Like the gas price spike that helped launch the current industry death spiral, nobody saw a possible D3 bankruptcy coming. Well, outside of this little corner of the internet, anyway. But with the mainstream media catching wind of what we’ve been crying in the desert for years now, a number of well-known industry analysts are coming around to the notion that America may not have three big automakers anymore. Jalopnik’s Ray Wert was ahead of the (adjusted) curve, bellying up to the TTAC line (sorta) yesterday. Today, none other than Danny Howes of the Detroit News is playing Cassandra-come-lately as merger and bankruptcy rumors take industry-watchers by storm. To be fair, Howes isn’t blind to Detroit’s sins, and his columns have been taking an increasingly alarmist tone for some time now. But until this week he’s faced the strings and arrows of outrageous fortune with brave face and stiff upper lip. No longer.
In his latest column “One Of The Big Three May Not Survive,” Howes lays down the pom-poms and faces facts: Detroit is screwed, and none of the solutions will be convenient or easy. Howes says a potential GM-Chrysler would be a “neutron bomb,” eliminating thousands of jobs to keep hard assets and cash intact. He notes that “GM needs more brands, more plants and more dealers like it needs another credit crunch.” Finally he concludes “GM’s directors aren’t keen to embrace a Chrysler deal with Cerberus because they realize the remedy for what ails GM won’t come from swallowing a competitor. It’ll come from buying enough time to survive the imminent shakeout because — and I wish I could say otherwise — one of Detroit’s Big Three may not.” Don’t worry, Danny… you’ve tried to say otherwise for long enough.
TTAC appears to have been right all along. I take no pleasure in the looming failure that is Detroit, nor should others.
The fallout will effect the American economy for years to come and there does not appear to be any meaningful “rescue” that will replace those jobs.
jimmy2x :
TTAC appears to have been right all along. I take no pleasure in the looming failure that is Detroit, nor should others.
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I take no pleasure either. But I have a lot of pent-up anger at those guilty of perpetual bad management. It borders on fraud.
I think they should be rounded up, named, photographed, and (at the very least) prevented from managing anything bigger than a shopping mall kiosk. Ever.
ZoomZoom, that list begins and ends with Wagoner
Mike & ZoomZoom,
In a sense I consider Wagoner the most talented executive in America today. Consider:
1. No profit for the last few years
2. Continued bleeding of market share
3. Vague reference to a turn around plan (“we’re on course” & “we will accelerate our turn around plan”), without any measurable details.
Anybody else I know would have had their asses fired years ago. Wagoner? The board continues to stand by him, even giving him a vote of confidence (~2 years ago already?). In fact, just a few months ago he got a 30% raise!
I’m sure when GM enters Chaper 7, Wagoner will give a heartfelt speech about how all this keeps him up at night – and gives him time to plan where to land that golden parachute.
The fallout will effect the American economy for years to come and there does not appear to be any meaningful “rescue” that will replace those jobs.
The domestic-nameplate market has been contracting for some time now. While the collapse of one of the Detroit 2.5 will certainly be felt, I don’t think it will have the devastating effect it would have 5, 10, certainly 20 years ago.
Meanwhile, Hyundai, Kia and VW all have new plants on the board or close to opening up. Thankfully those jobs are not in the little myopic bubble land of Detroit, where they lost the pulse of America a long time ago.
Sorry to nit pick. The phrase is ‘slings and arrows’.
Howes is one of the sharpest industry observers, and this column does not disappoint.
In the annals of business history, the story of the rise and fall of the US auto industry will be a case study in hubris, denial, and mismanagement.
It’s a national disgrace that one of the shining stars of the American economy has been laid low by arrogance, insularity, and poor planning, aided and abetted by a greedy, shortsighted union.
In the past three decades, we’ve seen a once-mighty industrial colossus fall into abject failure. Taken down by the Japanese auto industry we helped to create.
While I have zero pity for the execs of these car companies (in fact I think they should all be bankrupted like the workers they’ve betrayed), it’s a sad day for this country when we see Chrysler, GM, and Ford all teetering on the brink.
Chrysler’s gone, GM’s nearly so, and Ford may just hang on if they get real lucky.
Not too long ago, GM’s economic power was the rival of the GDP of most of the world put together. Now they are struggling to avoid bankruptcy; and they won’t be able to much longer.
I’m no GM fanboy, in fact my family owns no GM products. Of the 4 kids in my family, we all own Toyota, Honda, or Mercedes. Not a single American car. Not ONE.
Think about that. My dad was a “Ford Man”, and my grandfather only drove Cadillacs. Now none of us own a domestic car.
Detroit squandered a fifty year legacy in two short generations, and they’ll never come back. At least not in time to save the Big 2.8.
I take no joy in watching this tragedy unfold. While we all knew it was coming, we kept hoping against hope that somehow, some way, they’d pull it back from the precipice.
Unfortunately, for every CTS-V, there’s a 9-7X. For every Malibu, there’s a G5. And for every G8, there’s a Torrent.
This disaster could have been avoided with clear thinking, absolute honesty, and ruthless leadership. All of which is long gone in Detroit.
Say hello to your new Chinese overlords.
I still think GM is doing some of this on purpose to stop the perpetual bleeding of self inflicted wounds i.e. retiree benefits, franchise laws, UAW rules, etc. They go broke, scare the gov’t into changing legislation for them like eliminating franchise laws and union shop rules and eventually in the long term GM crawls back to a reasonable marketshare as a leaner, meaner corporate hunting dog.
They can’t continue to do business the same way as they have for 75-100 years and they know it. Going broke is the only way they can change the situation they are in.
They can’t move out of Michigan b/c the UAW agreements prob follow them everywhere. They can’t get out from under benefit agreements. They can leave the states with union shop rules but the UAW would likely badly hobble GM at the same time in other GM plants.
This disaster could have been avoided with clear thinking, absolute honesty, and ruthless leadership. All of which is long gone in Detroit.
Poor management and some regrettable products notwithstanding, this disaster could have been avoided if American auto buyers simply bought more of the good D3 cars instead of foreign and transplant alternatives that were either not meaningfully different, sometimes inferior, or at best only marginally better. American consumers who refused to consider and buy from the selection of competitive D3 vehicles over the last decade will soon see the true cost of their decisions. Coping with and paying for the consequences of a broken domestic auto industry will show you how dearly expensive your import purchase was. Unemployment, and all the social costs that go with it, are expensive beyond the dollars. Was your Camry, for example, really worth it, over a Malibu, Taurus or Fusion? Even in a diminished market, Americans can revive Detroit without a government bailout. Their aggregate purchasing power is the dormant tool.
Unfortunately, for every CTS-V, there’s a 9-7X. For every Malibu, there’s a G5. And for every G8, there’s a Torrent.
While some may disagree with your choices representing undesirable D3 cars, fine. Let’s put that aside for the moment. Let the uncompetitive languish. Forget the low-volume V — more CTS over competing entry luxury models. More Malibu over Accord and inferior Camry. More G8 over Audi and BMW, etc.
Americans like to evade personal responsibility for the society and culture that’s grown around them. From dumbed-down politics to drug-related crime to coarsening of public behavior — you name it — fingerpointing rules our response. Rick Wagoner did it. It’s Bill Ford’s fault. A dealer once screwed me on a warranty repair. I want to fit in. It’s not cool to drive a Ford or Chevy. OK, your prerogative. Here’s the bill. It’s stunning how blithely so many people fail to see or acknowledge their own contribution to the unfolding calamity.
Management of the D3 has been an infuriating problem for far too long, but the market’s penchant for holding outdated grudges and unwillingness to embrace the products of management doing something right is an equal contributor to the D3 wreckage. The consumer cannot escape the reality of sharing credit or blame, depending on your point of view regarding the state of the D3.
Phil