Car Companies On Gas Prices: 'This Isn't 2008'
DETROIT -- (WWJ) The rapid rise in gasoline prices is causing some concern in the auto industry. But there is also a feeling the industry is in a far better place than it was the last time fuel prices spiked.
"We are in a different place than we were in 2008 when gas prices went up," said Edmunds.com analyst Michelle Krebs. "The economy was in a decline then. There weren't the choice in vehicles that there are now."
The latest AAA fuel survey puts the average prices of a gallon of gasoline at $3.57 nationwide. That's a .40 cent increase in the past year.
Some oil analysts have predicted a gasoline price of $4 to $5 a gallon over the summer, and say gas prices could go higher if tensions in the Middle East rise higher.
CNW Market Research, an Oregon firm that surveys car buyers, said rising gas prices are again on their minds.
"The concern here is that data suggest that consumers are finding $4.50 a gallon gasoline a breaking point for family budgets," read a bulletin from CNW President Art Spinella. "More than 80 percent of general consumers say they would postpone any new vehicle acquisition if gas hits that figure."
Edmunds analyst Krebs says there is always a concern that higher gas prices could slow the recovery, or even pull the economy into another recession. But Krebs says an economic downturn would not hurt the auto industry in the same way it did in 2008.
"The big three have gotten their break even points to very low, where they can make money on very low sales," she said. "They've just cleaned up their balance sheets tremendously."
Another big issue is pent up demand. In 2008, the auto industry was coming off of several years when carmakers sold 16, even 17 million vehicles. In 2012, the industry is hoping to sell 14 million cars and trucks, which would be the most since 2008.
Data released by Polk shows that the average buyer now keeps their car six years. That's a number that jumped significantly during the recession.
"The last three years the length of ownership has increased by 11 months, or 23 percent over those three years," says Polk analyst Mark Seng.
Analysts say figures like that put make rising gas prices less likely to deter customers. And when those customers get into dealerships, they will find more fuel efficient choices.
Since 2008, Chevy has replaced the aging Cobalt small car with the popular Cruze. Ford has introduced the subcompact Fiesta, and greatly improved the fuel economy of the Explorer. Chrysler, meanwhile has revamped most of its product line, has launched the Fiat 500 small car, and is about to launch the new Dodge Dart compact.
We're also seeing the first electric vehicles, with plug-in hybrids coming, and more traditional hybrids coming.
"When gas prices go up, the equation for payback on things like hybrids, plug in hybrids, improves," says Krebs. "The economics of alternatives improve with higher gas prices."
Those who work in the auto industry say they will monitor gasoline prices, and adjust accordingly. And they also add that they are better able to make adjustments than they used to be.
"We clearly keep an eye on fuel prices," says GM CFO Dan Ammann. "But the strategy we've been following the past few years has been to really broaden out our portfolio, so that we a fuel efficient entry in every category."
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