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Automotive News & Views Do You Favor A Government Loan To The Detroit 3?
3958 messages, Last post on Oct 02, 2009 at 4:52 PM
You are in the Automotive News & Views Forum. Your Hosts are steve_ & claires
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Replying to: berri (Dec 05, 2008 4:33 pm)
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Replying to: jimbres (Dec 05, 2008 3:10 pm) Amen to that. It is easier to make more money than it is to survive a nuclear war. I would look for the Chinese to buy up the pieces of GM. They love the Buick in China. They will soon pass US as the number one car buying nation. They will need the capacity. |
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Replying to: circlew (Dec 05, 2008 4:49 pm) Only if the UAW makes "real" and meaningful concessions. Then I can see Ford making it and GM only if they do some quick and massive restructuring. Chrysler is probably through unless Ceberus puts up more money and I think that should be a condition for any government loans there. Having said that, I think the question becomes more like will any of them make it through 2011? That may be more doubtful, but by then hopefully the economy is rolling again and can better absorb the Detroit 3 collapse, or at least the failure of GM and Chrysler.
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Replying to: tpe (Dec 05, 2008 4:53 pm) Very good observation. I think that is what Obama has in mind. His stimulus package is asking for $136 billion to start immediately repairing roads and bridges around the USA. He claims each billion spent will put 40,000 people back to work. Just $34 billion would employ 1.360,000 people. Far more than the Big 3 represents. Those workers will stimulate the buying of whatever cars are left. Problem solved. May the best products come out on top for all of US. |
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Replying to: tpe (Dec 05, 2008 4:53 pm)
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Replying to: chikoo (Dec 05, 2008 2:49 pm)  He seemed like one of those people who buys the flag, not the vehicle. That's his choice, but one must remember how many of these American car companies came to be: through bankruptcies, mergers, and acquisitions. Anyone remember Packard? Hudson? American Motors/AMC? They never got bailed out. They failed or got bought. Even if, for example, Chrysler went bankrupt, there's still the matter of the Viper, and the Caravan. Hey, VW might buy Chrysler to secure their minivan source, since they're selling a version of it now. And there's plenty of people who wouldn't want to see the Viper go away...potential buyers of whom some are rich enough to be potential buyers for the design and rights. Same story with GM and the 'Vette. Can you imagine a car nut, like, say, Jay Leno allowing one of those famous names to die off? GM or Chrysler going BK would be rough, but not the end of the world like some would want us to think. And yes, I always insist on separating Ford out, because Ford is in a VERY different financial and market position from the other two these days. |
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Replying to: joel0622 (Dec 05, 2008 2:56 pm) Yes, the "Buying American Cars, What Does It Mean?" forum has been going on for a number of years now.  Since the profit margins on vehicles are well under 10% (0% at the D3), that means most of the car costs stay in the country of assembly/sale. For example: Sales price - $10,000 (just for round numbers) Profit to automaker in home country - no more than $1000, likely much less Money to dealer, transport truck company, paint shop, parts shops, assembly plant, parts suppliers located in the USA - $6000 Money to outside the country for non-US made parts (lets say $3000). Note that all cars, both Detroit badged and others, have many parts from outside the US - transmissions, fuel injection parts, spark plugs, radios, etc. The differences in parts sourcing between US and foreign nameplates is not all that great anymore. When we talk about "My country" let's make sure we are talking about U.S jobs and are not using "My country" as camouflage for "UAW". |
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Replying to: berri (Dec 05, 2008 4:33 pm) All 3 are not going to go out of business the same day. Ford can last at least a year longer than GM. The company that currently owns Chrysler, can either fund them, or sell them. not to mention many auto parts vendors going under. If a vendor is dependant on only GM for it's income, that was a bad business decision. In fact, high unemployment is going to impact most every US business soon if things don't start improving. We are in deep do-do as demonstrated by even oil prices crashing down. GM will need to cut jobs, with or without a bailout. They are simply building way more cars than they can sell (at a profit). Discounting cars to the point of loosing money on each one, just to get rid of them, will not work anymore. They have no more money to waste. At least I hope they don't get more. You say "Impact every business soon". Well, are we going to bailout every company that has financial trouble? Where do you draw the line? |
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Replying to: berri (Dec 05, 2008 4:33 pm) I doubt the difference is as great as you think. Even if they get the loans there are going to be massive job losses. If they don't get the loans and one or more go under, the best parts are going to survive in a consolidated or purchased company. And the US will continue to buy as many cars as it needs, regardless of the fate of individual companies. |
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Replying to: berri (Dec 05, 2008 5:07 pm) My best case scenario for 2011 is this: 1. Ford survives. 2. Chrysler is gone. 3. GM is forced to make massive cuts and changes (more than their current plan). They replace Wagoner, get rid of their high cost structure, strip down to 40% of current size, and the new management REALLY gets going on competitive new products. We have a smaller but viable auto industry again and can grow in a competitive environment with excellent products. My worst-case scenario is as follows: 1. Congress gives $34B bridge loans. GM makes token incremental efforts to restructure. Wagoner stays. UAW makes token moves to suspend (not eliminate) jobs bank. 2. Chrysler muddles along for another year before going belly up. 3. GM continues to lose market share, Wagoner comes back to the trough at least two more times, to the tune of almost $100B total. 4. GMs market share continues to drop, even in an economic recovery. GM continues to make reactive incremental cuts. By 2011, GM is either dying or actually finally goes BK after draining the taxpayers of $100B. Becuase of GMs mediocre continued presence, Ford is badly strained because of the weakened competitor in GM that has been artificially kept on life-support for 3 years too long.
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