The Next Auto Shakeout

Is there a problem with the cars? They may not be outstanding but they aren't terrible. The hot versions of Mitsubishi's Lancer are favorites of the pedal-to-the-metal set. Consumer Reports recommends one model each of Mitsubishi and Suzuki.

So what's their problem? Mitsubishi never recovered from a disastrous attempt to grow sales with what was a "subprime mortgage stunt." They "sold" cars to people who couldn't afford them and didn't even have the money for a down payment.

Suzuki makes small cars and while you might think that should be good today, they just may be too small for this market. This year Suzuki's also been hit particularly hard by a lack of dealer financing.

How long can these two afford to stay here? It really doesn't do any good to ask an auto company if it is going to close down. Every dealer seems to have a son-in-law who is a lawyer, and let a company abandon the market and there's a lawsuit. The usual technique, seen since Studebaker went down in the 1964, is to slow down, offer fewer models and let the business disappear, and finally announce that it's done its best but there's just no business.

Two others on the endangered list are Swedish Saab and Volvo, which is particularly sad. Saab sales were down to 5,000 in the first half. Personally, I love Saabs. Consumer Reports recommends both cars (the 9-3 and 9-5). But Saab was bought by GM, probably the worst thing that can happen to a car company--except to be bought by Ford, which is even worse. Saab has been sold to a Swedish carmaker but survival still is a question.

Volvo is even sadder. I believe Volvo makes some of the finest cars sold here--strong, safe, powerful--but Ford bought it and has never been able grow the business. Sales in the U.S. were just under 30,000 for the first half. Ford is trying to sell Volvo and apparently has been talking to the Chinese, not a good sign for Volvo.

There are other weak brands, but weak doesn't always mean endangered. Toyota's youth brand, Scion, is a disaster right now, only 26,000 sales in the first half. But Toyota can keep it going.

Can the endangered car companies hang on until business turns up? As long as someone can make up for the losses, yes. But recovery could be slow--years slow. Business after the worst year before this, 1991, was recovering for eight years.

Of course we have been talking about entire companies leaving the market. Brands are going too. GM is killing Pontiac and killing or selling Saturn and Hummer. Ford says it isn't killing Mercury, but they don't seem to be trying too hard to keep it alive. There is talk of new entries, from India first and perhaps someday from China. But so far, it's just talk.