Almost Made It

December 1st, 2008 by Potato

When I first “made up my mind” to buy a Prius (in quotation marks because I obviously don’t have a Prius in my driveway now, so my mind couldn’t have been that made up), it was because my car had been stolen and even though it was recovered it wasn’t pleasant to drive anymore — I was constantly reminded of the violation. It was also because it was 10 years old and starting to act its age. In 2006, it incurred over $4000 in repairs, and I really doubted it was worth that much in the first place. In 2007, another $1000 in repairs, plus an estimate for $700 in repairs that I decided to defer (good choice so far — both those parts are still going strong). 2008 however has been fantastic. Repairs so far haven’t broken $200 (not counting scheduled maintenance), and I was starting to think that my car was getting through it’s mid-life crisis and I might be one of those Honda owners who gets 15 or 20 years out of their car. I was getting so hopeful I even took the down payment I had saved up and put it in the market.

Unfortunately today I took my car in to the tire shop for a routine rotation + alignment, and they said they “weren’t going to waste [my] money with an alignment — your lower ball joints are loose and it’s going to be $550-$600 to repair”. Now I’ve known for a little while that some suspension work was coming for my car. In the summer it’s fine, but it makes a heck of a squeak going over all the potholes in the alleyway once the temperature dips below zero, so I suspect that once they start looking closer at the ball joints they’ll find double that amount of repairs to do.

Oh well, if it’s not repairs on an old car, it’s payments on a new car, and I can at least console myself with the fact that if the depression does hit, I can always park the car and not pay for repairs, but if I were to get another one I’d have to pay the loan off no matter how much I avoided driving.

It looks like a lot of people these days are choosing to keep their cars longer. It doesn’t look like the amount people drive has changed all that much, but new car sales are way, way down, leading to the Detroit 3 to look for handouts/bailouts. It’s amazing how much they’ve shot themselves in the feet over the years with cheap credit and leases. As Derek DeCloet points out in a recent Globe article:

“The Detroit Three spent years training their customers not to buy vehicles without a subsidy – usually in the form of 2-per-cent or zero-per-cent loans. They also taught them not to bother saving for one, because no down payment was required. (Your columnist, when buying a Pontiac Vibe five years ago, was practically admonished by the salesman for putting $2,000 toward the purchase. Didn’t I have a better use for the money, he wanted to know?)”

So with the days of a zero-down lease/financing over with, it’s going to take time for new car sales to come back because people are going to need a few years to start saving up for those down payments again. On top of that, the Detroit 3 have been existing in this perverse parallel economic universe for some time now: their quality has been coming up, but mostly when measured by short-term surveys, “initial quality”, etc. The perception that their quality, especially the long-term reliability, is still low, and so for the most part they compete based on price. However, they don’t have the advantage in terms of margin AFAIK: their labour costs are higher, their “legacy” costs are higher, and for GM in particular, they have a lot of duplication selling the same crap in a ton of very slightly different trims under different badges. That’s a bad position to be in, and I’m actually amazed it lasted for as long as it did. Now with people suddenly interested in keeping their cars longer, and needing more predictability in costs (they can’t tap their HELOC for a costly surprise repair) long-term quality is going to play even more of a factor.

This is again a spot where they have perhaps shot themselves in the foot when it comes to their hybrid programs. The Honda system is simple: the belt-and-cone CVT may be fragile (we’ll need some time to see if that’s really the case), but the hybrid implementation is very simple, and will actually work on engine power alone even if the motor/battery dies (though the engine is perhaps more likely to die than the motor — and given that we’re talking about a Honda engine, that’s not likely). The Toyota/Ford system has been poo-pooed all over for requiring the battery to work to run, but beyond that it’s actually a pretty elegant transmission system that should be quite durable. The only issue I’ve heard with it is that it might not have sufficient cooling, which might be one reason why you’re not supposed to tow with a Prius (note that you can tow with a HiHi or FEH). The system GM developed, it’s “two mode transmission” is like two GM transmissions frankensteined together, with four clutches throughout (I am lead to believe that the clutch is a common point of failure in GM transmissions). It’s a system designed primarily for large trucks (the Tahoe hybrid and Escalade hybrid), which indicates that clearly GM was hoping to continue marketing large trucks based on <5 years of ownership even in a future where a hybrid system was deemed necessary. At the same time, GM and Ford stopped making minivans, so if/when those soccer moms who “need” 3rd row seating want something that sucks a little less fuel, they’ll go to the competition for a minivan.

I’m pretty sure that just because of how many people are employed by the automakers and their sub-industries that they’ll get a bailout from governments — the American government if not ours — but I hope that they actually manage to change into companies that can compete in a world of high gas prices and tight credit. I hope it’s not just going to be used to supply their burn rate for another 6 months or a year when they’ll be back in the same position. I also hope that Toyota and Honda — who are equally foreign automakers in Canada and who also employ a lot of Canadians — don’t get completely screwed by the bailouts.

One Response to “Almost Made It”

  1. Ben Says:

    I heard an ad on the radio down here from a VW dealership that was offering 0% interest over 72 months and no payments for the first YEAR!