Did we miss something? After repeating the inherently suspicious Center for Automotive Research stats on the impact of a Motown meltdown, and sharing the history of the federally-sponsored Chrysler comeback, AutoLine Detroit apologist and Autoblog columnist John McElroy is ready to share the upside of another federal bailout for Detroit. “Most people seem to miss the fact that they are on the verge of a massive turnaround. If the Big Three get a government bailout this time, I see history repeating itself. Most people seem to miss the fact that they are on the verge of a massive turnaround. I’m not trying to be a rah-rah cheerleader here [as if!]. I’m persuaded simply by the facts.” McElroy is laboring under the impression that the eventual savings from the last United Auto Workers’ contract is The One. Less cost, less over-production– less means more! “That means they’ll be able to slash their incentives. Every $1,000 that General Motors cuts from incentives will drop roughly $4 billion to the bottom line. And GM has an average of $3,500 in incentives!” Huzzah! Where do I sign? “What this means is that when the economy finally starts to recover and the car market begins to grow again, GM, Ford and Chrysler will be in an extremely competitive position, one they haven’t been in for more than 40 years. And that’s why those who say giving them a bailout is just throwing good money after bad are dead wrong. The Big Three are not only on the verge of a roaring comeback, I predict that in the next decade they’ll go on to hit record profits.” I wonder if John’s a betting man?
Find Reviews by Make:
Read all comments
I agree with him.
MichaelJ :
GM stock has never been cheaper. If you really believe that, and believe that a buyout’s a done deal, buy!
They must have been slipping crack into the water supply in Michigan. The only thing the big 2.1 are on the verge of is bankruptcy. They have been mismanaged. They and their overindulged workers have produced utter crap for decades. Their dealers are all thieving scoundrels. Their executives are overpaid morons.
They are, and have been capable of producing fine products all along, but instead they have honed utter mediocrity into what they consider to be high art. You reap what you sow and Detroit been sowing crap. They’ve been on notice for my entire lifetime that they could and should do better. Instead they’ve driven their customers away in droves. THEY HAVE FAILED.
Failure should not be rewarded with tax money. Socialism is a failed experiment. This isn’t the Soviet Union, or 1970s Britain. We don’t need American-Leyland.
The airline industry has survived 25 years of bad times. Nobody thought Pan-Am or TWA were “too big to fail.” Chapter 11 allows companies to restructure and reinvent themselves. If they are “on the verge” of some big turnaround, then by all means, DO IT YOUR FRIGGIN SELVES, but don’t ask me, or my kids for the capital to do it. We’re already saddled with paying for two wars, and (ironically) a big tax cut.. not to mention a host of other foolish things our government has blown money on.
Build something worth buying, or die. It seems Detroit has chosen the latter but can’t face reality. Neither can McElroy.
–chuck
I don’t believe a buyout’s a done deal. I think there’s a serious uphill climb for this to happen…there’s an awful lot of opposition. But if I knew for a fact a bailout was forthcoming, and that GM would be bridged to 2010, I would buy.
If GM had such a good case, then they wouldn’t need the bailout. That’s the point. The free market would be happy to give them the money they need to bridge to 2010 if the turnaround would be as crystal clear as GM and John McElroy want you to think.
The banks however don’t think so. And now even the insurers refuse to cover Ford and GM suppliers. They would never do that if GM had the numbers to back them up. But they don’t, so they’ll die.
They must have been slipping crack into the water supply in Michigan.
Yep, nobody commenting at TTAC has hat… er, disdain for the folks in Detroit and Michigan. Nope, none at all.
If GM had such a good case, then they wouldn’t need the bailout. That’s the point. The free market would be happy to give them the money they need to bridge to 2010 if the turnaround would be as crystal clear as GM and John McElroy want you to think.
Ummm, are you aware that there’s been a bit of a disruption in the credit markets? Right now the “free market” at least the part on Wall Street is worried about their own exposure to toxic debt.
Yes, the banks have become more cautious when it comes to lending money. But there’s still enough cash in the market. If a GM recovery was such a sure bet, then everybody would line up to get a piece of it.
Also, that’s exactly why there loan guarantees for banks have been established world wide, so that the banks can once again start to take some risks. Of course they won’t be as reckless as before the credit crunch, but that’s a good thing…look where that got us.
A 25% chance of success just won’t cut it anymore.
And keep in mind that the credit ratings of GM and Ford have been abysmal even before Fanny, Freddy and Lehman, in spite of new UAW contracts.
In short, if you can make a good business case, you’ll get the money from the banks. If they believe that giving GM loans would mean throwing good money after bad, then the taxpayer shouldn’t expect anything else.
GM does not have a chance…silly bailout or not…if they keep all of their brands. GM should go from the 4 dozen or so they have now, down to about 3-4…with Chevrolet and Cadillac being the ONLY ones that are 100% safe.
OR………….
Make Chevrolet your blue collar brand, Pontiac your “sporty” brand, and Cadillac your luxury brand.
Actually…the only thing worth saving in Pontiac is the G8…so make that a Chevelle or Impala SS and shut the damn thing down. Make the Enclave and new Lacrosse a Cadillac, and say good bye to the rest.
There…I just saved GM.
Read that post and I agree. His point seems just wacky.
I guess All market fluctuations have contrarians, paid for, political, or otherwise.
Too bad, C11 is so inevitable, as GM or F stock is basically an Option Contract at these levels.
His comments applied to GM and Chrysler are absolutely batshit insane. For Ford though, I think they’re right on.
Unlike GM and Chrysler, Ford actually has a whole lot of compelling product that starts rolling off the line next year. Granted, Ford’s survival depends on their success, but for the first time in a long time an American automaker is going to have a full line that is competitive with the imports. Its becoming more clear that Ford is going to be the last one standing in all of this.
What a conincidence that Ford might go bankrupt in the same year the Detroit Lions might become the first 0-16 team in NFL history.
P71_CrownVic :
November 16th, 2008 at 12:19 am
GM does not have a chance…silly bailout or not…if they keep all of their brands. GM should go from the 4 dozen or so they have now, down to about 3-4…with Chevrolet and Cadillac being the ONLY ones that are 100% safe.
Well put. I clearly remember Chrysler, Dodge and Plymouth being a shell of their former selves in the immediate post bail out period.
* Chevrolet’s chassis on frame trucks needs to be made profitable at 40% of 2006 sales. Trust me, some Americans will still want a Tahoe.
* Chevrolet cars – make the G8, an Impala versus the fleet queen it is today and for God’s sake learn how to build a profitable, fuel efficient, small car to replace the Cobalt in North America. It better be one that will sell versus Toyota and not fall apart. A $40,000 Chevy Volt is not the answer.
* Say goodbye to Hummer, Pontiac and GMC.
* Buick can stay, if it is sold exclusively by Caddy dealers.
* Merge the retailing of Saturn and Saab here in the US so that it represents Euro-GM as a brand – if these brands need to stay. If not, poof!
Whether GM survives a bailout or Chapt 11 and a bailout will depend who takes the helm from Rick Wagoner, the next product line up, plus how the dealership count, VEBA and retiree benefits are settled.
‘Most people miss the fact that Detroit is on the verge of a massive turnaround’ ?
Perhaps we all missed the “fact” because it doesn’t exist. Plus having plan for a turnaround before you can present the “fact” would help.
Suffering from BDS: Bailout Derangement Syndrome.
I wish I had a calculator for every time I read about some slack jaw claiming “Detroit is on the verge of a turnaround” over the past 40 years……
It seems to me the Republicans are the ones who have been the most un-patriotic group around. They created the largest Government ever of any country ever, most of which to keep tabs on the american public. The bail out the financial sector, which is, lets face it dead. They continue to lay off and fire tens of thousands. What the bailout does is insure delayed compensation from the Executive ranks is paid out while the common guy is left in the street. They do not want to bail out GM for 10% of the cash they blow away on Wall Street, why. Are they trying to distroy what little manufacturing base they is left in this country. News flash to Republicans, you cook the goose here and you will be left with nowere to go or hide. The Patriotic party, please.
Most people miss the fact that Detroit is on the verge of a massive turnaround?
Yes. Ford and GM have both cut massive amounts of structural cost in the last 3 years, improved their products, brought their capacities in line, and restructured their UAW contracts to save a ton of money starting in 2010. That’s a massive turnaround. The problem is, they’re still in process, not done yet, and the UAW savings don’t take affect until 2010.
AG: Probably not a coincidence…
Detroit took too long to improve. They’re not going to come roaring back. At best they’ll manage to be profitable at a much lower sales volume. Record profits? That wouldn’t be saying much, since it has been decades since these companies had a truly good profit as a percentage of sales. Record profits after adjusting for inflation? Now, that would be something, but highly unlikely to happen.
Reading the comments there suggests that most of the Autoblog readers think he’s insane, too, starting from the very first comment.
If they adjust to lower volume and lower market share than the profits will be possible.
I do think that car sales in a few years (2012?) will be the highest in history. All the people who bought cars from 2003-2007 (all big sales years) will want new cars. The sales will just be amongst more companies.
Droid800- I think Chrysler has the best product to me right now, (Jeep Patriot) some people are going to say Chrysler has good stuff now or coming, others will say Ford or GM.
The Fiesta looks intriguing but thats the only one.
GM has the nicest cars of the big 3 but most are too expensive. I’ll never be able to afford even a Malibu
OldandSlow- Caddys should be sold at Saturn dealers. The low pressure sales tactics that are still at most Saturn dealers work well for import luxury makes.
How come everyone I see driving a G8 looks like a huge tool? It’s always some late 20s/early 30s looking guy yakking away on a cell phone.
I recall something about a sucker being born every minute. Seems Mr. McElroy is one, or trying desperately to recruit a few to a clearly lost cause.