HOW HE SEES IT U.S. auto industry meets Gasoline Alley
By JOHN HALL
MEDIA GENERAL NEWS SERVICE
I remember standing in a hotel hallway in 1979 being lectured by James Schlesinger, then the Energy secretary for President Jimmy Carter, about the American belief in some constitutional right to cheap gasoline.
He told me that the 75 cents a gallon I had paid to pump low-test gasoline into my rusty Pontiac Tempest would not be the end of it.
How right he was. But the impact of the continued rise in oil prices has turned out to be a far more important economic story than he or anyone seemed willing to acknowledge then, or is admitting now.
Gas lines and shortages cast a pall over the national economy and helped sink Carter in his bid for reelection against Ronald Reagan. Now the gasoline price spiral is scarcely being noticed.
Gasoline prices averaged $1.46 a gallon for unleaded gasoline when Bill Clinton left office in 2001, according to the Energy Information Administration. They jumped up to a fraction over $3 a gallon last October, and then began declining the next month to $2.56. Private data indicate the nationwide average has started to rise again over recent weeks.
The price of gasoline doesn't seem to be affecting the overall U.S. economy, which is still galloping along on the strength of tax cuts and monetary policy.
But the oil shock certainly is having another kind of impact.
The upheaval in the U.S. auto industry continued last week when the great-grandson of Henry Ford, William C. Ford, Jr., announced that 14 Ford Motor factories would be shut down and 30,000 blue-collar jobs -- a fourth of the workforce -- would be trimmed.
That cutback, which matched earlier ones of similar severity by General Motors and Chrysler, had many causes, including labor contracts that paid workers for not working and medical and pension costs that crippled the U.S. automakers' ability to compete in the global market.
The biggest cause, however, may have been the explosion in world oil prices that has accompanied the war on terrorism and the invasion of Iraq.
Fuel-efficient autos
Japanese and other foreign automakers cleaned Detroit's clock in building fuel-efficient automobiles. Toyota started its Prius hybrid vehicle line -- right in time for the shock of the massive world oil price increases -- while Detroit was pushing gas guzzlers.
Detroit wasn't tone deaf. A retired auto executive explains that his business was building exactly what the marketplace wanted. Most Americans, for whatever reason, were shopping for SUVs, heavy sedans and muscle cars.
Study after study showed most people simply did not want small automobiles. And they did not want automobiles that ran partly on batteries and partly on gasoline, this former executive still insists.
Maybe so, but others say they have finally seen the light.
Dealer showrooms are bulging with unsold heavy sedans and SUVs; many of the plants that are being shuttered built gas-guzzlers; and Bill Ford said he soon may open a new auto factory that will be innovative and aimed at the small car market, like GM's not-so-successful Saturn project in Spring Hill, Tenn.
One reason no one wants to talk about gas prices is that it all leads to the same, lousy place that a lot of American voters don't want to go to: mass transit; high-speed rail, and small, fuel-efficient cars.
For a brief period during the Reagan administration, gasoline prices jumped from $1.24 in January, 1981, to $1.37 at the end of the year, and then sank to $1.21 in 1984 before plunging well below a dollar for the balance of his second term. Detroit went back to the guzzlers with a vengeance.
Some people say the muscle cars will be back at the first opportunity.
A recent news story about the recovery of a 1968 Corvette stolen from its owner and returned to him after nearly four decades is like True Romance to automotive fans. But for now, the harsh reality of Detroit's retrenchment has shoved the love affair aside under the pressure of an international oil squeeze.
X John Hall is the senior Washington correspondent of Media General News Service. Distributed by Scripps Howard News Service.