It is no secret that Detroit makes its biggest money on SUVs and pick-ups. That is a huge problem. The US companies are launching smaller cars as fast as they can to try to bring in the consumers who want more fuel-efficient vehicles. But, the Japanese already have these cars in dealers, and they have had them there for years.
But, even if the Big Three can launch attractive, fuel-efficient sedans and crossovers, moving away from light trucks is going to hurt. The margins on $30,000 pick-ups are much greater than they are on $20,000 four-door cars. In other words, the change in product mix will hurt the bottom line.
That means that Detroit is facing a very tough storm. Vehicle sales in the US are expected to fall well below this year’s level of 16 million as 2008 comes around. Some pessimists put the domestic sales number for next year below 15 million. The would take about $25 billion of revenue out of the US car market.
Combine a multi-billion drop in sales with worse margins on the product mix and the Big Three resurrection will die early in 2008
Douglas A. McIntyre
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