Our Nostradamus predicts the future
The ruse is obvious. Whether you be Nostradamus, the fortune teller reading palms outside a trendy night spot or the poor schmuck who has been conscripted to write the online horoscope, the trick is to speak in such fuzzy platitudes that no concrete argument can dispute your vague prognostications. Michel de Nostredame’s 16th-century prediction that we would be consumed by a giant war was hardly prophetic considering war was a constant part of medieval life. That we would be consumed by weapons far beyond those available in medieval times might have been genuine foretelling. Or it could have just been the product of an overly vivid imagination.
Specifying exactly what the future might hold, on the other hand, is almost a sure ticket to failure. Today’s best data can never take into account tomorrow’s random calamity, and though there are a few brave souls who made money during this last depression by hedging their bets, almost all would admit their brilliant fiscal forecasting was also luck. Trying to predict the future is always a great exercise forcing us to examine the past for clues of what tomorrow might bring.
1. Gas prices will rise My first prediction is the only one I can virtually guarantee will come to fruition. The worldwide price of gasoline will increase. That’s a no-brainer, I hear you saying. But it’s not the simple rise of the price of crude that’s important but how that increase will occur that determines its long-term effect on the automotive industry.
The two most recent spikes in the price of gasoline have been foretelling. When gasoline first rose past the magic dollar-a-litre mark in 2005, Canadian consumers were livid with panic and indignation. Newspaper headlines trumpeted the end of capitalism and even the disappearance of the automobile until prices retreated to a more manageable level.
Yet, since then, gas has pushed well past 2005’s highs with nary a whimper from those same consumers. Only when the $1.40 barrier was breached did their angst once again boil over and even then with far less alarm. If the recent past is any indicator, North American consumers’ agitation at rising fuel prices is a fleeting thing, causing momentary hysteria but quickly forgotten when the spike plateaus or recedes even slightly.
This could be bad news for the environmentalists. Virtually all proponents of the green revolution are counting on the high price of gasoline finally forcing North Americans out of their hulking SUVs into the cozy confines of subcompacts and hybrids. But, as recent history has shown us, such shifts are hardly dramatic and often temporary. After a brief flirtation with the hybrid during the original spike in fuel prices, North Americans are once again buying the pickups they covet. The only way a significant, long-term migration away from the gas guzzler will come about in North America is if there is a seismic jump in gas pricing, the kind that can only come from a dramatic hike — say, to $2 a litre — resulting from government levies. Otherwise, the average North American consumer simply panics when his or her fuel tank first passes some arbitrary level (the first $100 fill-up sure spooked some SUV owners), grouses that the government should do something and then ultimately accommodates these normal market increases into the budget without making dramatic changes in how and what he or she drives.
2. Electric cars will not take off — yet For the very same reason, I suspect electric cars will remain bit players in North America, despite Nissan CEO Carlos Ghosn’s contention that electric cars will account for 10% of global sales by 2010. The United States is the most coddled civilization in history. This is a demographic that invented the drive-thru lane because fast-food restaurants weren’t convenient enough. They are unlikely to willingly accept the many limitations –performance, range, charging times –of the electric car. Hybrid cars barely account for 3% of sales despite the incredible level of media adoration they’ve enjoyed for the last 10 years. Only a long-term, dramatic spike in the price of gasoline will make electric cars attractive to les Yankees.
3. Diesel will continue to flounder One of the worst by-products of all that intransigence is that the diesel engine will continue to flounder in North America. Europe, of course, immediately adopted the compression engine as its solution to its higher-priced petrol. In so doing, all manner of impressive engineering companies — Volkswagen, BMW, Mercedes, Fiat et al. — devoted much research to oil burners, which are the equivalent of gasoline engines in performance but with better fuel economy. Proponents have long pointed to the popularity of diesel-powered VWs and Mercedes as harbingers for growth in the segment, but BMW’s relative lack of success with its diesel additions reveals that to a be a brand-specific niche. To the vast majority of North Americans, the diesel remains the neighbour’s smelly Ford F-250 Super Duty, its Power Stroke V8 ruining their otherwise peaceful morning reverie with its angry ack-ack gun exhaust and enough unburned hydrocarbons to warrant an environmental impact citation. It points to an America still relying on traditional gasoline-powered vehicles in the foreseeable future.
4. Fiat will benefit Chrysler That’s not to say that fuel economy won’t be a driving factor. If Chrysler, for instance, is to have any success at rejuvenating itself, it will be a result of Fiat-based technology and automobiles that eke out more litres per 100 kilometres than the company’s current lineup. Despite Fiat/Chrysler CEO Sergio Marchionne’s protestations, Chrysler is, at best, the shell of a car company, likely to become more an exercise in rebranding foreign products with a familiar name rather than a source of actual engineering. That’s if it survives, which, considering the phantasmagorical plans Marchionne recently put forward, is hardly guaranteed.
Chrysler will have to wait 18 to 24 months for the influx of Fiat technology it hopes will prove its salvation.
5. Ford will continue to succeed It requires no Ouija board to proclaim Ford will be successful in the coming years. It is important, however, to remember that Ford’s relative success through the recent economic turmoil compared with its domestic competitors is mostly the result of having hit fiscal rock bottom before General Motors and, therefore, having started the rebuilding process earlier. GM has all the tools — exciting new products in the pipeline, a healthy bankroll — for an equally impressive turnaround should it not become mired in the recent internecine squabbling that has generated headlines of late.
6. Volvo will prosper under Geely At least one former Ford unit — Volvo — will prosper under its new owners. It may have benefitted from Ford’s buying power, but it did not flourish under Ford’s management style. New owner Geely is more likely to defer to Volvo’s expertise. With what one assumes is a healthy financial balance sheet behind it (a luxury it hasn’t enjoyed for almost two years as Ford prepared for its sale), this is Volvo’s best opportunity in some time to make inroads against its European competition.
7. Saab won’t be so lucky That other Swedish brand, Saab, will flounder. Even if by some miracle someone buys the ailing automaker, its production, brand awareness and distribution network have slumped to such a degree that the end is nigh. Resurrection would require a financial commitment in the order of that behind GM’s 10-year rejuvenation of Cadillac and there’s just not that much money floating around for that kind of investment.
Or so says my crystal ball.