A few months back Connecting the Dots wrote about the Detroit Canary syndrom saying it would be a predictor for the US economy. It would appear that the canary is now in intensive care. But in all this darkness there is a silver lining of sorts.
As grim and bleak as things look for Detroit’s automobile industry, there is a ray of hope down the road. If you have been reading along Connecting the Dots just finished a series called “Moving away from oil”. As you will note that series is all about future tense. What that means is the infrastructure for that still is sitting on some hard drive in an AutoCAD file. That does little good for today when Americans still need to get around.
There still is a need for cars, and people have just been putting it off for a variety of reasons. Typically Americans allow for car payments in their monthly budget. It runs a close second or third next to food purchases. However Detroit is not the top of the economic food chain, jobs with a future are.
At best the loans the US government is making to Detroit’s automobile industry are nothing more than an infusion of new blood. The wound has not stopped bleeding and to do that requires major restructuring and new fuel technology cars.
At some point the cars on the road new will reach the end of their useful life, and any amount of protein and fiber drink will not help nurse them along any further. Recycle, reuse and repair can only go so far. That is when cars will be purchased. Depending on the state of the economy at that point the purchased will either be new or used cars.
To see when that would happen would require knowing the age and milage of the cars on the road. That at best is hard to come by. Looking at dealership maintenance logs, state emission checking logs would be about the only semi accurate source. If Connecting the Dots were to look at past trends, few people will buy a car going into the winter months as there is just too much wear and tear on a car with sand, salt and whatever else is found on and in the road including potholes. So the second quarter has been historically a car buying time. Tax refunds tend to be applied as a down payment for many car buyers.
The second quarter should also have some of the new government stimulus under way with new jobs being created. However this will not be enough to get the auto industry out of the hospital. At best it may get them out of intensive care.
The most powerful medicine for the auto industry is throwing out the old school thinking and start the new school thinking. This is no easy task as said before. They must basically shun oil and focus on alternate energy, however they are already behind on the curve. Electric cars are fine around town, but have limited range making them undesirable. Adapting recharge on the fly technology as Connecting the Dots suggested in our Moving away from oil series would make the cars more marketable and less expensive to run. However as also noted the infrastructure for that is not in place and would take the better part of a decade to complete if they started this year. Short translation, the American auto industry is in for long term physiotherapy if they are ever to survive.