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Friday, December 19, 2008

Ford: Thanks, but no thanks 


Correct me if I'm wrong, but isn't Ford's rejection of the bailout loans evidence that General Motors and Chrysler did it to themselves?


6 Comments:

By Anonymous Anonymous, at Fri Dec 19, 11:04:00 AM:

GM and Chrysler need to downsize to a world where total annual US auto production is closer to 12 million ... not the 17 million we've had ... and their market share is flat, or more likely lower. It's that simple. If they're forced to make green cars while gas is at $2.00, this dynamic will be even worse.

... but a downsized GM-Chrysler can't support their legacy burden of healthcare and pensions. Economics is about trade-offs ... you can't get everything you want. Until now, GM management, the UAW, Obama, Barney Frank, etc have been oblivious to market realities.

I expect we'll soon see a huge pile-up of unsold cars ... even though companies have been cutting production ... and that it'll affect all car makers, but GM-Chrysler the most. If so, the "days sales inventory" ... a key industry metric ... will start shooting up: "Dealers have 100 days of unsold cars, up from the normal 35" ... something like that. Methinks this is why Chrysler decided to idle its plants for a month ... but that's only a stop-gap measure.

I'm fascinated by this, as the plight of the Big Three is an early indicator of the problems we'll be facing as a nation over healthcare and other entitlement spending. The truly progressive move would be to have the one million healthcare dependents of the Big Three become an experiment in how to radically cut healthcare costs while maintaining or even improving outcomes ... which is achievable. If government can't achieve this for a million people, why would we ever want them to take on 300 million.

Link  

By Blogger Viking Kaj, at Fri Dec 19, 11:14:00 AM:

Hey TH,

Do you suppose this has anything to do with the fact that Billy Ford is a Princeton grad ('79)?  

By Anonymous Anonymous, at Fri Dec 19, 12:01:00 PM:

Ford just sees a competitive advantage in the future. The "drag" on all three is the UAW. The "bail out" will do NOTHING to improve GM & C and will allow the UAW to extort even more. They will "give back" in the big print and extort more in the fine print. After two or three additional infusions of federal money, GM and C will still be basket cases.
Ford, on the other hand, will have gone to bankruptcy court and freed itself from UAW inefficiency and featherbedding.  

By Blogger Larry Sheldon, at Fri Dec 19, 01:11:00 PM:

You are not wrong.  

By Anonymous Anonymous, at Fri Dec 19, 03:59:00 PM:

The biggest single problem with GM and Chrysler is....(drum roll)...their product line.

Sure, it is easy to bash the UAW, work agreements, work rules, etc. There are real problems there. But comparable models made by Honda, Toyota and Nissan are not necessarily cheaper.

If GM and Chrysler had an excellent line of cars and trucks that everybody liked (which would be indicated by a larger market share) they would not be in this much trouble.
They lost a large part of a generation starting in the late'70's, early '80's that they have not gotten back, because a lot of their cars are frankly....crap.
Design, function, quality...it goes on and on.
GM makes some really good cars that have real value on the market, as does Chrysler. But their overall "line up" is weak.

-David  

By Anonymous Anonymous, at Sat Dec 20, 08:23:00 AM:

No, Ford isn't run any better than GM or Chrysler. In fact, over the last generation, by many measures, they've been run the WORST.

And their incompetence was so bad that they were the first to run out of money a few years ago, in the midst of a stronger economy, unlike today's. They were nearly in bankruptcy then, just like GM.

So, they hocked the furniture, for $23B, to survive. The only difference between them and GM is timing. All else is about equal.

Ford wants some welfare sugar too, believe me.  

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