As the U.S. market finally makes the inexorable shift to more rationally-sized cars, Ford's President for the Americas, Mark Fields, will explain how his company plans to make money with smaller cars. Ford will apparently focus on doing what might seem intuitively obvious to some, but has not heretofore been part of doing business in the U.S. market. They will build small cars that people will actually find desirable to own and willing to spend more money on. For the past several decades, automakers, particularly those based in Detroit but import companies as well, have simply tried to reduce the cost of small cars below the price people were willing to pay. Since people weren't willing to pay much for lousy cars, you can see where that equation went. The problem for the automakers is that it doesn't cost that much less to build a car like a Focus than it does to build a Lincoln or a full-size truck. The engineering costs, wages for workers, tooling, etc. are all the same whether you build big or small. The lower cost of using less material is not enough to make up the price difference.

The entrance of MINI into the U.S. market earlier this decade proved that Americans were wiling to pay more for small cars, certainly enough to be profitable. The key is cars have to be desirable, good looking and have the features customers have come to expect. While Ford's latest Focus may miss out on the good looking part, it does have plenty of features - like SYNC - and people have demonstrated a willingness to buy it. The average transaction price that people are actually paying for the Focus has risen by $1,000 and Ford intends to make money on cars like this and the upcoming Fiesta by providing a good driving experience rather than just a box. What a concept!

[Source: Detroit News]

OK, we finally have a post that offers a critical look at the mushrooming ethanol production plant trend. Jon Chavez, writing in the Toledo Blade, talks to a lot of industry folks and finds the general consensus to be that ethanol plant profits will be pretty good for the next few years, but after that it's going to be a rocky road.

The key to understanding the situation is summed up in a paragraph towards the end of the article. "Unlike some investments with only a few unknowns, ethanol has up to five price variables that affect plant profits: corn, ethanol, oil, natural gas, and transportation," Chavez writes. Since these five variables are constantly changing, anyone claiming to know what will happen in five years (including Chavez) is making a bold claim. Still, it's good to hear at least some dissent in the go-go ethanol boom seen 'round the country.

[Source: Toledo Blade, hat tip to Joel A]

Kimberley Strassel is on the editorial board of the Wall Street Journal, and she went on The Daily Show with Jon Stewart last week to talk about oil prices, oil companies and ethanol. Her basic argument was that high oil prices at the pump are not the fault of oil companies and their record-breaking profits (ExxonMobil, for example, made more than $8 billion between January and March of this year, a jump of 44 percent over last year) but instead the fault of congress and unrest in the places where we get most of our oil. And, of course, a high rate of consumption. Strassel did not answer Stewart's question that, even if oil costs more per barrel, shouldn't the companies' costs be going up and their profits remaining pretty much the same?

On ethanol, Strassel said that nobody would use the fuel if congress hadn't mandated ethanol usage last year because it was difficult to transport and store. She didn't mention anything about local ethanol plants that are coming online across the country.

For at least a little while (a month or three), you'll be able to watch the clip here, after that you'll have to buy the show on iTunes.

[Source: The Daily Show]