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I don’t like rumors that no one wants to substantiate, but I think this one is not of the Sasquatch-got-me-pregnant variety. The scuttlebutt: banks still willing to make new car loans are more so when the make is foreign. The meme has been traveling around for a while by net, got an unsupported mention on NPR this week and spurred me into making a few phone calls. Off the record, wink-wink, nudge, nudge, it’s easy to get you bought on a car from a company not headquartered in Detroit. In other words, the gangrene of bankruptcy has already set in. Now it’s a matter of how far the powers that be let it spread.
7 Comments on “[Not So] Wild Ass Rumor of the Day: Banks Redlining Domestics?...”
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Recent events make their residuals unpredictable. Banks aren’t too eager to loan money on cars (or homes) if they can’t reasonably predict what they’ll be worth during the loan term.
Rick Wagoner in particular shot himself in the foot with his public pleas for money, as he got all the drawbacks of bankruptcy without any of the benefits. Is there any reason why he still has a job that doesn’t involve a dustpan and a bucket?
Is there any reason why he still has a job that doesn’t involve a dustpan and a bucket?
At this point, I’m thinking either a) he has blackmail material on the rest of the BoD, or b) GM’s BoD reached a critical mass of obfuscation and, basically, admitting fallibility at this point would result in an ego implosion that might register on the Richter scale.
Have you seen what happens when management makes a mistake and can’t or wont admit it? It makes them more than a little likely to continue to make strategic blunders because there’s no repercussions. If you’ve ever parented a toddler, you’ll understand the nature and importance of logical consequences: eg, if there isn’t any, the child’s behaviour gets worse. Now, imagine said toddlers are in charge of a multibillion dollar corporation.
Yikes! But if that is true then that’s a total body blow to Ford. Yes GM is a bunch of #$@%-ups, we all know that, but that doesn’t affect Ford.
Talk about throwing the baby out with the bathwater.
Why is Wagoner still in charge at the Tubes?
I’m banking on a variant the punchline of the Futurama episode Fry and the Slurm Factory. Eeeww.
Bridge2far – Redlining has been done before on auto manufacturers, it’s not illegal AFAIK. Many lenders would not lend on Daewoo vehicles for example when they entered the US in the late 1990s.
Second, it’s not reported as a fact but as a rumor. It’s completely plausible that banks would “red line” Detroit vehicles now given the uncertainty of their futures. It’s not like the banks state “no loans,” rather they redline through loan pricing/terms which effectively take them out of the finance market for those vehicles. It may not be all banks but a few.
I’m a DCJeep and Ford dealer myself. I think the reaction of today is 3 mos behind sched. I think the eye of the hurricane has passed, and that the buildings are still standing, windows blown out, but structures still up.
Meaning, that all the car co’s are effectively BK, under any normal definition of the term ‘bankruptcy’ the fact they are still upright, tells us all that they know something we don’t.
That something is the obvious, the dubious, and the fact that an Obama nation is not going to pull a vertebrae out of the US spine, bc it knows that the patient will then be paralyzed, possibly for life. The cost for the gov’t to fund the welfare, unemployment, and trickle down from a GM full fledged free fall would supersede bailout bucks.
It’s the economy stupid, why spend 100billion on trickle down effects, when it’ll only cost you 50b to buy some time.
My bet is bailout, no question, next topic, done deal.
jwolfe, you do make an excellent point. These “loans” are probably cheaper than the alternative. I think the quesion is whether they will save the car companies or simply delay the inevitable?
Seriously, we’ve been hearing about great new products that will turn their fortunes for years while their market share dropped and losses grew.
GM burned $2.5 billion per month last quarter. A government cash infusion of, say, $50 billion won’t all go to GM. If GM gets half of it they will be in the same cash situation in 10 months… 12 tops. What will change by then unless there is some SERIOUS restructuring and job losses? And these promised new cars like the Volt will still be another 6-12 months away…