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New rules of the road

High gas prices are finally steering motorists away from big SUVs. Corporate America, take note.

June 04, 2008

In some of L.A.'s wealthier neighborhoods, the homeowners seem to have swapped cars with the hired help. While just last year the well-off were commuting to work in SUVs even as domestic workers pulled into their neighborhoods in cheap subcompacts, today you're likelier to see the moneyed set behind the wheels of Toyota Priuses, while their maids shuttle about in behemoth Lincoln Navigators.

Until recently, nobody knew when the gas-price tipping point -- the level of pain at the pump that would prompt car buyers to change their behavior -- would arrive. With gas now above $4 a gallon in most of California, we are clearly there. SUV sales have fallen off a cliff; even the resale market is so bad that about 36% of people trading in SUVs in May owed more on the vehicle than it was worth, according to the Wall Street Journal, which is why these automotive brontosauruses are suddenly becoming affordable for low-income motorists.

All this is proving very painful for U.S. automakers, which are deeply reliant on SUV sales. On Tuesday, General Motors Corp. announced that it would close four North American truck plants and might sell its gas-guzzling Hummer brand (if it can find anyone willing to buy it). Ford and Chrysler are suffering as badly or worse. The only silver lining is that sales of small cars and smaller SUVs are taking off.

The Big Three can't say they weren't warned. Experts have long insisted that automakers would benefit financially by accepting government efforts to improve gas mileage rather than fighting them. Congress finally passed new fuel economy standards last year; meanwhile, California's attempts to impose even tougher fuel requirements have been blocked by the Bush administration, no doubt at the behest of automakers. That's a shame, because if they had adapted years ago to a new environmental and economic imperative, they'd now be fully geared up to produce the gas-sipping models consumers crave. Other industries that are resisting change as fiercely as the automakers once did should take note.

The country will not, and cannot, continue to give corporations a free pass to emit greenhouse gases and pollute the air. With some kind of carbon-pricing scheme all but inevitable (even if it takes a few years), the companies that invest a little in reducing their carbon footprints now will save a lot down the road. Those that refuse probably will be road kill.

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