Automotive Industry Needs More Than Money, States Edmunds.com

[rickaren]

December 4, 2008

SANTA MONICA, Calif.--(BUSINESS WIRE)--If the Detroit Three receive a loan from the federal government, it could just prolong their lifespan without curing their illness, according to Edmunds.com.

“Getting the loan is an important first piece of the puzzle, but will not be enough on its own,” remarked Edmunds.com Chief Executive Officer Jeremy Anwyl. “There are other actions that need to be taken to preserve taxpayers’ investment in the automotive industry.”

Anwyl believes that legislators should take two additional steps once they finalize their decision about the loans.

First, they should create a stimulus to motivate hesitant car-buyers to re-enter the marketplace. Currently, every automaker is suffering as car sales in the past three months have slowed to a pace not seen in 25 years. At this sales level, no automaker is viable, and does not represent natural demand for the country’s size. Pent-up demand is building, but most consumers need encouragement to look beyond the financial crisis before making a big-ticket purchase like a new car. Even modest encouragement from the government could go a long way.

Secondly, legislators should implement a coherent energy policy that helps to shift consumer demand to more fuel-efficient vehicles. Automaker incentive trends and Edmunds.com Web site traffic patterns clearly indicate that interest in large SUVs and trucks return when gas prices dip. If domestic automakers are expected to convert their fleet to smaller, more fuel-efficient vehicles, there must be support for influencing widespread and consistent consumer demand for such vehicles.

Edmunds’ AutoObserver.com Editor Michelle Krebs pointed out, “Now that gas prices are remarkably low, there is no need for automakers to spend quite as much on incentives for large trucks and SUVs. Even the Japanese automakers, which are boosting incentives on most vehicles, recognize that they can reduce incentives on their large SUVs and trucks without impairing consumer interest.”

LINK:Automotive Industry Needs More Than Money, States Edmunds.com