It's Not the Greens, It's the Greenbacks

The GM-Hummer relationship was never meant to be permanent. It was a marriage of convenience, sustainable only as long as it remained profitable. GM executives now are examining the prenuptial clause of that agreement, trying to determine whether they should drop Hummer altogether, or keep it with a smaller, more fuel-efficient group of products. What will happen depends on what can be sustained profitably -- and what can be done with the least amount of harm to GM's Cadillac dealers, some of whom have invested millions of dollars to turn their dealerships into Cadillac/Hummer superstores, GM sources said last week.

What is certain is that GM will sell more small cars in the U.S. market, including models obtained from its foreign subsidiaries, such as Opel in Europe, and those built in North America. Ford is employing a similar strategy, pulling in models such as its little Fiesta from overseas and planning to build more fuel-efficient cars at its North American plants. Chrysler, according to Robert Nardelli, the company's chief executive officer, will partner in the development and acquisition of more fuel-efficient cars.

Nardelli offered no specifics on that prospect in a recent interview. But for several months now, Chrysler has been flirting with Nissan with an eye toward procuring more small cars.

It's all about the money -- what consumers are willing to pay for in what markets for what reason. Thanks to high fuel prices, the chance to make money selling small cars in the United States is beginning to look good for a variety of players, including Italy's Fiat Group, which is studying the possibility of manufacturing small cars in the United States beginning in 2010.

None of this means that all big trucks and SUVs will disappear. Many people need trucks. As long as they need them, there will be companies to design, develop, manufacture and sell them, albeit with more fuel-efficient engines and transmissions.

Nor does any of this portend an end to supercars manufactured by companies such as Lamborghini or Ferrari. Remember, money talks. People with lots of money often enjoy speaking loudly. As long as they are willing to do it in a Lamborghini or Ferrari, those companies will be around to serve them.

None of this is rocket science. It isn't philosophical. The car companies will give consumers whatever they are willing to pay for. Right now, the companies are betting that high fuel prices are here for the long term and that many consumers are willing to pay more to get more mileage out of a tank of gas. It's just that simple -- really.