You cannot produce any product with ever-increasing quality and durability, and make sales gains year upon year forever. Not unless your customer pool is increasing almost exponentially. Therein lies the dilemma of each and every automobile manufacturer, domestic AND imported in the U.S. market today. They’ve all but manufactured themselves out of business. Their cars are already piling up on our shores, as well as in the middle of our country (buy a beach front parking space NOW if you can!). My humble prediction is that if the Detroit 3 go under, so do Toyandissan as well, within the next year after the first domestic company files (unless President-elect Obama rides in and fixes the Waggoner).
Why will they have to file? Whether it’s jingoistic backlash (laughable), an employee reVOLT (i.e. massive strikes and T-workers finally hopping into bed with that ‘dirty’ UAW), or other unforeseen complications, it is going to happen. Or did we forget the memo that was leaked from Toyota that basically stated “We need to drop our American workers’ wages down to a more palatable rate, say $8.25 per hour.” You don’t talk about cutting wages by $300M unless that is exactly what you want to do. Toyota has wisely looked at executive compensation cuts to make up some of this budget target, but it still will not save them unless they can start selling cars, immediate like.
When everyone and their brother-in-law started buying these brand new cars, it had the effect of creating a staggering glut of perfectly serviceable used cars that even now hang out in dealer lots, visit the auctions without selling, and even languish in private sellers’ hands, sitting for weeks or months (hey, AutoTrader ads will run until it sells!) until they eventually lower the price or accept a lowball offer that meets the eviscerated resale values.
There are so many new and used cars and trucks out there that if every auto manufacturer were to shut down tomorrow, they could easily be maintained for decades, if not centuries. Especially with all the newly freed up parts manufacturing capacity we are going to have. For proof of this, you need only look to Havana, Cuba, where old Detroit iron has soldiered on for decades without the support of the manufacturer (which may be similar to what we’re going to see in this country if any or all of Our Boys go Chapter 7).
The most glaring place where all the automobile companies went wrong is in the selling of far too many trucks to way too many people who were willing to beg too darned much from the banks to get them. All financing follies aside, Trucks, and by extension SUVs survive much longer than cars in most uses. Even when they are driven harder, longer, and rougher than mere passenger cars, they are much more durable, and will soldier on that much longer (if they are just properly maintained). So what happens when you give them to soccer moms who don’t abuse them or even use them for actual heavy duty work ? They will last practically forever, except those that rust out, or get the old insurance roast, and meanwhile no one except the hard-core workmen will need more trucks. But why buy new when there are so many lightly-used, pristine, potential work-horses available out there? You can buy a new truck for $30,000+ or you can buy 3 2008 F-250 repos for about $33,000 (one example multiplied by three, @ $10,500 ea. plus a reasonable $500 ea. purchasing fee for New Car Consultant Stephen Lang ).
It’s like the story (my goo-search turned up nothing) of the company that made a better light bulb (CFLs?) and priced them the same as a regular incandescent, then promptly went out of business(or so the story goes) because people weren’t buying any replacement light bulbs. Well, people are no longer buying replacement cars, either because they don’t need them, or because they can’t get them financed, or both.
You hear anecdotes about people running a Camry for 80,000 miles without an oil change, and Top Gear can’t kill the Toyota Hi-Lux, you’re creating an entire race of ‘zombie cars’ that refuse to die.
While I appreciate the increasing quality, and durability in products, and I’m also a big fan of reasonable prices, I recognize the sheer orgy of volume sales is done. This recession/depression is assuredly not what any of us wants, and while it damages everyone, be it Honda, Toyota, or Ford, (and the rest), this entire market was due for a correction, just as the oil futures bubble burst, so has the new car sales bubble. No matter how many sales get traded amongst the car companies, the market is now shrinking and this is a Less Than Zero Sum Game.