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Automotive News & Views GM News, New Models and Market Share
8375 messages, Last post on Nov 24, 2009 at 7:14 PM
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Replying to: 62vetteefp (Dec 01, 2008 3:53 am) The "I need a suburban to toll my boat/trailer and carry 8 people" community is relatively small (nationwide speaking). The cnn article is dead on, if not for the easy credit for the consumers and the manufacturers, you will not see the explosion in sales of these type of vehicles. When the sales numbers go back to the preboom levels, can it sustain the development and production costs?
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Replying to: 62vetteefp (Dec 01, 2008 7:57 am) You are more optimistic than me. I figure at least 3 years to get back to 15 million, and I think there will STILL be production overcapacity for that volume among the domestics unless the big 'B' happens before then. Obviously, the bailout under consideration, and crucially its conditions, will change that picture if it goes ahead.
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Replying to: nwng (Dec 01, 2008 9:12 am) |
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Replying to: nippononly (Dec 01, 2008 9:17 am) But it is all guess work on my part. No data here. |
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Replying to: 62vetteefp (Dec 01, 2008 7:57 am) I think in this sentence you mean "utilization" in regards to costs, and sales in regards to revenue. Utilization is how much of the capacity of the plant is being used currently. The capacity of a plant is a fixed-number - as in how much can a plant make when run 24/7 (with labor available, and accounting 15% or so for planned and unplanned maintenance). You are correct though in that the less a plant produces and sells the higher cost of each unit produced. That is because no matter if the plant makes 100, 1000, or 10000 units there are costs that have to be paid - property tax, insurance, wages, basic utilities, security, advertising, and pensions & benefits. These are fixed costs. Because GM has so many of these costs, that is why they could sell so many cars for so many years, and still lose money year after year. As their sales have decreased over the years, GM kept spending as if they had a larger market-share. This was and is the problem. How do you get your costs lower than your sales revenue and make money. GM and the others have for years failed (mismanaged) this basic business principle, and have not acknowledged this until the last minute. They had no contingency plan for when the economy turned bad, and they have no financial reserves. And the evidence of the DC meeting is that they still have no clue on how to change their business, besides a few tweaks in a year or 2. The best thing would be for 1 of the Big3 to go BK and liquidate, and have some other investors come in and setup a system that will manage things better.
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Replying to: 62vetteefp (Dec 01, 2008 9:22 am) You're also guessing that if GM goes under - 1) the plants wouldn't be restarted by someone else, and 2) the other manufacturers wouldn't get increased business in the meantime. Because the plants have value, there will be someone who will want them. Even if you only got $1M for an auto-plant, that is better then the alternative of $0! So they would be sold. I used to live near the Wang computer building. Digital Equipment another multi-billion $ company in the area was around then too. When there was a high-tech bust around 1990, both went under. I remember the Wang buildings, which were state-of-the art, the main 1 being 15 stories with a helicopter pad, sold for $640,000 at auction. The investor turned around, leased the space to other industries, and a few years later sold the buildings for $40M. The Digital buildings throughout MA were bought by Fidelity and others. So some organizations and peoples' loss were others gains. Hundreds of corporations, and tens of millions of people have been laid off over the years. It is not disaster. These people and facilities have all found new lives for the most part. Everyone involved within the Big3 family needs to get together and figure out how to make PROFIT NOW. They can do this, but they prefer not to make the cuts necessary, finding it easier to beg the taxpayer (as no bank or investor cares to throw their $ in). Also - take a look at how much Ford and GM have lost over the last few months and do the math. How long does $25B last? 6 months? Is that enough $ to make them get to profitability? Also if the Big3 get this money, how do they make enough profit to pay back the loans with interest. I would guess they need to pay back $6B/year over 5 years. Do the research and tell me when the last time GM and Ford made $30B over 5 years.
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Replying to: kernick (Dec 01, 2008 9:56 am) Not guessing. Experts in the field (independent from the big 3) have already said what they calculate will happen if one of the big 3 goes under. The entire supplier system shuts down in this country and production stops for up to one year of all assembly plants. You can disbelieve this or not. That is what they came up with.
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Replying to: kernick (Dec 01, 2008 9:56 am) Ford made a profit earlier this year. They're losing much less than GM right now, and are asking for a line of credit rather than an out and out bailout. This thread is about GM, don't try to bring Ford down with you.  It's a fair statement about how they'll pay these things back...I think that's why buying an equity state is preferable to a loan. I don't think GM stands a chance of paying their loan back...honestly, same with Ford, which is why I'm hoping they DON'T tap the credit line. Oh, you're forgetting Chrysler, which would have to pay back part of the $6 billion too. But then again, everyone always forgets Chrysler, as they should, 
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Replying to: gagrice (Dec 01, 2008 7:08 am)
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Replying to: kernick (Dec 01, 2008 9:36 am) No, capacity. The big 3 have shut down and are shutting down plants to reduce capacity. And sales mean vehicle sales which is correlated to capacity. If capacity goes down they build fewer vehicles. If plant closings keep going down and corresponding new plants are not built then sooner or later there is a crossover and the country will have under capacity. Of course since we dropped to 10,000,000 sales a year there is a lot of over capacity today. BUT once sales go back to 15,000,000 or even less than that there will be undercapacity.
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