It’s that time of the year when industry pundits [usually] run out of news. Normally, this leads to retrospective reflection and informed speculation. The autoblogosphere has been pretty bad at this, of late. They missed carmageddon more or less completely, treating Detroit’s BS like the Lord’s own gospel. That said, TTAC has offered its share of botched timelines and devil-may-care details. One nice, unforeseen twist: Ford. CEO Alan Mulally flew in from Seattle and kicked some Blue Oval butt. As a result, I give FoMoCo a chance of making it– albeit a shot rather than a dead cert. Ford must withstand the fallout to come, as GM and Chrysler head for bankruptcy. Now that’s for sure– regardless of the automakers’ progress on Capitol Hill of Pennsylvania Avenue. While I’m at it, I’ll go out on a limb and make some more predictions for 2009.
Near Term – Next Few Months
I repeat: the U.S. federal government will bail out Detroit. Despite the Republican Senators’ moaning and groaning and defeat of the first go-around, the money will head for Motown– even though the bailout billions only delay the reckoning day for a few months. Plenty of TTAC fodder ahead as we watch GM and Chrysler try to negotiate with their creditors and the UAW.
GMAC will avoid going bankrupt– barely. The debt exchange hasn’t been going down well with bondholders; it’s now on its last iteration with plenty of sweeteners. But they’ll make it across the finish line. GMAC will convert to a bank holding company and voila! Another government bailout via TARP. Too bad its base of principal customers– GM dealers and their car buyers– is gonna be much smaller. And soon. Another bad deal for Cerberus. No tears here.
Auto sales will still suck. Yep, the entire first quarter will be a disaster for everyone. More dealers will fail; at least a thousand. All manufacturers will cut production. Again.
Transplants’ fear of the UAW organizing their plants has disappeared. Their workers know for certain that union affiliation has zero benefits (as if it ever did before). The Republican bailout bill mandated that Detroit blue-collar working stiffs get paid the same as Toyota workers today, not in the future. In the next Congressional go-around, the Republicans will stick to their guns on their “wage parity” demand. So why would transplant workers consider organizing and give two hours a month of pay for union dues and get nothing in return? Answer they wouldn’t.
Toyota and Honda will furlough employees.
Ford’s MY2010 Fusion will get [more] rave reviews. Three years since the launch of the Hermosillo trio, Ford’s redesigned and reengineered C/D mid-size vehicle will be hailed as a true competitor to the Camcord duo. FoMoCo’s four cylinder EcoBoost will provide more power with better fuel economy than any engine from the Japanese. And the Fusion hybrid, with its US-sourced technology, will officially beat the pants off Toyota’s hybrid. Only problem: low gas prices mean no one will care.
Mid Term – Next Spring/Summer
Assuming the government steps up this week with a federal grant (a.k.a. loan) now, GM and Chrysler will go belly-up later. Over the winter, the financial situation at both companies will worsen, and the cash burn will increase. There’s not enough emergency money in the government kitty. Worse, the attempts to get reorganized outside of bankruptcy will fail miserably; every single creditor will want a better deal. The UAW will show its real intentions: no sacrifices. “We already gave.”
The car czar will have no enforcement power to make the deal work. And even if he does, the cuts required will be so drastic that they border on ridiculous (at least outside of bankruptcy).
Cerberus will refuse to support Chrysler. It will go straight to Chapter 7.
Congress will step in with Debtor-in-Possession (DIP) financing for GM. Expediting the bankruptcy, cutting out any negotiation in the bankruptcy process among creditors, will be allowed as a “national matter.” Some will cry foul, but Obama will take the lead from his “bully pulpit.” Hard to argue with the President – makes you look bad.
The biggest losers will be the bondholders – the hedge guys get their knees chopped off in the non-negotiated reorganization. Amazingly, GM will still believes it can support its multiplicity of brands. Thankfully, Rick Wagoner will resign (forced out) and take rest of the Board with him to Aruba. The new CEO will call the game: Chevrolet and Cadillac are the “go forward” brands. The Swedish government will take on Saab (and Volvo from Ford). Every other GM brand will die.
Ford will get close to seeking government assistance, but instead tap its credit line. Ford will count on picking up sales as Chrysler folds, especially in the truck business. CEO Alan Mulally will decide not to replace Chrysler’s foregone rental fleet business with his own vehiclesl he will figure that nameplate devaluation will be too severe. GM will jump on with the business along with Hyundia, Kia, Nissan,and Toyota. But Ford will have a new problem: GM’s cost basis will be lower than Ford’s.
Long Term – Fall
Ford will negotiate a partial debt for equity swap with its debt holders. The deal will dillute current shareholders but the possibility of prosperity is on the horizon. Mulally will keep the Ford jet and his paycheck. Time will name him “Person of the Year.”
GM will undergo a painful restructuring. The dealer body count will fall drastically. Half of GM’s labor force will get shown the door, with little compensation. The UAW’s health care VEBA superfund will get stock in the new GM but little cash. It will be enough to give UAW retirees full health care coverage short term, but it will only be a promise for the future. Ouch.
Parts of Chrysler will find their way to other car companies. Mostly to GM, which will get the minivan business. Ford will scarf the Jeep brand but only pick up the Wrangler. Nissan will pass on the Saltillo truck plant, rightly figuring it can never compete with Ford, GM and Toyota in the pick up market.
As the credit crisis passes, car sales will rebound late in the second half of 2009. But to everyone’s chagrin, car prices actually increase, forcing folks to “trade down.” This plays right into Ford’s 2010 playbook with its line up of well-equipped small cars.
What say you?
As the credit crisis passes, car sales will rebound late in the second half of 2000.
Do you mean second half of 2009?
My two cents for what could happen –
Ford will probably survive, but to do so, they will have to restructure their debt. They will get much of the benefit of the GM and Chrysler decline, including a lot of the Detroit loyalists and fleet sales.
Saab and/or Volvo may end up in the Swedish government’s hands or just get the benefit of loans.
GMAC will either get the benefit of TARP or else will have its assets sold to banks and/or auto finance companies at the behest of the government, with the liabilities put into Chapter 7.
Chrysler may find itself getting one round of government money, to be shown the door later. Dodge will end up with Nissan, and the rest of it will be sold off. Cerberus may have to prop it up in order to prevent the firm from falling apart under the threat of investor lawsuits, but they will prop it up for just long enough to sell it, at a substantial loss.
GM will limp along, but not recover. Over time, the government will attempt an orderly sell off of the foreign assets, with the non-US operations cut loose. The government will take an equity stake, effectively nationalizing it, and it will shrink over time.
Ford will scarf the Jeep brand but only pick up the Wrangler.
No! I don’t want the Jeep Curse to claim Ford.
This comment isn’t a flame, it’s a genuine enquiry:
Let’s assume that Detroit have filed for bankruptcy and the United States doesn’t have an indigenous car company anymore. TTAC have done their “I told you so’s” and the dust has settled….what will be left for TTAC to talk about? Ever since, I started reading this site (about 2.5 years ago) there’s always been “bankruptcy talk”. But when if it happens, there will be a huge hole in topics to talk about. This isn’t a criticism on TTAC, but just a genuine enquiry of “where do we go from here?”
Back to topic.
I don’t agree that the Ford Fusion will be a Camcord beater. Toyota and Honda have spent years honing their product to reach the maximum market. Even if their product does falter, they have the resources to fix it.
This is (essentially) Ford’s last shot at a mid sized sedan for the NA market and I, personally, think that Ford won’t get it right. Toyota and Honda spent years making the Camcords the best they could, by listen to customers and refining it. Camcords were not overnight successes, they grew organically (tried and tested method). Ford are hoping for a bullseye on a budget, much like the Chevrolet Malibu. Lutz said that the new Mailbu would trounce the Camcords (paraphrasing), yet it’s fallen short of that mark. Because so many people got burned with GM products, they simply didn’t trust it anymore, (irrespective of whether it was a good product or not). Likewise, I think Ford will have the same problem.
Now onto Ford as a company. Whilst under Mr Mullaly, Ford have a good chance of surviving and, even, coming back stronger. But where do they go after that? Mr Mullaly will have to leave his legacy in the hands of current management and even elect a new CEO, but I simply don’t trust the current management.
Mark Fields: No flipping way! His “Mazda turnaround” was borne of most of the work done by Japanese Executives before he arrived. Then look at his track record at PAG and Ford Americas! Incidentally, I spoke to a new source I acquired and apparently, my perception of him was spot on. So, I stand by my words.
Lewis Booth: This guy does seem to have the right credentials. He made Ford Europe a success and seems well respected. But he is 60 years old. They need someone younger at the top. Plus, I don’t think they’d let a Briton lead Ford.
Bennie Fowler: Quite possibly. He has done sterling work as the Global quality manager and seems to know Ford well enough to run it. But, I wonder how much of the “quality work” he’s done is due to his knowledge of engineering (highly unlikely, his background is in business administration) and how much is down to him just “managing”. Could he REALLY take Ford forward? Or just tread water?
While there may be others in contention, the point is, I don’t think there is anyone worthy of carrying on Mr Mullaly’s good work. Mr Mullaly wants Ford to be “Western Toyota”, organic expansion of the “Ford” brand and focus on the product. Profits will come with a good product. But does his management team BELIEVE in his vision? Or just following his vision, because it’s good for their careers….?
It’s because of this gripe, that I think the Ford deathwatch will be back on the agenda in about 5 years’ time.
Nissan will pass on the Saltillo truck plant, rightly figuring it can never compete with Ford, GM and Toyota in the pick up market.
The Ram brand still has some life among truck buyers, maybe. I could see them trying to make a go at it, especially if F150 sales take off.
Also, the new Fusion will garner all kinds of awards, but sales will still suck as buyers seek the “safety” and established reputation of Toyota and Honda. Why get stuck with a lemon made by a company that no longer exists?
I don’t agree that the Ford Fusion will be a Camcord beater.
I am inclined to agree, but it doesn’t have to be, either.
If Ford can generate enough retail sales to make the Fusion competitive with the Altima, that combined with enough sales of the F-150, Mustang and Fiesta could help to keep Ford afloat. It probably won’t be as profitable as the rest, but it might be enough to make it.
It’s interesting to see how this is playing out. Although Mulally claims that he went to the bailout hearings to support his cousins, what he really did was establish Ford as being in considerably better shape than GM. The financial press had been giving GM kudos for being the leader in its turnaround effort (yeah, they blew that, alright), but these meetings made it clear to everyone that Ford is ahead of the curve. They’ve already won, even if they don’t get any money.
No! I don’t want the Jeep Curse to claim Ford.
There’s an interesting precedent for this going all the way back to WWII. Ford made just as many Jeeps as Willys did. The Willys jeep was called the MB, the Ford jeep was called the GPW but they are virtually identical vehicles. AFAIK almost all parts are interchangeable.
Honestly I think Jeep would do fine under Ford. It would be nice if they’d introduce the Gladiator (Wrangler-based pickup) but the two Wranglers in the lineup now are probably fine.
As for the rest of Jeep’s lineup, what can be said of the remainder of Chrysler applies: Who would miss it?
Katie – good call on Ford being dependent on one person. I hope Ford realise that and are even now looking outside the lifers for Alans’ successor.
Putting Booth in charge would be a major disaster – not because of his age – he’s a “beanie” who moved to general management and had the sense to listen to some good subordinates (I’m thinking John Fleming in particular, but he’also rather mature). I think the whole world realises that having a bean counter in charge of an auto company is not good news….
Fields – completely agree (why is he still there?). Fowler, I don’t know about – maybe Ford should send him to say Australia to see what he can do running one of the regions.
Personally, I hope Ford make it, but I reckon it’s going to be very close. As far as I can see, they’re betting that they’ll have the Euro Fords in place for 2010 when (hopefully), the market will be stronger (and maybe less competition).
BTW – how come the Senate didn’t haul Cerberus in and ask them to support Chrysler instead of the US taxpayer?
Gone Motors and Crisisler will sell off an assortment of assets at sub-fire sale prices.
The patient European manufacturers who were once, geographically speaking, part of the Roman Empire, and have wanted US presence will finally get their wish. Look for various Asian manufacturers to pick up tooling and other assets.
Look for Crisisler or one of GM’s brands to become the joint venture between Renault and Fiat.
And something else to think about … yes, it’s true that people aren’t buying cars right now. But you know what? They’re still wearing them out at the same rate. And the manufacturer who recognizes that fact will be ready when the market comes back to life.
Gas might cost $4 per gallon again. Or it might still cost $2. In either case, the winner of this match will be ready.
And it’s going to get REAL interesting.
This is close to how I’d call it. However, I think more of the impending cost savings will come Ford’s way. Even if they don’t immediately get the benefit of all the UAW’s concessions to GM (I agree Chrysler is dead) they sure will in the 2011 contract negotiations.
Ford is better positioned with better product than GM, and I agree the Fusion will be well reviewed but with mediocre sales (see “Aura” for that definition)
A reputation is hard to make, hard to change, and hard to lose. Ford has a unique opportunity here, and a corresponding challenge – the entire country will be watching very closely what they do. Mistakes will magnified, but I also think they will get a lot of play if they can get compelling vehicles – the S-max, euro Fiesta, etc here quickly and un-crappified.
I hope the Swedes get Volvo and Saab back, and restore the brands to what they once were. When I heard Volvo was for sale, I daydreamed of a Canadian-Swedish coalition buying Volvo. The Swedes providing most of the marketing and management, and Canadians providing most of the labor. They could make the reliable, utilitarian Volvos of yore, with an emphasis on making them especially useful in Nordic countries. It’d solve a bit of that large unemployment problem in Ontario…
Not that would actually happen. It’d require leadership and vision in Canada’s brain trust, two qualities almost entirely lacking with it right now.
Don’t say I didn’t predict this… it’s only going to get worse from here on out…
it’s only going to get worse from here on out
Maybe we should allocate the TARP money toward building jail space for dumb vandals, instead.
I think you will find the Union will not give in, no matter the odds or no matter the facts in place, they will not give. They will call in every IOU within the Democratic Party, which will not survive in its current guise without this and affiliated unions’ existence and support.
This is the true political driver to any resolution of the automobile crisis, and it could/will be a major driver for any recession handling from here on.
I am not suggesting that 2010 Fusion will ass-kick the Japanese in sales, just that it represents a real improvement over the current version. Enough so that the auto reviewers will put it in the same universe as the Camcord.
All of the domestic manufacturers still suffer from the lack of consideration by many car shoppers – and in some vehicle categories, for good reason. But if more import buyers do at least take a look at the Fusion, there will be some sales benefit.
What about the Ford dealer count? Aren’t they also in a similar position with regards to too many dealers for too few customers?
ferrarimanf355:
That kind of think will just solidify the Detroit area’s image as a 3rd world wasteland. In a way I hope it happens more, it will kill any support that remains for the bail-out outside of Michigan.
Pissy autoworkers should think twice about messing with foreign cars around Detroit. Vandalizing a new Camry in the greater Detroit area means that you are messing with something that 1) is probably owned by someone carrying a gun, and 2) probably cost the owner more than their house.
KatiePuckrik: I entirely disagree re: 60 years is too old. It takes a series of decades to gain experience (and a salary in the millions), and the majority in these positions are not approaching senility or what one might call out of touch status until at least 75. 60 is most certainly not “too old” for any most any executive.
Now this doesn’t mean any eighty year-old CFO shouldn’t be retired by now (double negated) (how old was/is Greenspan?) but the guy should not be (and won’t be) replaced just because he’s 60.
Dave :
December 15th, 2008 at 4:06 pm
…
BTW – how come the Senate didn’t haul Cerberus in and ask them to support Chrysler instead of the US taxpayer?
Where is the difference in one private owner – Cerberus – and many private owners at GM? If the government gives its grant to GM, it subsidizes all current shareholders, in the same way it would subsidize Cerberus if it gives a grant to Chrysler.
Ken,
We might quibble over a detail or two, but your prognostication looks spot-on.
OK, so here are my two quibbles:
1. Timing. I’m not sure the liquidity crisis will be played out quite so quickly, leading to a recovery no sooner than Q2 2010, rather than Q4 2009.
2. Poor Ford. Ford really does have what it takes to turn things around. But my fear is that if (when) GM goes C11, Ford will be forced to do the same, if only to keep GM from garnering a huge cost advantage vis a vis the UAW.
With respect to the foreign car vandalism, it’s Woodhaven. Downriver = a hole
That is – no respect!
The general concept of your article seems pretty probable. Though I do wonder how GM will ultimately lurch into its Day of Reckoning/Reorg. GM is soooo big and convoluted, it is hard to tell how that thing will come down.
Another big stinky coming down the pike that segways into the politicization of the domestic bailout is Card-Check. Pretty much every union in the States has gone all-in on the passage of that Act.
The unions are desperate to pass that bill, and they have their Donkey buddies running things with a near super-majority in Congress and The One in the Oval Office. They get it this off-election year with that majority or they don’t even try the next election year.
So if I were to amend your predictions with a caveat, it would be how Card-Check mixes it up in Congress vis-a-vis the Bailing 3. If nothing else, Ford can only grow stronger with all those developments if they just can stay off Uncle Sam’s leveraged Patriot Crack.
Interesting:
http://money.cnn.com/2008/12/15/autos/chrysler_envi/index.htm?postversion=2008121513
Canadian Volvo. I hadn’t thought of that. That would be awesome. I’d bet the Canadian gov’t could outbid Sweden and take Volvo as their own domestic brand.
Windswords —
Too little, too late. And the wrong vehicle for the EV market.
Trust me on that last point. I live in Wrangler country and drive one, too. (And I don’t mean one of those four-door Silly Wranglers.)
Dear Katie – (my daughter’s name is Katie BTW)
What shall we talk about post bankruptcy? Why, they’re will be even more fodder to talk about how the bankruptcy went so terribly, terribly wrong…
With every politician from the Wayne County Dog Catcher all the way up to President sticking their fingers in the bankruptcy process how can it not be an unmitigated disaster.
Probabilities of GM ever being a low cost, unionized, domestic producer is just about the same as an asteroid strike on Kansas – we could only hope.
With all this baggage, GM’s best outcome is that of a pseudo nationalized company, or Crown Corporation (for residents of the Empire).
What say you?
I say “whither”. You say “wither”.
Let’s call the whole thing off.
re: “As the credit crisis passes, car sales will rebound late in the second half of 2000 [?]…What say you?”
i feel compelled to side with ferrarimanf355 [December 15th, 2008 at 4:47 pm] on this one when he says… “it’s only going to get worse from here on out…”
after spending practically everything and saving practically nothing over the last half-century pursuing ‘the american dream’ on the cheap and easy, i fear most people in this country are in for a very rude awakening.
the credit collapse is only in it’s early stages. and with all due respect to mr. elias, i feel most of his assumptions are far too optimistic considering the ugly reality i see swirling all around us.
I truly believe Ford is going to have a major meltdown if GM and Chryco
collapse…
As for the next CEO, how about a car guy, like John Coletti, yeah, he’s retired,
but I’ve got money that says he’d come back to run the show…
SteveL
philipwitak – Car sales tank in every major recession, falling about 30% from the peak level. But they also bounce back dramatically fast, usually establishing a new, higher peak in sales. I saw a chart today going back to 1967 which dramatically illustrated this point. I will inquire if Mr. Farago can use this proprietary chart and post it to his website.
As far as timing goes, it may be late in the second half of 2009 for the bounce to become visible. I point out that the scrappage rate for cars is 13 million units a year in the US, and the current sales rate on new cars is below that. That negative replacement rate is unsustainable and suggests a near term “floor” on sales of around the same level.
I was going to comment on the word used in the headline phrase “wither Detroit.” The word is “whither,” as in “whither the wind blows, thither the grass bends…”
But Strippo already made a much funnier comment about it than I was going to; and besides, I thought maybe the author used the wrong word intentionally, as a pun to illustrate the withering of the auto industry. Well done!
I was ready to roll with that until I got to the phrase “devil-make-care” – and I just couldn’t read any further. The expectation of more garbled phrases (what’s next – flushing out an idea? better late then never?) was just too distracting.
Sorry…
The “wither” of the title was an intentional play on words. I swear.
The devil-make-care was a mistake, thanks to a Mother whose malapropisms are legendary. Well, at least in these parts.
Text amended. Literary sensibilities soothed. I hope.
Regarding Mr. Mulally’s successor . . .
Jim Farley.
I think the guy is great. He doesn’t seem to get the press he deserves.
Jim Farley is related to Chris, no?
“I’d better have a good sales report, or I’m going to live in an Econoline DOWN BY THE RIVER!”
The “wither” of the title was an intentional play on words. I swear.
I figured you changed it from “whither” to “wither” after seeing another “whither Detroit?” headline.
I say you are an optomist.
As defense analyst Colin Gray Writes in a recent book about the near-term possibilities of major conflict, “Another Bloody Century,” when considering optimism and pessimism, “optimism is apt to kill with greater certainty.”
— “Fear of China” by Robert D. Kaplan in The Wall Street Journal, on page A14, on April 21, 2006.
ferrariman,
Those four cars will get more attention than the many more Hummers that have been keyed and vandalized by environmentalists. I guess some cars are more equal than others.
Ronnie, I remember that one H2 being vandalized in that Metro DC area… let me dig up the link…
But seriously, I own a Honda Civic, but my next car will certainly be American for fear of some retard ruining my whip…
What about the Ford dealer count? Aren’t they also in a similar position with regards to too many dealers for too few customers?
Ford’s already cut their dealer count by about 15%. Besides dealer buyouts and consolidations, the credit crisis and generally shitty economy are culling the weak dealers as well. I think I saw a prediction that another 2000 dealers (all brands) will go down in ’09. The silver lining in the screwed economy is that it’s taking out dealers by a natural death so GM and Ford don’t have to spend money closing them.
I feel sorry for the companies that sell specialized software to dealers like Reynolds & Reynolds. OTOH, you should be able to find some great deals on used mechanics’ tool chests and Snap-On sets. I wonder if Snap-On, K&D and Matco will survive.
The only reason the Swedish government is interested in Volvo and Saab is that if those brands go under, their suppliers in Sweden will be hit hard, which will in turn hurt Swedish economy. Plus, there is a lot of debate over there, a large portion of their lawmakers want none of the car business mess.
no_slushbox :
That kind of think will just solidify the Detroit area’s image as a 3rd world wasteland. In a way I hope it happens more, it will kill any support that remains for the bail-out outside of Michigan.
And the more you propagate that image, the more folks will believe it, however inaccurate it is.
On the radio today they were saying that about 4% of people are sociopaths. I wonder who’s more of a sociopath, a vandal or someone who’d like to see more vandalism because it helps the political point they want to make.
Pissy autoworkers should think twice about messing with foreign cars around Detroit. Vandalizing a new Camry in the greater Detroit area means that you are messing with something that 1) is probably owned by someone carrying a gun, and 2) probably cost the owner more than their house.
I bet you thought that #2 was real funny. Go ahead, make fun of poor people. If they’re black, does that make it a twofer for you? FYI, median price of homes sold in in Metro Detroit in ’08 was a little over $62K, down about 50% from ’07 but still a bit more than MSRP on a Camry, even a V6 (speaking of which, I was talking with my aunt today and she mentioned she recently had to have her Toyota serviced due to engine sludge). That $62K avg includes a lot of low value properties in Wayne County. Oakland County was $111,000 and Macomb $80,000. So that Camry must be loaded with something illegal in its trunk if it’s worth more than a house around here.
You can crack wise all you want and kick the cripple if it makes you feel good, but my guess is that if you bothered to actually check out the Detroit area you’d find out that most of the area is not a 3rd World wasteland (just wondering, what ethnicities are there in the “3rd World”?) but rather a pleasant place with lots of nice neighborhoods and other amenities. We have a fine symphony that just hired Leonard Slatkin as musical director, replacing the acclaimed Neeme Jarvi, and the DIA was recently renovated and expanded and has a very good collection, including old masters, and of course the amazing Rivera murals. Now how’s that for diversity? A world famous piece of art created by a communist and commissioned by a wealthy industrialist.
Even in the city, there are places like Boston-Edison, Palmer Woods, and Rosedale Park with lovely, elegant homes. Oakland County is still one of the wealthiest counties in the country, plus there are the Pointes on the east side, Grosse Isle downriver, and Plymouth on the west side. At least around here a million dollar house is actually a million dollar house. A while back, Harry Bennett’s estate was up for sale. There were all sorts of secret entrances and tunnels on the property. I think the asking price was about $500K.
I do embroidery work for a number of M/Cs. Nice guys, at least to me. I’ll introduce you to them and you can let them know, face to face, how you feel about the folks who live around here. Most of the guys in the M/Cs are black. You don’t have a problem with that, do you? I’ve been trying to sell them on Kel-Tecs (I have small hands) but they prefer S&Ws and Glocks.
Is it Chicago? No, but I’m not sure that walking around the south side of Chicago is any safer than the east side of Detroit.
It’s easy to be a big man when you’re anonymous on the internet. You willing to post your narishkeit under your real name?
I agree that suppliers in Sweden will be “hit hard” but not that the Swedish government is interested in nationalizing Volvo or Saab. The word out from Sweden is that won’t happen. According to BBC News anyway.
To put it into perspective; this is like the Canadian government taking control of Chrysler, just too much of a political headache. Who would make the decisions?
Canadian Volvos?
I know they had an assembly plant in Nova Scotia that closed in the late 1990s. Pretty sure that Volvo assembled 220s in Canada as well.
As badly governed as Michigan has been, I saw this interesting factoid, California has 3 1/2 times the population of Michigan and 12 times the debt. California will be insolvent before Michigan will.
Here in California, we will be insolvent by March.
rcguy:
Yeah, to put this hypothetical lashup under direct government control would be a disaster. Decisions would be made for exclusively political reasons, new plants would be built in darkest New Brunswick to keep some seats safely one party or the other, etc. In my fantasy, the Canadian-Swedish governments would act like an investor or a bank: they’d front the cash, and put a few ground rules (for example, a certain percentage of all manufacturing must be done in the host countries) and then let the management team do what it wants, hands off. If this new management team were to look at Ontario and it’s nearly bankrupt collection of parts suppliers, I’m sure they could cut some sweet deals without any need to coordinate with political powers.
Ontario and the Fed. are working on some sort of 3.3 billion aid package for the auto industry already, so there is interest in spending big money, at least in Canada. Having Manga get a contract for manufacturing trim for the new Volvo would accomplish the goal of giving them a check from the taxpayer, and would be a long term, not a short term solution to boot. That was my thinking, anyway.
Great piece, Ken. Very close to my own predictions, except that I still don’t see the number of brands as a major problem for GM. Properly managing those brands remains the real problem.
I’ve been mucking about with a piece on what these companies need to do to make the most of their restructuring. Need to get it done…
+1 Ronnie . . . good post.
I see Ken has been gazing at his crystal ball again.I think with the economy changing on a daily, if not hourly basis,acurate predictions are
a fanatasy.
Off the topic this beating up cars thing pisses
me off.I’m a soon to be retired CAW member and I detest imports with a passion.However I draw the line at damaging someone elses property.I can understand the frustation,and the rough times folks are dealing with.
Going out to beat up cars doesn’t help our cause at all.All it does it confirm the low opinion that folks allready have of us.
Neb, I love that Canadian/Swedish tie up for personal and professional reasons. A novel idea. When Chrysler goes tu maybe they can buy the Brantford plant and start making something new there. I’d rather see money go to that than trying to bribe Cerberus to keep it open.
>>>Not that would actually happen. It’d require leadership and vision in Canada’s brain trust, two qualities almost entirely lacking with it right now.<<<
Right now? How about ‘for goddamed ever’?
Ronnie Schreiber:
The Camry/house comment might have been a bit rough, but you’ve been knocking the south rather vehemently.
And there are a lot of African Americans in the south, so maybe you’re the racist.
Detroit should not be bailed out, it is that simple. This country is littered with boom and bust towns – the government did not interfere then and shouldn’t start now.
If you want to go into race: Poor blacks left their homes to go to the North to find jobs, back when there was a lack of good jobs in the south.
Now that the predominantly white workers of the historically racist big-3 and UAW face moving to find better work they want to be put on permanent government welfare instead.
Ronnie, those of us who live or aspire to live in areas like Southern California or South Florida, where our monthly housing payment is strikingly similar to the cost of an entire house up in Detroit, envy your rock-bottom housing costs.
Perhaps the median is $100k or so but I was amazed to see more than 25 pages on realtor.com of Detroit houses less than $1,000! Granted, none of them were beautiful, and I saw no Sub-Zero refrigerators or Wolf ranges, but that makes a Camry look downright pricey. I remember seeing a decrepit shack with toxic mold all over the place in Malibu and it was gone from the MLS in less than a month … for $600k. $500 in Detroit. No extra zeroes.
You are right that your million dollar homes are really, well, million dollar homes, but according to realtor.com there are essentially no single family homes in Detroit over $1 million. In fact, there’s only one, and it’s a former office and hardly counts. Admittedly, this changes radically in Grosse Pointe, where your $8 million homes look remarkably similar to Palm Beach’s $30 million ones … sadly without the nice weather or ocean views.
So maybe we high cost housing guys are crying not laughing. And we’re losing big on our real estate too, so maybe you should worry about us! Sympathy cuts both ways, etcetera.
The guy you responded to made a pretty good point, and accusing him of being a psychopath was overdoing it a bit. When you destroy foreign cars or threaten their owners, you make yourself look like people best shunned. The guy’s giving you a warning, which you should listen to: Destroy foreign cars, you make the rest of the nation look at you funny. Maybe that’s why there isn’t solid support behind the bailout throughout the nation.
There are two Americas, those who make American cars and those who don’t want to buy them.
Your task, should you choose to accept it, is to change that.
Tough. I can’t blame you for being grouchy. And you get to suffer through dismal winters, too.
Sorry.
D
How much would it cost for the Federal Government to wind down Chrysler in a fashion that didn’t (immediately) destroy GM and Ford?
as far as the Fusion-Camcord comments, go to Edmunds.com Reviews and browse thru both the Fusion and Camry user reviews. You may want change your mind about the superiority professed about the Camry.
“FoMoCo’s four cylinder EcoBoost will provide more power with better fuel economy than any engine from the Japanese. And the Fusion hybrid, with its US-sourced technology, will officially beat the pants off Toyota’s hybrid. Only problem: low gas prices mean no one will care.” Exactly – will the Fools of America figure out that elegant technology is the key to managing transportation costs or is it back to gas hogs?