THE AUTOEXTREMIST

April 6, 2011

Runnin’ down a dream…

By Peter M. De Lorenzo

(Posted 4/5, 4:30 p.m.) Detroit. With a tip of the hat to Mr. Petty and The Heartbreakers, what’s passing for “life” as we know it in the auto biz these days is bordering on the flat-out crazy, or scary or both. Looming questions are hanging in the air over this town like giant dirigibles hovering in the gray-blue spring sky overhead, reminding anyone who happens to be paying attention that this business could go any number of ways in the next few months, most of them Not Good.

This business has become a seething cauldron of conjecture and hand-wringing, with the overriding impetus behind this percolating uneasiness being the fact that no one really knows what’s coming next, and considering what the people in this business have been through over the last 30 months, is it any wonder that a little creeping paranoia is starting to rear its ugly head?

Question 1: What about the inexorable climb of the price of gas? Yes, the auto manufacturers are better prepared and equipped for it, especially GM (Chevrolet Cruze and Sonic) and Ford (Focus and Fiesta), but if anyone at these companies says they know what the American consumer is going to do this time around they’re lying through their teeth. Back in 2008 when gas first squirted past $4.00 per gallon it combined with other severe economic forces to bring the domestic auto industry to its knees. This time around no one is predicting anything close to that, but with the automotive supply chain being intermittently thrown into chaos from the rippling effects reverberating around the globe after the tragedy in Japan, and the possibility that these effects could be felt deep into the early summer, no one is being smug and confident either. But manufacturer concerns only cover one side of this equation.

Question 2: What about the American consumer? Will this be the final awakening so to speak? The point in time when American consumers finally realize that “affordable” gasoline is a thing of the past and that they will now have to adjust their future purchase decisions accordingly? I’m betting the answer to this question is an emphatic “yes” and all of the preparations that at least two of the three domestic manufacturers in particular have made in an attempt at making money on small and compact cars will be put to the test.

Question 3: But what will this fundamental shift to smaller vehicles do to the light truck market? In case anyone is still operating under any delusion, those fat profits that GM and Ford have cranked out in recent months? Yes, both manufacturers have competitive and in some cases profitable passenger cars in their lineups for the first time in a long time, but make no mistake, the majority of those profits have come from the burgeoning recovery of the light truck market. And for the first time in a while sales in the month of March showed the beginnings of some weakness in the light truck market when gas prices started climbing again, so if you happened to have heard a collectively whispered “uh-oh” in the halls of GM, Ford and Chrysler, now you know why.

It just demonstrates that this whole auto industry recovery thing is at a very fragile point. Yes, the numbers and expectations look rosy, but if there’s a lag in consumer acceptability of these small cars, and truck sales start trending downward too fast, then watch out. Things could get dicey, and in a big hurry too.

Is it a big mystery as to why Sergio Marchionne pushed the idea of a Chrysler IPO back to 2012? Not when you see where indicators are trending right now in this market.

And one more thing to contemplate while we’re on the verge of what could be the first widespread readings of $5.00 per gallon of premium gasoline at the pump around this country?

Question 4: Is automotive marketing, or what passes for it these days, on the verge of a complete meltdown? The short answer? Yes. Traditional media has been thrown for a loop, big hit advertising properties are becoming harder and harder to come by and even more expensive, and what about the whole social media thing? Well, it’s not the sure thing that it once was by any stretch of the imagination.

Here’s the thing about social media: It was oh so cool when it was new, but American consumers are so used to being overexposed to it and oversaturated with it that fewer and fewer social media campaigns really have meaningful impact.

Then again that’s the fundamental “social” nature of this country when it comes to marketing and advertising, come to think of it. We collectively alight on something and it’s all good, all the time… until it’s not. Then we run it into the ground. And then when something that was smokin’ hot hits the wall of oversaturation and overfamiliarity, then we’re done with it so fast it makes marketers’ heads spin.

Staying ahead of what’s next has been the challenge of marketing since day one of the concept. And smart marketers at these auto companies are already looking for the next big thing in these turbulent times. If it’s not pure social media, then expect a hybrid of social media and traditional word-of-mouth advertising to carry the day, or something like it.

If there are any people left in this business who are still waiting for things to smooth out, calm down or somehow get more predictable, then they’re dreaming, as this business will never ever be that again.

Me? I’m just runnin’ down a dream that the True Believers will somehow stay ahead of the sloths and the quagmire dwellers still embedded in these companies, the ones who threaten to bring this business down at any moment with their serial incompetence, unbridled arrogance and lowest-common-denominator mediocrity, because if that happens, then this business has a real shot at long-term stability and a measured upward trajectory.

That counts for a shred of optimism and a pinpoint of fiberoptic light at the end of the tunnel this first Wednesday in April.

And that’s the High-Octane Truth for this week.

See another live episode of "Autoline After Hours" with hosts John McElroy, from Autoline Detroit, and Peter De Lorenzo, The Autoextremist, and guests this Thursday evening, at 7:00PM EDT at www.autolinedetroit.tv.

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