Dearly beloved: Supposedly, capitalism is a pretty simple process. Let the market decide who lives and who dies. It worked for the ecosystems of the world for the past 6 billion years. Darwin; natural selection, survival of the fittest (or luckiest.). Trouble is, a lot of countries preach capitalism, but seldom practice it. The bailouts of banks, fiscal stimuli and other such market distorting activities don’t really help anyone in the long run. It has long been argued that there are huge overcapacity issues around the world, and something, someone has to give. Give up the ghost, preferably. The collapse of GM and Chrysler would have addressed these issues, but this post isn’t about the bailouts of GM and Chrysler and their validity. I want to know who’s next to die.
Who do you think will be the next company to leave the market either by bankruptcy or by being swallowed by a bigger fish? Do you think it will be one of the smaller companies like Mitsubishi or Mazda? After all, Volkswagen is eying up more of Suzuki’s stock (insert obligatory Bertel Schmitt joke here). How about Daimler or BMW? Things were pretty dicey there last year. How about names on the OICA list you rarely see mentioned elsewhere? Or are you thinking sobig that another big company will fall? Toyota is stumbling at the moment and Ford’s heavy fleet sales might not be good for them in the long run. Or maybe you think GM and/or Chrysler will fall again and this time stay dead because there simply isn’t any money (or political goodwill) left to fund another bailout?
Whatever you think, give us your answers: Who’s next to pass away?
Toyota is stupidly big, posting profit, and IIRC was sitting on US$ 100B cash reserves before the pedalgate. I don’t see them going anytime soon.
The smaller Chinese, I see a lot of sharks eating small fishes there.
Chrysler was already snapped by Fiat. Although that’s not technically true. They might fall again. However, I wouldn’t leave them out until seeing what they have cooked. The new Grand Cherokee is hot, and the interior is not “crap”.
A simple list is not enough to say who stays or who goes.
The operative words here are “stupidly big”.
While critical mass is essential, I don’t believe that massive size and centralization are advantages in the current era. This goes for both governments and corporations.
There will be epic consolidation in China. Some of that consolidation could involve more western nameplates getting eaten by Chinese (or maybe Indian) companies.
Beyond that… GM isn’t going anywhere (sorry RF), Ford isn’t going anywhere, Toyota isn’t going anywhere, VW probably isn’t going anywhere. But the others? Given a time horizon of a decade or more, it’s really hard to say.
May help to look at the trigger for the next consolidation. I believe that will be much higher interest rates across the board for US buyers. When a prime US borrower is forking out 10+ % over 5 years….
It’s coming, could take years to get there, but rates can’t go much lower and the eventual cost of the wave of loan defaults for the last few years will be much higher rates.
So I would look for companies with large US market exposure, that have relatively small cash piles and product that doesn’t have significant profit margins (margins / prices will drop to offset the interest rate spike).
GM seems to fit the bill for me. The next bankruptcy likely wipes out the new investors and turns what is left of the company over to the Chinese.
I would imagine the Federal Reserve will end up with a lot of GMs IPO to make it look good and all…
In the US market, I can’t see how Suzuki or Mitsubishi lasts much longer. Who considers those brands and why? Both are spending money to design US unique models, but not getting any sales success from it. Mazda is a sinking ship – other than the 3 and the Miata, what do they have?
My neighbour to the right has an trunkless SX4 in weird copper metallic color. The one two houses over has a black GV (the new one on unibody). So yeah, they do consider. I suppose the proximity of a dealership helps.
Let me polish my crystal ball. I’m going to have to go with a timeline of 5 years out.
I think Land Rover will disappear. Tata wants to retire and his successor will have to address the debt structure that Tata Co. is carrying. Something will have to be done.
If the Mulally plan works, Ford’s going to be rolling in dough within 3 years. I figure that they’ll approach Geely to buy back Volvo for cash and probably grab Mazda as well. Both are weak and they might get them for cheap.
Opel is toast. GM can’t keep that afloat in Europe. GM America will survive but is now a second class citizen. It’s going to take decades before it recovers its might.
I’m thinking that Fiatsler is going to go through a crisis and will falter. Chryco will have to be parted out to stop the bleeding. I can see a new player like Magna grab Jeep and try – how about a distribution deal with Penske – to have it as a stand alone marque.
Mitsu is toast in NA. Suzuki will drop out too but will make a deal to make cars for someone else and still have models here. Possibly GM.
Nissan is in trouble. They can’t sell light trucks, and their home market sucks. Their partner has no presence in NA. They need either another partner or some serious sales somewhere else. S. America perhaps? They’re too big to disappear in 5 years but they bear watching.
Ford buying up more brands? Seriously? PAG was an epic failure for the company and almost had fatal consequences. Ford has now dumped Jaguar, Land Rover, Aston Martin, Volvo, Mercury and (part of) Mazda, all of that under Mulally’s watch — and Lincoln is still on life support.
What on earth would make you think that Mulally would want to get back into the brand management game?
@Dim,
Haha. May be u need another/a new crystal ball.
I don’t see Ford to buy back Volvo any time soon, unless Mulally is thrown from the ship.
It’s all about the IP. Both Volvo and Mazda have contributed a ton to the current generation of cars from Ford. With Lincoln floundering they certainly can afford (ha!) to have a nameplate like Volvo, especially when it comes to Europe. They were forced to sell Volvo and I think that they’d take it back in a New York moment if they could. The Mazda matchup worked out for both. For some reason both Ford and Mazda complement each other and each is stronger for it. Mazda needs help bad.
These WAGs are predicated on Ford doing well, particularily in NA (yeah I know the euro market is worrisome but I figure that will turn around within 3-5 years), and that Geely will stuff up their version of Volvo bad enough that they will be willing to sell it back to Ford.
I think VW Group will buy Mazda Motor Corporation in the near future ( after Ford will sell its 11 % stake in Mazda ), and then will merge Suzuki and Mazda . The acquisition of Mazda will accelerate Alfa Romeo resurrection if VW Group will buy Alfa Romeo . VW Group could build a RWD Alfa Romeo sedan based on next RX8 and a new Alfa Romeo Spider based on next MX5 .
Chrysler is still in a world of hurt. Once the GM IPO hit their sales which have already been behind any and all targets and estimates will collapse.
Who will die next? Chrysler.
No surprises here. Mitsubishi and Suzuki are already on their death throes in North America. The only way either of these companies will survive is if they become the rental brand par excellence. Their marketing and distribution networks are simply too sparse at this point to move their mostly mediocre product line.
Smart will likely be gone within two years. Maybach is definitely on it’s way out. Saab won’t be able to build back their presence in North America… I don’t see them being anything more than a possible two model company in NA or Europe.
One of the hardest reckonings that may come is the possible elimination of Buick and GMC in North America. The ‘official’ primary reason these models were kept was that buyers simply wouldn’t migrate to Chevy or Cadillac if these two brands disappeared.
The REAL reason is the dealer network. GM could ill afford to sack all of their BPG dealerships. Many of them would have not only required years of legal red tape. But inevitably certain Chevy and Cadillac dealers would have needed to do battle with GM for their survival as well… since hundreds of the BPG dealers were exceptionally successful (and had better real estate) compared to certain Chevy and Cadillac dealers.
Everyone believes that Kia and Hyundai will continue to succeed here. That may be true. But the level of cannibalization between the two brands is a problem. If certain overseas automakers come to the States with strong warranties and far cheaper prices, you may see at least a branding consolidation between the two brands. ‘Kia’ is becoming an increasingly competitive brand. But it’s simply not necessary given the demographic reach Hyundai now enjoys in the United States. In fact models like the Forte and Rondo would likely do far better if they were marketed as Hyundai models. Kia still has a quality stigma with certain buyers who remember the initial cheapness of their cars.
Lincoln may be on the chopping block in 3 years. It’s exceptionally difficult to make a profit in the $40,000 to $60,000 price segment and with the exception of SUV’s, Lincoln really doesn’t have any real cache compared with the competition. What Oldsmobile was 10 years ago, Lincoln is today. An American brand trying to take on foreign competition with a demographic history that clashes with that core goal. You can’t sell a younger person a car when everyone associates your brand with the land barges and older vehicles of times past.
@Steven Lang: “It’s exceptionally difficult to make a profit in the $40,000 to $60,000 price segment …”
I would argue that it’s not exceptionally difficult — if you have enough volume to amortize your tooling and engineering costs (and get lower supplier pricing). Audi, BMW and Daimler are all demonstrating a great deal of success at this. (Lexus is surely equally profitable but Toyota doesn’t break out the data for Lexus.)
However, Lincoln is missing that “volume” part: the global Lincoln sales are roughly 1/15th of those of any of the German premium brands. That kind of volume can maybe work for Jaguar, but not in the segment Lincoln is attempting to occupy.
Suzuki might as well be out of NA already.
Mitsubushi, Smart, Maybach, and Scion are done after that. Killing off Mercury might have saved Lincoln.
Sadly, I think Alfa Romeo is also screwed.
Don’t know what will happen with Saab and Volvo.
In the looooong term I believe the odds are good the Founder’s Great Experiment will fail.
Excessive diversity and multi-culturalism AND a lack of unifying bonds will lead to the “house” so divided that fragmentation of society and the political structure is very possible.
Besides, the USA is simply too big to effectively manage, especially by the horde of lawyers infesting politics, babbling buffoons loyal to class and fueled by greed.
Hopefully the “new” USA and its sub-portions will not be owned and operated by a corporate structure but a future based upon an oligarchy may be inevitable.
But the Disgruntled One will be dead and long gone, my carriage rusted out and no one around who will remember me… forgotten, not even a faded impossible-to-read headstone as my ashes circulate through the ecosystem absorbed by minute organisms and my detritus settling down into the cracks and crevasses between sundry dust particles awaiting the future of swiffer-type sweepers to grab and be disgarded, tossed into the trash and hauled off for a visit to the local landfill or wherever future waste is deposited.
This bright cheery message brought to you by the letters D and K and the number 10.
And your point is?
Chrysler. It’s already more or less gone. Swallowed up into Fiat.
Certainly, excluding China, of which I’m ignorant, Suzuki, Mitsubishi, Mazda, and possibly, Kia, will face significant challenges due to their size and lack of market share, although I could certainly see Mazda moving closer to Ford again as their financial woes ease, that was a good relationship for both. In Europe, Fiat has one too many name plates and might lose either Lancia or Alfa. Hopefully Lancia’s new product onslaught via Chrysler could move them up the charts, but I would hate to see the end of Alfa Romeo, one of my favorite European makes. Having a sales outlet in North America for Alfa should help keep both brands competitive. The German’s, BMW and Daimler, well, BMW’s are so good I don’t see how they can fail as a marque, but product proliferation may kill them as an independent; they should settle for being the top 2nd tier company and quit trying to be all things to all people. As for the Daimler folks, perhaps my prejudices lead me here, but considering their track record with mergers and takeovers, (and the failure rate of both), and their seeming inability to run any company but Mercedes-Benz, leads me to believe that their business model is fundamentally flawed, and the only way they survive is by eating other companies. That is neither sustainable or desirable, IMO, and will ultimately lead to the dissolution of the company or to an unwanted merger/takeover. Mercedes-Benz itself may well survive as part of something else, again because of its (questionable to me) brand equity. I think the purge of North America is mostly finished, except for Mercury, which didn’t have to be. The N/A manufacturers have had their “Night of the Long Knives” and are in far better shape than Europe or Asia in terms of costs, size and profitability, so the imports had best watch their behinds for the next few years, as they will be playing catch up to the North American market. P.S. I didn’t mention France or England, mostly because the French are local players generally, and the English are owned by Germans.
– Suzuki is pretty big in Asia. I see them end up merging with VW
– Lincoln will die of natural causes. Ford made a big mistake selling Volvo but to keep Lincoln and (initially) Mercury. They should have kept Volvo and cooperated more with Mazda. Both strong brands with good semi-niche, semi mainstream products and much potential for technology sharing. hope Mazda survives or finds a good partner.
– Too many brands in China to go into detail here. there will be big consolidation (and that is demanded by the communist party too in addition to market forces)
– Assuming Chrysler somehow already disappeared, Lancia will too if Fiat is to survive at all.
– BMW and Daimler have to cooperate more with others, they are too small to be competitive on the long run. they currently live on their old reputation, but not on their product.
– GM: as a company (now without debt) might survive, but shed brands in certain markets. Opel might disappear since Chevrolet (=Daewoo) competes with them in Europe (their only market). China might save GM. I assume Buick will either be younger brand int he US, or die. GMC has always been useless and redundant. not sure why it still exists with the very same product. Buick at least look different than Chevrolet or Cadillac, but GMC?
– Mitsubishi: they still exist? If they are lucky someone merges with them
– Peugeot/Citroen: too small market with non-premium product. they might be a good merging candidate for someone wanting to build small cars (like VW buys Suzuki). but not sure who would want them
– Renault/Nissan: they are not too bad positioned (except for the US). their products are kind of so la la and don’t have the Toyota/Honda reputation. this might be bad considering they are strong in medium-price range only.
– I’m not so sure about Honda, they are small and their products lately are weird. the fit is their best vehicle (and that is a bit overpriced and once others bring competing cars to the US, they might have to lower that)
– Jaguar, Land Rover etc. are brands living off the past. If they don’t get good products their owners will let them die.
– Saab: will die soon
bravo cammy for this one! i too wanted to suggest the same topic
but was to lazy to do so.
anyhow, my thoughts are:
1. Lincoln dies. Why? Bcoz Silvy says so!!! and of course, bcoz of missing sales.
2. Ford only has Ford (brand) left. People realize they are paying way to much for Fords. Oh and btw, Ford should be all american, not wanna-be EU/asian. Ford has huge debt. Enter (***) market conditions, and Ford dies. Silvy is celebrating. Nullo is on prozac.
3. GM stays on course. GM sells american cars (as it should). But GM management still has no clue. GM almost before another bankrupt.
Enter (***) war + market conditions. GM IP is all in hands of the Chinese. GM US based factories are building Hummers Humvees again (new GM CEO, Carlyle, United Defense, connect the dots). Another reason Ford is dead is that the US Gov is distrustful building their “tools of war” in Ford’s Mexican factories. Silvy agrees.
4. Fiat/Chrysler led by Sergio Marchionne have a renaissance.
New appealing product. Gaining market share.
(***) War: Americans invading another country (coincidently rich with oil) in the name of democracy (yeah right!). But this time, the *terrorist* (fighting for the freedom of their own country, heh) fight back. Hard. Obama brings the compulsory draft back. But it’s all relatively good. Why? Coz the pressure of joblessness is sinking.
Market conditions are bad coz of the double dip recession, jobs are scarce, hitting the 15% mark.
You do realize that Ford has been in Europe almost as long as it has been in existence? Hardly a “wanna-be”.
UnclePete
ok, fair enough, let me make it more clearer:
fords should have more american flair, be more bold.
we do not need another EU/asian looking car (scratch that wanna-be)
EDIT: just look at the lincoln design, its horrid!
then i see pictures of a 64 continental and daydream of lincoln greatness.
but then it hits me, it was 64. so many many years ago. todays lincoln is just BLAH.
just make them into a ‘lincoln’ trim level for fords, like silvy said.
@european: And I do not trully desire any Cadillac (other than a Fleetwood) built since I was born (1977.)
european: Fiat/Chrysler led by Sergio Marchionne have a renaissance. New appealing product. Gaining market share.
If so, the new Chryslers and Dodges apparently aren’t going to be based on Fiat/Lancia platforms. Those cars are recognized as second-rate even in Europe.
There is no way that Americans are going to flock to a damaged brand (Chrysler or Dodge) using platforms and components from brands that, in this country, have a reputation for building what can charitably be described as junk.
The Italians left this market with their tails between their legs years ago…and for a very good reason.
The little Fiat 500 might get some sales on the novelty factor, but not enough to save the company, let alone keep it in the black.
geeber
i just complimemted you on a commend bellow and you mess it up.
damn! why so angry and prejudgemental?
fiat is not considered crap in europe. maybe in your mind, but not in europe. and loyal chrysler/dodge buyers that had to go to other brands, bcoz chrysler was at the edge of bankrupcy, will flock back to their beloved brands when the refreshed chrysler and dodge offerings appear on sale.
While I am still quivering after reading the gloomy forecast by european and really can’t think straight, I do not expect any major changes in terms of cars makers biting the dust. GM and VW will probably overtake Toyota, Nissan and Honda may see some hard times, but, other than this, no major car maker I think is going to die in the next year or two.
@SomeDude
my timeline was more in the 5-10 years.
i’ve spoken to a friend who was an ISAF soldier in ghan,
and he confirmed concerning iran, “oh, it is so on”.
main obstruction are the chinese who want their oil interests
protected in iran. but that would mean for the US to give up on
10-15% proven world reserves of oil and gas. is the US only going after iran’s nuclear program (as they claim) and they dont care about the oil/gas fields? i dont think so. but the chinese wont give in either, coz if they let go of iran, they become
dependent on oil that is basically in the hands of the US.
they are not so eager to be in that position.
anyways, GM IP might be a bargaining chip. it’s no coincidence about that new CEO. as Bertel said “there are never coincidences”.
EDIT: even someone on this site said that GM was supported by key military officials in washington and kept alive to retain
US industrial capabilities. and you guys argue about UAW, yes or no. which is actually hilarious, coz if the gov really bailed
out GM to keep the UAW happy, they just could have printed the money instead and put them on the gov dime (pensions and all).
continued…
about the mandatory draft:
the US is already overstretched in two wars, and wont be capable of sustaining a prolonged war with iran. and these guys will fight back hard.
and not to mention what closing of the strait of hormuz will do to oil prices. i read that the iranians can keep it closed for a year. some say less, but even 6 month will bring havoc to the economies around the world. oh well, i bought my oil stocks already.
I think any brand that is trying to be all things to all people will be hurting in the next few years. That puts Fiat and Co. ontop of my hit list, since as we’ve seen on TTAC, their plans seem to be mostly platform/ component sharing across their portfolio. For that matter, anybody striving for the booby prize of the ‘world’s largest carmaker’ should feel the pain, since it seems striving for that goal makes you contract GM disease, a illness where you ruin what people like about your cars to increase your car’s appeal, a disease Toyota now knows a thing or two about, and VW will have to learn a few painful lessons on. (See the latest Jetta.) Companies that stick to their knitting (like for example, Mazda keeping with affordable, reliable, and fun) should do well, since people will always have a reason to pick them over the blandish giants. Giving a reason for somebody to buy something instead of just eliminating cons will be a powerful tool for success.
This is what Fiat *should* be doing with Dodge; making the maker into a nieche manufacturer of cars people would actually want to buy, instead of making a range of cars that only rental companies are interested in.
That said, there are too many players still, some of them will have to go. In North America anyway, demand was bound to shrink as the baby boomers started retiring, even if everything else was constant. I fear cars will end up somewhat like the airline industry: too many players and gubbermint intervention make for too-thin profit margins. So instead of having some players vanish and others be healthy, all the players end up sick but alive. It’s not a good situation in any sense, except that it preserves the status quo.
PS Cammy before you curse the mixed market economy remember that in ideal market economy players only get their opportunity cost back, which is the money they would have made doing something else. “Excess profit”(IE what we would call ‘profit’) is actually a sign that the market is operating at less then maximal efficiency. ‘Pure’ capitalism is such a extreme theoretical ideal that even my economics profs never referred to it as anything but an abstract model.
while i wont go into the rest of your comment,
i will address only the “looming failure of the new Jetta” part
many comments were made how the new Jetta is a downgrade etc.
but many posters also overlooked the part where it says
it’s to be sold in the US and CHINA. VW cheapened the production
of the new Jetta and will make bigger profits on each sold.
sure, they might loose some VW enthusiasts in the US, but they might gain new buyers that want to buy into the VW-european image for a lower price. not to mention thousands and thousands sold in china’s booming market. so the new Jetta is a win (profit-wise).
Mazda is safe for now. They’ve got new products to last them a while after the break-up with Ford.
While cooperation with Ford gave them great platforms and decent engines to work with… let’s not forget that many of the platforms used to springboard this development were Mazda platforms… and it was Mazda who made Ford’s engines (that previously-crappy V6) work. Let’s not forget: Mazda is one of the very few automakers who currently sells direct-injection gasoline engines in the US! And even without Ford, they’re now introducing their new Sky engines.
Suzuki is not just safe. It’s rolling in dough. Nobody knows small cars like Suzuki, and they’ve got a big stronghold in the emerging Chinese and Indian markets. In the US, they might be in trouble… but free of GM, they may be able to redevelop their dealership line into one which better reflects their global line-up.
The big loser: Mitsubishi. Shorn of its partners Chrysler and Hyundai… losing the development bucks Daimler-Chrysler was pouring into it… I don’t see a good line-up for Mitsubishi going into the future. All they got out of the three-way with Chrysler and Hyundai was the Lancer… which does well in some places, but suffers a lot from poor interior quality and economy when compared to the competition in others. They’re retreading old ground with the new Outlander, the Galant is a stylistic and sales mess and the iMiev, though it promised much, is dead in the water as far as future sales are concerned, thanks to the release of the Nissan Leaf.
Chrysler is a dissolution waiting to happen. Fiat’s exit strategy has always been to leave with more cash than it put in (Fiat only took on Chrysler because Chrysler was given away free), and the way to do that is to sell off the brands before they collapse completely and lose value.
That is why the success of any vehicle at Chrysler actually makes dissolution more likely – not less – and moves the breakup date closer. The better the Chrysler lineup performs, the more cash Fiat can pocket by divesting it. Further, Fiat knows the future looks gloomy and is not predictable (strong competitors, global economy faltering, national governments broke, Democrats may lose power), so Fiat will grab the bird in hand by breaking up Chrysler sooner rather than later.
The little companies may just scratch along like cockroaches after the atomic apocalypse.
I think GM will go bankrupt again by 2014. What survives of that, I don’t know. The worst thing they could do right now is an IPO, so I think that will be either delayed or cancelled. They can’t risk Death By Stock Market a second time, but their incentive giveaway program is going to catch up with them in the end.
The only global car companies which seem certain to go extinct are Mitsubishi and Saab. Both may, however, be bought as logos by Chinese makers much as has happened in parts of the small appliance, tools and yard equipment businesses.
Suzuki going completely into the VAG fold seems highly likely.
Saab fizzling out seems a done deal.
Other than that, meh. The global mumber of auto makers has expanded over the past fourty years, not contracted as has been so often predicted. You could argue that with more and more of the development expertise actually being in the hands of tier-1 suppliers, it is in many ways easier to get into, or stay in, the auto business today than it was thirty years ago. Know-how is more widely dispersed than ever before. Advanced computer design tools are now relatively cheap and easy to get. Governments everywhere are eager to hand out financial incentives to land jobs.
The fundamental rationale for a big thinning of the herd really doesn’t stand up to close inspection.
I think it’s a bit early to start writing Saab’s eulogy. Spyker just purchased the brand, and the new 9-5 looks like a great car, so it’s worth giving Saab a few years and a new product rollout before calling time of death.
Mitsubishi is another matter, and they do seem to be slowly slinking away from viability, at least in the US market. Mitsu’s parent company is one of those Japenese mega-conglomerates, and the time may come where it’s just more profitable to cut and run than to keep trying to make a go. It’s a shame, as Mitsu has made some great cars. They lost me when they killed off the Montero for the US market, but they do still have a cult following with the Evo, and if they can turn around like Subaru has done, they might have a chance.
I fail to see any problems ahead for BMW and Daimler. BMW is getting model-heavy, but they have the best car in the luxury markets largest segment along with two profitable British brands at either end of the market. Daimler has a comprehensive car line that is universally popular and profitable (R-class excepted)
and a strong commercial truck business. Granted, Maybach missed the mark stylistically and suffered from product neglect, while smart is a complete disaster, but if Chrysler couldn’t destroy Daimler, neither niche marque has the capability to cripple the parent brand.
I have a soft spot for Saab, but they will need to make HUGE strides in the next few years to survive. The new 9-5 is a step in the right direction, but their powertrains are still behind the times and their dealer network has been decimated in the wake of GM bankruptcy. The upcoming 9-3 will need to be a make-or-break volume mover to keep the company viable.
Lincoln will need mucho development dollars and a completely new design language to become competitive; nominally upgraded Fords with terrible styling simply won’t cut it. At this point Buick has more cachet than Ford’s “luxury” marque.
Hard to believe that Mitsubishi went from being a viable Nissan/Mazda alternative to Suzuki-level disaster in a mere half-decade. Their lineup is either hopelessly outdated (Galant & Endeavor)or mediocre-from-launch and hugely unpopular (Eclipse, Lancer, & Outlander. None of their offerings are widely considered by shoppers in their respective segments.
I wonder if what ford has done with lincoln lately is intentional to lower the bar to a point that when they focus and use the development $ and platforms that were going to PAG that lincoln will blow it out of the water. Anyone that thinks ford is toast (based on debt load), look at what they’ve done in the last three Q’s, I know that Ed would imply that they are paying off debt with debt, but that’s not the case (debt wouldn’t go down if they were), they are paying off with free cash flow (cash is also stable) and making profits double what GM can muster despite GM being essentially debt free and much larger in China (the future?).
rnc, good point, but what you seem to miss is, ford just sold volvo,
they surely put the $1.3-1.8 billions in the books. and ford has increased its selling price, but that cant go on forever. and ford had the aura of being the only unbailed-out mfg. wont last too.
fords mistake will be to continue to spend all the easy money they got on lincoln (make it more global) but all in vein. they should save for the coming double dip recession. it might happen that yearly sales in the US fall to 8 million. who really knows. but better have it for that, than waste it on tarted up fords lincolns.
And they’ve paid off $7 billion in debt (while cash level has remained stable), the money from volvo is what is paying for the shut down of mercury. The bias against ford (a wannabe european manufacturer? considering that they’ve been there much longer than VW) kind of makes your comments meaningless. I’m no fan of GM, but it’s easy to see with the liabilities removed and cash given that they aren’t going to die either. The J3 all of a sudden find themselves dealing with what the D3 did for decades…a cost disadvantage (where any cost reductions made can be matched and the cost disadvantage remains), we’ve seen how toyota has addressed this issue, Honda is who needs to worry, they are in reality much smaller than toyota and nissan and they’ve lost thier way badly, GM lived off reputation and loyalty for two decades (80′-90’s), I don’t think honda is going to get that much time.
rnc, see now you just p*ssing me off.
mercury closure was said to cost $300+mil til now, and will
cost the same additional amount till year end. thats $600-700mil
in total. compare that to the $1.8billion booked for the volvo sale.
so you’re wrong there.
and you are the one bias. acura sold 50% more cars than lincoln:
https://www.thetruthaboutcars.com/chart-of-the-day-luxury-and-premium-brand-sales-july-and-year-to-date/
so tell me again, who is going to have a problem.
btw, ford isnt appealing at all with their product, the 30%+ fleet sales confirm that. yes, they might get the easy dough now, but what when that dries up? huh? lets do another round of printing
TARP-2 money?
and if you really read my comments, you’ll see i addressed that “wanna-be”. i dont hate ford. but you hate the japs.
Don’t hate the japs, have owned several of thier products, but the reality is they are selling crap because they could get away with it and it is catching up with them. So I will tell you again, Honda is the one who is going to have problems, go take a good look at the cross tour thingy (along with 5 speed transmissions and mild hybrids and good old hard plastic), and then go and look at the japanese % of fleet sales in thier home country, of course domestic makers are going to dominate fleet sales (but the important part to remember is that ford’s fleet sales are heavily tilted towards business, places that buy cars based on cost (-) resale (=) true cost vs. rental which is what is the cheapest car we can get (seems to be alot of toyota’s at the airport these days). So you be pissed.
considering that jap cars are predominant
in sales back in japan, of course they will
be heavy in fleet sales back home –
COZ NOTHING ELSE IS BEING SOLD ANYWAYS! DOOH!
european: and ford had the aura of being the only unbailed-out mfg. wont last too.
If Ford were going to coast on that reputation for years, I would agree that this would be a problem, but considering that Ford is being very aggressive with new model introductions, this obviously isn’t happening.
european: btw, ford isnt appealing at all with their product, the 30%+ fleet sales confirm that. yes, they might get the easy dough now, but what when that dries up? huh?
You don’t understand important distinctions between fleet sales in this country.
Bad fleet sales are those to rental car companies.
Good fleet sales are those to corporations and units of government (local, state and federal).
Sales to rental car companies have historically been bad for two reasons.
One, because manufacturers typically dumped the cheapest, most spartan version on the rental car companies. Customers thus got the worst possible impression of a company’s vehicles.
Two, because rental car companies would sell their cars on the market within 18-24 months, thus flooding the used car market with a particular type of car. Resale values for RETAIL buyers of this particular model thus got hammered.
The second factor is not a problem with sales to corporations and governments. They generally keep a vehicle for many years and at least 100,000 miles. Buyers of that model are thus not faced with lower resale values because a bunch of used fleet models are coming on to the market after only 18-24 months.
Ford typically dominates the second type of fleet sales. The Crown Victoria has been the dominant police car and taxi for over a decade, and limousine companies have long loved the Lincoln Town Car (far more than comparable Cadillacs). Utilities and building companies have long used F-Series trucks and Econoline vans. These sales are profitable, and companies keep the vehicles until they are worn out, thus preventing damaged resale values.
If you are going to criticize Ford for making these sales, then, by the same logic, you should be criticizing Daimler Benz, because many Mercedes models sold in Europe end up as taxi cabs and police cars.
Ford, in fact, relies LESS on sales to rental car companies than either GM or Chrysler. And it is also aggressively making sure that the vehicles it does sell to rental car companies are better equipped, to make sure that customers do not get a bad impression of a particular Ford if they rent one.
@geeber
thank you for trying in good manner to explain your view.
i really appreciate it. but i must disagree.
1) i hate what MB is doing in europe selling E-classes as taxi cars.
but i understand why they do it. i’ve asked a couple of taxi drivers why they go for MB, they all replied the same:
most confy drive, and considering the amount they spent behind the wheel, anything else would damage their backs/spines. so they say.
the used-up MB taxi drives are then sold in eastern europe where they achieve very good residuals.
2) i understand very well the difference between daily rental and fleet sales (gov & others). but as you might know, the US (and state/municipal) goverments are all out of money. the rise in joblessness that happened during july2010 (9,6% -> 9,7%) were all goverment jobs. during the last and current year, goverments (US, state, municipal) were renewing their fleets (another type of bailout, but lets not go into that). i think these kinds of fleet renewal sales will end with this year (not completely end, but there will be alot fewer of them), and next year the mfgs will have to do mostly with private sales. thats what is going to hurt ford most.
This is all very easy to figure out. When the Bamster and Democrats get the boot, the life line that has kept GM alive and Fiatsler together will crumble. There will be no more bailouts, there will be investigations, and that combined with a continually weak economy will provide a perfect storm of destruction. I am waiting to see Cadillacs at a Ford Dealership soon. As for Ford’s product, apparently if they are going Euro, good them. Aside from SUVs and trucks, when was the last time people in this country went en-mass towards, “american,” cars. They are building what the market demands and so far they are being rewarded for it.
I know I’m in the minority but I have a feeling that Saab is far from done and that they are actually on the verge of a mini-comeback.
I think there is a market for front wheel drive semi-luxury in the US.
And to the larger issue- I don’t see any imminent automaker deaths anytime soon. In the last decade or so we’ve lost Plymouth, Oldsmobile, Isuzu, Pontiac, Saturn, Hummer, Mercury– I think the market has already trimmed the fat.
They all will die.
Here in Phoenix we have a new company called Local Motors (I think that is their name). You walk in tell them what you want and they build it.
I recently had the opportunity and fun of visiting local machine shops and met people who were Michelangelos with water cutters and welders. Shipping cars across oceans or across countries is expensive.
Just like computers put printing, photography, and movie making into the hands of almost anyone the building of cars will soon be available to anyone with CAD and a machine shop. Electric vehicles have already removed 1/3rd of the parts and soon Sony and Panasonic will sell us plug in dash boards.
Good luck with that.
Just try to certify, sell, license or insure it…
Thanks for the mention of Local Motors, folkdancer – we’re happy to be in Phoenix! Hope you come by for the next event: http://www.pingg.com/rsvp/d7q2mj85km8yspki7
We are here to build the cars this area craves. The Rally Fighter is the first community-chosen vehicle. Customers join us in the Micro-Factory to build their Rally Fighter – takes two long weekends.
The distinction I wish to make is that we can not build one of a kind vehicles that are made to order – that is not the intention. What we can do is include the community in the creation, development and build process. We can build cool cars in limited quantity so they remain special. We’ll only build 2,000 Rally Fighters – and all of the chassis and body data is open source. This means any amount of modding is possible.
Robert,
The beta Rally Fighter was quite easily licensed and insured. Since we are using a CARB certified engine, 50-state legal components, and a super safe race car style chassis it was a streamlined process. Rally Fighters are registered under the custom built umbrella.
In regard to Cammy’s post, I don’t know who will be next to bite the dust. I hope these company’s find a way to independently increase their agility in response to a rapidly changing market.
Ariel
aferreira@local-motors.com
Local Motors
Long term, all of them. Peak oil is unavoidable now.
Short-term? Chrysler if there is any sudden jump in oil prices. If say, Israel attacks Iran this week.