On more than a few occasions, numerous people recently have accused Detroit of building cars Americans don’t want. People are blaming Detroit’s choice in car production for their desperate position.

Bullocks!

There are many reasons the Detroit Big-Three are failing. However, they have build exactly what Americans WANT. Note the word choice. WANT. Americans have a love affair with large trucks and fast cars. Cars like the Ford F-150, the Ford Mustang, Cadillac Escalade and Chevrolet Corvette are the American cars people WANT. They are stylish, reliable, fast and are enjoyable cars to be in. In the past 15 years the American car companies have realized they need to compete on a reliability level with Japanese automakers becuase that’s what American’s started to value in a way they never had before. However, as gas prices started to rise and the economy started to take a nose-dive, Ford, Chevy and Dodge started to build cars like the Chevy Cobalt and Ford Fusion hybrid get over 30MPH and are as reliable as their Japanese counterparts. Even their styling is starting to come along. So, why is GM, Ford and Chrysler are in such dire straits?

The simple answer is labor unions and the huge liability of unions and their pensioning system. Almost $1500 from every car goes to pay for liabilities for employees that no longer produce cars. The complex answer has to do with generally poor judgement about labor contracts and leveraging credit beyond what was reasonable for an auto manufacturer. Poor mangement decisions from a group of people who thought the car business could continue this unlimited growth have put the companies in a bad position. So, what do you think? Do American car companies make cars people want? Am I totally wrong?

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For some time in the US, cars that can’t achieve a certain level of have what’s called a gas guzzler tax. It’s a somewhat reasonable tax if you want people to think green. However, a small tax is a small price to pay when you’re dropping $100,000+ for a brand new Mercedes-Benz CL63 or a $250,000 Ferrari <insert fast car here>. For those countries who have yet to mobilize via cars like the USA (China for example), the government is able to impose slightly more draconian taxes without backlash from the general population. Though I can’t say I agree with the government dictating what people’s behavior should be, it’s a more than effective method to take the “green” road. Here’s an example of some of the “tax reform” levels Chinese car buyers will see:

Engines smaller or equal to 1.0l - 1%

Engines over 1.0l but less than 2.0l - 5%

Engines over 2.2l but less than 3.0l - 9%

Engines over 3.0l but less than 4.0l - 25%

Engines over 4.0l - 40% 

While I applaud the Chinese for good intentions, you know what they say about good intentions. What about cars like the Chevy Corvette that gets mileage as good as any V6 sedan out there? What about engines that are turbo or supercharged? There is no final formula for the perfect way to tax cars. So, B+ for creative thinking and “good intentions”. F for execution. I just hope that American creativity and entrepreneurial spirt will yield a more reasonable solution to incentivizing small, efficient cars.

Source: China Car Times