Big Three Troubles - a Petite History

Back in the heyday of General Motors the life expectancy of a new car was about 100,000 miles. It was a big deal when the first 5 year-50,000 mile warranty was announced. Today, 10 year-100,000 mile warranties are not uncommon and cars survive a half-million miles of use. It is is curse of Japanese (and to a lesser extent German) engineering.

When GM was king, planned obsolescence was a profitable business model. The customer could be counted on to return every couple of years for a new car because the old one kept breaking down. Auto dealers actually counted of repeat business. Then the Japanese began flooding the market with cars that routinely ran well for decades. To compete, American automakers had to manufacture cars that didn't break down after a handful of summers. The reason truck sales became a large and large percentage of American automakers books is because people who bought pickup trucks and SUVs were the last of a dying breed. They still needed to have the best and newest each year regardless of the need, regardless of the price. Call is psychological obsolescence.

With this epic economic downturn people are not only deciding they are going to have to keep their current car for a decade or longer, they have realized that they can. The cars are built to last that long. So people have stopped buying new cars and will probably not buy another car until the economy recovers sometime in the 2020's.

The resulting inventory glut is massive. Every manufacturing plant producing cars for the American market could shut its doors tomorrow and keep them closed until 2010 and it would still not be enough time to completely draw down the inventory backlog. There are big SUVs sitting on lots today that will probably never sell at any price. Some automakers will certainly survive but I can't see any of the American Big Three being among the survivors.