jadziasman

To Be a Ford Dealer

Ford is lucky - that's all. Mullaly needed cash and plenty of it to restructure and mortgaged the company to get 25 billion. Ford and its CEO were lucky because the lenders were willing at the time to cough up the funds. We all know what happened after that.

Don't get me wrong. I want Ford to succeed and so do its secured bondholders. Auto sales need to get back to 12+ MM and soon.

Chrysler: Looking for a Miracle to Survive

Yeah, sure, a miracle (LOL!).

That miracle would be called the U.S. taxpayer.

Even if the Fiat deal falls through, it's unlikely that Obama will pull the plug immediately.

As Michael Scott said on the next to most recent episode of "The Office" - 'Everyone deserves a second second-chance.'

Bank on it.

Bear Market Over? Not So Fast

I decided to sell all my stock in my 401K today after a slight gain from the Nov 08 low. It's not much, but I work in the auto industry in metro Detroit and I cannot risk losing any money I might need soon. Can't get any equity out of my home - never did so or wanted to before and sure can't now. The Detroit area Case-Shiller real estate price index just hit 77.8 - January 2000 = 100. Prices are back to what they were when Slick Willy was finishing up his first term.

I agree with the prediction of 450-550 S&P. There's just too much uncertainty with commercial real estate, Alt A and option ARMs, consumer and government debt and the "managed" bankruptcies of GM and Chrysler. It won't take much bad news to make the market plummet again.

Once the S&P does hit 500, I'll get the chance to ride the next bear rally. When will the S&P hit its next new high? Oh, 2015 or thereabouts.

The Administration Doesn't Like What GM and Chrysler Have to Sell

GM hasn't been a car company for at least 20 years. SUV's and trucks were its profit makers and like Ford, they were very good at producing them. Many, many people bought these vehicles too because they were durable and safe. Gasoline cost only became an issue recently. And then Depression set in, but that's another story.

Sure, the upper management of GM should have seen this coming and made the necessary changes (beginning in 1973). But, there's a lot of blame to share in the USA.

Our wasteful ways with energy have brought these once great auto corporations to their knees. Forget about global warming, it's the competition for dwindling resources from emerging competitor nations - and we're going to lose. Fuel conservation will be forced on us. When the dollar devaluation really hits - sometime in the next five years, gasoline will hit $8 to $10 per gallon. The US will be much like Great Britain, a former powerhouse fighting a perpetual recession.

We will be the ones riding the bicycles, mopeds and motorcycles. Who knows - maybe our citizens will lose some weight and our health care costs will decrease.

The Question of GM's Future

My last comment shows what happens when you don't post for a while. Anywho...

GM is a multinational corporation with more of its sales outside its home market now than within it. Same as Toyota, Honda and VW.

GM sold the most cars world wide for the past 77 years only to be overtaken by Toyota in 2008. To imply that this manufacturer can be liquidated without serious disruption to the world economy is simplistic to say the least.

In fact, it is somewhat perplexing how GM could continue to be the top seller while shrinking as much as it has in the past 25 years. True, its competitor's have grown while it hasn't so its world share has dropped nevertheless it's still in the top two (for now).

To allow GM to fail now would be a huge mistake. Sure, it will need to borrow large sums but GM won't just sit on the money like the banks have done - will it? That money will be used to pay its employees, suppliers, its local governments, and most importantly - the bondholders of GM debt who have had the misfortune of either holding on it for too long or made the mistake of buying it the past few years. It will keep one important segment of the economy on life support until the Great Deleveraging ends.

And - It would be nice if they could sell more 'gotta have' vehicles at a decent profit too but maybe that's wishing too much.

The Question of GM's Future

sdoghanga

Do the Automakers Deserve a Bail Out?

I feel your pain, TURI.

Unfortunately there is no analgesic that will alleviate it.

You're probably too young to remember when the US was a cheap offshore resource for European nations burdened with expensive raw materials and labor. Later on (much much later) the NAFTA shafta was followed by the drip drip drip FLOOD of cheap Chinese imports.

As Carole King famously sang: "And it's too late baby, now it's too late. Though we really did try to make it".

DHL, GM: Does Failure Have Consequences?

Talk about apples and oranges!

How do you equate DHL and GM? You would have been much better off comparing DHL's ill advised purchase of Airborne to Daimler Benz's idiotic purchase of Chrysler. How in the hell did Daimler really expect that to work? Juergen Schrempf was the driving force behind that fiasco. The Deutsche Post purchase of Airborne was not as dumb but ended up with the same result - a big loss.

GM's woes are entirely different. GM has been losing market share since it peaked in the late 1950's. Instead of decreasing the number of brands it sold, GM did the opposite and INCREASED brands - Saturn, Geo, Saab, Hummer, etc. Had GM reduced its lineup to three brands - Chevrolet, Cadillac and GMC truck, it would have had the chance to focus on producing a full range of cars and trucks without the senseless rebadging of identical vehicles. Its dealer networks should have been cut back in the 1970's when the imports started to take market share. But that's all academic now.

Do the Automakers Deserve a Bail Out?

The leadership of the Detroit 3 and the UAW were responsible, not the thousands of non-union workers and the myriad supplier employees that do not receive the same wages and benefits as the relatively few that make $73 per hour in total compensation. The UAW rank and file voted on contracts which their leadership negotiated with D3 management. It's difficult to turn down a good contract when you can get one.

The UAW rank and file grudgingly approved a new contract in 2007 that takes away most of what they've gained in the past 50 years. Unfortunately, the new contract starts in 2010. It's unfortunate that the changes weren't made immediately.

Keep in mind that the old domestic auto industry has been shrinking for the past 30 years. Competition from the Asian and European transplants has increased quality and vehicle content while reducing price with respect to inflation. The D3 are producing better vehicles than they did in the 70's and 80's.

A bail out is not the answer. Loans to help stabilize the industry until the financial crisis is solved is what is needed. ALL of the Big Six automakers in the US had large decreases in year over year sales in October, not just the D 3. The problem won't be resolved until consumers regain their confidence. And no one knows how long that will take.

Look at the loan as a lifeline to keep the D3 afloat until the financial crisis levels off. Once everything has settled down, then pull the plug.

Accelerating the downward spiral we're already in will make it much more likely to cause a depression that even Helicopter Ben might not be able to save us from.