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Automotive News & Views GM News, New Models and Market Share
8429 messages, Last post on Nov 25, 2009 at 8:23 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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Replying to: 62vetteefp (Dec 01, 2008 10:12 am) Right now, they are shutting down plants to reduce capacity but they still have to pay the workers and suppliers. And you are selling fewer cars than forecast. And you have to have a $2000-$6000 rebate to move the product. It's no wonder they are losing money hand over fist. They need to break this business model to have any chance to make a profit. And the only was they can do this is bankruptcy.
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Replying to: dtownfb (Dec 01, 2008 10:27 am)
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Replying to: dtownfb (Dec 01, 2008 10:10 am)
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Replying to: dave8697 (Dec 01, 2008 10:58 am) You're right. There are more off lease cars available. You can get a used SUV for a song right now.... I think your situation is becoming more typical. Do i really need that new car smell or can I get by with a not so new car but be able to take the family to dinner at Chili's or Red Lobster on Friday or Saturday night? |
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Replying to: 62vetteefp (Dec 01, 2008 10:57 am)
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Replying to: dtownfb (Dec 01, 2008 11:18 am)
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Replying to: 62vetteefp (Dec 01, 2008 10:04 am) No, the majority of experts have said the opposite. I have posted link after link as such. The only people I've heard who have this view have something to gain from the $25B (Big3, suppliers, UAW, and some investors - like Cerberus), or those who are uneducated "pretty faces" of the media. Go to CBS Marketwatch, CNN Money, or the Wall Street Journal and see what I mean. |
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Replying to: 62vetteefp (Dec 01, 2008 10:12 am) You're confusing 2 things as one. Capacity is how many vehicles your plants can make. If you have Plant A that can make 100,000 Malibus, but the market is only buying 75,000 Malibus, then the plant has to adjust to make 75,000 Malibus, and it thus is being utilized 75%. If they are selling 60,000 Malibus then the plant slows down and they make 60,000 Malibus and the plant is utilized 60%. It is idle 40%, or it is running slower than optimum. If you close Plant A then yes you have cut capacity. You would cut capacity 100,000 Malibus. If you reduce how many cars Plant A is making, then you have reduced utilization. 2 different things; try some of the following: http://www.newyorkfed.org/research/quarterly_review/1976v1/v1n1article2.pdf When demand goes down, utilization goes down, thus resulting in a higher cost/unit, thus reducing profit (or increasing loss per unit). (I'm a Mfg. Engr. and have an MS in Business Management.) 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. "Mothballing"; are you familiar with that? Or the good manufacturers can deal with the good and bad times. I hate to use this example but what is Toyota doing during this slowdown, that's also affecting them? They are training people in new skills, and doing extra maintenance; while they still may idle for a week here and there. They can run at 50% utilization for the next 6 months if need be, and then if GM goes under run at 100%. A good manufacturer has long-term planning, and is a marathoner not a sprinter. Most manufacturers will simply ride out this "storm", and take advantage of the turnaround.
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Replying to: 62vetteefp (Dec 01, 2008 11:28 am) Standard business terms are anywhere from Net 30 - Net 60. Almost any sale between companies gets paid 30 to 60 days after delivery. Customers do this partly to insure that the delivered goods are of acceptable quality, and partly to hold onto cash as long as they can, to minimize the cash they themselves need to borrow. My company also figures in its plans that about 3% will never get paid. This delay in getting paid is why companies need liquidity. That is why you hear that GM needs a certain amount of cash (something >$10B) to stay in business. Any business needs to initially raise their startup funds + have enough $ to pay their expenses for 60+ days. |
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