Listen to this article
Browse the “specs and dimensions” page for the H2 on Hummer’s website and you get plenty of information: hip room, water fording depth, fuel tank capacity. Finding out how far a gallon of fuel will take you is a tougher proposition. With petrol at about $4 a gallon, that once obscure detail suddenly matters a lot. (The answer is thought to be about 15 miles.)
General Motors’ decision to consider selling the baddest US gas-guzzler gives a sense of the brutal shift in consumer behaviour Detroit now faces. Rather than a celebration of GM’s centenary year at the shareholder meeting, Rick Wagoner announced a cessation of production at four plants that build pick-ups and sports-utility vehicles, alongside extra shifts at those making smaller, more fuel-efficient cars. He also “green lighted” the Chevy Volt electric car.
Detroit has just been through a painful restructuring, with huge job losses and tough buy-out negotiations with the unions. It now faces a structural change in consumer behaviour that is forcing it to adapt its product range radically.
The bad news is it will be painful, at least in the short term. The costs of revamping product lines will be significant. SUVs enjoy high margins and will be sorely missed as volumes fall. Rivals such as Toyota are particularly strong in smaller cars. Given the overall squeeze on consumer spending power from the housing/credit crisis and high energy prices, the car companies face a less extreme version of the storm the airlines are caught in.
The better news is that US auto makers are adapting rather than praying that consumers will one day flock back to driving big cars. The road will be rocky. There could be casualties. But at least Detroit is now trying to produce cars consumers want – and will continue to want in a high-oil-price future.
Lex is the FT’s agenda-setting column, giving an authoritative view on corporate and financial matters. It is also one of the few parts of FT.com available only to Premium subscribers. This article is provided for free as an example. A Premium subscription gives you unlimited access to all FT content, including all Lex articles and the FT mobile Newsreader.
If you have questions or comments, please email email@example.com or call:
US and Canada: +1 800 628 8088
Asia: +852 2905 5555
UK, Europe & Rest of the world: +44 (0)20 7775 6248
Get alerts on Lex when a new story is published