Detroit Bailout; Don’t Forget The Demand Side

 

Gas Prices

You cannot listen to the radio, watch TV, or read a paper and not hear about the Detroit Bailout issue.

Even the blogosphere is adding their points;

Mark Cuban, Ron Ulrici , Jody DeVere, Tim Walker and probably hundreds more.

But all the rhetoric looks only at the supply side, or the manufacturing side.

Its Supply and Demand

Last spring GM was quoted as saying that even with incentives, they could barely sell small cars such as the Chevrolet Cobalt

Then gasoline hits 4 dollars or more per gallon, the Honda Civic became the best selling car in the US.

Then October and November of this year, 2008, gasoline prices fall back down to $2.00  or $2.50 per gallon, the Ford F-150 full size pickup is back at number 1.

Every type and size of vehicle lost sales as this financial crisis has worsened, but the segment that fell the least was the full sized SUV.

Pavlovs’ Dogs

If you have the option of selling a cup of coffee for .99 cents and making a couple of pennies off the top, or selling that coffee for 4 bucks and make boatloads – what would you do?

Ring the bell, get a treat

Absolutely no plan, no bailout, no restructuring will work if the demand side of the equation does not change.

So spend the money on the bailout.

Then add 30 cents a gallon as a gas tax.

The bailout will be paid for in no time by people who insist that they need a Lincoln Navigator or Hummer to shop at the mall.

All references were from the print edition of Automotive News

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Photo Credit; Chip Bennett