Tuesday, June 3, 2008

Downfall of the Gas Guzzlers

From the AJC,

General Motors is closing four truck and SUV plants in the United States, Canada and Mexico as surging fuel prices hasten a dramatic shift to smaller vehicles.

CEO Rick Wagoner said Tuesday before the automaker's annual meeting in Delaware the plants to be closed are in Oshawa, Ontario; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico. He also said the iconic Hummer brand will be reviewed and potentially sold or revamped.

Wagoner said the GM board has approved production of a new small Chevrolet car at a plant in Lordstown, Ohio, in mid-2010 and the Chevy Volt electric vehicle in Detroit.

Wagoner announced the moves in response to slumping sales of pickups and SUVs brought on by high oil prices. He said a market shift to smaller vehicles is permanent.

GM shares rose 25 cents, or 1.4 percent, to $17.69 in morning trading.

Well it looks like there will be a permanent shift towards fuel efficient and alternate fuel vehicles. GM says that the closing of these plants is in response to slumping sales which were caused by high oil prices. They also said that fuel prices hasten a dramatic shift to smaller vehicles and that the shift to smaller vehicles is permanent. Using a transitive relation, I believe this means that GM predicts high fuel prices are here to stay (*transitive relation: if a is related to b and b is related to c, then a is related to c). In other words, high fuel prices lead to a market shift towards smaller cars... market shift to smaller cars is permanent... therefore high fuel prices are permanent. In other words, I think GM is betting that gas prices are going to stay high.


Anonymous said...

Your blog is right, the auto companies sure are acting as if high fuel prices are here to stay. We're really feeling the effects of that here in Detroit since we've always depended on the auto industry.

Anonymous said...

completely true, although if demand for gasoline grows less in our country (like that will ever happen!) it may go back down, and this cycle may all start again.

Unknown said...

As I have gotten older, I can no longer get in or sit for long periods of time in a small car. After a lifetime of hard work I deserve a big car.

Anonymous said...

I've never been one to like the big Gas Guzzlering vehicles. I understand how some people need them, but that doesn't mean I hate them any less. It really is insane how the gas prices are, but I'm rather glad there's less of these things out on the road.

IF Blogger said...

Looking back at this post it looks like either LaubachM was right and the demand has caused the gas prices to go down, or I was way off and GM cut down their SUVs because they knew they were going belly-up. Well, the demand has obviously had a strong effect on gas so far. It is interesting to try and predict these things, but gas prices, like stock prices, are really impossible for anyone to predict reliably for long periods of time.