Detroit to INCREASE Car Prices in a Recession?

http://www.businessweek.com/lifestyle/content/dec2008/bw20081218_689313.htm?chan=rss_topStories_ssi_5

According to this, Detroit is planning to sell out it's current stock, take their government bailout, cut production and then jack up prices OPEC style with the idea that people will have to replace their worn out cars sooner or later.

Ed Wallace is a former car salesman who does a weekly radio show that has heavy sponsorship by local car dealers. He was right on the price of oil coming back down, and I think he may be right about this being what Detroit wants to do. But with South Korea, China and India wanting to sell cheap cars here, could they be setting themselves up for a crash followed by more requests for bailouts? Detroit has never really wanted to build small, inexpensive cars.

no real profit for them in small cheap cars.
small expensive cars would have profit, but outside of enthusiasts who buys small expensive cars?

I see the Used car market / Craigslist as the solution to all of this.

In reply to EricM:

one flaw. if there are no new cars that are affordable, then there will be no cheap used cars either.
not sure about other places, but the used car market in chicago has raised prices ridiculously high IMO. very hard to buy a cheap car that is decent.

There is no shortage of used cars. ever

internetautomart wrote: In reply to EricM: one flaw. if there are no new cars that are affordable, then there will be no cheap used cars either. not sure about other places, but the used car market in chicago has raised prices ridiculously high IMO. very hard to buy a cheap car that is decent.

I could see people literally duct taping their old beaters back together any way they can. Think of Cuba and old American cars from the '50s sporting engines from 70's vintage Russian cars.

Anything that runs would be worth money. I see people on Craigslist already here in Dallas begging for 'reliable' $500 cars.

internetautomart wrote: no real profit for them in small cheap cars. small expensive cars would have profit, but outside of enthusiasts who buys small expensive cars?

I can't believe every MINI owner is an enthusiast and BMW can't produce enough right now and they ain't cheap!

EricM wrote: There is no shortage of used cars. ever

see how Cuba keeps those old Chevrolet's running......

Maybe the execs are hoping they'll make a few last-minute profits, and they'll run with those and the bailout money to Mexico when the companies tank in a couple of months.

People aren't buying your product. Do you:

A: Decrease the price on your product through use of incentives

B: Make a better product

C: Make a cheaper product that people can afford

D: Increase the price of your current product (lolz fail)

Snowdoggie wrote: Detroit is planning to sell out it's current stock, take their government bailout, cut production and then jack up prices OPEC style with the idea that people will have to replace their worn out cars sooner or later.

berkeley them and their mismanagement/lack of foresight/lack of competitive edge.

That philosophy will end up helping Toyota, Nissan and Honda (maybe even Mitsubishi--lol) even more. Dummies.