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Gas prices a threat to GM turnaround?

Gas prices a threat to GM turnaround?

Posted Apr 19th 2006 11:52AM

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To all General Motors executives and news reporters proclaiming the company's new SUVs a rousing success, hold your horses-- at least through the summer. The new GMT900 siblings may be fine vehicles, but gas prices are back up and consumers are starting to feel the pinch again. While full-size SUVs like the Chevy Tahoe and GMC Yukon (pictured) appeal to buyers who would buy an SUV regardless of the state of gas prices, vehicles such like the Chevy Trailblazer and GMC Envoy are arguably more price sensitive purchases. These buyers may in fact choose a more fuel-efficient crossover vehicle instead -- a vehicle doesn't make GM nearly as much money, not to mention the fact that the company is currently experiencing a gaping hole in the mid-size crossover segment, sending potential GM buyers elsewhere.

[Source: Reuters via Stuff.co.za]

Category: Trends, SUV, Crossover, Cadillac, Chevrolet, GM, GMC

Tags: Fuel Economy, FuelEconomy, gas price, GasPrice, GMC Envoy, GmcEnvoy, GMT900, mileage, mpg

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MikeW

On May 6, demand ethanol free gasoline!!! drop $0.50-0.75 right out of the cost of gas.
Time for a grassroots movement.
No carburetors! No ethanol! [repeat]

For the guy claiming to get 17.5 mpg, what is your tire pressure 75psi?

April 20 2006 at 10:11 AM Report abuse Permalink rate up rate down Reply

jamie

Okay guys,

Gulp! Try $4.50 a gallon in Brooklyn already!
http://www.nydailynews.com/front/story/410113p-346997c.html

Here in LA-LA Land it's only $3.09 for self serve regular.

Will that affect SUV sales? Nah, if you can afford the tank; you gotta be able to afford to fill it.

They've been paying these prices and more in Europe and Japan for years. Get used to it.

Prices are headed for $6.87 a gallon, because demand is outstripping supply 2 to 1. Do the math, honey. Welcome to the real world and global economy.

April 20 2006 at 12:33 AM Report abuse Permalink rate up rate down Reply

Andrew

whofan

Autoblog recently tested a Tahoe with Disp on Demand and got about 15 mpg. This was in mixed driving that seemed closer to highway.

EPA mileage is usually a little optimistic. Their website lists Tahoe as best case 16/20.

I think 22 maybe on highway under ideal conditions, *maybe*. But no way mixed.

www.thetruthaboutcars.com review got about 13 mpg mixed.

BTW epa website lists Toyota Sequoa as 15/18. So as big SUV's go this the Tahoe is not that bad. But as prices go up they will lose *some* customers.

April 19 2006 at 11:01 PM Report abuse Permalink rate up rate down Reply

whofan

"Excuse me Mick but where did you get the 22mpg number? You haven't been watching the GM TV ads again where they claim the new Tahoe gets 22mpg HIGHWAY on the EPA test"

I have a 2001 Silverado Z71 extended cab 4x4 3.73 gears 5.3l engine. It gets 17.5 MPG mixed driving.
I don`t think a 2007 GM truck with displacement on demand getting 22mpg hwy is much of a strech.

April 19 2006 at 9:21 PM Report abuse Permalink rate up rate down Reply

Andrew

Gas prices do matter. When prices go up sales of low fuel economy vehicles go down.

People love the "big iron" (big trucks and SUV's) and they will pay a lot to push the extra 1000 lb of steel down the street, but they will only go so far. High gas will lower SUV sales, it is only a question of how much.

For those that say Toyota also sells big, low-mpg vechicles, I say you are right. Difference is that GM needs big iron to stay solvent (or at least go bankrupt more slowly) for Toyota it is just a bonus.

April 19 2006 at 9:16 PM Report abuse Permalink rate up rate down Reply

Steve

In reply to the 22 vs 33 mpg annual fuel consts comment:

$1818 for a 33 mpg car (in this case a Corolla)

$2727 for a 22 mpg car (a Toyota Highlander.)

That's roughly 900 dollars a year extra. For some it's worth it... for some it's not; Apparently you don't mind blowing some extra cash on gas, and to be honest, at these prices, neither do I... my car averages around 21 mpg, and my wife's at around 23.

However, for every rise in gas prices, a the number who stick with a larger vehicle shrink and the number who refuse drop. The U.K. has noticeably smaller vehicles than we, but you will still see the occasional Land Cruiser or Grand Cherokee roar by on her highways.

April 19 2006 at 8:15 PM Report abuse Permalink rate up rate down Reply

#4. "Boy, you really have feel for GM. I mean, with everything going on in the world - war in Iraq, talk of war against Iran, China's rapidly growing thirst for oil, supplies becoming scarcer, etc. - only a genius could have foreseen that gasoline prices would actually RISE and that consumers might be looking for something more fuel-efficient.

Not that it's their fault. No way. It's those bloody foreigners and all those other automakers that somehow figured out that gas-guzzlers were dinosaurs. Sneaky devils. No fair!!!!"

Umm....Could you please explain Toyota's brand new plant in Texas to build full size trucks..06MY Tundra around 17/22 and Sequoia around 15/18...what they figured out, my friend, is that people like you are sheep and if they dangle a Prius in front of your eyes, they can shove a Tundra and a Sequoia up your ass and have you begging for more. Now if they could just squeeze up there that Highlander Hybrid that gets worse fuel economy but better performance than the regular model, they could achieve the ultimate trifecta.

April 19 2006 at 4:55 PM Report abuse Permalink rate up rate down Reply

Be Oh Be

#21
You're right. I think at least getting some more mention that GM actually makes cars too would go a long way though. It's amazing the idea of perception. If someone is told something over and over again, whether it's true or not, you'll start to believe it.

A friend of mine was in the market recently for a nice, new, small car. He looked at the Civic, the Jetta and, of all things, the CRD Liberty (which he ended up with). Now this guy is smart - he has a Masters degree in oceanography - so he's open minded and understands "reasoning" and looking at every possible option when it comes to making a decision. Anyway, I asked him if he'd even consider a Cobalt - he flat out said, "no way, GM cars suck, and the Cobalt is a poor person's car, they simply suck, why would I want something like that"? - on and on. It's amazing that once people get their minds wrapped around the idea that GM is nothing but an SUV maker and has nothing to offer anyone other than huge Suburbans, there is no changing their minds.

Now, I'll tell you, the Civic is probably a "cooler" car than the Cobalt, but it really isn't that much better when it comes down to it. They're still just basic transportation.

GM has some major hurdles they have to jump over right now. If I were VP of marketing or product development at GM right now, I wouldn't be sleeping much.

They need some halo cars, and quick. They need to put that new hybrid powertrain they're developing with BMW and DCX in every single car they make - including the new rear wheel drive "Zeta" cars. They have to put the best transmissions (6 spd. automatics) in every single car they build. They have to be better than Toyota at everything they do - and let the whole country know that they've been around for 100 years, and that some of the best and most innovative cars in American history came out of their company. If they don't do this, and do it quick, they'll never regain the status they had in the 60s and 70s.

April 19 2006 at 4:11 PM Report abuse Permalink rate up rate down Reply

Puff Chippy

Perceptions lag reality and in the auto industry they lag a lot. Sure domestic autos are as good if not better than anything foreign but it may be another 10-20 years before that becomes the perception of your average consumer. GM builds some of the best cars in the world today yet there's still a perception that lingers from the cars they made 20 years ago. Toyota's quality has been slipping badly yet they'll live off their reputation for years. Heck, look at Mercedes. Even Hyundai (!!) has better dependability ratings than what MB's been putting out but people still think they make great cars.

April 19 2006 at 4:09 PM Report abuse Permalink rate up rate down Reply

Mike

Ewww ... I didn't have the 'Ho particularly in mind. I did want to point out that sometimes a person just has to sit down and do the math. We all know that there are some folks who can't even afford to do maintenance on their old vehicle but who kid themselves that they can somehow afford a "better" one. Having just read recently that Explorers have some kind of timing belt(s) that may cause a $2000 bill at belt-changing time I think folks need to look at all angles, not just the current price at the pump.

April 19 2006 at 4:01 PM Report abuse Permalink rate up rate down Reply