Michigan’s upcoming Republican primary has made the Bush and Obama administrations’ bailouts of General Motors and Chrysler a political football that both the Republican candidates and Pres. Obama are kicking around. The Seattle Times published an Associated Press fact-checking piece that was fairly balanced in that it pointed out that both the Republicans and Pres. Obama might be stretching the truth in their respective claims about the bailout.

On one point, though, I think that Calvin Woodward and Tom Krisher of the AP themselves told a bit of a fib, so I thought I’d run it by the B&B for your opinions. In discussing Rick Santorum and Mitt Romney’s criticism of how Pres. Obama’s team, headed by Ron Bloom and Steve Rattner, structured the bankruptcies and reorganizations of Chrysler and General Motors, the AP addresses the notion that the companies were given to the UAW and, in Chryslers case, Fiat as well.

SANTORUM: “All the federal government did was basically tip to the cronies, tip to the unions, gave the unions the company.” – June 13 New Hampshire debate.

ROMNEY: “The idea of billions of dollars being wasted initially – then finally they adopted the managed bankruptcy. I was among others that said we ought to do that. And then after that, they gave the company to the UAW. They gave General Motors to the UAW and they gave Chrysler to Fiat.” – Nov. 10 Michigan debate.

THE FACTS: These are distorted accounts of complex arrangements by which the companies, unions, government and courts fashioned a plan to lighten staggering health care and pension costs at the heart of the automakers’ decline.

A trust owned by the United Auto Workers – but not directly managed by the union – received a 17.5 percent ownership stake in GM in return for taking over the health care costs of blue-collar retirees. That stake declined as the company left government ownership by selling stock to the public; it’s now about 10 percent. In return for its share, the UAW could not strike over wages at Chrysler or GM in the last round of contract talks, and it gave other concessions too.

Just as the government did not give GM to the union, it did not give Chrysler to Fiat.

Chrysler and Fiat have paid back all but $1.3 billion of Chrysler’s $12.5 billion bailout – with taxpayers likely to be out the rest. The Italian automaker got control of Chrysler by buying 23.5 percent of the company from the U.S. and Canadian governments, after receiving an initial 20 percent stake in exchange for management expertise and technology, then 15 percent for meeting performance targets.

Though I think they minimize the ties between the UAW and the VEBA it owns that manages members’ health care, Woodward and Krisher do a decent job of explaining the structuring of the UAW’s stake and what obligations it took on in exchange for equity stakes in the companies. I think, though, that they conflate the genuinely complex health care and pension obligations of the companies to their UAW employees and retirees, and the manner in which Fiat gained control of Chrysler. I believe that they also exaggerated Fiat’s skin in the game.

The $11.2 billion in loans to Chrysler that have been repaid, were not paid back by “Chrysler and Fiat” (emphasis added). As Sergio Marchionne told a flock of business and autojournos at the NAIAS last month, the auto market in Europe, upon which Fiat is heavily dependent, will continue to be flat for the next two or three years. Fiat’s not making the billions needed to pay back those loans. That revenue was generated by Chrysler’s operations in North America.

Okay, so you can say that it’s Marchionne and Fiat’s management that has brought Chrysler back from the brink. Actually, as Pete DeLorenzo is wont to say, most of the new Chrysler product that’s behind the company’s reversal of fortune was developed by a skeleton crew of “true believers” in Auburn Hills during the dark days when the company was financially failing and being restructured. DeLorenzo sometimes is a bit of a one note Johnny when it comes to the rock star known as Sergio, but he has a point. It was Chrysler, not Fiat, that made the product that has quite possibly has brought the Walter P.’s company back from the dead.

Where I really think Krisher and Woodward fall down is when they try to say that 60% of Fiat’s controlling share of Chrysler was paid for. The article admits that Fiat paid not on thin lira for the first 35% of Chrysler they were awarded by Rattner’s team. For the purposes of accounting, a value was placed on Fiat’s “management expertise” and “technology”, two things they would have brought to the table even had they paid real money for Chrysler, in exchange for their first 20% of the Auburn Hills automaker, and then 15% of Chrysler was given to Fiat for meeting artificial targets that TTAC’s Ed Niedermeyer has shown to have been essentially a rigged game relating to the production of high gas mileage vehicles.

So what do you say, Best and the Brightest? Did the US government “give” Chrysler to Fiat?

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can dig deeper at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks – RJS

15 Comments on “Ask The Best & Brightest: Was Chrysler “Given” to Fiat?…”

• 	jmo February 21st, 2012 at 4:31 pm
  “two things they would have brought to the table even had they paid real money for Chrysler” Seriously, at the time do you think anyone, with any sense, would have paid actual cash money for Chrysler?
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  • 		aristurtle February 21st, 2012 at 4:40 pm
    	Yeah, that’s a good point. Who wanted to pay billions for a used Chrysler in 2008? If I recall, the options were 1) “have Fiat pay for 25% of Chrysler and pretend they paid for 60%” 2) “pay for the whole bailout with taxpayer money, like we did for GM” 3) “some Chinese company buys the Jeep brand in a Chapter 7 liquidation, the rest goes to the crusher” and (1) there seems the most palatable.
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• 	Pch101 February 21st, 2012 at 4:38 pm
  Was Chrysler “Given” to Fiat? Fiat was given Chrysler stock, and the Chrysler entity was provided with debt, in exchange for what was effectively Fiat’s sweat equity. If Chrysler defaulted on the debt, then Fiat presumably wouldn’t have been liable. In that sense, Fiat had very little skin in the game; there was no substantive stick to accompany the carrot. At the same time, the US government needed a new operator with automotive management and industrial turnaround expertise, and it didn’t have a lot of choices. Since Fiat could face extinction without expansion, Marchionne was highly motivated to make the deal work, which apparently was good enough.
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• 	jaybird124 February 21st, 2012 at 4:39 pm
  Yes they were given to Fiat, but in terms that the game was rigged. It’s worth noting that Chrysler probably wouldn’t have had a buyer otherwise, but it sucks the way it panned out.
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• 	Toad February 21st, 2012 at 4:42 pm
  In a legitimate (or normal) bankruptcy Chrysler’s secured creditors would have determined how the company was restructured, either by being sold off, shut down, or reorganized. Instead the government did a “cram down” and set the terms of the reorganization by giving management of the company to Fiat (with a purchase option), giving some of the assets to the UAW retirees, and keeping some reissued stock to make the numbers work. Arguably this was done with the intention of preserving pattern bargaining based UAW contracts that would have been renegotiated in a normal bankruptcy (as is currently being done at American Airlines). Chrysler would have survived (although restructured) a normal bankruptcy, but the end of pattern bargaining was not a result the UAW was willing to tolerate. The cram down allowed the labor status quo to be preserved. By plan or dumb luck, Fiat has turned out to be a more than competent manager of the talent and resources at Chrysler. When you get something for nothing it is definitely a gift, but Sergio has invested a lot of time and talent on Chrysler product engineering vs. financial engineering. With the improved product Chrysler is putting out they seem to have a good shot at surviving, and maybe even thriving. GM should be so lucky.
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  • 		jmo February 21st, 2012 at 4:49 pm
    	Where did you think Chrysler was going to get the funds to reorganize? No one was willing to offer debtor in possession financing to an auto company back in 2008 – it would have gone Chapter 7 and the debt holder would have got essentially nothing.
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  • 		aristurtle February 21st, 2012 at 4:52 pm
    	No, Chrysler would not have survived a normal bankruptcy in 2008. The banks were not going to loan out a ton of money on the bet that Chrysler would suddenly turn around when (a) the mortgage/CDO bubble was in the middle of exploding, and (b) Chrysler was a basket case under Cerberus, worse under Daimler, and had basically been circling the drain since the K-car lost its sales momentum. The company would have been liquidated. Its only asset worth anything significant was the Jeep brand, which would have been purchased by Renault/Nissan or some Chinese firm. The tooling for everything else would be crushed into scrap metal, sent to Shenzen, and turned into Chinese-built laundry machines and PC cases. Fiat jumped at the deal because they were on the ropes in Europe as well and desperately needed to expand to stay competitive. (A good idea on their part, as now Chrysler is holding up the company while Europe slides into a financial crisis). In the absence of Fiat, I can’t see anyone else going for it, not in 2008. The real question is “would anyone have cared”. I mean, I understand the GM bailout. I don’t like it, but it was probably the least bad of the possible alternatives; GM was one of America’s largest employers and having them go under right as the Great Recession started would be really bad. But let’s be honest, here, if GM was stable and it was Chrysler alone going under, nobody would have lifted a finger. It feels almost like Chrysler got bailed out because we were already doing GM anyway, so what the hell, right?
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    • 		Russycle February 21st, 2012 at 5:13 pm
      	Would anyone have cared? Let’s see… Chrysler employees Chrysler suppliers Chrysler customers, who might like to keep their cars running for another 5 or ten years. But yeah, in normal times Chrysler probably could have been left to die, but it wasn’t normal times. And it seems like Fiat benefited the most out of this deal, which does rankle a bit. But as Pch points out, they were probably the best option available at the time. And if that means I get to drive a sweet little Alfa with a Dodge badge on it some day, I won’t complain too loudly.

  • 		Pch101 February 21st, 2012 at 5:15 pm
    	“In a legitimate (or normal) bankruptcy Chrysler’s secured creditors would have determined how the company was restructured, either by being sold off, shut down, or reorganized.” Is there a central website where you folks get your misinformation? I find it interesting that the same inaccuracies get rehashed here, over and over again.
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• 	JCraig February 21st, 2012 at 4:47 pm
  The point of the bailout was to keep the million or so jobs from disappearing. As noted nobody wanted to buy Chrysler or GM and they would have probably been left to liquidation. The old loyalists at Chrysler may have done the work on the improvements but it would’ve been for nothing had they been left to fail.
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• 	getacargetacheck February 21st, 2012 at 4:53 pm
  The question of whether these companies were “given away” is irrelevant and at best academic. What Santorum and Romney have the 20/20 hindsight luxury of not talking about is what would have happened if GM and Chrysler were left to a slow, painful liquidation process. The disruption in the supply chain for the remaining OEMs, the even-larger unemployment rate, the destruction forever of a big chunk of the US industrial capacity, more spent on TANF and unemployment insurance and SNAP…hard to believe anyone in Michigan but the most obtuse would cast a vote for these twits.
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• 	SherbornSean February 21st, 2012 at 4:57 pm
  Mitt’s career really started to take off when he returned to Bain & Co. dring the period when the consulting firm was falling apart. His remedy was to transfer ownership from the original owners and founders to its current managers and employees. Weird that he is so opposed to that idea for GM and Chrysler, especially given how well Detroit has performed the last two years.
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• 	Brantta February 21st, 2012 at 5:11 pm
  Six months (and more) after bankruptcy and Fiat takeover… December 2009 Ed Niedermeyer – Pentastarred zombie is crashing into oblivion – Chrysler continues to exhibit all the signs of freefall – nothing short of a BIBLICAL MIRACLE will stop Chrysler ignominious decline – Chrysler is a DEAD AUTOMAKER walking March 2010 Pete DeLorenzo – Chrysler is DEAD and BURIED one way or another – Fiat-Chrysler doesn’t have a snowball’s chance in Hell of surviving – at this point Sergio & Co. are going to need A MIRACLE for a shot at survival. – despite Sergio Marchionne’s track record in rescuing Fiat, the Chrysler situation is dramatically different, and to assume that because he did it once he can do it again is wildly optimistic and woefully off-base
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• 	Educator(of teachers)Dan February 21st, 2012 at 5:17 pm
  I really don’t care. Results speak the loudest and right now Chrysler is doing quite a bit better than anybody expected. The company seems to have learned more from its near death experience than GM has. In fact the thing I’m much more excited about than this article is the day I can go over to Dodge’s website and “build my own” Dart to get a good idea of what one optioned the way I want would cost me.
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• 	alluster February 21st, 2012 at 5:26 pm
  Chrysler was in fact given to Fiat considering Fiat had no skin in the game and literally ended up buying Chrysler for pennies on the dollar. In return they now own the fastest growing brands in the US, outpacing market growth by 4 to 1. Almost all of the latest designs at Chrysler Co selling well were conceived before the bankruptcy. Though I am happy for Chrysler’s growth and profits under Fiat, I wish the Govt had instead bribed Ford to take over Chrysler, which BTW was on the ropes too and could use much needed capital. Ford could have killed Mercury, Chrysler. Kept Ford, Jeep, Dodge (which will be like GMC for Chevy) and Lincoln. I think Chrysler would have made much bigger profits under Ford. It doesn’t matter Fiat owns them, its still an American Brand with 90% or more of their sales in the US.
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Back in the Clinton Era I worked as a financial analyst. My job was to make numbers dance on a computer while the masters of all things corporate made their decisions. It was brutally boring work. But when you’re only 23, you figure this rite of passage is just part of being a grunt before finally making it headlong into middle management.

I hit the middle management level a little over a year later, and then took a LOT of time off. Two hour lunches. Random walks in the middle of the day. I created Excel macros for most of my work and left the rest to other grunts in the corporate machine. I focused my spare time towards three things: cars, social life, and investing.

The first two were naturally interesting. The final one was about seizing opportunities and figuring out where, beyond Wall Street, I could develop a niche.

Since then I’ve made hundreds of loans and finance deals. Cars, new businesses, even real estate. It’s worked out well… but that’s only because I usually insist on collateral.

Lending Club has a different methodology. All of their loans are unsecured. Want to build on your home? If your credit is good enough, you can get the money… without the usual risk of a foreclosure.

Need a car loan? You may pay a few percentage points more than the 0% and 1.9% factory deals that are available for super-prime consumers. But there is no lien on your car. None.  No lien means no immediate opportunity for the lenders to retrieve the car if you default on the loan.

What are the costs should you default on your loan? Well, I would consider it the same as when you have a douchebag ex-partner. Except in this case you are that douchebag. The cost comes with a nice big thunk on your credit history and, if you operate a business, you will have higher expenses for those things that are based on your credit rating. You will also be a de facto thief, a degenerate, a lowlife, a schmuck and a parasite of the modern world.

But for some folks, that’s a small price to pay for a free car.  Come to think of it. That’s a small price to pay for some folks who still work in the corporate world.

19 Comments on “Can Lending Club = Free Car?…”

• 	jmo February 21st, 2012 at 3:54 pm
  without the usual risk of a foreclosure….But there is no lien on your car. None. But, both are subject to a lien (in most states) as the result of the judgement against you for not repaying the loan – correct?
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  • 		Steven Lang February 21st, 2012 at 4:07 pm
    	No. Each state has limitations on what you can collect with a judgment. The avenue for collection on a judgment primarily exists in four categories: Bank account, home, wage income, vehicle. http://www.fair-debt-collection.com/state-garnishment-laws.html This is what Lending Club states in their loan agreements. https://www.lendingclub.com/info/loan-agreement.action Judgments often take years to collect and some folks go to great lengths to make themselves judgment proof. Ask me how I know.
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    • 		jmo February 21st, 2012 at 4:22 pm
      	So by no, you mean yes, those things could be subject to a lien? So, best case, you end up with them garnishing your paycheck for years? I fail to see how that equals a free car.

    • 		Steven Lang February 21st, 2012 at 4:47 pm
      	I mean no. Judgments and liens are two very different legal instruments. Judgments are only good if the garnishee has wage income or assets that you can collect on. They typically take years to finalize due to the appeals process in most jurisdictions… and then you have to try to collect which is often futile. Liens, on the other hand, offer immediate collection and restitution. In most states you can recover the vehicle immediately regardless of their financial situation. Even if the person declares bankruptcy, they will likely not be exempt from the lien once they emerge from it.

    • 		jmo February 21st, 2012 at 4:54 pm
      	“Judgments are only good if the garnishee has wage income or assets that you can collect on.” Which, in my example, he does. I think you’re thinking of the folks you deal with who are judgement proof. That wouldn’t tend to be the case with these borrowers, if someone is doing a reasonable amount of due diligence.

• 	strafer February 21st, 2012 at 4:13 pm
  I have been investing with Lending Club for over a year now, mostly picking debt consolidation or home improvement type loans without anyone defaulting. Hope this article doesn’t start a trend of shady car buyers thinking this is free money for them.
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  • 		kvndoom February 21st, 2012 at 4:17 pm
    	CTS-V wagon, HEEERE I COME!!!
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  • 		Lokki February 21st, 2012 at 4:18 pm
    	I’ve never heard of Lending Club. Can you expand a little on it please? Off-hand it sounds a lot like the usual “And the lions shall lay down with the lambs…” schemes which work great for a while. EDIT: OK, thanks; I’ve gone to the site. My summary would be that borrowers solicit loans and promise a given rate of interest in return, which rate seems – based on quick reading – to depend on credit score and difficulty of attracting investors. Lenders can agree to invest in loans of varying grades and rates of return – the higher the risk, the higher the rate of return. Risk on each loan is limited by the fact that the lender only invests in $25 shares of each loan. Since shares are small borrowers will need to attract multiple investors (4 per $100) to get a loan. This need to attract puts upward pressure on proffered rates of interest. In the meantime Lending Club wins by collecting fees. They’ve started a bank with very little investment of their own money – brilliant on their part. I honestly have no idea if the rates being offered to borrowers are good enough to be attractive. The rates of return to lenders sound OK (9.3 percent or so?) before taxes, I’m not so sure they’re worth the risk for the net returns. Of course, I’m not much of a gambler, so perhaps I’m wrong but there doesn’t seem to be much real data beyond a FICO range and some proprietary formula based grade of A to G. This will be fun to watch but I’ll probably never do more than that.
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    • 		strafer February 21st, 2012 at 4:31 pm
      	Basically, it’s peer-to-peer lending. Check out lendingclub.com for details.

• 	Advance_92 February 21st, 2012 at 4:17 pm
  I would like a better idea of what’s going on here. Is this lending club somehow providing security for a loan but not obligated to do anything if the borrower doesn’t pay?
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• 	brettc February 21st, 2012 at 4:27 pm
  I’ve never heard of Lending Club either. It looks like maybe it’s similar to prosper.com based on a quick glance at the site.
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• 	stickman February 21st, 2012 at 4:31 pm
  Advance_92, no. They have an escalating collections process but as Steven points out, no collateral. It is pretty clear on their website that a portion of borrowers do default and they have some aggregate data on how overdue some of the payments have been. The process is documented on their website but basically round 1 is to contact the borrower and see what can be worked out, round 2 is (re)negotiate terms, and round 3 is collections/court. strafer, as an investment, how do you like it? I have been intrigued enough to review their website and prospectus multiple times but I just can’t quite get up the nerve to partake. It intrigues me quite a bit and the returns seem pretty good. I like how they have different grades of investment for those who want more or less risk. If it’s not too much to ask, you mention you’ve had no defaults in a year, are you only investing in Grade A — which investment option did you pick?
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  • 		strafer February 21st, 2012 at 4:40 pm
    	Originally started as a loan for a family member starting a business, most of which was fulfilled by other club members and I loaned what was left to fill. As the monthly payments are made to my account, been reinvesting mostly in 36 month grade B loans, and getting between 9-10 % ROI. Some of the loans had been paid off in several months, way before the 36 month maturation.
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• 	1000songs February 21st, 2012 at 4:36 pm
  Forgive my ignorance, but what are you on about here? If you borrow money from Lending Club and buy a car “you will also be a de facto thief, a degenerate, a lowlife, a schmuck and a parasite of the modern world.” What? Why? Huh? I definitely missed the point here. I’ve re-read your article 4 times now and have given up.
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  • 		Toad February 21st, 2012 at 4:52 pm
    	Same here. I re-read it and did not get it either. The second to last paragraph left me completely baffled.
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    • 		Steven Lang February 21st, 2012 at 4:56 pm
      	A little clarity for you. “No lien means no immediate opportunity for the lenders to retrieve the car if you default on the loan.”

    • 		Russycle February 21st, 2012 at 5:24 pm
      	I interpret Steven as saying if you buy a car with a loan from Lending Club and don’t repay the loan you will be a thief, schmuck, etc. But you’ll have a free car, and there’s not much Lending Club can do about it.

• 	Lokki February 21st, 2012 at 5:05 pm
  Steve - I think that perhaps the last two paragraphs should be combined together. I think that the readers (confused above) are missing the connection between the 2nd to last paragraph (what happens if you default) and the last paragraph about being scum. They’re reading it independently and coming to the conclusion that anybody who takes a Lending Club loan is scum – which is not what you probably meant.
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  • 		Steven Lang February 21st, 2012 at 5:10 pm
    	Good suggestion. Done.
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During the late 1980s, my future wife spent several years teaching English in northern China. Back then, many Chinese manufacturers felt that showing off Western-language brand labels indicated worldliness, and so this Chengdu passenger van got a “CD” grille ornament and some somewhat garbled lettering above. I found this photograph, which was shot during a trip to Sichuan Province, in her collection and had to share it.

15 Comments on “Adventures In Chinese Vehicle Branding, 1988: CHEИD⅁U Van…”

• 	VanillaDude February 21st, 2012 at 11:38 am
  Living overseas I saw many attempts to spice up a product with English words. Popular English words include: USA California Sport West Fun Mustang Surf Freedom College Special So, within a crowd, it isn’t uncommon to see a Western-styled, or US-styled foreign jacket, shirt or sweatshirt with these English words printed on them. I loved seeing them because they usually made little sense. I own a “Special California Mustang” athletic jacket. The English language signifies a coolness that is very attractive to most world cultures, especially among young people. America is still a very desirable place to dream about for billions of people. We are envied.
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  • 		cheapthrills February 21st, 2012 at 11:58 am
    	My favorite is the pinstripe packages available on various Euro hatches named after random US cities. I know there was the Boston edition Golf, the Atlanta package Opel Corsa, as well as ones like Memphis, St Louis, and many other not-so-lustworthy locales. It never made sense to me.
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    • 		VanillaDude February 21st, 2012 at 12:06 pm
      	That explains the Skoda Duluth and the Laser Omaha.

  • 		David Holzman February 21st, 2012 at 2:40 pm
    	Adding to your list “American news” at a small amusement park in southern France. Of course, the most fun is when they garble English. There are lots of funny examples on the Japanese Engrish website (google it). My all time favorite car related one was a Nissan advert showing an SUV with the caption, “Forever and always, we can meet our best friend, Nature! Take a grip of steering. Nissan.” Nice photo.
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  • 		mad_science February 21st, 2012 at 2:52 pm
    	This is common in Kenya as well. You’ll see customized minibuses (“Mutatus”) with graffiti-looking side art in semi-coherent English. Stuff like “Don’t Step!!”
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• 	strafer February 21st, 2012 at 12:41 pm
  Guess the flip side is all those tattoos of Chinese characters Americans love to add to their skin. Who knows if they mean something other than what the tattoo parlors list.
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  • 		dejal1 February 21st, 2012 at 12:49 pm
    	The Chinese characters on guys all mean “I’m a bottom”. Truth.
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    • 		Dynasty February 21st, 2012 at 2:51 pm
      	LOL!!

• 	philadlj February 21st, 2012 at 12:48 pm
  The Chinese auto industry is also in love with very long alphanumerical model names – the ZYGT75C42-R, for instance, or the 9711FRMC5.
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• 	fredtal February 21st, 2012 at 1:47 pm
  You would probably get the same thing if you asked Americans to put Chinese characters on a vehicle. Maybe that is why no one puts on single letters like that anymore.
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• 	Dynasty February 21st, 2012 at 2:55 pm
  Looking at the photo, I bet the owner of the said van re-arranged the letters and turned them backwards. Either that, or they were using Russian letters and not English.
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  • 		MrWhopee February 21st, 2012 at 3:01 pm
    	Agreed, perhaps the logos all fell out due to weak glue, and the owners are having trouble putting all of them back in the correct order, or orientation. Though it would be hard to get the N to show up like that, unless it’s mounted bottom (glue) side up.
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• 	redseca2 February 21st, 2012 at 3:14 pm
  Carefully molded into the plastic above a switch on my chinese paper shredder in letters 1 CM high: FORWARD – STOP – REVSERE
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  • 		cfclark February 21st, 2012 at 3:21 pm
    	A blender we owned (maybe we still have it), almost certainly made in China, included the option to blend up a “SMOOTIE”. To this day, any thought of patronizing an establishment such as Jamba Juice is expressed in our household as “wanna go get a smootie?”
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• 	confused1096 February 21st, 2012 at 4:14 pm
  My favorite: Years ago I purchased a set of cheap kitchen knives that had the admonishment “Do Not Use On Children” printed in the instructions. Wish I hadn’t lost them in a move.
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Travel on U.S. roads fell to its lowest level since 2003, while Americans hold on to their cars longer than ever, two Detroit newspapers report to the horror of their carbuilding readers.

Last year, U.S. drivers logged 35.7 billion fewer miles over 2010 — down 1.2 percent — to 2.963 trillion miles. That’s the fewest number of miles since 2003, when Americans drove 2.890 trillion miles, the Federal Highway Administration told the Detroit News.

What’s keeping people off the streets? Says the DetN:

“Stubbornly, high gas prices and an economic slowdown since 2008 have convinced some Americans not to drive as much.”

At the same time, people are holding on to their cars longer than ever. The research firm R.L. Polk told the Detroit Free Press that new vehicle owners kept their an average of 71.4 months, or nearly six years, the longest in the eight years Polk has done the survey, and nearly two years longer than the average life of ownership in 2003.

The average age of a vehicle on U.S. roads reached a record 10.8 years.

Looking for reasons, the Freep heard a familiar tune:

“Consumer spending remains conservative in a still-weak job market with relatively high unemployment rates. Many buyers have longer-term financing options to secure more affordable payments. In addition, vehicles produced in recent years have been more durable and reliable than their predecessors.”

54 Comments on “Americans Drive Less, Keep Cars Longer…”

• 	VanillaDude February 21st, 2012 at 11:18 am
  There is another reason. Aging. We have an aging population and this is also impacting the number of miles driven in the US. Boomers are retiring and they will not drive as much as they had. Compared to previous generations, Boomers drove much more. They have a higher percentage of suburban living than previous generations and grabbed car keys at times of low gas prices, low insurance prices, and in an era when driving a gas guzzler was the norm. These people are retiring. This will continue to impact this figure.
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  • 		obbop February 21st, 2012 at 12:55 pm
    	Makes sense to me.
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  • 		jmo February 21st, 2012 at 1:13 pm
    	That’s very true. Also, I’d have to assume the number of kids 16 to 22 who are driving is also declining, due to a tight job market, graduated licensing, facebook, etc. many kids aren’t getting a car until they graduate college.
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  • 		jeoff February 21st, 2012 at 1:43 pm
    	Yeah, and as folks get older the less they like change. My dad got rid of his ’99 Corolla for a new one two years back, and he really misses the old car every day. Everything from the visibility (he says it is only a matter of time until he backs into something), to the way the new one accelerates drives him nuts.
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  • 		Bowler300 February 21st, 2012 at 4:39 pm
    	And teens aren’t driving much. I just today read a stat that something like only 48% of teens 16-19 have their license.
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• 	Zackman February 21st, 2012 at 11:36 am
  In this economy, who wants to take on a car loan if the car they have is perfectly servicable, regardless of age? I’m just about to turn 61 and figure I may buy one more new car. Two reasons why we have kept our CR-V and Impala so long – they’re both outstanding cars and have served us well, even if they are showing some wear and have a few small issues that I’m not bothering to fix, so why get rid of any of them? I’m having my Impala detailed this spring, and I may get the temp control and mode selector lights fixed on both cars. The second reason is Chevy simply isn’t building a car I truly like enough to buy right now. I’m hoping the next Impala will float my boat into something I can mildly customize to my taste as to what my image of an Impala should be. Three tail lights isn’t necessarily one of them, but would be a plus. Don’t even ask why I won’t consider anything else – my mind is set on Chevy right now, but I never say never…
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  • 		VanillaDude February 21st, 2012 at 11:45 am
    	My growing family forces me to replace perfectly servicable vehicles. My friends have the same issue. We get more kids, and we can no longer keep a perfectly fine vehicle. So, if you are not experiencing a lifestyle change that would impact your driving habits, then you can keep your vehicle longer. Boomers are done with their lives and are now coasting. This changes things within the Market regarding buying and driving habits.
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  • 		racebeer February 21st, 2012 at 11:45 am
    	I with you on that. I’ll be 60 this year, and my current fleet is more than adequate. This is how it stands right now: 2004 Rainier w/63k 2001 Trans Am Convertible w/48k 1998 Firebird w/54k 1963 Dodge w/110k No maintenance issues with any of them (Dodge included), they all do the job for us, so why trade?? I live in the ‘Burbs and work in the city, taking the bus from a local park n’ ride. The wife drives about 12 miles round trip to work with the Rainier, which she loves and wouldn’t trade for anything. I might buy another car at some point, but it won’t be new and it won’t have a top!!!! So, I’m doing my part…………
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    • 		David Holzman February 21st, 2012 at 2:51 pm
      	Only 110k on the Dodge? Those things were good for 300k. Sounds like you’re wasting some good capital equipment! If you’re in Boston, I’ll be happy to drive it for you a few days a month.

  • 		zerofoo February 21st, 2012 at 12:55 pm
    	What you need is a Corvette convertible. It’s a fine vehicle, and at 61, you deserve to treat yourself!
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    • 		Zackman February 21st, 2012 at 2:19 pm
      	Oh, if only I could afford one. That IS my dream car, as wifey is painfully aware of…in metallic gray, please.

  • 		DubTee1480 February 21st, 2012 at 2:49 pm
    	Hey Zackman, when the climate control lights on my ’04 Impala went out, I sent the unit to this guy and he put LED’s in it. http://www.bbengineer.com/cars/impala/store.htm#climate I don’t know that you can buy off the shelf bulbs for them like you could back in the day.
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• 	Landcrusher February 21st, 2012 at 11:51 am
  And older drivers have always kept cars longer. I am a big SUV owner, but could selling low mpg vehicles be hurting auto sales in the macro? If you drive less due to cost per mile, you don’t wear out your car and come back for another. That extra SUV profit may not be as good as selling more cars. The old Detroit solution was cars that wear out quickly, but that won’t work anymore. Is a highly effiicient car that is comfy, or fun to drive, what they need to be selling boomers?
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• 	Landcrusher February 21st, 2012 at 11:54 am
  PS. Mom traded in last year. Her 1990 Maxima had 60k miles on it. She now does about 100 a month in her new Rogue.
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• 	Robert Schwartz February 21st, 2012 at 12:07 pm
  I will second Zackman, and add that I think that new cars are lumpy, claustrophobic, and overweight. I drive a 2002 Accord, and I don’t think I have seen anything on the market with which I would replace it. My only motivation for buying a new car would be if one of my children needed a car. So far, all of them live in big cities and use public transportation. But, rather than see one of them buy an overpriced used car, I would give him the Accord, and suffer through a new car. Another factor is that there is not much technological difference between new and my 2002. When I bought my 1995 Mystique, I realized that with traction control, ABS, and dual airbags, I had crossed a technological bridge, and that I would not go back willingly. I don’t see anything like that in new cars. Certainly, when vehicles that are driven in traffic by built in digital computing machinery (what we could call automobiles, because they are self mobile) become commonly available, we will cross another such bridge.
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• 	marshall February 21st, 2012 at 12:28 pm
  Good to know — all three of my cars are “above average” You would think they were all from Lake Wobegon. 1994, 2000, 2004. All older than 71.4 months. I wonder how “average miles/car” and “average miles/driver” have changed.
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• 	200k-min February 21st, 2012 at 12:35 pm
  Ummm, used car prices…anyone, anyone? My father’s 2003 Honda Pilot has some funky transmission issues. He looked to see about dumping it for a newer used Pilot, way expensive! Then he looks brand new, he says, and I quote “It’s not worth $36k.” He even went and looked at a Highlander and said the same thing. If an off lease 3 year old vehicle had taken a 30%+ depreciation he’d be in a new “used” vehicle. If new car prices were 10% lower, he’d be in a brand new vehicle. Instead he’s looking at putting a new tranny in the 2003 ($2500) and running it for another 100k. And this is a buyer that can pay cash for a $30K+ vehicle.
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• 	speedlaw February 21st, 2012 at 12:54 pm
  Everyone I know in my little village, an “upscale” burg, is not buying cars….even if your job is secure, inflation, (which we are told does not exist now), taxes and health insurance are sucking up any “excess” cash. I am sick to death of seeing Minis in my area….everyone who replaces a car seems to arrive at that same conclusion… When the car dies they get a new one. Not before. I’ve not seen any recreational car replacement since the crash….and this in an economically intact area. New cars aren’t much better than the “old” ones now, other than being new. My nine year old BMW, maniacally maintained, does not drive “worse” than a new one…depending on the model, it is often “better”. I can’t imagine that the same is not true for an Accord or other car. The days of massive improvement between model cycles is over….technology has mostly plateaued.
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  • 		Toad February 21st, 2012 at 2:42 pm
    	+1 on that last paragraph. It is tough to rationalize purchasing a new car that is only marginally better than a well maintained late model car you already own. Is a new Accord, Camry, or Pilot significantly better than a paid off 2005? More importantly, is it $600 per month better?
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  • 		cfclark February 21st, 2012 at 3:30 pm
    	I am bored with my ’03 Subaru to some extent, but I have no rational reason to replace it–it should have plenty of miles left at 114K, it’s comfortable and it gets me where I need to go with reasonable fuel costs (and of course, no monthly payment cost). I posted here because I have noticed the same thing in my area–scads of Minis (MINIs?), including my wife’s own 2011. (She tends to cycle through cars more quickly than I do.)
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• 	redav February 21st, 2012 at 1:28 pm
  My dad used to own a ’64-1/2 Mustang. When it became a maintenance headache, and he sold it. He often expressed regret over that decision. Now, I can see where he was coming from. When you find a car you love–one that does just what you want it to do–keep it. It becomes a good friend.
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• 	jeoff February 21st, 2012 at 1:34 pm
  With so many folks insecure about everything and cars that lasting so much longer than they used to, it is hard to justify high new and used car prices.
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• 	asapuntz February 21st, 2012 at 1:43 pm
  Those who want a car to last a few more years are likely to cut back on the yearly mileage. Deteriorating roadways probably motivate that behavior as well. Maybe $4 gas makes a difference, but I’m dubious since $10 gas (and better-than-most alternatives) in Europe haven’t exactly led to empty roads.
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• 	replica February 21st, 2012 at 1:46 pm
  The biggest problem with new cars is they aren’t really that “new.” What does a car do today that a 10 year old used car doesn’t? It seems they get more cheaply made with each passing year. Interiors scuff easier, paint has tons of distortion in it now, all this added technology and still gets the same MPG.
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  • 		jmo February 21st, 2012 at 2:46 pm
    	It seems they get more cheaply made with each passing year. Build and material quality has increased massively in the past 10 years.
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• 	jeoff February 21st, 2012 at 1:54 pm
  Does anybody sell a car that has better visibility than they sold 15 years ago?
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  • 		supersleuth February 21st, 2012 at 1:59 pm
    	The Fit probably has better visibility than the Civic hatchbacks of that era. (But the Fit is an aberration in these days of the return of the high beltline.)
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  • 		azmtbkr81 February 21st, 2012 at 2:05 pm
    	They sell cars with more cameras…does that count? Pretty soon cars will be eggs on wheels with monitors like the USS Enterprise instead of windows.
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    • 		replica February 21st, 2012 at 2:09 pm
      	Windows are so 90′s. Get with the times.

    • 		Steven Lang February 21st, 2012 at 3:40 pm
      	Funny, when I read that Windows remark I started thinking about MS Windows. Funny how the mind wanders when you have a nasty case of the stomach flu.

  • 		David Holzman February 21st, 2012 at 3:00 pm
    	Almost no-one. Even the Subaru Forester now has less visibility with the redesign, although its still probably better than most. One of the really good things about the MINI is visibility. But effing high beltlines and fat C pillars are all over the place.
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  • 		acuraandy February 21st, 2012 at 3:18 pm
    	Not that i’ve seen. Panther, maybe? Oh wait, they aren’t built anymore…
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• 	Robstar February 21st, 2012 at 2:18 pm
  I guess I’m in the minority — I want a (newtome) car. I’m looking for used at $5k or less for a stick shift econobox so I don’t have to drive my WRX STi every day & spend tons on gas/maint. I’m tempted to buy a new car” (something $12-13k+TTL on special) only due to safety. The only reason I’m looking for a car at all is my 2000 neon (3 speed auto) just ate it’s second transmission at 210k….
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  • 		rentonben February 21st, 2012 at 3:57 pm
    	Safety is what got me out of my 2002 Saturn ION and into an new car – 2 airbags didn’t cut it when I have kids.
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• 	George B February 21st, 2012 at 2:42 pm
  The main barriers for me are electric power steering and poor styling. Most manufacturers just haven’t figured out how to make EPS feel like hydraulic power steering and most cars would look better with a couple inches of height sectioned out below the beltline. There is something wrong with car proportions when ordinary cars need rims 18 inches or larger to fit the design.
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  • 		redseca2 February 21st, 2012 at 3:28 pm
    	I don’t even like hydraulic power steering unless it is very subtle. I miss the sore muscles I would have after running some of the old british and german cars I have owned down California Highway One and would love the automotive equivalent of the steering damper you often find on a motorcycle.
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• 	manbridge February 21st, 2012 at 3:15 pm
  Gack, new cars are just so unappealing. Especially on a sensory level. Drive by wire throttle? No. EPS? As if the engineers were challenged to make normal power steering worse. And so they did. ABS that on all Suburbans I’ve owned (1994,2001,2007) has never worked very well. Or gotten better over the years. Confused by bumpy gravel roads/low pedal nonsense etc. TCS/Yaw control? It is absurd as a car guy to have to accelerate AGAINST the application of brakes just to get up a snowy driveway when all that was required was throttle modulation. My father-in-law actually got the brakes smoking hot coming up a 200 yard driveway. I turn these systems off whenever possible. I suppose they are intended for drones. Weight gain that forces same components to do more work with less efficiency. Example form Suburbans…. 2001 and 2007 share same 4L60E transmission. 2001 has less lard and original trans at 175K. 2007 has had trans failure at 60K. And it gets worse mileage, has less outward vision, and comes with cheap plastic bumpers as opposed to the 01′s metal ones. And it is harder on tires. Is newer safer? Perhaps, but there are still just as many people dying per miles traveled as ever IIRC.
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  • 		supersleuth February 21st, 2012 at 3:23 pm
    	You don’t recall correctly. In the US they have resumed a steady, significant decline after a plateau between 2000 and 2005. http://www.usatoday.com/news/nation/2010-04-12-traffic-deaths_N.htm
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    • 		manbridge February 21st, 2012 at 4:14 pm
      	But the header above states ‘Americans driving less’, so I took that to mean less deaths but less miles driven. But looking closer at USA today article, they say Americans drove 1.6% MORE miles. So one is left wondering who is correct, USA Today or TTAC?

    • 		Landcrusher February 21st, 2012 at 4:25 pm
      	It’s likely the individuals drive less while the increase in population adds to total miles driven.

  • 		jmo February 21st, 2012 at 4:07 pm
    	It is absurd as a car guy to have to accelerate AGAINST the application of brakes just to get up a snowy driveway It makes perfect sense if you don’t have a limited slip diff. By braking the slipping wheel power is transferred to the wheel with the most grip.
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  • 		supersleuth February 21st, 2012 at 4:18 pm
    	Don’t know about the miles traveled, but official DOT statistics shouldn’t be hard to find.
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  • 		Moparman426W February 21st, 2012 at 4:43 pm
    	Manbridge, you are right. Anyone who thinks that abs won’t lock the wheels has never tried it on gravel, or even a blacktop surface with a little gravel on it.
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• 	redseca2 February 21st, 2012 at 3:23 pm
  I recall an article in ROAD AND TRACK many, many years ago that noted that research indicated the average purchaser of a new Rolls-Royce in Great Britain kept the car for 27 years. The article went on to compare the cost of ownership for the Rolls versus buying a new median price Detroit car every three years, using the previous one as a trade in. Even factoring in maintenance, the Rolls came out ahead per ROAD AND TRACK. Mind you this was a long time ago when the average american iron was $3500 and the Rolls perhaps $35,000.
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  • 		jmo February 21st, 2012 at 4:09 pm
    	What was the average miles driven per year on the Rolls? I bet the vast majority of those cars had less than 100k miles when 27 years old. The average American would have over 400k by then.
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• 	rodface February 21st, 2012 at 3:29 pm
  I see a lot of complaints about new cars in this thread, including the marginal improvement in gas mileage, poorer visibility, and perceived lower level of build quality, when compared with their predecessors. The one thing people seem to consistently skip over in these comparisons is the safety factor. Bloat, complicated electronics, poor visibility, snub noses and high belt lines are unfortunate side effects of ever-increasing crash test standards. We can all agree that, desirable as a 60s-era American land yacht may be, the cheapest econobox on the road today is a safer car by many orders of magnitude. Not only will it hold up better and protect you better in a crash, with its reliable handling and better brakes, the “crappy” car will do a better job of keeping you from crashing in the first place. Layers and layers of electronic aids, airbags and the like reduce simplicity and increase repair costs, but they work, as evidenced by an ever-decreasing accident rate. We aren’t having less accidents and fatalities per capita because people are becoming better drivers (obviously), or are less distracted (cell phones!), or because cars are getting older on average (what?); it’s because cars and highways are becoming more high tech, and safer. I think it’s important not to lose sight of this. It seems romantic to imagine that when I have a son or a daughter they’ll want their first car to be an old BMW convertible from the 80s or some other cheap beater with a lot of character. I would never forgive myself if they got in an accident that they likely would have survived had they been driving a modern car with the latest preventative and reactive safety features.
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  • 		replica February 21st, 2012 at 3:36 pm
    	There’s an entire segment of lightweight modern cars. They didn’t seem to be spoiled completely by safety. There’s a 2011 model year car I drive everyday that’s under 2,300 lbs. It doesn’t have gun-slit windows or poor visibility. I think it’s entirely a choice for cars be be designed as poorly as they are now. I guess sheet metal is cheaper than glass. Do higher belt lines and massive pillars improve safety or just the perception of safety?
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  • 		cfclark February 21st, 2012 at 3:38 pm
    	Does it seem that the reduced visibility that is a function of increased crash test standards is at odds with the (perhaps more sensible) goal of increased crash avoidance? If I see the obstacle ahead slightly earlier and avoid hitting it, is that not preferable to hitting it, even if I walk away?
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    • 		jmo February 21st, 2012 at 4:12 pm
      	“goal of increased crash avoidance? ” As most folks aren’t paying attention anyway I think increased visibility is going to do much good. And really, is that 5 degrees of obstruction caused by the A pillar the reason for the crash? I’s say that would almost never is it the culprit.

  • 		manbridge February 21st, 2012 at 4:28 pm
    	I don’t think a reasonable person would advocate returning to 60s-era cars for everyday use. But somewhere, tradeoffs have to be made. Or why not just have everyone drive tanks that have a top speed of 15mph? And have no deaths? I mean if it will save one life then we’ve got to do it! The answer is because it is not practical. I would like to see safety as a choice instead of its being foisted upon the buyer. In this way the risk averse types could spend more and buy what they want, and others could have a less safe car without all the penalties. Perhaps the risky would be weeded out of the gene pool, but then that would be better for the rest. And free up some traffic congestion to boot. But then again, people choosing freely gets us into rather deeper water.
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    • 		Toad February 21st, 2012 at 5:08 pm
      	Your argument is good in theory, except that most accidents have one innocent party as well as a guilty party. You may forgo safety devices in your car because you are a very safe driver, but you still get killed when you are broadsided by a driver who was texting. Auto safety standards also protect 2nd owners of cars who cannot practically retrofit crash bars or air bags into a used car. Like it or not, as a society we have decided on minimum safety standards for restaurants, homes, cars etc. because some people make very bad personal safety decisions.

    • 		aristurtle February 21st, 2012 at 5:16 pm
      	Safety is a choice and a tradeoff you can make. Buy a motorcycle. Light weight, low cost, good performance, excellent fuel economy, exciting to drive, reduced traffic congestion in areas where lane-splitting is tolerated, all the normal car-geek preferences checked off right from the start (manual transmission rear wheel drive mid engine power-to-weight etc. etc.). All at the cost of increased license requirements (read: a three-day class, at worst) and reduced safety. (And, frankly, the reduced safety, while real, isn’t as bad as the statistics suggest if you’re smart about it).

  • 		jeoff February 21st, 2012 at 4:30 pm
    	Every “advance” engineered in today’s cars does not increase safety, some decrease safety (think infotainment systems), and perhaps even some features that are engineered for saftey may result in a net decrease in safety (massive pillars). ESC and ABS decrease the chance of a rollover with minimal added weight or a decrease in visibility. I think that there is a good chance that we are past the point of diminishing returns with the amount that we have sacraficed visibility for the sake of roll-over protection.
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• 	…m… February 21st, 2012 at 4:56 pm
  …public roads in a police state are travelled with trepidation, lest the state-sanctioned highwaymen or robotic enforcement extract their onerous toll upon the traveller…
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