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Detroit automakers feel pain of gas prices

Ford, GM, and Chrysler are stuck with SUVs

Gas prices drain revenueOh, if only they had looked ahead.

Half a decade ago, the sport-utility craze was in full force. The three large automakers based in Detroit were reeling with delight, while their strategists were planning ahead for new and better SUVs and heavy-duty pickup trucks.

With Japanese automakers having spent the last few years focusing on more fuel-efficient vehicles and developing hybrid technologies, the US companies are feeling the disadvantage. Gas prices have nearly tripled in a few short years, and truck- and SUV-focused companies such as Chrysler are at a loss, literally. Chrysler reported earnings of less than $70 million for the last quarter, and they project losses in the hundreds of millions in the near future.

One might reason that the American companies should follow suit and begin producing smaller, more fuel-efficient vehicles. However, in order to stay competitive with the smaller cars, their profit margins will remain around one-tenth of the green gap with the larger trucks and SUVs. For that reason, it still doesn’t make sense financially to refocus their efforts.

While great fuel economy is simply not feasible at this point in the realm of large automobiles, the executives at the companies such as General Motors can find solace in the newer models of their vehicles being more fuel-efficient than previous models. It appears that they will hold their path, cross their fingers, and hope that consumers still have a place in their hearts for gas-guzzling beasts.

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Posted on Monday, July 31st, 2006 at 7:55 pm In Auto Warranty  


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