The Future Of Automakers And Gas

Gas is back below $3-a-gallon and thanks to new incentives, Americans are buying trucks again. This news comes as the Treasury Department turned down a request by General Motors to help finance the automaker's possible merger with Chrysler.

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ALEX CHADWICK, host:

From NPR News, it's Day to Day. U.S. automakers are reporting their October sales today, and the news could hardly be any worse. Ford says its U.S. sales are down 30 percent from one year ago. That's about the lowest level in nearly two decades. But buried in this data is a surprising trend, and it's this. Trucks and SUV sales appear to be making a slight comeback. Earlier, I spoke with Marketplace's Sam Eaton, who said that, indeed, fuel prices are the reason behind it.

SAM EATON: The national average price today for regular unleaded gasoline is at about 2.42 a gallon. And now, that's after peaking in July at $4.11 a gallon, so a big difference there. Definitely makes it a lot more palatable to fill up a big truck at those prices. I talked to David Brown with Automotive News, and he says, we're starting to see signs that America's love affair with these big trucks and SUVs may not be over yet.

Mr. DAVID BROWN (Writer, Automotive News): Nothing's booming. I mean, the buyer is sitting on his wallet, but the mix of what is selling at a very low rate is moving back toward looking a little more like the mix it was before gas was up to 4.50.

EATON: Now, this is especially true for large pickups, which are selling faster now than at any other time this year. And the key measure of loyalty among truck owners that trade in one truck for another is at its highest level in over a year.

CHADWICK: Yeah, so is this a short-term blip, or do the automakers really think that we're going to see a real longer-term shift back to trucks and SUVs?

EATON: Well, Alex, this, of course, all depends on what happens to the price of gas, which no one really knows. But the financial incentives are also playing a big role here. And as soon as all of these 2008 models are gone, and the fire-sale deals disappear, it's anybody's question. But with Ford recently announcing that it's going to re-hire more than 1,000 workers to speed up production of its new F150 pickup, there may be a longer-term trend at play here.

CHADWICK: That's just amazing. I mean, hiring people back for SUVs, it's not what you had expected six months ago. What does it mean for U.S. automakers as they invest in - really in smaller and more fuel-efficient cars, which is what we expected they'd be building?

EATON: Of course, and this is the multi-billion-dollar question here. Congress, of course, has required automakers to boost fuel economy by about 40 percent, regardless of what consumers and gas prices do. It's obviously a lot easier for the car companies to make that transformation and the investments involved if consumers are actually buying those fuel-efficient cars.

You have to remember that selling large trucks and SUVs is much more profitable than selling a small compact car. So, volume is key to the shift toward higher fuel economy. And even if the government pitches in with its $25 billion loan program for fuel-efficient vehicles, that's only a fraction of what's needed.

CHADWICK: OK. Thanks so much, Sam. Sam Eaton of public radio's daily business show, Marketplace.

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