The U.S. Auto Market May Teach The President A Little Humility Yet…
ByHayek wrote: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
We’re seeing Hayek’s words proven true today in the attempts of the President to re-create the U.S. auto industry. Here’s a quote from Treehugger on March 30, 2009:
Yesterday, big news broke that Obama denied Chrysler and GM further bailout funds. Both had submitted plans detailing how they’d use the funding to get their companies back on track. Both were deemed ‘not viable’. How did they fail to make the grade? One reason was neither planned on going green enough–after rejecting both plans, the Obama administration laid out a "Path to Viability" for both companies. Common to both? Putting more effort and resources towards developing and selling fuel efficient vehicles. Yes, Obama’s bailout refusal should lead to greener American cars…
This statement, from the Obama administration’s "New Path to Viability for GM & Chrysler" outlines the issue:
"Industry financial analysts and industry experts are nearly unanimous in their views that, to be competitive in the decades to come, auto companies will need to transform their processes and products to improve efficiency, reduce costs, and offer higher quality, more fuel efficient fleet."
The expert’s predictions seemed to make sense last summer. Gas prices were outrageously high, the economy was softening, and American consumers were grumbling more and more about the amount of money they spend on gasoline. The Toyota Prius had been a niche hit amongst green lifestyle folks on both coasts and all signs seemed to indicate that it was quickly becoming not only a niche car, but the future of success in the U.S. auto market.
Now fastforward a couple of months to BusinessGreen’s report on June 5, 2009:
"However, while Toyota may be enjoying mainstream success in Japan, it is continuing to struggle in the US, where the company has been hit by the slump affecting the entire auto industry.
Despite claims that Americans turning their backs on gas-guzzlers have contributed to the present dire straits faced by GM and others, Toyota’s latest sales figures point to a stagnant market for more efficient Japanese models as well.
Sales of the Prius in the US were down from 15,011 in May 2008 to just 10,091 for the same month this year. For the year to date, sales of the Prius in the US stand at 42,753 compared to 79,675 in 2008 – a drop of more than 45 per cent."
Let’s be clear, we’re not claiming that gas guzzlers are flying off the dealership lots in this economy, but as more and more Americans begin seeing many “environmental” products like the Prius as fashion accessories for rich, young liberals, it’s very possible that such cars won’t look like the future of success in the mainstream U.S. auto market. What the President and his idealogical band of “experts” are requiring U.S. Auto manufacturers to do is focus the bulk of their resources on following a trend that may-or-may not have peaked last year. Quite possibly, the Obama administration’s idelogical biases about the auto industry may be severely corrected by demand as the niche enviromentalist market may start voicing concerns about the environmental damage caused by the necessary disposal of old Prius and Volt batteries and looking to different technology such as air compression to power the next generation of environmentally-sound cars.
It’s hard to predict tastes and preferences and even harder to lead them. It’s hard enough if you are the President of GM trying to make good with the price mechanism in a marketplace, it’s even harder if you are the President of the United States trying to make good with the environmental lobby.
