The Hummer: the last of a dying breedYou don't need to be an analyst or an auto industry insider to realize that the truck market is shrinking as quickly as gas prices are hiking. With fuel costs flirting at $5.00 a gallon, few people are opting for trucks and SUV's when shopping for a new car. Gas prices are also effecting the used car market, with smaller traditionally less popular vehicles pulling in a pretty penny, while trucks and SUV's are being offered for less and less. It should come as no surprise then, that the Honda Civic, a compact sedan hailed for it's reliability and fuel efficiency, is the top selling car in the US for the first time since 1992.
Petroleum-based industries have been hit hardest by the rising costs of oil. "All the factors are working against the truck market right now,” says Jessica Caldwell, an analyst with Endmunds.com per the New York Times. And as the demand for trucks shrink, companies like Ford, Chrysler and General Motors take a huge blow as they compete for sales in a dwindling market. Dealers report that the only people buying trucks are the ones who need them for work. And with skyrocketing oil prices that show no signs of dropping, we can assume this change is permanent.
Sink or SwimFor US automakers, to survive in the new market, some major adjustment is required. Automakers, whose bread and butter has traditionally been the truck and SUV sales, must switch to manufacturing fuel efficient/alternative energy vehicles if they are to survive. This task is easier said then done. Companies are losing money rapidly—GM's bank account is reportedly shrinking by 1 billion dollars a month—even as they make efforts to adjust. Skyrocketing gas prices hit manufacturers and consumers alike like a ton of bricks, and automakers are stuck with a ton of inventory that won't sell. Meanwhile alternative fuel technology lags behind demand.
General Motors announced it will shut down four plants that make trucks and alter or eliminate the gas guzzling Hummer. Chrysler announced that it will cut 12,000 jobs by the end of 2008. Ford who has already laid off thousands of union workers, is cutting another 2,100 salaried positions. The company speculates that they won't turn a profit until next year.
The near future looks dim for US automakers. Only time and money will tell which companies will dig themselves out of this rut.
On the upside, despite current economic woes, this change in the market is forcing consumers to re-examine their driving habits, and opt for more fuel efficient vehicles. At the same time car manufacturers are picking up the pace on sustainable automotive technologies—just last month Honda released the first commercially available hydrogen cell fuel vehicle—and this is something we can all look forward to.
For more information on how oil prices are effecting the automotive industry, check out these articles...
http://www.nytimes.com/2008/06/05/business/05auto.html?ref=businesshttp://knowledge.emory.edu/article.cfm?articleid=1148