Home > current events > Zone Pricing and the Big 3

Zone Pricing and the Big 3

Special two parter today. Have you ever wondered why a gas station in your part of town charges upwards of 25 cents more per gallon than a gas station of the same company three miles down the street? For instance the closest station to my apartment has gasoline priced at 2.29 while on the same street across the city the gas is priced at 2.09. It’s a system called “zone pricing,” that allows the prices to be changed by the owning companies. This doesn’t reflect the average mark up by the gas station itself, moreso how much that station is charged for gasoline.

New York State, in a rare fit of actually doing something, has decided that this will now be illegal. It’s not a simple response to higher gas prices, it’s a response from complaints by gas station owners who asked the state to look into it ten years ago, when gasoline was high at 1.50. New York is the first state to render this practice illegal but I’m sure more states are going to follow suit as the new law just makes common sense and impedes the limited market pricing that has a moderate effect on the price we pay. Good job state senate (something I’m not at all used to typing).

Nationally, the big talk is about whether the government should bail out the Detroit auto makers. I’m against it. I’m against it because for the last ten years (at least) American automotive companies have resisted changing an outdated business model and now comes the ferryman to collect his coins. It’s getting to the point where I feel that incompetence is being rewarded.

For example, Ford relied on sales of its Taurus car for years as a staple of its financial intake. They did this to the point where they built a factory in Georgia to make the Taurus and nothing else. When sales of the Taurus began to decline in the mid 90s that particular factory had to cut workers as it was designed with only that car in mind. In contrast any Japanese or German auto factory can produce any car that company sells. If the Toyota Camry stops selling, the machines have to be reprogrammed and some assembly line rails refitted but otherwise the factory can still run. They have been doing this for years.

That type of working model is what separates the foreign businesses from the domestic ones. The foreign companies seem to make the attempt to improve their business even if they are doing well, while the Detroit firms have been resting on laurels that have long since wilted.

I’m not a car guy, I drive a Pontiac that has been fairly reliable. So I don’t relish in the failing of these companies, so it is not with any joy that I say let them die. There is a point however where we cannot hand these people a bucket full of money if they don’t plan on doing anything differently. If the government is going to bail them out, they should get a restructuring plan in writing making them liable for repayment in return for the cash. Anything else is polishing the brass on the Titanic.

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  1. acseverson
    November 25, 2008 at 12:46 am

    Don’t forget about the auto unions! They have a part in this whole mess as well. That’s another reason why Toyota is still able to be profitable – they don’t have to answer to unions.
    I think that the big oil companies should “bail out” the auto makers. How much profit did Exxon report last quarter??

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