Gasoline prices rise; this time, industry is ready

Three years ago, when the price of gasoline shot past $4 a gallon, Detroit's automakers were trapped. This time the Detroit 3 are in a better position.

GM

Three years ago, when the price of gasoline shot past $4 a gallon, Detroit's automakers were trapped.

They couldn't give away the boatload of trucks that had long been the bread and butter--and profit generators--of the Detroit 3. With gasoline prices rising and with scant offerings in the small-vehicle segment, Detroit's sales plunged even before the financial crisis invaded in September 2008.

Last week, oil passed $100 a barrel, and gasoline prices rose to $3.50 a gallon in some markets. This time the Detroit 3 are in a better position to make money and not give away cars.

Another way of looking at it: the price of a barrel of oil has caught up to the industry's new-found capability and efficiency.

From the Chevrolet Cruze to the Ford Fiesta to the upcoming Fiat 500 and recent and coming hybrids, there are plenty of fuel-efficient alternatives in multiple segments from many automakers. Everybody, not just Detroit, is emphasizing fuel economy, and "40 mpg on the highway" has become the new industry catchphrase.

A big winner in the new strategy is Ford, which made a decision to downsize its engines and shrink its lineup with fun-to-drive cars. Ford's product position has ratified CEO Alan Mulally's strategy to offer a fuel-efficient vehicle in nearly every segment.

Some questioned Mulally's vision to transform a Michigan factory that once produced profit-rich Expeditions into a factory that produces multiple versions of the Focus small-car platform. Right now, that decision looks pretty good.

The industry, as a whole, is on the right track. And the price of oil no longer is an inverse indicator of Detroit's future.

(Source: Automotive News)

 

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