The Big 3

Hi Everyone:

This week's topic is again a front page story. The present day big 3 is composed of General Motors, Chrysler and Ford. GM and Chrysler are in dire financial straits and have received billions of dollars in federal bailouts. Ford has not received any bailout money yet. All 3 have one thing in common; their sales of new cars is in the toilet.

Obviously, the recession and the credit crunch have hurt the big 3 tremendously. I want to examine another reason for their continuing problems. In order to do that, we must look at the present day big 3's past history. In the not so distance past, 1973-1974, the members of OPEC decided to enforce an oil embargo against the United States. The embargo nearly crippled the US economy. We all learned right then and there that were outside forces (i.e.: foreign countries) that could control both the supply and the price of oil/gas. The majority of American made cars at the time got around 10-15 miles per gallon. At the time, who cared? Gas was cheap and plentiful. At the same time Honda and Toyota were beginning their foothold in this country with relatively inexpensive cars that got much better gas mileage. Let's not forget that there were other foreign car companies already selling cars here. VW, Austin Healey and British Leyland all had cars that got around 30 mpg. VW although plentiful, was not mainstream and was kind of looked down upon. The other car companies were not very popular but owners of all three realized the savings of having a car that got good gas mileage.

The American car companies then decided that they should also make small 4 cylinder cars. Cars like Pinto, Vega, Skyhawk, Pacer, Gremlin, began to appear. Yes they were small but they weren't built very well and certainly didn't get as good gas mileage as the foreign counterparts.

Then came 1979 and the second oil embargo. We as a country hadn't learned our lesson from the first embargo. The country was importing more oil than before and our American made small cars were still inferior especially compared with the Japanese cars. In viewing a 1986 copy of Consumer Reports annual car issue, it shows that there were 4 American made cars that got over 30 mpg and 7 models that got over 40 mpg. Was it the beginning of new thinking in regards to better gas mileage? Not so fast. Sometime soon afterwards the American car companies decided to produce more larger cars with bigger and more powerful engines. This meant a higher profit margin for them, but less fuel economy, (think SUV's) for us. Even though the Japanese companies kept up with the Jones' with larger more powerful cars, their core group of cars still got excellent fuel economy.

In 1999 Toyota took a leap of faith and offered a gas/hybrid car that got over 42 mpg. They have now produced over one million of the Prius'. It always seems that the American car companies are late to the party and a dollar short. Hindsight is 20/20, but who couldn't see what was coming with gas prices. It was inevitable that gas prices would increase each and every year. What no one envisioned or could have even imagined was that the price of a gallon of gas would reach an unbelievable cost of over $4 per gallon. I think it even hit $5 per gallon in California.

Just imagine for a moment that common sense was used way back when and American ingenuity developed both very high mileage and alternate fuel cars. The American car companies would be in a much better situation than they find themselves today. And we the consumer would also find ourselves in much better shape using less gas to go further distances and decreasing not increasing our dependence on foreign oil. The recession and the credit crunch would still hurt, but not as much. You will be hearing a lot more about the electric only Tesla cars that get 300 miles per charge from a 110 volt plug in.

Enough said!

Talk with you next week.