General Motors, Chrysler and Ford all have ignored calls for more fuel efficiency at their own peril, according to a new report from the University of Michigan Transportation Research Institute.<\/p>\n
The report, “Fixing Detroit: How Far, How Fast, How Fuel Efficient?” found that the existing culture within the domestic auto companies has systematically underestimated the value consumers place on fuel economy.<\/p>\n
In turn, the decisions to downplay the importance of fuel economy have crippled the profitability of the domestic manufacturers, the authors of the report said Monday.<\/p>\n
Walter M. McManus, UMTRI’s director of Automotive Analysis Division, and Rob Kleinbaum, managing director of RAK & Company, said from their own personal experience as General Motors employees, they knew research, clearly showing consumer interest in higher economy, has been ignored or diminished for years.<\/p>\n
“The key to a long-term recovery is executing an excellent portfolio of products, and we find that increasing fuel economy standards will lead to a portfolio of products that is more likely to raise the profits of the Detroit 3 automakers than to lower them,” McManus said.<\/p>\n
In fact, U.S. carmakers stand to gain more from tougher standards than their Asian competitors, McManus said.<\/p>\n
Kleinbaum also said that rapidly developing conventional wisdom in new media that the Obama administration will force GM and Chrysler to build cars no one will buy misunderstands consumers concerns. Consumers want more fuel-efficient cars, he said.<\/p>\n
The UMTRI study finds that an industry-wide mandated increase in fuel economy of 30% to 50% — roughly 35 miles per gallon to 40.4 mpg – would increase Detroit automakers’ gross profits by roughly $3 billion annually, if they could sell the vehicles.<\/p>\n
The increase in fuel economy also would boost production enough to fill two large assembly plants. The chance that increased profits could exceed $6 billion is 18% if fuel economy standards were increased to 40.4 mpg, but only 6% if standards remain at the mandated 35 mpg, McManus said.<\/p>\n
Kleinbaum said the industry attitude about fuel economy is symptomatic of its current culture. “For years (GM) has discounted consumer research results when calculating the benefits of improving fuel economy, often by as much as two thirds,” he said. “If GM had followed its own market research results over the last three decades, they would not be in Chapter 11 today.”<\/p>\n
GM spokesman Tom Wilkinson said the report does not reflect profound changes that have occurred at GM in recent years.<\/p>\n
“A look at the EPA Fuel Economy website shows that, by segment, GM vehicles are now as fuel efficient, and often more fuel efficient, than those from other foreign or domestic competitors,” he said.<\/p>\n
“GM has also made a long-term commitment to push ahead with a broad range of energy saving technologies, including extended-range electric vehicles such as the Chevy Volt,” Wilkinson said. The new report builds on studies published by UMTRI beginning in 2005 predicting that the three biggest domestic automakers stood to lose billions in profits and thousands of jobs in the event of an oil spike—a prediction borne out as Hurricane Katrina and tensions around the world sent prices skyward.<\/p>\n
The studies documented the financial risks to Detroit automakers and the risks to American jobs of higher fuel prices, and predicted that gas prices of more than $3 per gallon could lead to combined losses of $7 billion to $11 billion of profits for Detroit automakers.<\/p>\n
By the time gasoline prices spiked to more than $4 a gallon in July of last year, Ford and GM had already reported combined losses on their automotive operations of more than $57.2 billion. And through the first quarter of this year, their cumulative automotive operations losses since 2004 total $83.6 billion, McManus said.<\/p>\n
In addition, they have lost 14.2 percentage points of market share since 2004. For the record GM lost 8.8 points and Ford lost 5.4 points of market share during the period.<\/p>\n
Kleinbaum also said the report that successful turnarounds at all three domestic companies ultimately hinge on rapid cultural transformation, which requires replacement of management teams.<\/p>\n","protected":false},"excerpt":{"rendered":"
General Motors, Chrysler and Ford all have ignored calls for more fuel efficiency at their own peril, according to a new report from the University of Michigan Transportation Research Institute.<\/p>\n
The report, “Fixing Detroit: How Far, How Fast, How Fuel Efficient?” found that the existing culture within the domestic auto companies has systematically underestimated the value consumers place on fuel economy.<\/p>\n","protected":false},"author":20009,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[8],"tags":[],"make":[],"post-state":[],"category_old":[151],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/8128"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/20009"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=8128"}],"version-history":[{"count":0,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/8128\/revisions"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=8128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=8128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=8128"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=8128"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=8128"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=8128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}