Simanaitis Says
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THE AUTOMAKERS’ DILEMMA
“MAY YOU LIVE IN interesting times.” This classic Chinese saying was intended as a curse, not a blessing. And so it would seem for automakers today.
Reading the weekly Automotive News, I’m confronted with the inherent conflicts of selling transportation to people in this country and around the world. Unknown actions to come from President-in-Waiting Donald Trump only confound matters.
For example, with gasoline at historic low prices in the U.S., consumers plunk down their money on more and more light trucks as opposed to cars. And forget fuel-sipping hybrids or fuel-eschewing electrics, despite regulations on the books requiring automaker fleet averages of 54.5 mpg by 2025.
The big sales winners today are full-size pickup trucks, SUVs and crossovers, this last category often straddling the design platforms of auto and light truck. (My 2012 Crosstour, ahead of its time, it seems, and no longer in the Honda lineup, is essentially a stretched Accord. Other crossovers are SUVs with less rugged intent than their parents.)
Automotive News, November 28, 2016, reports that Toyota is adjusting its car-truck ratio in a catch-up game with other automakers currently producing a 60/40 mix in favor of light trucks. Today, Toyota is roughly 50/50.
Toyota H-CR subcompact crossover.
According to Automotive News, the company’s new H-CR subcompact crossover coming next spring is top of the Toyota dealers’ wish list. It’s seen as an ideal choice for two key demographics: younger buyers trading up from small cars, and empty-nesters downsizing from SUVs and large cars.
Automotive News, November 7, 2016, notes that light-truck sales in the U.S. may reach 10 million this year. With total vehicle sales of around 17 million, this is not far from the 60/40 split cited above.
Compared with cars, especially small ones, pickups and SUVs have bigger profit margins. This is one reason why U.S. automakers farm out their small-car production to Mexico and other countries with less expensive labor costs. For example, Ford’s Fusion is made in Mexico; its Transit Connect, in Spain.
Ford EcoSport.
The Ford EcoSport, which made its debut at last month’s Los Angeles Auto Show, will be the company’s first import from its facilities in India. Automotive News, November 21, 2016, said, “The design is already outdated, and the stubby proportions are way off the mark for U.S. audiences. The interior feels like it’s made of cardboard and has the build quality of a homemade piñata…. Apologies to those for whom this is their first Ford, in case it’s their last, because the automaker is better than this.”
Ouch.
On the other hand, in Automotive News, November 28, 2016, Staff Reporter Michael Martinez offered a counterpoint to TrumpTweets about Ford and its Louisville, Kentucky, production not moving to Mexico. Noted Martinez, “Louisville Assembly was never in danger of closing and moving across the Rio Grande…. Keeping the [Lincoln] MKC in Kentucky past 2019 is little more than a surface gesture of goodwill by Ford to a Trump administration it has repeatedly said it wants to work with.”
“If Ford indeed moved the MKC to Mexico in three years,” Martinez continued, “the 4700 workers at Louisville Assembly would have just made more Escapes. The number of jobs that would have been lost? Zero.”
Indeed, Automotive News expressed mixed views on the president-elect. A page-one headline for November 14, 2016, read “Ally-In-Chief?” Subheads to accompanying pieces included, “The industry sees a window for some regulatory relief.” and “Auto funk or Trump bump? The market awaits economic plan.”
And, in its November 28, 2016, the Opinion column took a rare political stand in “Along With Regulation and Trade, Ideals Are At Stake in Trump Era.” Concerning the auto industry’s global interconnectedness and diversity at every level, the editors wrote, “Donald Trump’s campaign and election have emboldened elements that seek to tear that fabric apart.”
“Furthermore,” the editorial continues, “the industry, befitting its social and economic importance, should be prepared to speak out forcefully in the political arena in defense of democracy…. Unless you have the courage to speak out on the big, important issues of our time, you deserve no credence on the smaller ones.”
Yes, we live in interesting times. ds
© Dennis Simanaitis, SimanaitisSays.com, 2016
Simanaitis Says 
Denise…thanks for this piece. At 80 all I want is quietness and good ride..a long way from my MG TC days and the Abbington Rough Riders. I currently am driving
a 2013 Cadillac SRX and expect to be buried in it….the high hip point is perfect for old farts getting in and out and helps seeing around 5 foot tall moms in their huge Suburbans. For oldsters SUVs are the way to go…
One other thing..I read that if Ford exports to EU from the US there is a 25% tariff. But if Ford exports to the EU from Mexico there is none…Getting the corporate income tax in line with other Western economies will go a long way to get jobs back to the US
Hi, Grey,
Your comment re the SRX is similar to the appeal of our Crosstour. (It saves the hair on the top of my head.)
As for tariffs, etc, check out http://www.caranddriver.com/features/free-trade-cars-why-a-useurope-free-trade-agreement-is-a-good-idea-feature. I believe that 25 percent is our “chicken tax” on pickups and SUVs coming the other way. The Euro tax is a flat 10 percent, apparently independent of country origin. Our import tax is 2.5 percent.
Years ago, when I lived on St Thomas and brought over my Ford Pinto wagon, I had to pay 2.5 percent ad valorem because the car had been built in Ford’s Canadian plant. I was told, “In the eyes of U.S. Customs, it’s a foreign car.” Ha.