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Insider: Another Lesson of Katrina

As Hurricane Katrina battered the Gulf Coast, leaving thousands stranded and bureaucrats in Washington scratching their heads wondering what to do, there had to be a fair amount of head scratching happening in the halls of buildings in Detroit.

As Hurricane Katrina battered the Gulf Coast, leaving thousands stranded and bureaucrats in Washington scratching their heads wondering what to do, there had to be a fair amount of head scratching happening in the halls of buildings in Detroit. It appears U.S. automakers, like the military, may have been unprepared for the inevitable fallout of what would be one of the worst natural and commercial disasters in our nation's history, especially for the energy industry. I wonder what was going through the minds of Bill Ford and Rick Wagoner, as well as Tom LaSorda, as they watched gas prices jump from $2.79 a gallon to more than $3.29 overnight. While the President called this a "temporary disruption" that would inevitably work its way through the system and force gas prices to level off at a more "reasonable" level, Katrina brought an underlying failure in the domestic auto industry to light: Detroit is unprepared.

CNN, CNBC, the New York Times and many other media outlets rushed to their nearest gas stations to talk with consumers about the higher gas prices. Consumers were irate. But they shouldn't just be irate at the oil industry. They should point their fingers at Detroit, too. After all, the domestic auto industry has been shoving gas-hogging SUVs and trucks down the throats of Americans for years—absurdly noting that the cost of gas was less than that of bottled water—because these vehicles were equal to printing money for the industry, accounting for huge profits for each one that rolled out of dealerships. And now gas trumps bottled water, and it appears the game may be over. I know the industry will try to say this too shall pass, but don't bet on it. There's little doubt in my mind at least, that consumers have felt the effects of big SUVs on their pocketbooks and the thought of spending $75-$100 a week on gas is just too much.

Detroit must take a hard look in the mirror before it starts to blame oil companies or other outside factors. I know I will take some flack for this, but GM is the biggest problem child of them all. The world's largest automaker has decided to speed up the introduction of its large SUVs because it needs the profits to survive. But how will these vehicles fare in the mindset of $3.00+ for a gallon of gas? Sure, they will have displacement-on-demand, which boosts fuel economy a bit, but we're still talking about MPGs in the teens.

What about developing compelling small cars and diesel vehicles that provide more real-world benefits? I just finished driving a Mazda5 a few weeks ago, and I have to admit I was impressed. This vehicle uses all the space available in its tight package (even providing three rows of seats), while providing exceptional fuel economy all at an affordable price. Both GM and Ford have similar vehicles (Opel Zafira and Focus C-Max) for sale in Europe but not here. While Chrysler is about to introduce a series of compelling small cars, including the Dodge Caliber and Jeep Compass (and has Smart cars in its larger DaimlerChrysler family), what about the other two? Where is the Nomad concept GM showed a few years ago? What about Ford's decision not to bring the new Focus to the U.S., while it sells the vehicle in the rest of the world? The perfect storm has brewed not just on the Gulf Coast, but in Detroit as well, and Katrina could change the game for a long time. Come on Detroit, we're waiting. And the clock, like the numbers on the gas pump, is running. 

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