Major Auto Industry News Part II

The Senate has decided on a new set of fuel economy standards for the auto industry, the House will likely pass it this year, and seems to in accord with President Bush, so I expect the legislation to be signed.

The Big 2 + 1 lobbied heavily against the changes. Toyota was opposed, Honda was somewhat opposed, and Nissan took no position (The private equity firm bidding on Chrysler says the bill will destroy the auto industry).

Based on extensive reporting in the Detroit media, apparently none of the auto (foreign or domestic) companies think we can hit the new standards without radical changes in American consumer and driving habits.

Physics is unforgiving, in order to move a vehicle of a certain weight a certain distance at a certain speed – energy must be expended. Technology will likely provide a part of the answer, but not a full solution.

So be prepared for smaller cars and smaller trucks. Be prepared for a higher rate of highway deaths (semis will not be downsizing).

In our household we drive two small fuel efficient vehicles, but then I don’t have to load up tool boxes, cattle feed, or six kids and my commute is about 4 blocks. If the rustbelt weather is bad I can usually stay home, and my wife has retired from nursing so I no longer have to worry about her going to work in lousy weather.

Other people have different vehicle needs, for both work and family. Winter in the rustbelt can be very ugly.

So, how much change are US consumers willing to accept? Will consumers regret the actions of elected officials? Will Nancy Pelosi and Diane Feinstein get a backlash from California consumers when the real impact of this legislation becomes clear? Will actors arrive on the red carpet in Chevy Cobalts? Will the titans of Wall Street travel NYC in the Ford Focus? Are we prepared to gut even more of our manufacturing base? Your thoughts?

PS: It is likely the Delphi deal will become a model for much of the auto parts industry, which is interesting because those workers who do keep their jobs (most jobs are offshored) will no longer really be in the middle class. Is this the end of an era for US manufacturing? Will blue collar workers be dumped from the middle class? Is this progress?