The Car Industry Drives Toward Trouble

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U.S. car companies cannot rely on Europe for profits. As a matter of fact, poor demand has caused losses in the region for General Motors (NYSE: GM) and Ford (NYSE: F). In a perverse way, Chrysler is lucky to have almost no presence there.

China, the world’s most promising auto market, is no longer growing. That leaves the United States, where sales have sputtered much more than was expected two years ago.

Now, the U.S. market has run into trouble, if the sales plans of Chevy and Chrysler are any indication.

Chevy has devised a complex program to draw buyers to models that have not sold well, particularly 2012 versions of its vehicles. GM has started to offer a 60-day refund policy. The new owner has to have driven the car or light truck less than 4,000 miles or it cannot be returned. The vehicle cannot be damaged. The buyer must keep the car for 30 days. Presumably if the buyer does not like it after a few days, he or she should park it in the garage for the duration.

Chrysler’s plan allows buyers to delay payments for 90 days. It would seem that only helps people with financial problems. Unlike with Chevy, the cars and light trucks cannot be returned.

GM and Chrysler barely will admit they have sales problems, but their programs tell otherwise. A slowdown in U.S. market sales would wreck Big Three profits. The two-year ride of substantial American car sales would be over. So would the period of success at American car companies.

Douglas A. McIntyre