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Showing posts from November, 2008

The Illusion of a Green Auto Market

I keep hearing people proclaim the lack of foresight on the part of the Big Three in making more fuel efficient cars to meet market demand.

While this is, in part, true, it is not a prescription for saving them. Retooling to make more fuel efficient cars isn't going to drive up demand for Big Three autos. In fact, demand doesn't need to be driven up! Just look at the numbers. GM is outselling Toyota worldwide. Ford is outselling Nissan and Honda. So if the Big three are outselling the rest of the world, how are they going bankrupt?

The reason that Detroit has focussed on making pickups and SUVs is that it was the only place they were profitable per unit. Their operating costs are just so much higher than the Japanese, and the smaller, cheaper cars lose the profit margins necessary to keep the Detroit companies afloat. Take a look at the graph on this page.

So where do those operating costs come from? Here are places to look:

1) Union wages and benefits: GM's cost per hour of…