A Painful Transition From Oil to More Energy-Saving Technology

The following editorial appeared in the St. Louis Post-Dispatch on Wednesday, June 26:

___

In 63 years of selling cars, Johnny Londoff never has seen anything like it. Big SUVs _ Chevy Suburbans and Tahoes _ hot sellers just two years ago, now seem glued to the lot at his Florissant Chevrolet dealership.

Customers turn up their noses at $6,000 rebates. Meanwhile, itty-bitty Aveos and Cobalts are selling fast, but smaller cars mean smaller profits, Londoff said.

“We’re surviving,” Londoff, 84, says of his fellow St. Louis auto dealers and himself. “We’re not making any big money anymore. I tell my wife we’ll have to put water in the cornflakes.”

Auto dealers are among those being ground in the gears of the American economy as it downshifts toward energy conservation in an era of pricey oil.

In the long run, America will adjust to being a nation of gas-sippers. We’ll drive plug-in hybrids (both GM and Toyota have models in the works) and maybe even hydrogen-powered cars. Industry will adopt more energy-saving technology; computers and telephones will replace more business trips.

Those sorts of changes have been occurring anyway. Compared to the 1970s, America today uses only 58 percent as much oil to produce a dollar’s worth of goods and services. Today’s sky-high oil prices will throw that process into overdrive.

The problem lies in the short run. Over the next couple of years, lots of Americans will be hurt badly by the energy mess.

Auto and airline workers already feel the pain. Nationally, one out of five auto plant jobs has disappeared in the past two years; more layoffs and buyouts lie ahead as sales tumble for trucks and SUVs. GM’s Wentzville plant seems safe; it’s the only plant making work vans for the company. The fate of Chrysler’s Fenton plant is more difficult to predict. It makes minivans and big pickups, and sales of both are falling. Sales of the 2008 Dodge Ram pickup, a macho machine made in Fenton, are down 38 percent.

American automakers are on a crash program to build smaller cars. GM, for instance, plans to introduce its plug-in Volt in 2010, promising 150 miles per gallon of gasoline.

But the Big Three may find it difficult to survive the transition without a dip into bankruptcy or a bailout from cash-rich foreign investors. Virtually all their North American profits come from pickups, minivans and SUVs, and those are becoming dinosaurs in an era of $4 gasoline.

Faced with higher fuel prices, airlines are cutting flights, laying off thousands of workers and parking their older gas-guzzling jets. Five smaller airlines already have gone bankrupt. Continental, United and Delta plan to shed 9,000 jobs.

Analysts say airlines would have to cut their scheduled flights by 20 percent to break even at today’s fuel prices. On Wednesday, American Airlines announced it would cut 43 American, American Eagle and AmericanConnection daily departures out of Lambert International Airport. But American so far has been mum about job cuts.

The crisis has a few silver linings. Skyrocketing shipping costs should make American companies less likely to move production jobs overseas. And expect a boom in energy-saving technologies. The American economy is highly adaptable, but it doesn’t change overnight. The good news is that the switch already has begun _ Americans drove 1.8 percent fewer miles in April than a year earlier.

For the next year or two, however, a lot of Americans will be pouring water on the cornflakes.

___

(c) 2008, St. Louis Post-Dispatch.

Visit the Post-Dispatch on the World Wide Web at http://www.stltoday.com/

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.