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At the Detroit Auto Show, Executives Ponder Gasoline Prices

Posted: 01/18/2011 - 8:17 PM ET

Executives from the major brands, speaking to Reuters at the Detroit auto show, pondered the effect of spiking gasoline prices on future design and consumer buying trends. Although the current surge toward $4 a gallon gasoline would seem to ensure the success of small, fuel-efficient cars, all the pundits agree that the only thing that's certain in this global economic climate is that there are no sure predictions.

The last gasoline peak in the summer of 2008 topped out at $4.11 a gallon in July before retreating by $1.65 at year's end. Current levels are still about 25% below that with the average for regular hovering around $3, but with some regional highs going to $3.50. In 2008, the public turned immediately to small cars like the Honda Civic, Ford Focus, and Toyota Corolla, outraged by the high cost of fuel.

Wild fluctuations in prices not only for gasoline, but also for materials in car components like steel, copper, aluminum, and platinum have Ford continuing to bet on high fuel costs and the popularity of small cars. "We do believe at Ford that the price of gasoline is going to march upward over time," said Bill Ford, Ford Motor Co. Executive Chairman at the Detroit auto show. "And we've built our whole entire strategy around that."

Toyota market brand chief in the U.S. Bob Carter agreed and pointed to the speed with which buyers change their preferences. "We're seeing consumers quickly shift back to a higher mix of fuel-efficient cars and now trucks are actually starting to slow down. Sixty days ago, we found the opposite happening."

Mike Jackson, CEO of AutoNation Inc. said the tipping point for a real sea change in the public's buying preferences will be higher than it was in 2008, probably closer to the $4.50 to $5 range. "Every time you have one of these spikes, it moves upward the freak-out number," he said.

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