Auto profits ride on cuts as much as sales

Jeff Tyler Apr 3, 2012

Jeremy Hobson: After a house, the most expensive thing most Americans will buy is a car. And today, we’re going to find out how many cars Americans bought last month in the face of rising gas prices.

Here’s Marketplace’s Jeff Tyler.


Jeff Tyler: Consumers may be buying more hybrids and smaller cars, but it’s probably not any kind of lasting trend.

Eric Noble: There’s no correlation mathematically between the sales of a vehicle in a segment and its fuel economy.

Eric Noble is an auto consultant with Car Lab.

Noble: If the widely reported shift to small cars had really happened, Fiat would be in great shape and they’d be sold out of Fiat 500s. They’re not.

He says consumers who bought hybrids were already planning to. Higher gas prices just provided that extra push.

More broadly, for the industry as a whole, sales are up. But David Cole with the Center for Automotive Research says better car company profits have more to do with cutting costs.

David Cole: Now the industry is profitable because of the massive restructuring that has occurred.

U.S. automakers have slashed employees, factories and benefits. If sales rebound further, Cole says the industry is poised to be very profitable.

I’m Jeff Tyler for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.