Lutz Desires Pricier Gas, Predicts Costlier, Smaller CarsS

MarketWatch has a fairly shaggy interview with GM's "Maximum Bob" Lutz in which he opines on the impending 2020 federal mandate that carmakers achieve 35mpg CAFE standards. First, Lutz says he wants to see gas prices in the U.S. rise, to levels similar to what the rest of the world pays (which would be more than twice as expensive as the $3 per gallon that many Americans are paying now). Then, he argues that the CAFE requirements, as long as gas is still relatively cheap, put GM "at war" with its customers, who want big trucks the company can't get to achieve the 35mpg target. Soooo... let's put two and two together: In Lutz's vision of our motoring future, more expensive gas solves GM's CAFE challenge by curtailing demand for the company's current key product, big trucks. Those customers are replaced by folks who desire smaller vehicles that are significantly more expensive, due to advanced tech. Maybe Lutz was talking off the cuff, but we were struck by these comments.

For one thing, he's arguing against some of GM's most profitable core products, trucks and SUVs. Filling the void are smaller rides that get better mileage and presumably square the profit-loss circle by allowing for higher pricing based on new technologies (small cars have been out of favor in Detroit for a while now because they represent such meager profits—trucks and SUVs are obviously a different story).

It's sneaky, but to us it sounds like Lutz is positioning the consumer squarely between GM and the government. The economic environment of 2020 consists of inflated gas prices and more expensive, but smaller, vehicle choices. Trucks and SUVs have...well, apparently vanished from the scene.

Could this be interpreted as an attack on the CAFE objectives? This wouldn't be anything new for Lutz, who has dissed CAFE in the past. For any politician within earshot, the message is obvious: 35mpg CAFE=inflation in not one but two key economic sectors. Consumers won't like it, and Lutz knows it.

[MarketWatch]