With Americans driving less and banks tightening the screw, Detroit’s “Big Three” — Ford, GM and Chrysler, could be the next big bailout. “Life is a highway, and I wanna drive it all night long…” - Tom Cochrane

“Road trip!” Remember those epic words?

When I was seven or 8 years old, my dad and I took a cross-country trip in a beaten-up old VW bug. He had bought it for the princely sum of one dollar, from a friend who had simply gotten tired of fixing the thing. (It needed about $900 worth of repairs.)

I’ll never forget that little bug. It was light blue with rust accents from all the dings and dents. The shifter was a crystal doorknob taken from someone’s house. And the entire back seat had been torn out, making room for a sleeping bag area where dad and I could sleep.

The trip took us from San Jose to Detroit… then down to Atlanta… then a westward swing through El Paso, Texas, and back home again to Cali.

On some of the wide-open stretches where no one was around for miles — just us and the 18-wheelers out in the great American landscape — Dad would sometimes let me drive. I would sit in his lap and steer while he worked the pedals. For an 8-year-old, that was pretty much the coolest thing in the world.

Like rock and roll, the road trip will never die. But it’s certainly taking a beating these days. Based on current trends, this will be the first year Americans drive less since 1980.

The road used to be a symbol of freedom. There are countless books and songs written about it, some more well-known than others. But thanks to the cost of a gallon of gas these days, that symbol of freedom has morphed into a symbol of oppression. The highway has become a driveway: “You want to drive how far? Do you realize how much gas money that would take? Maybe we should just fly…”

My Other Car Is a Hot Wheels

Detroit’s “Big Three” — Ford, GM and Chrysler — are really feeling it, too. With the three-ring circus unfolding on Wall Street, many haven’t noticed how bad things have gotten for motor city.

There are plenty of stats to illustrate just how hard up the big automakers are right now. But here is one of my favorites…

The market cap of General Motors (as of this writing) is $6.4 billion. The market cap of Mattel Inc. — the company that makes “Hot Wheels” — is $7.3 billion. (The tickers are GM and MAT respectively.)

So basically, it’s more profitable these days to make those little toy cars we all used to scoot around the kitchen floor as kids than it is to be the No. 1 or No. 2 volume automaker in the world.

If ever there were a lesson that “bigger ain’t necessarily better,” this would be it. General Motors’ total revenue in 2007 was more than 30 times that of Mattel Inc’s… roughly $181 billion, in comparison to just under $6 billion.

The trouble is, GM booked a whopping loss of nearly $39 billion in 2007… whereas Mattel showed a profit.

Trouble in the Heartland

And here’s an ironic thing: It used to be that U.S. car market was a huge profit center for Detroit’s Big Three. The rest of the world was more of an afterthought.

Now things have been flipped around. It’s the international market that looks good, and the home market that’s dragging the numbers down.

The Big Three are making decent money in regions like Asia, Africa, South America and the Middle East. At home they are drowning in red ink, thanks to sky-high labor costs, tightened belts, and a nasty drop-off in truck and SUV sales. Gas-guzzling SUVs and oversized trucks were huge cash cows before the gas crisis hit. For many years, the American love affair with “big iron” helped Detroit fend off the onslaught of smaller foreign models. Not anymore.

And how about the overseas automakers? How are they doing? I checked in with Sara Nunnally, our globe-trotting foreign markets analyst, to find out.

Sara’s view was surprisingly upbeat. “You’d be surprised to see how well foreign automakers are performing,” she said.

“Take Honda for example… When you combine high commodity prices and a strong Japanese currency, you might expect tough times for a big exporter like Honda. But Honda actually just increased its quarterly net profits by 8%! Its yearly profit forecast remains strong, too.

“And Toyota, while forecasting a drop in profit for this year, is still expected to top GM’s sales for the year, and for the first two quarters is living up to that expectation, selling 300,000 more vehicles than GM so far.”

We already saw that bigger isn’t always better with the GM / Mattel comparison. The ultimate bottom line is profit, not gross revenues or market share. But the fact that Toyota is now so close to confirming the No. 1 crown, and turning a fair profit while doing so, speaks volumes.

The Future Is Elsewhere

So what is the answer to the Big Three’s problems? We already know those problems are set to get worse… much worse.

The 2007 numbers for GM, Ford and Chrysler were ugly as sin — and that was all before gas skyrocketed to $4 a gallon, consumers started cutting up their credit cards, and banks started pulling in their horns on leasing and finance programs for pricey vehicles.

If there were no political element, the solution would be painful but clear… the Big Three should say goodbye to American markets. Let North American operations die, or otherwise naturally shrink back to a viable size.

(I’m reminded here of a tree I came across hiking through the Australian desert. This tree managed to survive countless droughts by letting its limbs die off from the top down, keeping precious water reserves in the trunk and roots. When the rains came back, the tree would resume growth in its upper limbs again.)

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