Buckle up: We’re in for a bumpy ride in ’09

By Warren Brown

CORNWALL, N.Y. — There is no use waiting to exhale. The new years is going to be tough, too.

The only difference is that we’ll be absent the convenient fantasy that only American car companies are suffering in our collapsed economy, that they somehow have been peculiarly inept and thus especially deserving of punishment.

That much was made clear last week by Toyota’s announcement that it expects to lose money in its core automotive business in the fiscal year ending in March. That would mark Toyota’s first operating loss since 1938, a little less than two years after it rolled out its first production automobile.

Compared with the billions burned by Detroit’s car companies in recent years, Toyota’s projected loss of $1.66 billion in U.S. dollars is relatively small stuff. But Toyota’s now-smudged balance sheet supports an alternative, perhaps more accurate assessment of the problems affecting domestic automobile manufacturers in particular and the global car industry in general.

Put simply: The problem isn’t product quality or desirability. It is a lack of consumers with the confidence to buy. And, in the United States, it is the absence of an energy policy that would more sensibly lead the automobile industry and its customers to an agreement on what kinds of vehicles should be built using what kinds of fuel at what basic price.

Such a policy — whether it be a demand-tempering adjustment in federal fuel taxes or some other mechanism — would introduce much-needed stability to the market and help car companies better determine what to build and sell. If what they build speaks to the realities of the market in terms of fuel costs and environmental concerns, and if it does so in an attractive and innovative way, those new-generation vehicles could engender the kind of consumer excitement that ultimately leads to sales.

Immobile consumers

The problem now, according to executives at the Washington Area New Automobile Dealers Association, is that consumers are not just sitting on the marketplace’s fence. They’re stuck there — immobile, unwilling.

“Our local dealers have access to lines of consumer credit. But people are nervous. It’s hard to get them to come into the showroom to even ask about credit,” said Gerard N. Murphy, chief executive and president of WANADA, whose organization represents nearly 200 franchised new-car dealers.

Much of that consumer skittishness stems from the ways in which our politicians and business leaders have handled the nation’s current economic downturn — which is not terribly different from how they’ve handled other economic flops in the past.

Consider the most recent exam-ples:

UMortgage companies, banks and insurance companies get into trouble making ill-advised loans and engaging in other risky transactions. But the government bails them out with relatively little fuss. Meanwhile, foreclosure signs continue to go up on properties held by struggling working-class and middle-class families.

UCompanies announcing cutbacks — and they seem to be in every industry nowadays — usually start by trimming workforces, or by reducing salaries and benefits. That’s not exactly a strategy that gets people excited about buying cars.

UGasoline prices, nationally averaging $1.65 a gallon for regular unleaded according to figures released early last week by the Energy Information Administration, now seem like a cruel joke. At summer’s peak, pump prices averaged $4.11 a gallon for regular, wrecking lucrative truck sales by foreign and domestic vehicle companies. Gas is now more affordable. But more than a half-million people in the United States have lost their jobs since those pump prices fell. Many of those people are now in no mood to buy gasoline at any price, or to buy a new car or truck, fuel-efficient or otherwise, to put it in.

UIn the best of times, we’ve been less than realistic about how to move our nation toward greater fuel-efficiency. Our politicians and regulators tell the car companies to crank up more miles per gallon. Then they promise U.S. consumers that they will find a way to keep America pumping the developed world’s cheapest gasoline. And when their own domestic car industry is clobbered by economic circumstances beyond its control — the same circumstances squeezing Toyota and everybody else — our politicians hold fast to the fantasy that helping American companies has less to do with fashioning a thoughtful, consumer-oriented energy policy, and more to do with forcing the United Auto Workers to accept more pay concessions.

UAnd so it goes. The banks mess up. The mortgage holders get hurt. The bank tellers and loan officers get fired. Top executives mostly stay put. Companies lose money. Their employees lose jobs, or receive reduced pay and benefits. The auto companies get a bailout. The workers’ union effectively gets busted, forced to accept the generally lower pay of nonunion workers at foreign-owned rival companies. That means the nonunion employees at those rival companies are themselves unlikely to get a pay increase anytime soon, partly because their pay had been pegged to a pole once held higher by the UAW.

Are you getting the picture? All of the talk about making the domestic car companies “restructure” and become “profitable” and “viable” is nonsense — as much nonsense as returning Toyota to untroubled, long-term profitability — if we don’t get serious about putting people back to work and paying and treating them in ways that make them feel profitable and viable. That is the crux of the consumer confidence problem. Consumers feel put-upon. They feel downright suckered by their government, their financial institutions, their employers and their unions.

Consumers are fed up, and they’re just not going to buy it any longer. Until they start buying again, the car companies and the rest of the economy will be stuck in a mess.

Happy New Year.