Julia Campbell Sells Her Ford as Shrinking Fleet Hits Carmakers
bloomberg.com
By Angela Greiling Keane and Jeff Green
Dec. 16 (Bloomberg) -- Julia and Evan Campbell, a two-car couple in Medford, Massachusetts, will soon go down to one vehicle after the registration expired last month on their 13- year-old Ford Ranger.
To save on insurance, fuel and fees, they plan to sell the pickup and rely on the Boston region’s public-transit system and their Honda CRV sport-utility vehicle.
“Gas prices have plummeted, but that’s definitely not going to last for all eternity,” Julia Campbell, 31, said.
The number of cars, trucks and buses on the road in the U.S. may shrink for the first time since the 2002 recession because of decisions like the Campbells’, according to George Magliano, an analyst at IHS Global Insight Inc. in Lexington, Massachusetts.
“With everything happening, it’s very likely the fleet will shrink next year,” he said.
The fleet has contracted only nine times in the past century. While a 10th decrease would further drag down sales for General Motors Corp., Ford Motor Co. and Chrysler LLC even as automakers seek federal aid, the decline may also unclog some freeways and lead to lower tax collections for road maintenance.
Households that dispose of extra vehicles without buying replacements are part of a chain of events reducing the number of cars and trucks. Discarded autos are either sold for salvage or to motorists junking even older vehicles.
Consumers who abandon second or third cars or stop making discretionary purchases are eroding U.S. sales that GM on Nov. 7 said may decline to 11.7 million cars and trucks next year, the lowest since 1982.
Scrap Rate
That would fall short of the annual scrap rate of 13 million vehicles, the number of cars and trucks junked last year.
The scrap rate is determined by adding 2007 auto sales of 16.1 million units to the previous year’s 244.2 million vehicles already on the road, according to Federal Highway Administration data, then subtracting the 247.3 million cars and trucks registered in 2007.
Prior to 2002, following the Sept. 11 terrorist attacks, and a drop in 1991 coinciding a recession, the last period the U.S. fleet shrank was in 1942-44, during World War II. The total also fell in the Great Depression years of 1938 and 1931 to 1933, according to government data going back to 1900, when 8,000 vehicles were on the road.
Drop in Driving
Gasoline prices, which peaked at a record $4.11 a gallon for regular in July, helped cut vehicle miles traveled by 3.3 percent, or 100.1 billion miles, in the 12 months through October, when the total fell 3.5 percent, according to the Federal Highway Administration.
A smaller fleet may accelerate that decline, said Ken Orski, a transportation-policy consultant and publisher of Innovation Briefs, an industry newsletter in Potomac, Maryland.
Fewer miles driven means less gasoline purchased, cutting funds available to fix U.S. roads. The $43 billion Highway Trust Fund, which gets 90 percent of its revenue from federal gasoline taxes and pays for highway projects, needed an $8 billion bailout in September to keep from going bust.
“This is yet another reminder of why we need a new approach to investing in the nation’s transportation infrastructure,” U.S. Transportation Secretary Mary Peters said in an e-mailed statement through spokesman Brian Turmail prior to his departure from the agency Nov. 24
Secret Hope
“Publicly encouraging Americans to change their habits, consume less fuel and try transit while secretly hoping they drive more and burn extra fuel to pay for new roads, bridges and transit systems is no way to run a transportation system,” Peters said.
Recessions historically crimp auto travel as fewer people go to work and consumers watch expenses, Orski said. Total U.S. miles driven fell 0.5 percent in the 1980 contraction.
Fewer auto registrations will hurt states, which collect registration fees, more than the federal government, he said.
Any environmental benefit from fewer cars on the road may be canceled out by driving older cars that spew more pollutants, said Joshua Schank, director of transportation research at Bipartisan Policy Center in Washington.
Less-crowded roads are also a negative indicator for the economy, he said.
“If you have less congestion because people don’t have the money to spend to use the facility, that’s a bad thing,” he said. “If a road is fast and empty, that’s a good sign that something’s wrong with your economy.”
No Rebound
Driving didn’t rebound as gasoline prices started falling in July because the recession slowed consumer spending, said David Ellis, a research scientist at Texas A&M University’s Texas Transportation Institute based in College Station.
“To the extent that we fund our roadway construction from gasoline taxes and registration fees, it could have a negative impact,” he said. “On the positive side, it has an impact on traffic congestion in our urban areas. It’s a mixed result.”
An unemployment rate that rose to 6.7 percent last month, the highest since 1993, is diminishing consumers’ confidence and making them “unwilling to make long-term commitments in terms of purchase of new vehicles,” Ellis said.
To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net.
Last Updated: December 16, 2008 00:00 EST |
