RANTS #458

August 13, 2008

For once the short-term thinking isn’t coming from Detroit.

By Peter M. De Lorenzo

Detroit. Now that gas prices have softened a bit, faint sounds of warning are starting to creep into the media’s coverage of the auto business. The gist of the bleating? That Detroit may have overreacted in tearing up its future product plans to skew their upcoming product lineups toward vehicles that deliver dramatic leaps in fuel efficiency.

To say this notion is flat-out absurd is an understatement. Anyone who thinks the current pullback in gasoline prices is anything but a temporary lull is kidding themselves. The global pressure put on the price of oil by Russia, China and India's burgeoning economies will continue to wreak havoc on the U.S. price at the pump as those countries consume more and more of the world’s resources.

And besides that stark reality, do we really need to be reminded that one of the main reasons for Russia’s incursion into Georgia has everything to do with gaining control of a massive oil pipeline to the West?

And do we really need to be reminded, too, that the next gas price spike will be more severe than the most recent one?

I would certainly hope not.

But then again there were consumers making ridiculous “sell low-buy high” auto purchase decisions in the Oil Panic of 2008 that made no sense whatsoever. So to think that some people now believe that the latest pullback in gas prices means that happy times are here again shouldn’t really surprise anyone.

The ironic part of this is that for once the Detroit 2 are ahead of this story. GM and Ford in particular have made some tough calls in the last five months to dramatically alter their product portfolios in the coming years. Part of that was driven, of course, by the looming stiff increases in the EPA mileage requirements, but the reality for these automakers and their planning teams was the reasoned belief that the era of “cheap” oil was well and truly over, and to think any other way was to be foolhardy and irresponsible.

That some analysts are now hand-wringing about whether or not Detroit overreacted to the price of oil is yet more proof (as if we really needed any) that the Detroit 2 cannot win this PR battle, no matter what they do or what they say. Not with consumers who “hate” Detroit (read some of last week’s letters to understand the depth of that hatred – ed.), not with the “finger-snap” environmentalists who think that the solution to all of our troubles is but a couple $100 billion away, and not with the vipers in the media looking for their next Detroit “implosion” story, either.

Consumers who want Detroit to die bring their own reasons for their thinking to the table (some of it based on bad ownership experiences, too much of it based on the “it won’t affect me” and the “who cares” syndromes), the knee-jerk environmentalists can’t be reasoned with, and those in the media who relish reporting on Detroit’s imminent demise are doing what they do best because that particular form of “train-wreck” journalism has become a staple of the American media scene - and it is what it is. There is no amount of corporate PR in the world that will convince these factions that there is new, clear thinking at work in Detroit

But I reserve particular ire for the self-proclaimed “expert” analysts who are now starting to question Detroit’s commitment to revamping their product lines for fuel efficiency, terming it “overreacting,” because it’s just ludicrous thinking. These are the same analysts, remember, who were harping on Detroit ’s slow move to change in the past, and they as much as anyone should understand the concept of lead time and what it means in this business. That they’re weighing in now with their “instant” analysis about product commitments that had to be made for the 2010-2011 timeframe because gas has dropped $0.30 a gallon says more about their underlying motivation than anything I could possibly say at this point.

GM and Ford product planners made the right call. Yes, they will offer a diverse lineup of vehicles accounting for all the various needs that our nation’s fleet has to accommodate (even SUVs too), but the new mainstream passenger cars on the way will be fuel efficient and right for the globally intense world we live in today.

As they should be.

As stunning as it may seem, for once the short-term thinking in this country isn’t coming from Detroit .

Who could have possibly envisioned that?

Thanks for listening, see you next Wednesday.