GM, Ford, Chrysler

[awg]

Seeking some opinions on what is coming up for these 3 giants.

I really dont like what I see.

Their corporate bonds have a very low rating.

Sales are certain to be much lower in the next, say 2 years.

I am dubious that all 3 can survive in their present form

They surely will want a big handout...but will they get one...should they?

How can they roll their finance?

As it stands now, I see new car sales in Oz ( and most places except Asia) will plummet.

very basic analysis obviously, more in depth comment or refute most welcome

 

[frenzel]

GM and Chrysler seem to be heading towards a merger, but will be interesting to see if they get the cash required. More than likely in some way shape or form.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a6zEJzIao5ss&refer=news

Chrysler have over $10b in cash, so that should help GM from impending doom combined with a lot of sell off talks.

Read somewhere that at one stage GM was rumoured to have approached Ford for merger talks. Would make for an interesting Australian landscape without Ford v Holden if that ever happened.

 

[Smurf1976]

Two problems for them all really. First is the massive pension, health etc liabilities to former employees. Second is the actual vehicles they are making.

Let's face it, if you're buying a car then you want some combination of performance, economy, luxury, reliability, safety and general appeal.

Performance - Europeans and Japanese dominate that one in most respects
Economy - Korea, Japan, to some extent Europe
Luxury - Europe
Reliabiltiy - Japan, Europe
Safety - Europe
Appeal - Europe, Japan, US only to a limited extent

So GM, Ford and Chrysler are in no man's land in terms of product with most models. There products are a compromise in a world where most don't really want a compromise. Hence they'll only sell at prices which reflect that reality. Add in high production costs and it's a no brainer that they've got a dud business model.

Best thing for them would be to go out and buy some Japanese cars. Then sit down and work out just what it is that makes Toyota's Corolla and Nissan's GTR (Skyline) both highly successful yet absolutely different vehicles. They target very different markets but there's one thing in common - they are both products that deliver in terms of what the consumer wants from that type of car. The consumer isn't left feeling that they bought a compromise.

 

[Aussiejeff]

Two problems for them all really. First is the massive pension, health etc liabilities to former employees.....

Hi Smurf1976 - that's a very interesting issue you raise there. Indeed, I wonder how much more it costs today (in percentage terms) for firms to sack or make employees redundant due to economic "hard times" compared to past years? I would guess all this rapidly growing unemployment is going to be a far greater cost burden on businesses, governments and economies than previously? The savaging of newly unemployed Australian's capital in super-funds wouldn't be helping either.

Second is the actual vehicles they are making. Let's face it, if you're buying a car then you want some combination of performance, economy, luxury, reliability, safety and general appeal.

Performance - Europeans and Japanese dominate that one in most respects
Economy - Korea, Japan, to some extent Europe
Luxury - Europe
Reliabiltiy - Japan, Europe
Safety - Europe
Appeal - Europe, Japan, US only to a limited extent

So GM, Ford and Chrysler are in no man's land in terms of product with most models. There products are a compromise in a world where most don't really want a compromise. Hence they'll only sell at prices which reflect that reality. Add in high production costs and it's a no brainer that they've got a dud business model.

Haven't the Melbourne Cops just purchased a fleet of jazzed-up trick Hummers?


aj

 

[Glen48]

Toyota are in trouble because each time the Yen goes up 1 cent it cost Toyota 10 million, they do have a plant in USA and have a Hybrid car yet with Oil maybe at $30 a can the is no need to look for Fuel economy. The whole World is like a Geoff Robinsons Hypothetical: NOTHING works out it is like coming Home to find you Wife has AIDS, your Daughter is Pregnant, your only Son is Gay, your Dog has Rabies, your Super is worth nothing, your Coin collection is gold plated, your House is built on the wrong Block and your Beer is warm.
Talk about making History and setting new records.

 

[trillionaire#1]

much of their model line ups are big cars,rv,suv pick up trucks
the japanese makers have always focused on smaller cars
and with everybody tightening their belts these cars are going to sell easier.

sad to see these iconic brands suffering,but if they can fast track some
changes to their line ups ,and customers perception to what they sell
they may soldier on.

 

[Smurf1976]

sad to see these iconic brands suffering,but if they can fast track some
changes to their line ups ,and customers perception to what they sell
they may soldier on.

But do they have enough capital left to design, manufacture and market such vehicles? Or is it already too late?

 

[howardbandy]

Greetings all --

The chairman of Chrysler has admitted publicly that Chrysler is already bankrupt, but is being kept afloat by loans.

Both Ford and GM look like they will run out of cash within a few months -- a year at the most.

I believe that all three will be bankrupt or very close to it very soon. I also believe that there will be tremendous pressure for the US government to bail them out. Imagine government officials trying to justify picking winners and losers in the $750+ billion aid to the financial industry but being unwilling to aid the US auto industry and its lower and middle class employees. I think Ford stock at $2.00 is an absolute steal. But sell it immediately after the bailout is announced, because the bailout will not work.

I could be wrong,
thanks for listening,
Howard

 

[mayk]

If OIL stays near $50-60, these SUV's makers will again flourish.

I guess the auto-industry is entrenched into the lives of US population and exports American brands/image to the world. For this reason keeping them afloat will not concern tax-payers much. People might support their bailout more than bloody banks.

I personally like Japanese models because of their reliability and economy (cheap to run and maintain).

 

[Glen48]

Honda sale are down 41% so it looks like all cars manufactures are getting hammered.

 

[bluelabel]

I heard on 774 this morning that gm have asked george for $10bn, and that they are on the verge of a liquidity crisis.

I have searched but cant find the story. can anyone confirm this?

:bier:

blue

 

[Smurf1976]

Honda sale are down 41% so it looks like all cars manufactures are getting hammered.

If that's typical across the industry then those already in a weak position will quite likely collapse in my opinion. And those not in a weak position could soon end up in one.

If you're in massive debt, have huge fixed costs and are making losses already then a drop in sales would quite likely spell disaster. With the situation they are in, if GM etc lose 41% of sales (and presumably at least 41% of revenue) then their total costs would fall by a lot less than that (since much of their costs seem to be fixed), possibly only a few %. That's got to mean a major increase in losses which doesn't bode well.

I should add that I don't want to see GM, Ford, Chrysler go broke. It's just a scenario that I've been aware of for several years now and have come to see as a likely event, hence it doesn't surprise or alarm me to find that it now looks imminent.

 

[Aussiejeff]

If that's typical across the industry then those already in a weak position will quite likely collapse in my opinion. And those not in a weak position could soon end up in one.

If you're in massive debt, have huge fixed costs and are making losses already then a drop in sales would quite likely spell disaster. With the situation they are in, if GM etc lose 41% of sales (and presumably at least 41% of revenue) then their total costs would fall by a lot less than that (since much of their costs seem to be fixed), possibly only a few %. That's got to mean a major increase in losses which doesn't bode well.

I should add that I don't want to see GM, Ford, Chrysler go broke. It's just a scenario that I've been aware of for several years now and have come to see as a likely event, hence it doesn't surprise or alarm me to find that it now looks imminent.

No worries!

Guv-Mint bailouts a-plenty for sure!

The world is rolling in loot ATM if the actions and interference in the markets by regulators and Central Banks are anything to go by.

aj