Auto, Supplier Execs: Two-Dollar Gasoline Won't Help Auto Sales
November 13, 2008

By Bill Visnic

DETROIT - Automaker and supplier-industry executives and engineers speaking at the Automotive News Green Car Conference here said the recent retreat of fuel prices to around $2 per gallon has provided consumers' finances a little breathing room - but isn't going to do much for the embattled auto industry.

With gasoline prices beating a hasty retreat from the panic-inducing $4 levels attained earlier this summer (the Energy Information Agency said this week's national average for regular unleaded was $2.22), Sue Cischke, Ford Motor Co.'s group vice president-sustainability, environment and safety engineering, said, "We do think there's going to be a little bit of a rebound," for sales of pickup trucks. But small-cars sales have flattened along with fuel prices.

"Maybe we will never get back to where we were in the SUV market," Cischke continued, "but there will always be truck demand."

But despite the ongoing plunge in the global oil market driving prices to less than $60 per barrel from highs of near $150 per barrel this summer, Cischke and others at the conference here, including Michael Brylawski of the Rocky Mountain Institute, are convinced the shift in consumer demand will remain real - and permanent.

"The world is going (to) smaller (vehicles)," said Tim Manganello, chairman and CEO of supplier BorgWarner Inc.

"Our $2 per gallon doesn't mean anything, because it's a flat (U.S.) market," he said, adding that whatever growth is occurring in the auto industry is coming in Asia and other developing markets - places where fuel is expensive and always has been. That factor means there will be no slowing of development for efficiency-enhancing technologies.

In fact, several industry executives speaking at the conference here either directly or indirectly lobbied for a mandated "floor" on U.S. fuel prices that would help assure the industry - and consumers - doesn't backslide on efforts to improve fuel efficiency.

In today's political and financial climate, it obviously remains unpopular to suggest new forms of taxation, but that effectively is what the calls for a floor on fuel prices imply: a variable-rate tax that would assure gasoline and diesel prices never drop below a predetermined level.

Another speaker here suggests the U.S. consider a vehicle tax based on carbon-dioxide output, similar to that used in many nations in Western Europe. Since CO2 output is directly proportional to fuel economy, higher-consumption vehicles that use more fuel pay a higher tax than vehicles that get better fuel economy.

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