Detroit Automakers Return to Washington with New Rhetoric But No Real Changes
“SUVs will go the way of the dinosaur. Cars will be smaller but still possess luxury interior elements. High mpg, safety and reliability, will be important at all price levels.” – From my August 28, 2007 post, “Time to Clean Up: Saturn in Virgo (September 2, 2007 – July 21, 2010)
As the leaders of the “Big Three” U.S. automakers make their second visit to Washington, it seems that they still refuse to acknowledge the primary reasons why their companies are in trouble. Driving to the Capitol in their hybrids and taking a $1 a year salary are gestures to appease members of Congress. But are the U.S. automakers really willing to give up their SUV gravy train and compete head on with the Japanese in small and midsize high efficiency cars?
“Throughout the 1990s and into this decade, we became increasingly dependent in the U.S. market on trucks and large SUVs, which were in heavy demand by consumers and generated large profits. Many of our competitors, both foreign and domestic, likewise followed market
demand and added more truck and SUV products to their lineups. Our focus on these vehicles, however, left us exposed in the event of a market shift to smaller, more fuel efficient vehicles. Although we believe that the shift to smaller, more fuel-efficient vehicles is permanent, trucks, vans and SUVs will continue to be an important part of the North American market.” –Ford Motor Company Business Plan submitted to Congress on December 2, 2008 (bold emphasis mine)
The first thing that any business needs to understand and plan accordingly for is product cycles. The rise and fall of the Sport Utility Vehicle (SUV) correlates to the transit of Pluto in Sagittarius (1995-2008). Ruled by Jupiter, the enthusiastic fiery energy of Sagittarius likes living large and in the moment. Sagittarius is casual and sporty, loves to travel and needs space to haul around their stuff. While jeeps and other SUV-like vehicles existed prior to 1995, the transit of Pluto in Sagittarius drove the trend for bigger “trucks.” SUVs are primarily an American phenomenon as the USA’s “personality” is Sagittarius and therefore Jupiter-ruled. SUVs really flourished and grew in size after Pluto in Sagittarius entered the first house of the USA’s horoscope* in September 2001.
SUVs were such a gravy train for the U.S. automakers that they ignored making quality, fuel efficient and cost competitive small and midsize cars. The cost of crude oil and other commodities began rising in 2003 when Uranus (price spikes) entered Pisces (oil; market bubbles). At that time it didn’t matter as Alan Greenspan was keeping Fed funds at 1%. Credit and lending was E-Z, resulting in overpriced homes and vehicles through “wealth extraction” from one’s home (as long as it continued to increase in value). Housing prices peaked as Saturn ended its sojourn in Cancer (real estate) in July 2005, a transit that began in June 2003. The credit bubble began to pop on Wall Street in the summer of 2007 after Saturn in speculative Leo completed a series of oppositions to Neptune (credit; planetary ruler of Pisces) that began in August 2006. Commodity prices really began to rise after Saturn entered efficient and price conscious Virgo in September 2007. Suddenly it was not as much fun driving around in
a vehicle that was eating gobs of money at the gas pump. With expansive Jupiter constricted in Saturn’s ruler Capricorn and Pluto also making an appearance in earthy and practical Capricorn during the first half of 2008, the trend had definitely drifted to smaller, more fuel efficient, and “greener” cars.
Even though gas prices are at least half of what they were at the July 2008 peak, the current planetary energies reflect the SUV/big vehicle trend is over. Not only did the Big Three not have the right product mix to reflect the new reality, they weren’t prepared for the housing slump and credit tightening that makes their vehicle prices unaffordable. Yet they still advertise an SUV that few people today under current credit conditions would be able to obtain a loan or lease for. And how many people could come up with the cash to buy it even after their “red tag event” discount:
Price Details from a GM advertisement on the front page of The Wall Street Journal on November 22, 2008:
2008 Cadillac Escalade: $69,515 MSRP
$64,260 YOUR PRICE
-$6,750 CASH BACK
$57,510 RED TAG PRICE AFTER ALL OFFERS
$12,005 TOTAL VALUE FROM MSRP
The Pluto in Sagittarius era of oversized and overpriced vehicles is over and no amount of government financing will bring it back. Price matters, but again, Detroit seems to be clueless.
Here is the base price of GM’s Chevy Malibu and its Japanese competitors (prices obtained from the automakers websites):
Chevy Malibu $22,275 ($29,145 fully loaded)
Honda Accord $20,775
Toyota Camry $19,145
The price gap is even wider when you factor in that the Malibu’s Japanese competitors have higher residual values even before Detroit’s troubles became acute.
Detroit’s foreign competitors have not been immune to the downturn in auto sales. They too got into the SUV/big vehicle game to be competitive in the U.S. market. Financially strapped consumers are not going to buy a new vehicle unless they have to. And millions of people do not need to buy a new vehicle because after several years of auto buying, they’ve got a new or fairly new vehicle already parked in their garage.
My next post will focus on the Big Three’s plans and their prospects from a planetary perspective.
*The USA was born on July 4, 1776 at 5:10 PM LMT in Philadelphia, PA. Sagittarius was the sign on the eastern horizon which is the first house of the horoscope representing the country's outer personality and physical appearance.
Posted 12/03/2008 10:55:00 PM