August 5, 2009
Cash for Clunkers: A Yellow Brick Road to Nowhere.
By Peter M. De Lorenzo
(Posted 8/4, 9:30am) Detroit. Judging by the splash of coverage and the boost in car and truck sales, you would have thought that the frenzied “cash for clunkers” program was akin to finding a cure for all known afflictions affecting mankind and achieving world peace. Oh, if it were only that simple.
Yes, it has undoubtedly made an impact. People are swarming the showrooms, dealers are happy, manufacturers are (quietly) thrilled, and politicians are shouting from the rooftops that this is exactly the kind of “for the people” stimulus program that the American economy has needed.
Are there positives? Absolutely. Newer cars and trucks with better fuel economy are on our roads, local businesses are busy playing a supporting role in the execution of the program (even though the incompetence of the government-run program has been beyond laughable), and most important, a listless car market has been temporarily energized, which except for that word “temporarily” is a really good thing.
But it’s that “temporarily” word that’s bothering me. It has a foreboding feeling about it that could very well spell another round of trouble for this industry.
After all of the sturm und drang expended over the fate of the domestic automobile industry over the last nine months, after all the talk about Detroit needing to build the kinds of vehicles “Americans want” that deliver the kind of fuel economy “America needs,” after all the public thrashings of Detroit in Washington and all the taxpayer money spent, and after all of the hand-wringing about Detroit needing to focus on building great products, here we are in the midst of yet another program that focuses on “the deal” over and above everything else.
When GM jump-started the auto business - and the nation’s economy - after 9/11 with its “Keep America Rolling” campaign, it was a boon to the industry and to the economic mood of the nation. And it worked well. Too well when it came right down to it. Invigorated by the awe-inspiring sales numbers, GM marketers adopted a strategy that would use the artificially compelling aura of “the deal” to crush its competition in the market, move the metal and grab points of share.
But what was a noble gesture after 9/11 turned into a nightmare in short order. After that, when consumers thought of American cars, their thoughts turned only to the size and scope of the deal. Whether or not the products were actually desirable or not rarely entered into the equation, because for the American consumer, domestic cars and trucks had officially become commodities attached to deals, not image-enhancing conveyances attached to hopes and dreams. Those kinds of thoughts were now reserved for imported brands, except in a few instances.
And to this day America’s car-buying consumers for the most part associate “the deal” with American cars, and nothing else.
Short term, yes, “Cash for Clunkers” is an undeniable boon. Hallefrickin’luja and all that. Long term? Not so much. Because the “hangover” after this program could be severe, with consumers sitting on the sidelines waiting for the next sales gimmick to get them off of their couches. And if that’s what the future holds for the Detroit automakers – conjuring up the next sales gimmick to generate showroom traffic - then this Yellow Brick Road paved with “Cash for Clunkers” is going nowhere good.
If Detroit is ever going to have a shot at long-term survival, then consumer attention must be shifted to the integrity and inherent competitive goodness of the products themselves, rather than the deal. Consumers have to understand why vehicles like the Cadillac CTS and SRX, Chevrolet Equinox and Malibu, Ford Fusion, Flex and Taurus, etc., etc., are worth consideration on their own merits.
And until that happens, I’m afraid that this inexorable commoditization of the domestic-sourced automobile will continue.
Thanks for listening.
See another live episode of "Autoline After Hours" hosted by Autoline Detroit's John McElroy, with Peter De Lorenzo and friends this Thursday evening, August 6, at 7:00PM EDT at www.autolinedetroit.tv. By the way, if you'd like to subscribe to the Autoline After Hours podcasts, click on the following links:
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