The Best And Worst Ideas In The Auto Industry
The past five years have been pretty tumultuous for the U.S. auto industry. There’s been an unprecedented amount of government involvement in the business, and automakers have been throwing out new and wacky ideas, trying to attract customers in a waning market.
But now, with auto sales picking up and an end to the long recession somewhat in sight (although, arguably, you might need a telescope to really get a good view), AOL Autos is taking a look back at the past five years to see which ideas worked, and which were a total flop.
#5 Best Idea: Toyota pushing hybrids across its entire lineup (Reader submission)
Facebook reader Paul Brunson said he thinks Toyota's plan to offer hybrid versions of nearly all of its models, including its Lexus brand (such as the ES 300h pictured here), was one of the best decisions in the past five years.
By 2015, Toyota plans to have 21 new hybrids on the road. The automaker is less psyched about fully-electric cars, and Toyota executives may have a point: Sales of the Nissan Leaf, which is fully electric, and the Chevy Volt, an advanced hybrid powered by battery with a back-up gasoline generator, have been slow to take off. Consumers concerned about high gas prices finally seem willing to pay the $3,000 upgrade cost to pay for the hybrid system.
As Toyota puts more and more hybrids on the road, economies of scale will help bring those costs down. Which will make those cars even more appealing to consumers.
#4 Best Idea: Letting Fiat take over Chrysler
When the White House was trying to figure out what to do with Chrysler back in 2009, the choices were few: Let it go out of business, or let Fiat take the automaker over. This was not easy for the White House, which was lending the struggling automaker billions of dollars to gothrough Chapter 11 Bankruptcy reorganization.
The Obama Administration was already facing criticism from Republicans for using Troubled Asset Relief Program funds torescue Chrysler and GM rather than winning a separate funding bill in Congress. But the idea that the Feds were helping to fund a takeover of Chrysler by Italian automaker Fiat was a very tough sell.
Chrysler repaid the loans to the U.S. and Canadian governments in 2011, many tears ahead of time. Fiat has not only saved jobs that were at stake, but has added thousands more in the U.S. The products coming out of the Fiat-Chrysler alliance--the all-new Dodge Dart, Dodge Charger, new Chrysler 300 are first-class. More new products are on the way, and Chrysler is profitable with sales moving steadily upward.
Sure, the move was politically unpopular with the right wing. But the move has stabilized a major automaker and employer in the U.S. for years to come. The taxes paid by Chrysler and Chrysler employees will more than repay the early loans made to Chrysler by the Bush Administration in a few years. That, combined with the job protection and creation makes it one of the best decisions of the past decade in the auto industry, and certainly one of the best of the last five years.
#3 Best Idea: Tesla's continued pushing on electric cars
Amid accusations of vaporware, Elon Musk proved the naysayers wrong by launching the all-electric Tesla Roadster in 2008. The sporty 2-door reignited interest in EVs, proving that modern technology could finally produce an electric-powered car that someone might actually aspire to drive.
We would argue that without Tesla's Roadster, we may not have seen the Nissan Leaf or Chevy Volt come to market in 2010 and 2011, respectively, if at all.
Beyond the impact of the Roadster itself, Tesla has continued to innovate in ways that resoundingly refute the tired arguments made against electric vehicles; most notably with their recently launched Supercharger network. These strategically located quick-charge stations run entirely on solar power and promise to abolish the notion of "range anxiety"--first, for customers in California and then for the rest of us--once Tesla expands the network coast-to-coast.
#2 Best Idea: Automaker focus on fuel economy
Over the past five years, carmakers have brought a number of new technologies to new cars that improved fuel economy. Chevrolet introduced the Volt, Nissan brought an electric Leaf and nearly every major carmaker now offers some sort of gas-electric hybrid.
Ford Motor Co. has been able to market high performance twin-turbo engines as eco-frendly devices -- and in fact, they are. More importantly, those cars have things like electric power steering, continuously variable transmissions, low rolling resistance tires -- all which help cars improve their fuel economy and all can be moved from hybrids to mainstream cars.
The reason: Customers have demanded better fuel economy but have not wanted to hybrids. Carmakers have answered that demand with better performing vehicles.
#1 Best Idea: Cash for Clunkers
Cash for Clunkers was a $3 billion dollar program in the summer of 2009 that provided incentives for people to trade-in their older, gas-guzzling cars for newer, more fuel efficient ones. The idea behind the program was to boost auto sales, while also putting greener cars on the road during the depths of the latest economic recession.
While the program may not have stimulated the economy the way many had hoped, it certainly helped the ailing Big 3 American automakers -- Ford, GM and Chrysler. During the program, Ford's sales went up for the first time since 2007 and Chrysler and GM saw their alarming declines at least slow down.
Cash for Clunkers was also immensely successful in getting more fuel efficient cars on the road. According to the Department of Transportation, the average fuel economy of cars traded in was 15.8 mpg, compared to 25.4 mpg for the new cars that replaced them -- a 61% improvement. A University of Michigan study found that the program increased the average fuel economy of all cars on the road by 0.7 mpg in the first two months of its existence.
Photo Credit: Tony Fischer Photography, Flickr
#5 Worst Idea: Doing away with manual transmissions (Reader submission)
AOL Autos reader Mitchell Ray Scott said the disappearance of manual transmissions has been one of the biggest mistakes the industry has made in the past five years.
Lots of car lovers agree with him. Car & Driver has launched a Facebook page, called Save The Manuals, calling for a “crusade” to stop the migration to fully automatic transmissions. You can’t text while driving a manual, they argue, and if you drive well, you can also save gas.
According to NPR, in the 1970s, 70% of all cars sold were manual. Now it’s less than 9%. Automakers like automatics because they can make cars more fuel efficient for everyone, even the bad drivers.
Driving manual helps drivers be more intimately in touch with their cars. There’s no chance you can suddenly accelerate in a manual – you can just pop it into neutral if it’s doing something funky.
But, the manual option seems to be going the way of the ash tray – soon to be just a novelty in many cars. Too bad. Manuals make driving more fun.
#4 Worst Idea: Bringing the smart brand to the U.S.
When the pint-sized smart brand came to the U.S. in 2008, it seemed like Americans might be ready to give up their desire for gigantic SUVs for a more fuel-efficient car. In its first year, smart sold more than 25,000 vehicles in the U.S.
But Americans quickly realized they felt a little panicky in a smart car when driving on the highway, next to giant 18-wheelers. And sales have plummeted. Last year, smart sold just 5,000 cars in the U.S.Sales are up to 7,300 year to date in 2012. That’s a 90% increase compared with a year ago, but it still a tiny sliver of the overall market.
Unless smart can really convince urban drivers that they need their own set of wheels, instead of relying on public transportation, the smart brand is still going to have a tough time in the U.S.
#3 Worst Idea: Toyota's handling of the sudden acceleration recall
If Toyota had just fixed its faulty acceleration pedals and floormat issues when the company first began hearing consumer complaints, the automaker may never have faced the massive backlash that came when it finally conducted its largest recalls ever.
But in 2010, the automaker was forced to bring executives in for questioning in front of Congress to explain why it hadn’t fixed the problems earlier. The National Highway Traffic Safety Administration fined the automaker $32.5 million for failing to act quickly enough to remedy the problems.
And although Toyota’s sales seem to have rebounded, the sudden acceleration recalls took the luster off the automaker’s once shiny and impeccable image.
#2 Worst Idea:. Government focus on fuel economy
It may seem contradictory that we include fuel economy improvements in the best and worst categories, but there’s a difference. It’s a good idea when the automakers decide to do it. When the government forces them to do it, that’s a different situation.
While lots of people may equate the recent raising of Corporate Average Fuel Economy standards to more than 54 mpg by 2025 as the reason for carmakers building more fuel efficient vehicles, that simply is not the case.
First, attempting to manipulate consumer behavior by changing the rules in which vehicles are sold is silly and counter productive. Secondly, that idea never works. Last time CAFE had big change,SUVs became the byproduct. Finally, the current system is dishonest at its very core. While politicians say that CAFE will create fleets that will average 54.5 mpg, that is an outright lie. That number is created from a decades old formula -- and that lie is told so people will think it will be on the window sticker in 2025. It won't.
If the government wants to be bold and really change consumer behavior -- it should create a gas tax.
#1 Worst Idea: GM not selling Opel to Magna when it had a chance
In late 2009, after the auto bankruptcies were over and the industry was starting to heal, General Motors backed out of its plan to sell its European subsidiary Opel. Top-level executives decided the upcoming product lineup was too attractive to let go, and decided they’d hang on to the brand because the European economy seemed to be getting better.
Yeah, that didn’t turn out so well.
So now, with the European economy on the brink of collapse (as it has been for well over a year), there’s only one big dark spot in GM’s lineup: European operations. AKA Opel.
GM lost $361 million in Europe during the second quarter, and the automaker is scrambling to put together a European restructuring plan that it will hopefully unveil by the end of October. The company needs to fix European operations, because analysts are beginning to wonder if losses overseas could drag the whole company down.