Note to Detroit Three: Fuel Efficiency Pays

For decades, General Motors(GMGMQ Quote) and the other Detroit Three automakers ignored internal research indicating that consumers value fuel economy, a new University of Michigan study charges.

Yet today, increasing fuel economy by 30% to 50% would increase the three companies' profits by roughly $3 billion per year and increase sales by the equivalent of two large assembly plants, the study concludes, based on domestic 2016 vehicle sales of 15.3 million.

Rapid turnarounds are necessary, but fortunately for GM, "Chapter 11 offers a great window of opportunity for major change," says study co-author Rob Kleinbaum, an industry consultant who worked13 years at GM. Chapter 11 enables companies "to compress the pain and take advantage of the fact that in a crisis you can do things not possible in normal times," he says. A GM spokesman says the company has already moved to take advantage of consumer interest in fuel efficient vehicles.

Both Kleinbaum and co-author Walter McManus, director of automotive analysis at the UM Michigan Transportation Center, have first-hand experience with the effort to ignore information at GM, where the former was director of consumer research in the 1980s and the latter spent nine years as an economist.

Kleinbaum says studies showing that consumers valued fuel economy "were systematically fought and discounted and ignored -- I saw that very directly." Adds McManus: "It was standard practice to discount the market research. I personally did it. I was part of the group that thought that we knew better, that the economists knew better than the customers." That approach was "widespread" in the domestic industry, says McManus, who was a J.D. Power analyst after leaving GM.