Traditionally, as gas prices rise consumer spending on almost everything else sinks, slowing the economy as families put aside more and more money for their transportation costs.
With prices for regular gas in the region ranging from $3.79 to more than
$4.20 a gallon this week and with no sign of the upward trend reversing itself
or even leveling off, motorists are bracing for the worst.
But one part of the nation's commercial sector appears to be reaping
rewards from the high cost of gas. Oddly, it's the automotive industry itself.
In addition to the rising gas prices, which have consumers seeking more
fuel-efficient compact and subcompact cars, favorable interest rates starting
at 1.9 percent for new cars and 2.9 percent for late-model used cars can take
some credit for stimulating sales.
Americans who couldn't handle a car payment during the economic downturn
now appear to be back in the market.
"Spring is normally busy for car dealers," John Wall Sr. of Wall's Ford
in Salisbury said. "But this March, our foot traffic in the showroom was
better than last year and our new car sales were up 30 percent."
Wall said the smaller American-made cars are especially popular with
customers, a switch from the last couple decades when the auto industry in the
U.S. concentrated on profiting primarily from building and selling trucks and
SUVs.
It was that focus on building gas-guzzling vehicles that nearly sunk the
country's three largest automobile companies the last time gas prices spiked
to record rates. At the time, gas-efficient models -- the hallmark of European
and Asian imports for decades -- attracted consumers looking to save money at
the pump.
The result was General Motors and Chrysler ended up filing for
reorganization under the country's bankruptcy laws, while begging for billions
of dollars in federal loans to keep them from disappearing completely about
five years ago.
During those dark days for the nation's car industry, Ford Motor Company,
although still struggling, was the most secure. It didn't request a federal
bailout package nor did it file for bankruptcy. In a strategic move just prior
to the near collapse of the American car industry, Ford mortgaged nearly all
its assets to raise the money needed to make changes just in time.
But this year, American manufacturers are seeing signs of a rebound. In
March, all three U.S. automobile manufacturers reported gains, in part due to
sales of small, fuel-efficient cars.
In all, Americans bought 1.4 million cars and trucks in March, a 13
percent increase from the same month a year ago. According to Edmunds.com,
that was the most vehicles sold in a month since August 2007. Compact and
subcompact models combined are expected to account for 23 percent of retail
sales for March, according to the consulting firm LMC Automotive.
General Motors said Tuesday its U.S. sales rose 12 percent in March on
solid demand for cars and small crossovers that achieve 30 miles per gallon or
better on the highway. Chrysler Group's sales jumped 34 percent as buyers went
for Fiat's small 500 import and sales of its revamped, more fuel-efficient 200
and 300 sedans each doubled over last March's numbers. Sales at Ford rose 5
percent, with purchases of the smaller Focus rising sharply compared with a
year ago.
For Chrysler, it was the best month for the company in four years, while
Ford had its best March performance since 2007.
LMC predicts U.S. sales of new cars and trucks reached 1.37 million last
month, up 6 percent from March 2011 and the highest number since May 2008. The
figures come on the heels of strong performances in January and February, and
industry analysts say sales could run at an annual rate of 14.1 million to
14.5 million vehicles.
Traffic at the Seabrook town clerk's office, where car buyers in town
must register their vehicles within 10 days of purchase, bears out that trend.
Staffers said March was one of the busiest months they've seen in recent
memory. The office registered 44 more vehicles in February and March than
during the same period in 2011.
Wall said the American car makers are seeing success with their focus on
manufacturing cost-effective, fuel-efficient smaller cars, like Ford's Fiesta,
Focus and Fusion, he said.
"That emphasis put us back in the car business again," Wall said. "The
Fusion is our No. 1 seller. It has a hybrid, a four-cylinder and a V-6
(version). They all get good mileage."
And there's a major sign the American driving public and Ford have
grudgingly come to terms with the reality of sustained high gas prices, he
said.
"Another thing Ford did that's a great reflection of fuel prices is the
new Ford F-150 with its Eco-Boost engine," Wall said. "It has a turbo charger
to make sure you can still haul a heavy load, but it's a new technology that's
more fuel efficient. It gets 20 miles to the gallon, and for a full-size
pickup truck, that's unheard of."
According to Ford, sales of the F-Series pickup, which is the
best-selling vehicle in the U.S., rose 9 percent.
The recent activity at Wall's is in line with a report released in
February by the automotive industry watchdog J.D. Powers and Associates.
According to its 2012 Avoider Study, the owners of more than 24,000 new
cars purchased in May 2011 said "buying American" was important to them, as
was the continued emphasis on buying cars that offer good gas mileage. The
study found the most influential reason for buying a particular vehicle was
fuel efficiency.
And while economists usually predict that high gas prices put a damper on
the economy, there is evidence that the recovery of the American automobile
sector is in fact helping the economy.
"Auto is important because it creates so many other jobs," economist Sung
Won Sohn said. "Think about the things that go into an auto: glass, textiles,
rubber. There's a lot of financing activity. We are talking about a very
significant portion of job creation."
Sohn says high gas prices are actually helping to persuade people to
trade in older, less-efficient vehicles.
