Saw a number of articles recently.....Wall St. Journal and elsewhere.....speculating that the SUV is on its way to extinction. What are your thoughts on MB and the GL line? It would be a shame to see such a great vehicle be dropped but I guess the reality of economics may dictate that it happens.....or at the very least there might be a significant reduction in production.

 

My own opinion is that the headline "Death of the SUV" can be read "How can we sell more papers." SUVs are in use the world 'round, not just in America. They drive big trucks and SUVs in places were gas is $8-$10/gal because they need the vehicle. What you might see is "Death of the 'Soccer Mom' SUV" where folks who really do not need the extra weight, complexity and engine of an SUV will start going back to mini-vans or "crossovers" (which we old folks call "station wagons"). But one guarantee that the SUV isn't quite dead yet is that WSJ says that it is.

STP

 

Steve,

I think you are right but, the landscape is going to alter drastically and with that pricing and availability of certain models. If 50% of the purchasers of the GL are women ("soccer moms) then a 50% drop in volume may result in price increases or a deletion of a model. With the current weakness of the USD, European car manufacturers are not making much money on the cars they sell us (so they say) and with the US recession, they can't really raise prices to compensate for the dropping dollar.

We are seeing the same thing with pick up trucks. GM's sales were down 40% in May and it is directly related to fuel prices. Is the pickup going to disappear? I don't think so, but in Montana where over 70% of new vehicle registrations are pickups, I think the people who don't need them for work will not buy them. The pickup as a daily driver is dead (so says GM). I think pickup truck prices may rise, or there may be a thinning of the product line to create efficiencies.

I think the GL will be around for some time to come, but when diesel starts hitting $8.00/gallon, I think the number of people who are willing to tolerate the fueling costs will have found an alternative to meet their needs. So in the end, it may mean the death of GL like vehicles.

 

I strongly agree,
since i am owner of GL, i will always try to say that will not happen, in reality people are not interested in buying gas guzzlers now days. Goldman report estimated $6-7 gallon by end of this year.

the fuel efficient and low cost cars are having high demand now days. None of my near toyota dealers have the yaris 3 door available for test drive from last 2 weeks.

 

There will be issues, and some lines may not make it, but I don't share the complete doom aspect that many others have. The current high oil prices are caused by greed and speculation, and not necessarily by market forces/use. There is new oil being discovered on a regular basis, and while I don't think we will go back to $1.50 a gallon, I don't think we will see $8.00 per gallon for a long time. Look what happened in the 80's when they said we were running out of oil and prices hit about an adjusted 3.50 per gallon. Within a few years, no oil shortage, and fuel was back down under a dollar. There have been lots of oil discoveries to add to proven reserves, if we just make the decision to drill. Also, high current prices will cause oil deposits that are harder to recover to become economically feasible. $80.00 per barrel oil will cause people to recover the natural gas you see burning off in oil fields and the technology exists to convert that natural gas to liquid, and then change it into gasoline. In five to 10 years, ethanol from algae and switchgrass will become feasible and will reduce the need to convert food stocks to ethanol production. Finally, in an article in this weeks Dallas Morning News, http://www.dallasnews.com/sharedcont...1.4db8cbf.html
Professors of Engineering have invented a way to use micro reactors to turn lignite (coal, which Texas has a 200 year supply of) into heavy oil, and they believe they can bring the price of this heavy oil (which can be refined into gasoline) down to about $30.00 per barrel. We are going to have to change, and we need to conserve, and should drive more efficient vehicles when we can, but people will still need pickups and big vehicles, and I certainly hope the horizon is bright to allow technology to bring all these things online to help to solve the current energy dilemma, which I again believe is caused partially be greed. Just my .02

 

Hope this happen, people will be very happy.

 

The really sad part of this is that MB came out with the GL, which is most likely one of the best....if not the best......of the large all wheel drive SUV class, late in the game. I would have loved to have had this caliber of vehicle several years ago. Many of those "marginal" buyers out there who finally are able to "achieve their goal" of buying that top of the line SUV or pickup will now think twice because fuel has risen so incredibly fast along with food, utilities, etc. and the manufacturers will react to the number of sales bottom line.

 

blittle,

You are correct, the GL was late.

The thing that I understand about it's developement was that people were out-growing their ML's and Mercedes had nothing bigger for them to move up into. So those people were moving into Navigators, Escalades and Expeditions.

Mercedes had to make the decision about building the GL a few years before the first one hits the road. Things were a lot different regarding gas in 2004 when the executives made the decision to go ahead with the GL project to get the first ones available in 2007.

Now their stuck with it even with the high gas prices. The thing that may save the truck is the diesel. The CDI is a pretty efficient way to have a big truck. We get 18 mpg around town and 23.5 mpg on the highway.

I am glad we have a 2008 CDI and not a 2009 BlueTec.

 

There has to be a point when all these rebates and cash and rates on the hood of these domestic SUVs has to outweigh the increased cost of fuel, and make these things even cheaper to drive, right?

So let's just say a couple of years ago you paid 50,000 for a 15mpg truck, but could now get it for $40,000 with gas @ $5 vs $2.50 and driving 15,000 miles, your cash on cash outlay for the first four years of operation would be the same, but if you financed, even at similar rates, your cost is less now than before due to smaller principal, right?

...so these things are getting cheaper to own, right?

 

These technologies will not help nor will drilling off our coasts or Alaska. You know why? Oil is traded on a global market. The price of gas will be tied to the cost of oil on the global market eventhough the producers like Exxon will be paying much less for the cost of their own oil through their own fields off the coast or in Alaska. This will only lead to greater profits for Exxon and other companies who drill for oil and or refine the oil.

There are a few ways for the new technologies to work. One is to flood the market with excess oil so production outweighs demand. However, that will not happen. Oil companies will cut back on production so it never exceeds demand and the prices will remain high.

The second way for new offshore drilling and new technologies to effect the price of fuel is to institue laws regulating that the cost of fuel be tied to actual production costs versus the current market price caused by speculation. I'm a Republican but I think the only way to fix the issue is to fix the speculation in the market and tie the costs of fuels to the actual costs of the production. Pretty much all phone, power, and utilities companies are regulated and oil needs the same attention.

 

We just bought a Corolla last week due to the gas price spiking. What a change from GL to Corolla. Now we drive our GL on weekends and when there is a need to drive more than 4 people. Cost of fill up a corolla and monthly payment is equivalent of fill a GL for a month.

 

When the news appears on the front cover of "Business Week", "Fortune" or the "Wall Street Journal", it generally signifies the top, as measured by the "fear" index. Oil prices during the seventies and eighties surged with higher demand and a lack of infrastructure. Infrastructure construction in the oil industry with the surge of prices produced more supply as the economy slipped into recession curtailing demand. On an inflation basis, the inflation adjusted price in 1980 is about where oil prices are now. The Saudis are afraid they have lost "hand" in pricing and have declared adding another 500,000 barrels to the system and to raise production up to 13 million barrels per day from the 10 million barrels per day today. Prices today will force alternative energy methods to flourish. Who knows when this cycle will be broken, but I do know that it has been estimated that Americans have driven 1.4 billion miles less this year than last year. By the way, we import more oil produced from Canada (oil shale) than the Middle East. The economies of India and now China are consuming oil as they "industrialize".
My love of driving and my ability to pay for this wonderful privilege will dictate what I drive. Notice all the engines built by AMG and great cars sold by Mercedes based on performance and handling---the driving experience, not unlike the BMW M Series.

 

Absolutely......there is profit and there is greed. Greed eventually leads to someone getting hurt and in this case the "someone" getting hurt is the "American way of life!"

 

There is a silver lining with the high oil prices. It is forcing the manufacturer's hands to build more efficient vehicles as well as stimulating alternative fuels. Let's just hope we find one to completely diminish our consumption of foreign oil. Our country would flourish like never before while OPEC producing countries would have to revisit their lavish lifestyles.

I think OPEC is worried that they are effecting long term demand for oil. I'm sure they are worried about all the R&D being invested in alternative fuels and the effect it would have if someone came up with a viable alternative to oil. Wouldn't it be great to give the finger to OPEC!

 

Pigs eat and hogs get slaughtered!

 

Anybody see the recent story on Fox News regarding Jatropha plant...they are grown in sandy climates, the beans (look like black beans) are 40% oil. somthing like 20lbs of beans can be roughly converted into 1 gallon of diesel...

Check it out...it's quite interesting...
http://www.foxnews.com/story/0,2933,367541,00.html

 

Americans won't stop driving SUV's until the last barrel of oil is extracted from the earth. When (not if) gas goes to $6-8, and diesel $7-9, the SUV will only come out when needed to haul people or stuff, but they will still be used.

The CDI should remain popular due to it's efficiency and mpg, even if diesel costs a bit more than unleaded.

I just ordered a black and tan Vespa to match my GL - my plan is to only roll the truck when I need to haul my stuff around or when it is raining. It should be fun adapting to the changes we are going to have to adapt to

 

Oh my lord... say it isn't so.

 

I don't think so, because every time and SUV owner pulls up to the pump he/she is reminded of how much it costs to fill the tank and how many times a month it has to be filled.

It is this constant reminder that has people installing high efficiency furnaces to heat their homes. They have to write a big cheque up front, but have smaller monthly heating payments for 20 years.

In your example, you have a lower cost up front and high fuel bills moving into the future.

Dodge/Chrysler's current offer of subsidizing gas prices will help move the fuel inefficient inventory off the lots. It is a good deal for people who lease on a 3 year term. Of course, you have to wonder what the vehicle would sell for with a cash incentive.

 

I think they will just sell the excess to India and China, so the gas prices will continue to stay high (although maybe not as high as current, perhaps). I think the Arab countries have concerns about CNG (compressed natural gas) and it's increased use by developing nations. When I was in Delhi a few years ago, I was surprised by the relatively low levels of air pollution. CNG was mandatory for public transit and commercial vehicles and it really made a difference. A major supplier of natural gas is Russia, as it continues to increase supply to Europe and Asia.

This has geopolitical implications. If America is able to get itself (and other nations) off oil and natural gas with new technologies (say fuel cells) and export it as a cheap alternative to the internal combustion engine, it will take the wind out of Russia's economic sails and put itself back in the driver's seat (on the world stage). If it doesn't, I think the world is going to be a much different place (geopolitically) than it is right now and whether or not the SUV died because of high fuel prices will be the least of our worries.

To flourish like never before, we have to live off and export something we have, not import or drill for something that others can produce at a lower cost than us.

I don't think oil production is in itself the main problem here. Refinery output is too low. If the government wanted to secure cheap energy for the country, it could build several refineries as part of a national energy policy to easy supply problems. the costs, while high amount to only a fraction of what is being spent each month in Iraq and Afghanistan.

Finally, Canada has an abundant supply of oil sands oil. We are currently the second largest supplier of oil to the USA. While we can't supply all of the USA's needs, we could increase supply. That combined with increased refinery capacity could bridge the gap (reducing fuel costs) until an alternate fuel design could be created.

I don't see getting into the refinery business any less important than other national programs such as the USPS. Some programs are just too important to the nations well being to not be governed by a national policy for the benefit of the country.

 

I think using any kind of plant as a fuel source is bad policy. It allows us to drive our cars while depriving others of affordable food. Farmers will switch to this cash crop instead of edible crops reducing the acreage of food crops produced. This is not a tradeoff I'm prepared to accept.

 

By definition, we still haven't had a recession (which can only be defined in hindsight), just FYI. Doesn't mean the economy's great, but it hasn't crossed the threshold yet. I'd be more worried about inflation at this point, which is (very oddly) still computed without energy costs factored in.

Everyone's situation is going to be different. I still see people buying gas H2s and H3s (and other monsters). Where gas is currently at levels the US is terrified of ($10/gal and more), they still buy large vehicles - though, as you point out, at a much reduced rate. We both can and should drill our way out of this problem. We also need to develop more efficent engines, alternative fuels, and a little more common sense with regards to efficiency. There's probably not a track we shouldn't try to solve this problem, as long as it's market driven.

But about 90% of what we see in pricing right now is from speculators. The supply exists to meet the demand, so why are prices skyrocketing as if that weren't the case? Who are these oil speculators and what are their motives, other than pure profit? What will be surprising is to see the reverse effect of this particular bubble (which is what it is) to the dot-com and housing bubbles. When this one bursts (or at least deflates, which it will do), much of the rest of the economy will return to greater stability.

As for "Americans will drive SUVs until the last barrel of oil is out of the ground" and "pigs are slaughtered" comments, come on. Aren't we a bit more mature than that, guys? If your economies of scale say you must sell your GL (at a pretty steep depreciation) and get into what appears to be a more efficient car (with brand new financing and probably a bit of residual in the loan from that Mercedes you just had to dump while you were upside down in it), then go right ahead. I knew when I made the decision on this truck, it was a long term thing. Bailing out early would cost me much more than I could possibly save. Unless I need to go "fire sale," I'm staying with my diesel.

I do, however, have a V10 gas Excursion of my wife's I'm trying to unload. It's 8 years old. Personally, I never did like the thing. The resale value's going down 3% for every 2 miles I drive (because there's less gas in it). And it rides like a dumptruck.

 

Great discussion guys......! I read somewhere not too long ago that what is happening in the world is that the developing countries ( read China and India) are moving into the 21st century rapidly and their standard of living is moving up at warp speed. The same development that took us the better part of the last 100 years.......but the reality of that is that OUR standard of living is beginning to drop as a result of the rising costs assoiciated with the cost of fuel and competition for jobs .( read outsourcing ) The days of of $20/hr union jobs and owning your car + your SUV + your Harley and your boat are probably gone for all but a few. In other words.....the American way of life is paying the price for the rest of the world to enjoy what we have had since the end of WWII. Enough rant.........

 

But the out of pocket cost over four years is the same or less. Are you telling me that perception is > than reality?

 

My comment was a common saying. It wasn't a matter of being mature. To quote a line in the movie Stripes, "Lighten up, Francis." It was along the lines as... "what goes around comes around." In business and in your personal life, you will learn, if you haven't already, you reap what you sew.