Car Guys vs. Bean Counters - Bob Lutz [80]
Of course, my recipe had called for a gradual rise over time, not an overnight doubling.The gasoline sticker shock (due to the only partially explicable sudden rise in the price of a barrel of crude) had an even more profound effect on our fortunes than the financial crisis, because GM’s buyer group was hit the hardest. With Chevrolet and GMC, we were the nation’s leading producer of full-size pickup trucks (GMC and Chevrolet combined usually outsell Ford, which always and correctly claims to be the numberone single brand), and the market was imploding. Pickups are the preferred vehicles of tradesmen such as carpenters, plumbers, and electricians, and their work had evaporated along with new housing starts.
Between Chevrolet, GMC, and Cadillac, GM was (and still is, albeit in a now-smaller market) the dominant player in full-size V8 SUVs, commanding a share consistently over 50 percent. These had become the family vehicle of choice for many American households as they combined space, comfort, performance, and suitability for many sports and lifestyle activities, all in one vehicle. Decried for decades by the environmental left, they had emerged, in Darwinian fashion, as a powerful species, boosted by economic well-being, the large distances endemic to the United States, and, of course, the omnipresent low fuel price.
The latter ensured a booming market for used Tahoes,Yukons, and Escalades, most of which were snapped up by less-affluent families who still had the same transportation wants as the more fortunate new SUV buyers. As always, good resale value fueled demand for GM’s used SUVs, creating a highly profitable, virtuous cycle. GM’s and, to a lesser extent, Ford’s huge success with large SUVs prompted the Japanese to enter the segment with the monstrous Toyota Sequoia and the Nissan Armada, both of which had fuel-guzzling thirsts that would have caused GM to blush. Neither ever achieved meaningful volumes for the simple reason that American SUVs were the best: better styling, more rugged, longer lasting, more powerful, and offering the best fuel economy to boot. As written earlier, the “truck cultures” at Ford, GM, and Chrysler had, over the decades, managed to avoid the catastrophic loss of customer focus that their car-creating brethren had somehow fallen victim to. You can’t convince an owner of a U.S. truck that he or she should “go import” with their next truck purchase; they are delighted with their vehicles. And GM was delighted, too, because the full-size SUVs and pickups were the overwhelming source of automotive profits, more than covering the losses stemming from the heavily incentivized sales of the less-compelling passenger car lineups.
When gasoline prices doubled, SUV resale values tanked. Families on strict household budgets saw their monthly outlay for fuel double, and they scrambled to get out from under their purchases. The resulting glut of used full-size SUVs caused a plummeting of their value, and lease rates had to increase to bridge the growing gap between “new” and “three-year-old coming back off lease.”
GM’s results took a dive.While our overall sales were down no more than anyone else’s, the disproportionate drop in SUVs and full-size pickups made the total damage worse for GM and Ford than for the Japanese producers who, despite decade-long efforts to achieve a meaningful presence in the full-size truck market, were still predominantly selling small SUVs, crossovers, and passenger cars.
This is what we called “luck.” But, to the ever-import-focused U.S. media, it was skill, virtue, and prescience.
Every U.S. business journalist in print and television soon jumped on the new bandwagon: the far-seeing wisdom of the Asians had caused them to eschew big trucks and focus, instead, on what the media likes to call more efficient offerings. In contrast, dumb, shortsighted, insensitive, and greedy GM had “persisted” in creating and selling full-size SUVs and pickups despite the “clear signals” that fuel prices were going to rise and favor smaller vehicles. Night after