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Automakers Bet Big That High Gas Is Here to Stay

Ford logoFord Motor and General Motors suddenly seem to agree that high gas prices are here to stay, and therefore so is the shift out of big pickups and SUVs, and into small cars and crossovers.

GM logoChrysler has been more cautious in its rhetoric than Ford and GM. And while Ford has cut truck production this year, and GM has also announced production cuts, Chrysler executives said they entered 2008 with lower expectations to start with, so they've had less to cut.

A cynical person would add that Chrysler extended its $2.99 gas promotion, offering to pay consumers the difference between $2.99 and the price at the pump for three years. That could indicate Chrysler is less convinced than its rivals that gas will keep going up.

So are high gas prices really here to stay? It's easy to find oil industry analysts on both sides of that issue.

Some think high gas prices were artificially "Made in America" by political policymakers, as much as by market forces, and should start to come down. Other analysts think gas prices will continue even higher.

Either way, consumers seem to think high gas prices are here to stay, according to a Gallup Poll. Maybe that perception is just as important to the automakers as any attempt to forecast gas prices.

Jim Farley, group vice president, marketing and communications for Ford, described the shift from trucks to cars as "permanent," in a June 3 conference call.

George Pipas, Ford's U.S. sales analysis manager, said that for all of 2008, Ford expects to build roughly 60 percent cars and crossover vehicles in North America, and 40 percent pickup trucks and SUVs. Last year, it was 48 percent cars and crossovers, and 52 percent pickups and SUVs. "That gives you an indication where we're heading, not only in 2008, but beyond," Pipas said.

GM announced separately on the same day that it will permanently close four truck plants, and undertake a so-called strategic review of the Hummer brand. That's corporate-speak for, "Blindfold? How about a last cigarette?"

So even if gas prices do come back down, Hummer may not be around to find out, and maybe those four GM factories won't either.

GM and Ford aren't planning to wait to find out.

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