Say it Ain't So! Detroit Ignored Fuel Efficiency Demands, Says Ex-GM Economist
For years - and years, and years -automakers in the U.S. insisted that their studies showed that Americans didn't value fuel economy and preferred those fuel-swilling (and profitable) SUVs and pickups over gas-sipping compacts.
But that's not so, says former General Motors economist Walter McManus, now a professor and head of the Automotive Analysis division of the Transportation Research Institute at the University of Michigan.
GM often received outside data in the 1990s showing that people wanted fuel economy, McManus said in an interview with subscription-only Energy & Environment News.
McManus just as routinely dismissed them.
Disbelief
"The survey would estimate that people would estimate fuel economy fairly highly," said McManus. "Being a good economist, I said, 'No, they don't,' and I changed the results."
He said he did not believe the surveys because the preference for fuel economy they were showing was out of line with industry beliefs about consumers' preferences.
Economists within the industry, McManus said, were operating under the theory that they understood the market so the surveys couldn't be correct.
"It's my fault they had the wrong vehicles until now," he quipped in the E&E News interview.
Disconnect
And it wasn't just McManus. "There was a systematic bias against such results," he said. "Our job was not to seek the truth, but to justify decisions that had already been made."
Those decisions, he said ""are being made by upper-middle-class white males, by and large. They don't understand that the customers are not the same as they are."
McManus' comments came in an interview about a new fuel efficiency report, issued last week by Citigroup, that says the new federal CAFE standards for average fuel economy - 35.5 mpg by 2016 - will benefit the auto industry as well as consumers.
The former GM economist was lead analyst for the study.
Consumers would benefit from fuel savings, the study found, but automakers would benefit by producing vehicles "that everyone wants."
Discovery
The report projects that profits for Ford, GM and Chrysler would increase by a combined total of $3 billion a year from selling more-efficient vehicles, while Japanese auto companies' collective profits from U.S. sales would rise by just $800 million a year. That's because the Japanese already sell fairly efficient autos and wouldn't see as much of a sales volume gain as would the U.S. automakers.
McManus said that once the market offers a wider selection of more fuel-efficient vehicles, consumers will come to realize that they want them.
"People have a hard time thinking about their fuel savings," he said. "It's hard for people to understand the abstract, that a mile per gallon means this many dollars saved every month. But if you actually start experiencing by driving the vehicle, then you understand it."
Demand
And when the industry is producing the vehicles that people want, he said, the rules of supply and demand mean that they can charge more for the cars and trucks that meet that demand.
The Citigroup report cites the U.S. automakers' steady market share loss over the past decade while competitors from Japan and Europe that offered better fuel efficiency saw sales here grow substantially.
While SUVs - the forte of American auto companies - held a big chunk of the market in the '90s, the report says sales were inflated because manufacturers artifically lowered prices to keep the volume pumped up.
- Posted by
- John O'Dell October 21, 2009, 12:22 PM
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- Fuel Economy, General Motors
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- Fuel Efficiency
Plausible. If you believe it, it's kind of sad. We the taxpayers are helping two of the big 3 out... and why? Because their analysts willfully ignored results that didn't agree with their narrow-minded view of the industry? If you believe it.
....and in other news....
I think people always want higher fuel economy. But I think maybe it's taken out of context.
For example, if Joe wants to buy an SUV and one of them gets 15 MPG and the other gets 18 MPG and both fit Joe's needs, he will most likely get the 18 MPG one. But to say that Joe would get a 40 MPG economy car instead of a 15 MPG SUV is a bit of a stretch.
So, saying that Americans would rather all be driving around in high mileage cars but couldn't because Detroit didn't build them implies that we as consumers had nothing to do with it. Which is a load. At the end of the day, if a company wants to make money, they build what people want to buy, period. Gas was super cheap and consumers made a conscious decision to buy their SUVs and trucks.
I worked as an engineer for the industry for the past 10 years, and I know for a fact that they ignored the customers (hence bankrupt failed business model). Not only did they shoot themselves in the foot, the worst part was how the whole thing was a repeat of the 70's and early 80's. And don't be fooled, their woes are not yet over, because by-in-large, the same guys are still in charge, and still making the decisions, those that vocally opposed the collective suckfest of the last ten year death-spiral were pushed out, so who's left? Michigan has the best Automotive Engineering Schools in the world, and almost singled handedly developed all the key technologies for hybrids in the 80's and 09's, but these same students were sidelined by the Big 3, because the economist was making the decisions.