Wednesday, December 17, 2008


December 11, 2008

Well, what do you think? Now that gasoline prices have fallen by more than half since last summer and may drop even further, will you rush to your GM/Ford/Chrysler dealer and buy that new SUV at that unbelievable markdown?
Talk me down, as they say, but I tend to doubt it. You'll probably never go for a guzzler again.
It's ironic that just as prices at the pump were plummeting, the American auto execs were begging Congress for a bailout: Just get us through the next few months and we'll get better, promise.
They could be thinking of what happened after earlier gas crises: As soon as the cost of fuel went down, America's lust for big cars went back up.
It may not happen this time. There are too many other factors in play.
The big slogan of the presidential campaign (remember that?) was "Change," a vague term candidates would fling at each other, the Congress, and the present administration. As the economic implosion continues, however, a real, profound kind of change seems to be occurring from the bottom up — a change in individuals' attitudes toward consuming and conserving.
The auto industry hangs in the balance.
I may have missed it, but in all the Congressional hearings on car-company bailouts did anyone ever mention the very first principle from Economics 101, the law of supply and demand? The reason why the news from Detroit is so bad is not only that Americans aren't buying Hummers, but that they're not buying cars, period. Even the Asian companies with their host of fuel- efficient vehicles are suffering. And it's not only because credit is so tight they can't get loans, it's because people all over are looking at the car in their driveway and saying to themselves, "Heck, it looks good, it runs great — why not keep it a while?"
As Consumer Reports and other sources continue to show, the durability and reliability of cars both foreign and domestic have improved dramatically over the last years. Provided you were not in a major wreck or your cat hasn't torn up the interior, you could easily keep your car for a decade or more, and even then trade it in for what dealers now proudly call a "pre-owned vehicle," thoroughly inspected and serviced and almost as good as new.
Having less money — and even the fear of having less money — necessarily turns people conservative on consumption, particularly of durables: If goods are still good, why toss them out? Living like this for a time, they may come to realize a more fundamental fact: that their identities and self-esteem do not depend on how new their car or their kitchen is but how well it is used.
Last summer's petroleum peril forced many skeptics to see practical value in "going green," a mentality and a movement that had been gaining ground well before the economic meltdown: contributing to a "sustainable" environment by reducing energy consumption, living more simply and frugally, eating locally- grown foods.
Seriously taken and widely practiced, a sustainable lifestyle will have a major effect on the auto industry that has not been voiced in all the bailout ballyhoo. It is not just about making more fuel-efficient cars, it's about how many cars to make.
On Monday, the American Public Transportation Association (APTA) announced that ridership on public transportation increased in the third quarter of 2008 by 6.5% nationally over the same period last year. Increases in Los Angeles, the very symbol of the car culture, were even more pronounced: 14% for subways, 15% for light rail, 17% for commuter trains — all this despite falling fuel costs. APTA president William W. Millar commented that "As gas prices rose, more and more Americans made the choice to ride public transit. Now, even though gas prices are falling, Americans tried public transit and may find it convenient."
And not just convenient. "To sum it up," Millar said, "public transportation is good for the economy, good for the environment, and good for energy independence."
President-elect Barack Obama agrees; spending on transit is a major component of his massive public works proposal, and for the same reasons Millar cites. If that comes to pass, there will be many more transportation options available, and it is likely that the trend from the car to the train will continue.
So where does this leave the auto industry? The real issue, the big-picture issue, is not merely about "restructuring," it is about permanent downsizing. In the future, people will buy fewer cars and keep them longer. They will realize that ecologically, the greenest car is the car that is never built. Back to Econ. 101: Millions of individual decisions not to buy will force a different kind of restructuring not presently contemplated by either government or the car companies.
Predictably, both Obama and Congressional Democrats support the biggest car-loan ever, fearing another sector collapse. A better course would be to let the Big Three restructure themselves based on market forces and pour those billions into the industries of the future, the so-called green technologies, giving incentives to locating them in the very places affected by old-manufacturing unemployment. Wouldn't Michael Moore be ecstatic to see solar-panel and fuel-cell companies revitalizing Flint, Michigan?
Bailout or no bailout, the economy is re-shaping itself through decisions made at a million kitchen tables. When all this ends, small may be beautiful again.

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