,000++. Better put your order in soon!
“Better put your order in soon!”
Pete Buttigieg is standing by!!
I was think more along the lines of a Hummer with ZL1 trim V10. 2mpg?
120 G? I’ll buy a horse first… of course horses probably emit methane gas and will be overly regulated before I can get in the saddle.
Horses don’t emit methane gas. Only ruminants with multi-chambered stomachs such as cows, sheep, and deer, undergo enteric fermentation and emit methane, mostly in the form of burps.
Let me guess, it was called “That time when they quit making reliable fuel-efficient vehicles to concentrate on profitable models”? Spoiler: they got owned by the foreign car manufacturers, but stay tuned for the surprises that happen in chapter 11!
It’s almost as if the US auto industry didn’t learn anything from the 1970s.
> stay tuned for the surprises that happen in chapter 11!
Let me guess: goodbye shareholders and pensioners, hello hedge funds buying (debt placed) higher in the capital structure, lawyers, and firms providing DIP financing.
I’m an avid cyclist and I noticed there’s an equivalent phenomenon in cycling: fat bikes.
Those who ride them on roads and cycling paths look like idiots. But it shows that with a bit of marketing, you can push some people to buy anything.
That’s the beauty of my OTSO gravel bike. It’s designed to take fat tires if need be for winter; plenty of clearance in fork top, seat stays & chain stays.
I run mine with 38 mm Panaracer Gravelking tires which are great for most things, but not deep snow or packed ice without studs. They roll fast for how wide they are, and give good grip in bad conditions.
The cool thing the mech. E guys did at OTSO was make a frame wide enough for fat tires, but keeping the bottom bracket as narrow as possible.
i.e., you get on a road bike, and your feet are typically 150 mm apart. That’s how my gravel bike is too. A lot of fat tire bikes are 203 to 233 mm. The OTSO Voytek, which my neighbor has, is 183 mm “Q-Factor.”
Do you want to ride with your feet straight down like a road bike, or do you want them spread apart wide on the pedals? That’s what got this bike company started.
OK, I had to check. Both my Bianchi road bike and Waheela C are 61 cm frame size. Both have a Q-Factor, the width from crankarms where the pedals thread into them, of 153 mm.
The Bianchi’s a 2020 state-of-the-art race bike with the now fairly standard clearance for 28mm tires (I run 25mm Conti Grand Prix). The OTSO will take 700c x 54mm wide tires.
What does all those words and specs run someone? More than a 10 speed swchinn from Wally world right?
Trucker Guy,
Bianchi in September 2020 = $12,421 before sales tax.
OTSO ordered with down payment in October 2021 and bought in January 2022 = $4,730 before tax.
I do have a 16 speed Schwinn Paramount from the mid-nineties.
And Wolf will attest to the fact that I did design and engineer a custom track bike many a moon ago ….
Right. A good gravel bike covers 99% of your all-season riding needs. A fat bike (aka “cartoon bike”) covers the remaining 1% of scenarios.
When you have loyal followers that are conditioned to accept poor quality and believe that everyone else’s vehicle rattles like theirs does, it’s foolish to intentionally educate them otherwise.
“Monumental Blunder”, indeed.
What dynamics disallow an upstart US manufacturing start-up from entering US sedan market with a dumb technology, high gas mileage, low price competitor?
Not claiming it is possible, but if not, why?
Toyota
Mostly, I’d say the barrier to entry is the high cost of starting up a new car company. I’ve seen multiple estimates that put the cost of designing a car (even a cheap one) at several $Billion. Cars (even “simple” ones) are massively complicated machines with thousands of parts that have to be assembled with almost unbelievable precision. Do you have an extra $20 to $40 billion dollars burning a hole in your pocket? Then you might be a great candidate for starting a new car company.
Back in 1999, Ford had a problem – their car designs were seriously long in the tooth and they desperately needed new designs. Buying Volvo Cars (and Volvo’s car designs) for $6.5 billion was apparently cheaper than designing their own cars. And this is Ford, which already has a fully-staffed design and engineering organization.
Launching a NEW car company into an industry that already has more vehicle production capacity than customers strikes me as the classic definition of how to make a small fortune: “Start with a large fortune.”
Of the recent car startups, the only one that is producing significant numbers of cars is Tesla. They raised almost $30 billion, ($20 billion in investor money, and almost $10 billion in debt. And is still bleeding money with uncertain prospects for sustained profits in the future.
Not going to disagree – just adding a bit of depth to the topic:
You don’t need to design a new car from scratch – the Soviets back in the day bought Fiat licenses and thus the Lada, the local people’s car was born. In fact the Chrysler 300C & co. was still heavily based on the design done while Daimler was onboard and was closely related to the old “ugly-eyes” E-Klasse Mercedes-Benz until the end of production.
So licensing a massive, no-thrills sedan from a 3rd party and implementing it to US standards (headlights, crash testing, emissions, etc.) is not a big deal. Sure, expensive, but definitely not the billion dollars range and not 5-10 years, more like 2-3. Engine is the most problematic part as not many manufacturers are ready to sell you their most recent powertrain technology – but let’s assume that you can scoop up some Chinese inline-4 engine as well – not impossible, just difficult, which is why launching an electric car startup is much simpler.
You can even rent the production capacity from the likes of Valmet, Steyr, Nedcar who used to be car manufacturers themselves, but downgraded their portfolio to automotive supplier & service companies. That’s where the problems start: most of the production capacity (and production culture!) is outside of the US, in Europe and Asia – for parts and assembly alike. So you have to have a margin high enough to make the transport & import process worth it or you must indeed committ to invest in production facility in the US.
I’ve often wondered if an auto startup couldn’t save a ton of startup costs by simply buying a ton of cheap chassis/engines from some number 4 or 5 overseas outfit and domestically producing a high design “glider”/shell to go on top.
Performance might be crap, but lowest end cars could be attractive vs. today’s intentionally design crippled ones.
They’d have to have the capital to develop a supply chain for parts. Given the shortages in the industry right now, that supply chain doesn’t exist. Given how all the investor money was poured into a million EV SPACs, while rates are rising, the capital doesn’t exist either.
We better get used to not have everything we need available
Your question is answered by financialization. Except maybe under monopoly or oligopoly market conditions, this type of manufacturing isn’t very profitable by recent standards.
In the 21st century, it’s become a lot more profitable to make money off of money, through speculation.
Not sure about now or the very recent past, but it wasn’t too long ago that a noticeable proportion of many non-financial corporation profits came from lending their customers the money to buy the product.
I agree. Make one style. One. Three colors: Red, White, Blue.
No options. It comes with A/C, 4 cyl, simple automatic transmission..
4 door, but a “hatch back” for loading stuff.
Where a “radio” or screen would go is a big blank hole. Aftermarket will supply hundreds of electronics for that gold-mine of a space.
Tires? Most common size.
Brake pads? Hoses? Belts? The most common aftermarket models.
Sell them inside a Wal-Mart. Price $9,999, and go pick yours out in the parking lot.
Financing? 2% for 4 years, just to cover the paper work costs. No other charges. No “Title” crap charges, or “Dealer” fees, or “Paint Protection” rip offs. Just your State sales tax.
It will costs about $250 a month.
MA
Sounds interesting.
Perhaps offer via Costco, too?
Sears sold a 1950’s Henry J’s known as the “Allstate” for peanuts back then (I believe for less than $1,000). Some models were so stripped down, they didn’t even come with a trunk.
You could even buy an entire house from Sears back then. It came in a kit.
I love my Sears Crasftsman kit home & it’s just over a century old.
Subaru Justy ?
Loved Mine 3 Cylinders, 9 valves, ECVT Trans and just shy of 2000#’s. Nothing outside of my Audi Coupe-Q piloted the snow like that baby (on demand 4wd). 60mph cornering in deep VT snow. Off road performance surprisingly good as long as violating clearance issues didn’t bother you.
Going on memory here but Suzuki engine also found in Chevy Spectrum and a namesake model.
40+ MPG
Ugh, it’s gotta be red, white, or black.
Perhaps GM, Ford and Dodge can buy back a lot more stock and right the ship. That seems to be the leading US corporate solution now because it’s all CEO’s know how to do. I mean besides moving the factories to China.
Maybe when the people who bought the 80k pickups and SUVs are finished paying the eight-year loans off, they be ready for another one? There should be chips available then.
GM reportedly did move its factories and more importantly, tech to China. Now, when it is more a Chinese company than American and wants to sell CCP linked, subsidized cars to drive out legitimate, US producers, it should not be given another bailout.
Needless to say, for those reasons, a recession or depression is coming to theatres on your neighborhood, soon. High, punishing, food prices are coming.
I heard a great joke that is also good financial advice:
“If you are an investor in mainland Chinese companies, you should learn yoga. Why?
Because later on this year, when you lose everything in China you will be flexible enough by then, so you will be able to kiss your rear-end good-bye.”
“To please Wall Street and concentrate on the highest-profit margin trucks, SUVs, and crossovers, GM, Ford, and FCA have killed all their sedan models. They only kept their muscle cars. But the whole lineup of sedans has disappeared……It was a move, designed by some corporate idiot perhaps with the support of some lavishly paid recently graduated MBAs at some big-name consulting firm, to please short-termism-infected analysts on Wall Street.”
Even worse is that you can’t even find a lower trim model truck, SUV or crossover anymore, they’re only the loaded to the hilt models which are prices at msrp+. Even the lowly 1500 series trucks are pushing $70,000 loaded now. This is/was such an absolutely disgusting move by these filthy swine. They basically told the working class and the poor to f**k off. It’s time for everybody to tell them to f**k off. I hope they all go out of business.
It makes sense, in a way, to produce only most profitable models while demand is high and supply is low. Once supply chains ease then you produce the lower end models at volume and undergo price discovery.
Upper middle class people running out of money is how the plan falls apart.
I think Ford must have realized their mistake with the “Big Fancy Trucks”, as they recently introduced the lower end and much smaller Maverick pickup.
F-series ain’t a “mistake”. It’s the best selling full-size pickup truck in America — And a golden goose.
Of course, they’ll sell every Maverick they can build as well.
Front wheel drive= mini van with truck body fraud
For the first time in I don’t know how long, I saw Ram pick-ups being advertised with 0% interest, 72 mo., and $2000 bonus cash.
The solution to higher fuel prices in the US is just to have the pump prices posted in litres like other countries do.
Glib, but true.
Pulling up at the big neon sign outside the gas station, $1-2 per liter will always feel “cheaper” than $6 a US gallon.
Around 1980, the fuel station Racetrack actually did do that…
Didn’t last long…
Maff is complicated…
Quarts would be better. The populous would not feel like they were being hoodwinked as most don’t know what a litre is.
I remember Hudson Oil sold gas by the litre. They eventually were taken to court for charging customers too much for the fuel they received and underpaying employees for time worked.
I am living in France and have been driving a big old Toyota diesel 4×4 for years, because I regularly need to tow big heavy trailers with building materials. But of course this same car also got used for more mundane tasks like doing shopping and going out. And all around, people have acquired a taste for big cars and SUV’s. So everybody is high on the hog.
Now with the incredible spike in fuel prices, with diesel being more expensive than petrol for the first time in my life, my 20 mpg behemoth became way too expensive. Also, there is talk of diesel rationing in the near future, which would pose big problems for me since I live in the middle of nowhere. The same goes for lots of people around here. All of a sudden, these big cars and SUV’s are not fun any longer.
So I bought a cheap old but incredibly economic petrol car on the side that runs almost 50 mpg. For the petrolheads, it is a tiny-mini 2007 Daihatsu Trevis with one-litre 3-cylinder engine, 3.60 metres long, weighs around 800 kg. Ridiculously small compared to USA cars, these are variants on the Japanese kei-car, meant primarily for big city use. And although they have their obvious disadvantages, the second-hand market for these is rapidly drying up, and prices are rising.
Having this experience, I really do wonder how this is going to turn out in the USA. For starters, all those people who have paid exorbitant prices for the biggest and baddest trucks, must now be getting slaughtered at the pump. But also the big US automakers, who made the (for me entirely incomprehensible) decision to ax their car offers and concentrate only on trucks. Since when is putting all eggs in one basket good business? I can imagine that lots of people are going to make the switch that I did. So the dealer lots will fill up with big gas guzzlers and a new scarcity of economy cars may well arise.
The big three might get out from under by rapidly starting to market their European car models in the US. If they don’t change course soon (like yesterday) they most likely will get completely crushed by foreign automakers, with Toyota leading the assault.
We’ve seen this movie (US automakers caught with their pants down) before. I can’t wait to see how it is going to turn out this time…
On another website, someone posted a picture of the gas pump bill, $350.
That’s more than I ever paid for a car payment in my life, back when I had one.
I filled up for $186 the other day. That was 31 gallons in my 35 gallon tank. I usually don’t run it that low but was between stations. The new trucks have 50 gallon tanks. $300 per tank at the current $6 per gallon diesel price will get the attention of those guys with$1,000 per month truck payments. I don’t think this ends well for a lot of them.
If I remember 2006-2008, it took about 6 months of close to $4 gas to bust the auto industry sales. With March’s numbers, we are very closed to the jackpot again.
endeavor,
Not even close. In 2006, the housing market started to blow up, which then caused the mortgage crisis, which then blew up the US banks with Lehman imploding and going bankrupt and others getting bailed out, and the whole economy was shocked and came to a halt, and 10 million people lost their jobs.
Today’s problems: 8% inflation and rising, surging interest rates, huge overstimulated demand leading to labor shortages, supply shortages, shipping chaos….
Doing well for a carpenter
Of course !
He gets paid in gold and silver !
If I may say so, your English is very good.
@Marcus Aurelius
Thank you!
I am actually Dutch. I have worked in IT for a long time and been able to spruce up my English there. Then I got so fed up with the suits that I upped sticks and bought a dilapidated farm in France.
Learning French turns out to be harder than English, though :-)
Interesting life change JO, and congratulations on that move toward sanity, etc.
re the language challenges, just keep in mind that no matter how well you learn to speak French, THEY will always know by your accent that you are NOT French, and sneer at you both to your face and behind your back…
Other than that, bon appetite, eh!!!
Food sure is full of wonder, or was 50 years ago when I walk through that country!!!
Jos/VVNV-although it’s been several years (early ’90’s) my French sojourn found the folks in the countryside most gracious even in the face of my poor skills in Francais. What i did discover was VVNV’s experience could be absolutely expected from Parisians, who extended that attitude towards countryside Francais, Quebecois, French Colonials, Walloons, Swiss, etc., as well as we Yanks…
(…may also be construed worldwide as “a big-city attitude”, which can be equally as offputting as a provincial one…).
may we all find a better day.
I’ve seen this cycle a few times . I was fresh out of HS working at a big truck stop when the Arab oil embargo turned the world inside out. People are idiots when it comes to vehicles and housing. They think in the now, no matter how ephemeral it is.
@Philip
My parents ran a small bicycle shop in the Netherlands. In 1972 they were kind of forced to move the shop because the old building was condemned by the authorities. This was kind of a financial gamble and worrying for the whole family.
Then, in 1973, just after the move the oil crisis broke out. The Arab oil boycott hit out of the blue. Gas was rationed and driving on Sunday prohibited. Obviously people flocked to buy bicycles, business picked up like never before, and my parents never looked back.
As a youngster I thus learned some lessons then that I have never forgotten, the most important one being to always be prepared for sudden change. Something that doesn’t seem to have penetrated the brains of US auto executives.
Makes one wonder what these clowns are doing all day.
Same broad trend in UK…
Ford Fiesta was no.1 or no.2 for 3+ decades.
Tesla is now no.1 in March 2022.
Fiesta is 10th…
Would love to see GM offer a Bolt with about 115 mile electric range with a 30 KWH batter pack (~1/2 the current size) and sell the thing for $25,000. But alas, this won’t happen. GM & Ford are all in on keeping their model prices as high as possible. When they release a Chevy Blazer EV, I’d expect the Bolt to go the way of the dodo bird.
And probably the worst thing about almost all EVs is the oversized electric engine. The Bolt is a small car, yet has a 200 HP electric motor. Reduce the size of the battery by 25% (65 KWH) and do the same thing with the electric motor down to 150 HP which would be great and reduce overall weight and probably increase range 10%.
I would make sense (though the range would have to be closer to 200 miles I think), and you’re right, it won’t happen. They’re all going for max profit margins.
Most of American want commuter cars ,back and forth to work,grocery getter,pick up kids there to dumb to build what people want
EXACTLY correct IMHO bitty bug…
At this point in time, with charging and battery challenges existing but improving, a ”plug in HYBRID” makes total sense, with the battery big enough for the ”typical” daily run around town, say 50 miles on the overnight slow or couple hours fast charger(s),,, then the smaller and much more efficient gas engine for those trips across country, etc.
Even with today’s tech, should be able to average 50 MPG easily, and I hear there are already a couple of OK size sedans doing that.
@JayW
The Europeans, Japanese and Koreans do this already, and plenty of choice too. So, apart from ICE sedans, they might eat Ford and GM’s lunch in this market segment too.
If I had any GM or Ford stock I would dump it ASAP.
I remember the 70s, when gas was expensive for a time and people started wanting smaller more efficient cars, which the automakers derided as “econoboxes”.
Well, Detroit “obliged” the public by producing small cars. But they clearly didn’t want to. Why? Because per-unit profits would have to be lower.
So their strategy was to make their small-car offerings as unpalatable as possible. They made these cars plain ugly and unstylish because in their mind if you want a stylish vehicle you are going to have to pay more.
I fully believe that this is what gave the Japanese carmakers at the time an easy in to the American market. They didn’t go out of their way to make their “econoboxes” ugly, they made nice looking cars that people wanted to be seen in.
The automakers have always been so stupid as to cut off their nose to spite their face. Nothing new here.
Yah me too bought 1969 olds 442 for400$ ,gas mileage terrible at 75 cents a gallon ,but rip roaring power really some of best times of my life ,bought for a work car
Ford does have a small reasonably priced car with excellent fuel economy . It’s a four door with a little pickup bed in the back called a Ford Maverick. Sales are red hot, they sold out of 2022 order spots months ago and may start taking orders for 2023s next Summer.
Does Ford have a “sell at no more than MSRP” mandate like Toyota?
When this low priced Maverick starts taking sales away from the F150, then watch the price go up with the addition of tons of bling being added (leather seats, AWD, special paint schemes, etc).
In 2018, I tried to buy a low priced GM Colorado (Small truck) and at that time had printed out a “build sheet” from GM’s website. I built the truck out on paper at $29,000+ (4 cyl, no fancy interior, 2 WD, standard transmission, blah, blah). I took this sheet to the local GMC dealer and asked if they either had this in stock or could locate one like it. Well, they had none in stock but offered a Colorado at $42,000+ and I obviously said no deal. They then said they would try to locate one, but nothing ever materialized. I suppose I could have ordered one, but at that time did not want to wait for months.
Lets face it, automakers have found their pot of gold at the end of the rainbow by selling expensive vehicles with lots of high margin extras bolted on.
When this low priced Maverick starts taking sales away from the F150 and Ranger (forgot to add Ranger model)…
Ford used to make the Ranger just across the Mississippi from my home.
Before that, Henry Ford liked having a hydro power set up, the river for barges and a railroad line for his factory. Wood for the coaches was close too.
Henry Ford is spinning in his grave. This is the exact opposite of what he wanted for his customers. With a spirit like that, Detroit was the (1980s) Silicon Valley of its day.
“Lets face it, automakers have found their pot of gold at the end of the rainbow by selling expensive vehicles with lots of high margin extras bolted on.”
The greed disease has infected every pore of the economy. When you order a vehicle, they have made sure that if you want a reasonable feature like power windows and locks, you must buy the whole “technology package” with all sorts of bling for $5,000, or some such. The gouging is incredible. If you want carpeted floors or door panels which aren’t completely hard plastic, you end up with “luxury package B” which includes leather seating, or some such, for another $5,000. Pretty soon you’re $15,000 over the entry price.
Yup. There’s always that ONE thing in each package that I ain’t gonna do without, so I end up with a loaded model including features I could care less about.
Like “power 3rd row”. I put that down once and it never moves again.
But, before all the supply issues, you could haggle a LOT on the luxury model.
“you must buy the whole “technology package” with all sorts of bling”
That’s not greed. It’s just your failure to think like a business instead of a consumer.
If I have a part that makes money, but no one wants it; I will have a hard time selling it. But if I package that part with something that people do want, I get to make money on the wanted part and make money on the unwanted part.
As a manufacturer, would you rather sell more parts for more money, or fewer parts for less money?
“That’s not greed. It’s just your failure to think like a business instead of a consumer.”
Of course it’s greed. That you don’t understand that speaks volumes.
PS – I own my own business.
To the best of my recollection, Ford and FCA have European operations where some economy cars could be imported the US to sell here. GM not so much.
GM is big in China with 2.9 million unit sales in 2021. GM is pretty much out of the EU with manufacturing, less than 3,000 units a couple of years ago.
=perhaps with the support of some lavishly paid recently graduated MBAs=
Most likely because sedan jokes outnumber any other car body type jokes by the factor of 10.GM & Ford Top Brass are not amused.
Just like Ronnie Reagan jokes contributed mightily to the fall of Communism.
Let your imagination fill in the blanks …
Q:Can you fit 71 in a sedan?
A: Yes you can.2 up front and 69 at the back.
Q:Why do chicken coops have two doors?
A: ………
Q: ………
A:But if I’m gonna have sex with my boyfriend in a way that’s out of his Element, it will have to be on my own Accord.
Q: …
A: ….Sedan Hussein…
Q:Can you fit 71 in a sedan?
A: Yes you can.2 up front and 69 at the back.
Lol!!!
Don’t lose sight of the fact that Toyota has a tailwind from Japanese government policies that enforce an exchange rate that makes Japanese labor far cheaper in dollar terms than it should be. The yen is probably undervalued by about 20-25 percent at current exchange rates. That’s an enormous advantage in any business, especially manufacturing. (Having worked for both Japanese and American firms, both at times when the yen was overvalued and undervalued, I’ve seen the effects first-hand.)
Right now you can get a room at the Hilton in Nagoya (one of Japan’s leading cities, Toyota’s home) for $212 including a _first-class_ breakfast buffet. Great hotel, I’ve stayed there. The Chicago Hilton will set you back $250+, with no breakfast.
Combine the exchange rate advantage with the fact that the Japanese home market strongly favors small sedans, and you have a situation in which trying to compete with Toyota in the sedan market is pissing into the wind.
jm,
A lot of the Toyotas sold in the US are made in the USA. Some are made in Mexico.
Their pickup trucks are made in the old Levi’s factory in San Antonio.
And the Japanese transplants have some of the highest domestic content built into their vehicles. Good for American workers.
Some Toyota’s are made in Canada too as well as some Honda’s.
Know many people employed building Civics and CRVs for America including me (office “worker” lol).
Thank you American friends for buying from us. We don’t always get along but would rather have you guys as friends than Russia or China!
Eventually, some unlucky politician is going to have to tell his constituents something that they do not want to hear: “Oil is a valuable and underpriced commodity and you need to pay more and use less.” Until that time comes it is a game of musical chairs to keep the party going. Ford and GM, and most of their customers, think you can just weather any storm, then go back to making pickup trucks and SUV’s. Empty the SPR, browbeat the Saudis, stripmine Alberta. Anything except dealing with facts about resource depletion which have been known since the 1950’s.
There is an unlimited, almost infinite amount of oil.
The Earth creates billions of barrels of it, continuously, due to the sublimation of tectonic plate actions, etc..
It is not from Dinosaur poop.
Please, explain the chemistry.
Hint: It’s actually not dinosaur guts.
The continental plates are made of Calcium Carbonate. Under the extreme Temp and Pressure, Hydrocarbon Chains are formed. This “oil” seeps, eventually to the surface. Thus, oil appears in the most random of places, even UNDER the floor of the ocean.
1) There could not be enough Dinosaur meat to create the BILLIONS upon BILLIONS of barrels of oil burned for the last 150 years.
2) How did Dino Intestines’ get under the floor of the oceans? Today, they drill miles beneath the ocean floor. How did the critters end up there?
3) Why are depleted oil fields becoming productive again? They are refiling from a source beneath them.
4) Why, the deeper they drill, on average, the cleaner, purer, lighter, “sweeter”, and clearer the “oil”?
Oil has nothing to do with Coal.
2 different sources, 2 different chemical reactions.
My Organic Chemistry instructor spent the first half of the introduction course, in the 1970’s, explaining the process. It was the first thing he spoke during this first lecture.. Us young ones were a bit confused about why he was speaking about this process, until he turned from the Black Board (am I allowed to say that?), and said: ”
This is why we will never, ever, run out of oil. The Earth makes it constantly.”
From that moment, each of us students were hooked on Chemistry.
“Eventually, some unlucky politician is going to have to tell his constituents something that they do not want to hear: “Oil is a valuable and underpriced commodity and you need to pay more and use less.”
Um, Jimmy Carter – 1977? Remember the great “MEOW” – moral equivalent of war? Pepperidge Farm does.
At base, ALL vehicles are transportation appliances – nothing more. You can put as much lipstick on it as you want, but it’s still a means to get form Point A to Point B.
Long ago, Consumer’s Reports talked about vehicle TCO – “total cost of ownership” and steps to reduce that cost. The bottom line was “don’t buy more vehicle than you *need*!
I’m guessing that’s going to come back into vogue. The days of cheap energy are over and probably ain’t comin’ back.
As COWG said above, “maff is complicated” – lotta folks are about to discover that to their regret.
Are these sales numbers global? They seem too high per month.
US and Q1 (January February and March). GM doesn’t disclose monthly data.
Well look at it this way:
US auto manufacturers no longer have to complain about not getting access to the Japanese “car” market…………………
Right before Alan Mullaly took the helm of Ford in September 2006, he ran Boeing. Just as Ford was deciding to make him CEO, he made this true statement: His Lexus LS430 was the ‘finest car in the world.’
Lexus still makes one of the finest sedans in the world.
Except for the butt ugly front end…
Says the man who owns an 06 BMW E65…:)
My first encounter with these “smartest MBA in the room type” was analysis of our business. I’m an oilfield engineer and was told the guy helping us was a genius able to add numbers on powerpoint accurately. My first statement was my excel spreadsheet can do that as well never a mistake and for about 1/100000000 of the cost! This guy then looked at our oil fields and said we needed to only find and invest in the highest margin field. I then advised him great we found that in 1920 so if we stuck with that no job for him! Similar to the high margin SUV.. Only sell those forget the low margin sedan! Stupid!
GM still sells a few non-muscle cars in 2022: Chevy Bolt, Chevy Malibu, Cadillac CT4 and Cadillac CT5.
The Bolt is an EV, and it’s a crossover not a sedan.
GM stopped taking orders for the Chevy Malibu in February. It’s likely just filling orders for rental fleets, and that’s it.
EVs don’t count as cars? But the regular Bolt is classified as a hatchback. The Bolt EUV is a crossover.
And FCA still sells the Chrysler 300 and Dodge Charger sedans.
Chrysler 300 production ends in 2023.
The Charger is a muscle car.
I wouldn’t call the base Charger with the V6 engine a muscle car. That’s just a large 4-door sedan. They start at $32,500. The V8 ones are, though. So it depends on the engine.
You can say the same thing about the base Mustang in terms of the engine. But they’re classified as muscle cars nevertheless.
The Charger happens to be America’s only four-door muscle car.
“Muscle car” is just a slang term. The Charger’s classified as a 4-door sedan.
You’re being ridiculous. I me moi mio used the phase “They kept their muscle cars,..” You don’t get to tell me what I meant with that phrase, for crying out loud. And the Charger is a muscle car, and “muscle car” is not slang.
I’ve ridden in a Dodge Charger, and Wolf is 100% correct, it’s a muscle car. You can get PLENTY of horsepower out of a V6 engine, my Mustang has one and it’s easy to break the speed limits without even noticing
It is a mistake for US auto makers to let finance guys make marketing decisions.
It was an even bigger mistake for Boeing to let the finance guys make engineering decisions.
Naturally, finance guys have more money than brains. They’re not really interested in making cars, or real estate, or construction. They’re just interested in making money. They don’t care how.
There was a time when US corporations marketed on the basis of the quality of the products and services, but that went out when the finance guys started calling all the shots. Nowadays quality tends toward pretenses, mostly the job of marketing rather than engineering or operations.
US automakers haven’t been primarily manufacturers for a long time. If you look at their balance sheets you can see that they are basically finance companies, and making vehicles is just a side line, mostly limited to design and final assembly. They’d rather have suppliers make most of the parts so they can squeeze them.
Money often ruins people. Money can make people stupid. But it can also ruin companies, especially when the people calling the shots are more interested in their personal gains than in the viability of the firm.
Stupidity is worse than evil. Evil can be confronted, challenged, and defeated. But against stupidity there can be no argument. Beware of stupid people with delusions of adequacy and lots of money and a hunger for more. They are not your friends.
They run the world. That should terrify you.
That is why Ayn Rand made, in “Atlas Shrugged”, all the Industrialist individuals who created and ran their own Companies.
She realized that made all the difference in character and morality.
Rand is a recognized nitwit who impresses ignorant high school boys. She had no morals but did have a lot of hypocrisy. I don’t turn my back on people who are into that sort of thing.
She maybe was a nitwit, but Atlas shrugged resonates with a lot of people who are actually productive.
Dyno, Randian ‘heroes’ are modeled after William Hickman, a certified monstrosity.
Modern conservatism is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Wayne Gacy with a work ethic? Best relegated to the prison system, as they make for lousy captains of industry. It’s the hybristophilic atrocities.
My high school debate team shredded Rand so thoroughly the other team sputtered for a moment and went home.
To you, maybe.
Her book is the #1 printed book in the English language.
Her book is still in print.
The world is filled with nit-wits. I being one.
So what about her “morals” or being a nit-wit.? All of us have sleazy morals, when we want to. She being a “swinger” and doing Alan Greenspan, is no reason to judge, at all, her book.
Her philosophy was extremely simple and perhaps explained and answered, in 1,300 pages, the most important question of all time:
“What is the most important thing in existence”?. She answered that.
There is a moral justification for “selfishness”, but, then there is no such thing as “morals”, to begin with. Only a contract between to self serving individuals where I “promise” not to kill you if you “promise” not to kill me.
We are all constantly selfish. The point is, are you stupidly selfish or intelligently selfish.
“The world is filled with nit-wits. I being one.”
You could have saved yourself rather a lot of typing if you had simply conceded your errors up front.
So my SIL just brought a new RAV4 hybrid. It was $45k OTD. She had to wait several months for delivery.
GM is a little slow to act since they waited for government funding before making the leap but they are converting a Equinox plant in Ingersoll, Ontario to an EV van plant. Should switch up by the fall, but Equinox production in the plant is shut down as of April. If the government offers them money they will make cars again, but they will never do anything on their own dime
1) Alan Mulally screwed up the 787.
2) Alan Mulally is Ford Flex.
3) Alan Mulally small cars look like rats. That’s why Ford small cars are gone.
4) He entered the job in Sept 2006, sent Ford to 1.01 on Nov 20 2008, when
president Obama won election.
5) After a round trip to 1.52 in Feb 2009 Ford popup to $19 within a year.
6) President Obama saved Detroit, GM, Ford and the auto industry.
7) My bet was on Obama not on Alan Mulally.
On the housing topic. Canada to ban foreign housing purchases. That is one of the 1st good solutions to help with housing inflation.
I mentioned this before, but a lot of houses in my city have been bought by investment companies from India, Europe, and even Russia before the war.
Why they have been buying U.S. homes without ever viewing the homes, paying cash, and not inspections was beyond me.
I think that is even a better idea than raising rates. Raising rates would not slow down foreign buyers who are paying cash but it hurts local buyers buying their 1st home. Of course, rates were artificially low….but taking away foreign demand will help IMHO.
Paying cash are dumb ass government printed to infinity and beyond , and trading Chinese ,south korea,and Thailand junk for real estate seems like a good deal ,until global nationalization
Just why did Ford, GM, and Stellantis decide to stop making any American cars except a very few irrelevant and annoying ‘muscle’ cars?
Profit margins are higher on the Big Trucks and Big SUV’s.
And also because Toyota, Honda, Hyundai and others made higher quality sedans and GM, Ford and Stellantis were losing market share in those product lines.
GM reported annual profits of $10 billion for fiscal year 2021, which was an all-time record. So their decision may have been a decent one, on some levels. In the long run, we’ll see how it works out.
That profit came from highest ever per-unit gross profit and multi-decade record-low incentives. All automakers have done the the same thing during the chip shortage: cut incentives to near nothing, prioritize loaded versions of their models, and prioritize higher-end models. This is why new vehicle CPI spiked by 12.4% in Feb, the second highest ever, behind only March & April 1975 (12.7% and 12.5%).
I would suggest (as I have for the past 50 years) that Ford, GM, and Stellantis (including its predecessors) take a good long hard look at the excellent vehicles made by BMW and Mercedes-Benz and attempt to at least emulate them if they can’t do anything better in the way of a car.
Scbd- fifty years ago Mercedes and BMW were highly engineered vehicles designed for driving fast on good roads in a small temperate country where a car wasn’t necessary to live your life. Western interstates aside, back then roads here weren’t nice to cars. The American car’s design reflected it’s future use. Tough, not finicky. And here every corner had an independent auto repair shop, much more dealership service in northern Europe. American manufacturers knew they wouldn’t necessarily see the cars they sold in the dealer’s service bays after the warranty expired. In most areas of the US cars are necessary for work and groceries and kids. Today, regardless of marque, they’re mostly built here to a price point, as is rational in any competitive market. The blue/white rondelle and the three pointed star are losing lustre as indusry-wide quality of build converges. I’m sure they’re nice cars even now, but there’s lots of nice cars being built today. Rolls-Royce are nowhere near what they once were either. My father was friends with a real “car guy”, Bob Lutz, in ’72 when his daughter and I were classmates at Munich International School and Lutz was marketing VP at BMW. He said he built cars for drivers to enjoy driving. BMWs were kind of doggy till he got involved in design. They drove better than they looked. Later he went to the Dark Side(GM) and flogged the Volt, but he never got along with the executive suite mentality even when he was in it. They don’t make his type anymore. Still remember his pearl gray three liter sports coupe. They don’t make them like that anymore either.
Car people today are accountant types, not ex-Marine pilots, and they are comfortable building mobile tech kiosks, so it seems to me. They just have to figure out how to make people want to buy them. Younger buyers seem to like them. Trucks and SUVs are selling themselves, most car commercials in this area have been replaced with pharma ads, even during pre-christmas past. And every car dealer I see on the local dealership ads is a fatso, they haven’t missed a meal in the “hard” times.
Rick m:
Really enjoyed your tale.
Nice!
MB was ruined after the Daimler-Chrysler merger. Chrysler taught MB how to build a POS and the beannies (aka bean counters) loved it.
Auto manufacturers suffer from having to entertain “dealer advisory boards” that critique every product / manufacturing / incentive decision ever made. Most dealers have a 90 day view of the world: the past 30 days, the current 30 days and the next 30 days. That’s it. They don’t seem to understand the concept of the long game – just short term thinking and what’s best for them today. Sadly, some manufacturers / distributors listen to them a little too much and suffer the consequences. Dealers have never grasped, accepted, nor understood that it takes years to develop a product – not seconds. They just wanted their 33 cup holders, not considering that there are mechanical and electronic components under the console.
If you really want to torture yourself, sit through a consumer focus group on vehicle design and feature desires. Half way through one of those, you’d likely want to stick a pencil in your eye so you’d have an excuse to leave.
Oil was rising vertically between 2006 and 2008.
Alan Mulally decided to build F 150 with aluminium and plastic
instead of steel, during the financial crisis.
F 787 was not flying in wall street. Traders sent Ford to 1.01 in Nov 20 2008,
election day.
I have never understood why we give oil companies subsidies and tax breaks that decrease the cost of fuel while encouraging the public to buy more fuel-efficient cars.
We’ve seen this movie before. Gas prices shoot up, people start choosing small cars
And BTW I fell for fuel priced in liters on my first trip to Europe. I remember thinking gosh, that’s way less than the US.
I remember when Ford made the announcement in 2018 that they were closing their auto production lines to prepare for EVs. They said they couldn’t afford to do both and sedan sales were declining. They were already on my poop list for getting rid of the Crown Vic and Lincoln Towncar in 2011… Strike ONE
and for getting rid of Mercury as a brand plate when it had the hottest car model since Farrah Fawcett promoting their cars. Jill Wagner. Strike TWO
They claimed that they wanted to reposition the Lincoln brand for younger buyers. What says “fast” more? Mercury (literally the God of Speed) or Lincoln (president in the days of horse and buggy).
STRIKE THREE.
Where I work quite a few people drive large SUVs and they tell me that the tax benefit makes the deal irresistable. The list of vehicles is basically what we see on the road when it comes to new vehicles. It may be that in addition to high labor costs there is federal tax policy driving Americans away from cars to dual use SUVs. I am a lawyer and I claim I have to take files to court and a few times a year that is true in especially high dollar divorces, for example. I fill my Escalade with banker’s boxes. Anyone who has to carry sales materials or work materials from time to time can take advantage of this. So a surgical instrument salesman can drive a Porsche Cayenne and we see it quite a bit.
Can someone tell me how many people in the US are using this deduction? Does anyone really know? Does the IRS know?
Section 179 Deduction. Qualified Vehicles.
Small businesses can use Section 179 to write off a portion of qualifying business vehicle purchases in 2022.
The following list and informational guide is updated for 2022. For questions regarding vehicle eligibility and rules applicable to your business, please consult with your accountant.
What Vehicles Qualify for the Section 179 Deduction in 2022?
The list of vehicles that can get a Section 179 Tax Write-Off include:
• Heavy SUV’s, Pickups, and Vans that are more than 50% business-use and exceed 6000 lbs. gross vehicle weight can qualify for at least a partial Section 179 deduction, plus bonus depreciation.
• Obvious “work” vehicles that have no potential for personal use typically qualify.
• Delivery type vehicles, like a classic cargo van or box truck with no passenger seating, can qualify.
• Specialty “singular-use” vehicles generally qualify – a hearse, an ambulance, etc.
What Trucks and SUV Models Qualify?
To meet the weight criteria, the manufacturer’s gross vehicle weight rating (GVWR) must exceed 6,000 lbs. You can verify the GVWR of a particular vehicle by checking the manufacturer’s label that’s normally located on the inside edge of the driver’s side door where the door hinges meet the vehicle’s frame.
Here’s a partial list of SUVs and Trucks that might qualify* for a tax deduction.
Audi Q7
BMW X5, X6
Buick Enclave
Cadillac XT5, XT6, Escalade
Chevrolet Silverado, Suburban, Tahoe, Traverse
Chrysler Pacifica
Dodge Durango, Grand Caravan
Ford Expedition, Explorer, F-150 and larger
GMC Acadia, Sierra, Yukon
Honda Pilot 4WD, Odyssey
Infiniti QX80, QX56
Jeep Grand Cherokee
Land Rover Range Rover, Discovery
Lexus GX460, LX570
Lincoln MKT AWD, Navigator
Mercedes-Benz G550, GLS, GLE, Metris, Sprinter
Nissan Armada, NV 1500, NVP 3500, Titan
Porsche Cayenne
Tesla Model X
Toyota 4Runner, Landcruiser, Sequoia, Tundra
*Note: Qualifying for a deduction will depend on stated use, vehicle GVW (which varies with trim packages and options), and more. Please consult with your accountant regarding the eligibility of any particular vehicle.
Can Both New and Used Vehicles Qualify for Section 179?
As with all Section 179 deductions, the vehicle must be new, or new to you. So yes, used vehicles will qualify, along with brand new.
Is There a Time Limit for Using Section 179 for Vehicles in 2022?
Yes – you must buy and put the vehicle into service between 1/1 and 12/31 of the calendar year you are claiming the write-off.
Can I Finance a Vehicle and Take a Section 179 Deduction?
Yes, and this can be a very effective way to get the work vehicle you need, and save on taxes. And if your company is more than two years old with a good credit history, Section 179 Qualified Financing can help you save even more!
Careful here. Vehicle deductions can be audit triggers, especially for business types that don’t require vehicles. For example, in my business — online media — my chances of getting audited if I deduct a vehicle instantly spike. If you have a construction business or need to deliver things or are making client calls, etc., that’s a different matter.
So yes, you can do a lot of things on your tax returns. Just be ready to defend it during an audit :-]
PREPARE TO BE AUDITED by IRS is exactly correct Wolf!!
Been there and have had that done 3 times,,, and thanks to excellent accountant, never paid a cent of fines, though the first time visit to the IRS office was not fun, and at the time, IRS folks had a well deserved reputation.
The attitude of IRS folks has improved remarkably over the last 50 years since my first audit, and I was very fortunate to have a client/friend who was an attorney accompany me to the Federal Building then, or I am quite sure I would have ended up in jail: It was totally infuriating dealing with the IRS agent!!!
Avoid it if you can folks.
Yeah… my cousin who bought the six-figure Cadillac Escalade last month is a Realtor with high end clients. I have no doubt he is writing that puppy down.
The bottomline is this- to maximize your Section 179 deduction for the business vehicle purchase, buy a vehicle that weighs over 6,000 pounds. Or… instead of driving Miss Daisy, drive a sumo wrestler to push you over 6,000 pounds. And you deduct gas and maintenance as well.
I’m not much into cars so I don’t follow this very much. But it is weird to watch this.
I remember that during the pervious oil spike, fuel guzzling trucks went out of fashion. Good riddance. Then some years later they were hot again, despite a secular trend against fossil fuels. What were these executives thinking?
They were thinking about profits. Small cars simply aren’t very profitable in America. Our labor and environmental costs are high and we have no special advantage in the making of small cars.
Giant pickup trucks and SUVs however are an American specialty. For one thing most countries don’t need many such vehicles so they are loathe to make them in small batches. If you (largely) have the market to yourself… you can price accordingly.
American car makers dumb as rocks once again. Because the gov’t bails them out they do not need to be smart, tough and hard nosed. Lazy and entitled.
VinFast in going IPO and opening a plant in NC.
GM should not even exist in it’s current form and made off with 11 billion of bailout money in the end. It’s only a matter of time before their next bailout when their lunch is eaten by foreign automakers.
I said at the time i thought it was a stupid idea. Growing businesses do not abandon markets, they fight tooth and nail to enter or create new markets. If you own Ford of GM stock you might want to rethink that.
SUVs can be compact and yet preserve some design features that are desirable. There are many compact SUVs or cross-over vehicles with similar fuel-efficiency as compact sedans. There are sedans that are gas guzzlers too. Toyota sells gigantic gas guzzling SUVs too. Its the size, weight and engine size that defines efficiency of vehicles and not necessarily the shape.
The has been ever larger vehicles and trucks on the road as the result of construction and transportation economy. So safety has also been a factor as related to visibility to increase the height of vehicles perhaps.
In my opinion, unless rail transportation is utilized more given the same format for the economy, the net mass or weight of vehicles on the road will not go down substantially.
We in Canada have been paying much higher gas prices due to our currency for a long long time and the same vehicles are still driving on our road. I see the same gigantic vehicles being driven! Some are willing to pay the price no matter what!
I am more concerned about the vehicle, than the price of gas.
Years ago, in doing many calculations, and with thought experiments, I deduced that the price of gas was irrelevant in the ownership of a vehicle.
Just as the price of a particular food item is irrelevant to the food I normally purchase and routinely eat.
Price is NOT the most important thing in life.
Surely if the daily distance travelled by a car owner is way below average, the effects can be minimal. There is a lot of people living in dense cities and condos here in Canada who take the subway to work and play but we also have a lot of people also who drive long distances and cost of their fuel per month can not be much different than rent and they have been at it for years.
A 20 mile trip and return, using a typical Canadian car costs about $12. That is about $400 a month. A lot of people here travel about double that daily. It can get very expensive. Much more than the lease.
Stupid is as stupid does. . Same logic EU is using to turn off energy and food supplies from Russia that is critical to their survival. Nature should and will take its course with people who do self-destructive things, whatever their true motivation may be.