Auto Industry Challenged By Falling Gas Prices

Jan 13, 2015
Originally published on January 26, 2015 7:06 pm
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RENEE MONTAGNE, HOST:

OK. Cheap gas prices are helping to pad the profits of Detroit automakers. Still, falling prices at the pump also pose a big challenge to the auto industry. That's because over-reliance on sales of pickup trucks and SUVs help push U.S. automakers into bankruptcy. So the question is will Detroit be better prepared this time when gas prices go up again? NPR's Sonari Glinton reports from the Detroit Auto Show.

SONARI GLINTON, BYLINE: If you've paid a bit of attention to the auto industry in the last few years, this is the kind of stuff you expect to hear.

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UNIDENTIFIED ANNOUNCER: Ladies and gentlemen, I am very proud. It is my honor to introduce to you now the 2016 Chevrolet Volt.

GLINTON: Fuel efficiency with new technology like Chevy put into its Volt has been the mantra for all the automakers for quite some time. But now gas prices are low. Auto sales are high. And much of those high sales are based on the popularity of luxury cars, SUVs and pickup trucks - gas guzzlers. All that creates a real conundrum for Detroit. Here's GM's CEO Mary Barra.

MARRY BARRA: Obviously, that's the situation right now. But when we look at the long-term, this does not change our strategy one bit. We're going to continue creating solutions that customers are going to want.

GLINTON: How do car companies avoid falling into a trap of only giving customers what they want right now?

SERGIO MARCHIONNE: Oil prices matter to a point. They will not change our posture.

GLINTON: That's Sergio Marchionne, the head of the Fiat Chrysler Group. Chrysler certainly does benefit now from low gas prices. Sales were up for the company last year by more than 40 percent, mainly on the strength of SUVs and trucks. But remember - the car companies were reliant on trucks and SUVs the last time there was a major gas price spike. That's part of what led General Motors to the point where they needed a bailout, and Chrysler needed its second. So how do we know that Chrysler won't come back asking for more?

MARCHIONNE: I'm not going back for any third time. I guarantee you. I think we've all learned from 2009 how not to drink at the bar.

GLINTON: Part of what's keeping the Detroit carmakers from bellying-up to the bar again is that the government has set tough fuel economy standards. Here's Michigan Senator Democrat Debbie Stabenow.

SENATOR DEBBIE STABENOW: We have new fuel efficiency standards that require them to keep moving forward. The industry is meeting that, and I think we'll beat that with American ingenuity. So I'm not worried about them falling back.

GLINTON: 54.5 miles a gallon by 2025 - those fuel standards are the stick - pardon the cliche - that Congress and the president is holding over the industry. They don't just require the companies to make fuel-efficient cars but sell them as well. Car makers are trying. GM has hybrids. Chrysler has diesel options. Ford is using lighter materials. The companies are doing it in part because they have to. Ford's new CEO Mark Fields says customers may want bigger vehicles now, but...

MARK FIELDS: Customers still want great fuel economy no matter what vehicle they have because I think consumers are smart these days. They know at some point gas prices are going to go up. It's going to be really important for us to achieve the country's goals - is to have consumer acceptance around new technologies like electrification.

GLINTON: But this is the thing you hear almost everyone in the industry worrying about openly or in private.

FIELDS: The consumer acceptance of electrified vehicles is still relatively low, despite the proliferation of models that are out there. Right now, that's an issue.

GLINTON: The poet T. S. Eliot famously wrote, and the end of all our exploring will be to arrive where we started and know the place for the first time. Hmm. Maybe he covered the auto industry. Sonari Glinton, NPR News, Detroit. Transcript provided by NPR, Copyright NPR.