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Detroit Markets Smaller Cars For High Gas Prices

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Detroit Markets Smaller Cars For High Gas Prices


Detroit Markets Smaller Cars For High Gas Prices

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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And the cost of a college education isn't the only thing going up. Try buying a tank of gas. A gallon of regular unleaded has topped $3.55. Rising gas prices don't just affect how or how much Americans drive, they could affect what Americans drive.

NPR's Sonari Glinton reports on what that means for the recovering U.S. auto industry.

SONARI GLINTON: The American auto industry is very different now than the last time gas prices took a steep climb. To find that out, all you have to do is go on a test drive of a brand new car.

Mr. LEW ECHLIN (Group Marketing Manager, Ford Motor Company): Let's get you behind the wheel.

GLINTON: All right. Let's, all right, so...

Mr. ECHLIN: Do you actually want to drive or do you want to be a passenger?

GLINTON: I want to drive if that's all right.

Mr. ECHLIN: OK. And I'll hold the mic.

GLINTON: Yeah, you can be the interviewer.

Mr. ECHLIN: Excellent.

GLINTON: Lew Echlin is one of three Ford executives, who on a rainy day, went with me on a test drive of the new Ford Focus. It's a compact car that comes with all the bells and whistles: navigation system, moon roof, leather seats, 11 different sets of rims, no spinners yet. It's the kind of car none of the U.S. automakers made very well, if at all, a few years ago.

Mr. ECHLIN: What we're finding is customers are paying higher transaction prices for nicer cars. And so, we're making vehicles that we've invested mightily in technology and fuel economy and as a result, we are...

GLINTON: This must be, like, the worst road ever.

Mr. ECHLIN: I think you did pick the worst road ever.

GLINTON: Ford has the Focus and Fiesta. General Motors has the Aveo and the Chevy Cruze, and Chrysler will soon get the Fiat 500. All are small cars with high fuel economy. And each of them can be tricked out to your heart's content. Not like the old econo-boxes.

And slowly but surely, Detroit is shifting its attention from SUVs to cars. For instance, in 2004, 65 percent of vehicles Ford sold were trucks and SUVs. In 2011, that number dropped to 40 percent. So, as gas prices go up and people begin to look for more efficient cars, Echlin says...

Mr. ECHLIN: We're prepared for it. And I think largely, the industry has been prepared for it. Not to toot everybody's horn, but corporate fuel economy has gotten generally better.

GLINTON: Michelle Krebs is an analyst with She says with the high cost for pensions and retiree health care, the Detroit automakers could not make real profits on anything but big cars and SUVs. But that was before the recent bankruptcies and restructuring.

Ms. MICHELLE KREBS (Analyst, All of the automakers - Ford, General Motors, Chrysler - pushed their break-even points way down. And so they're much more able to weather downturns, whatever they're caused by - gas prices - than they were before, because they've cut costs so dramatically.

GLINTON: Nigel Gault is an economist with IHS Global Insight. He says while Detroit may be poised to handle a gas price increase, there is still the overall economy to think about.

Mr. NIGEL GAULT (Economist, IHS Global Insight): I think the big question is whether people who have jobs start to fear that maybe even though they survived so far, they might be at risk of losing their own job.

GLINTON: Gault says we're not at that point yet. But he says when consumers feel that gas prices could stall the economy, the first place they'll cut back is big-ticket purchases such as cars. It may not be a fatal blow, but it'll still hurt.

Sonari Glinton, NPR News.

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