- - Tuesday, December 4, 2018

ANALYSIS/OPINION:

General Motors is gradually disappearing — like a block of ice on the hot pavement of an August day.

Recently, it announced a fifth major round of layoffs in 14 years. Eight thousand salaried and 5,700 production employees, as it shutters plants making the storied Chevrolet Impala and five other sedans and withdraws to mostly specializing in trucks and SUVs.

CEO Mary Barra says she wants a more agile company capable of moving aggressively into electric vehicles, hybrids and self-driving platforms. The truth is that Japanese automakers can sell sedans at a profit but GM can’t.

Five years ago, sedans were half of U.S. auto sales, but those now capture only about 35 percent. And all the major automakers must grapple with the plateauing of annual U.S. light vehicle sales a bit more than 17 million.

SUVs are bigger and more expensive, but improvements in the engine and vehicle design have greatly reduced the gas mileage penalty imposed on drivers who choose those over sedans. And vehicles of all kinds are more durable these days.

Thanks to advances in metallurgy, fuels and lubricants — these industries are more high-tech than most folks recognize — and better design, engines last a lot longer now and run more than 200,000 miles as compared to half that a few decades back.

Consequently, car buyers are paying for the gas and keeping vehicles longer to compensate for higher SUV price tags.

Options like Zipcar and Uber, inexpensively delivered meals and groceries and Amazon Prime free more young people from the necessity of car ownership. Increasingly, those living in cities and congested close-in suburbs with access to decent public transportation for commuting are opting to skip car ownership.

Still, the battle for the sedan and smaller SUV markets indicates just how vulnerable GM and Ford remain to more agile foreign competitors. Since 2015, sales of Impalas and Fusions are down about 49 percent and 45 percent, respectively, whereas Toyota Camry and Honda Accord sales are down only 20 percent and 19 percent.

Japanese sedans simply deliver more value, reliability and verve, and don’t think for a moment the problem does not repeat where car buyers are heading.

The three best-selling vehicles in America may still be U.S. pickup trucks — the Ford F-150, Chevy Silverado and the Dodge Ram — but those are followed by Japanese SUVs — the Nissan Rogue, Toyota RAV4 and the Honda CR-V.

Ford and Chrysler already announced they are effectively pulling out of the sedan market and with GM’s exit, Asian automakers and Volkswagen will have a clear path to most of the remaining 5 million sedans sold here. And those are often the first cars young folks own and a gateway for manufacturers to hawk their SUVs as careers mature and incomes rise.

The U.S. tariff on sedans is only 2.5 percent, but SUVs and trucks benefit from a 25 percent levy.

When announcing the recent jobs cuts, GM carped that the recent steel tariff was costing it about $1 billion, but I did not hear Mrs. Barra offer to give up her truck/SUV tariff if the steel duty was dropped — that’s the hypocrisy of Detroit.

It’s going to get worse — a lot worse.

Mrs. Barra is betting that electric vehicles and autonomous drive are coming fast, but GM has been late to the party with just about every major innovation that instigated change in what Americans buy since the 1970s. Chrysler pioneered the minivan and SUV and Honda, Toyota and Nissan contemporary front-wheel drive, hybrid and all-electric vehicles.

GM’s primary expertise, like the other American carmakers, is in the internal combustion engine, transmissions and to some extent the effective use of metals and plastics, aerodynamics and general platform architecture.

As Tesla recently demonstrated, the latter are easily copied even by novices, and GM, Ford and Chrysler have to buy knowledge where it counts — electric motors, batteries and various forms of artificial intelligence software — either through vendors or pricey acquisitions.

It is important to remember that the carriage companies of the 19th century generally did not become the modern automakers — those emerged from younger, less hidebound companies.

Google’s Waymo is introducing its autonomous drive, ride-hailing service, similar to Uber, in Phoenix, and it has frequently been out in front of established automakers.

Don’t put your mother’s pension, or yours for that matter, in GM stock.

• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.


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