Are the Detroit big 3 finished?

[butchcassidy1]

Seems almost everyday you hear of more not so good news coming out of Detroit.

Its' like watching a train wreck in slow motion. After many years, they don't even have a Prius fighter in their lineup.

Maybe its' time to let them go under - no gov't (read taxpayer) bailpouts.

The question is when (if, at all) will the domestic car makers finally get it???

butchcassidy1

[UTAH]

Down - but not out.

Bill

[blackout]

Their domestic production will suffer for the next few years, but they are strong in Europe and other parts of the world (Ford and GM anyway). They have a lot of small, fuel efficient cars that are popular and that they intend to bring to the US asap.

[reba]

back in the 1970's.

American quality was junk along with big iron and smog laws.

I really believe 90% of the stuff comming out of Detroit is as good as any other. I'll put my Ford Ranger up against any Toyota.

Detroit will come back with maybe one less player and a lot fewer models as we know them; but new models will be added.

Last year I heard a top Ford executive state that Ford had some amasing stuff about ready for production, so they aren't sleeping at the wheel, the sudden increase in oil was an early supprise.

[SmokeyWren]

Originally Posted by butchcassidy1

After many years, they don't even have a Prius fighter in their lineup.

Not exactly true. Both Ford and GM have hybreds. BIL bought a new Ford Escape Hybred a few months ago - he had to get on a list and wait several weeks, then had to pay sticker price for it. There's still a waiting list, so Ford is building them as fast as they can. But that's not the answer.

Ford dealers are sold out of Focus cars and now there is a waiting list for those too. And the slightly-larger Fusion is doing good, too. The problem is in larger cars and all trucks - the Escape Hybred being the exception.

But of course Ford and GM have lots of gas hogs, and if you want one of those you can get a heck of a deal right now. Chrysler has been a lost cause since I was a kid in the '50s. They built a few good models over the years, but their bread-and-butter cars have been losers for decades. And similar to GM, Chrysler does a good job of killing a model just after they get it "right" so that sales should take off. Dodge Magnum (station wagon) is the latest example.

[HighwayPrisoner]

I would not get the shovels ready to bury the "Big 3". They surely have made some mistakes in the past, but back in the 50's to early 70's they built some fantastic cars. The big 3 have been the financial backbone of the U.S. economy. Today, if the big 3 folded, the U.S. economy would be in deep trouble. Think about how many suppliers etc would fold also, can you say depression. GM, and Ford are working hard to get back in the game. I think, We need to support the "Home Team". Toyota, Nissan, and Honda have invested here, which is good, and have created some intense competition. The big 3 have their work cut out for them, and hopefully can use the famous "Yankee Ingenuity" to recover their magic of the past.

[DonWarkentin]

Remember that big pickup trucks and SUVs have brought billions and billions of dollars of profits to the big 3; so the losses that they are taking now are still much smaller than the profits that they have already taken from big pickup trucks and SUVs.

The big 3 have totally different goals than the Japanese companies. The goals of the Japanese companies are to make as much profits as possible. The goals of the big 3 are to break even on average. They could lose billions in some years, and that is fine, as long as they break even on average over the long term.

Why this difference? The Japanese companies are owned by the stockholders, and stock holders want the value of their stocks to increase. Greater profits is what makes stock values go up.

The big 3 are also owned by stockholders, but in reality, the stockholders only own a tiny fraction of the big 3. Who owns the vast majority share of the big 3? It's the retirees and current employees of the big 3. The amount of market capitalization, ie, the total value of all outstanding shares of the big 3 is only a tiny fraction of the amount of money that the big 3 owe to retirees and future retirees. Therefore, the retirees actually own the vast majority of the big 3. If you see that the big 3 lost a lot of money, but they still paid what they owed to the retirees, then the true owners of the company, the retirees, are happy. As long as the big 3 break even over the long term, they will be able to pay the retirees their pensions.

So you see, the objectives of the big 3 are very different from the objectives of the Japanese companies, and both are very successful at achieving their objectives.

[klhansen]

Originally Posted by DonWarkentin

The big 3 have totally different goals than the Japanese companies. The goals of the Japanese companies are to make as much profits as possible. The goals of the big 3 are to break even on average. They could lose billions in some years, and that is fine, as long as they break even on average over the long term.

I have to disagree.
I don't think that the big 3's GOAL is to break even in the long run, but that's just been the history. The owners (stockholders, retirees, and everyone else) would be much happier if they turned a profit in the long run. Uncle Sam (along with the rest of us as taxpayers) would be happier if that happened too, as profit = taxes into the coffers of the US Treasury, offsetting what the rest of us have to pay.
The big 3 may have been asleep at the switch, but their problem was just in predicting what the US consumer would want to buy in light of higher oil prices. Now that the consumer is demanding more energy-efficient cars, they'll ramp up production of what's in demand, bringing out new models as quickly as possible.
IMO, The only thing that would have a chance at killing the Big 3 is if EVERYONE started riding the bus whereever they go. Like that's going to happen soon. Even then the Big 3 would just turn into bus companies, that would then be know as the Medium Sized 3.

[BoulderGT3]

IMO, the Big 3 are slow moving and inbred. They laughed at Honda and Toyota. Who's laughing now?

The decline has been steady for 30 years or so. Inability to see what the market will want. Wretched brand management by GM. By the time they do come out with something it's late and me too at best. Witness Saturn. Labor structures are a cost burden and too much capacity. The dealer network it old and crotchety. The list goes on and on. You can pick up some bright spots; I would hope so with the thousand model variations they have.

There is a very good reason that GM is trading at 50 year lows. They have been unable to deliver in a competitive market. Take a look at Honda and Toyota stock prices by comparison in the same market.

They will continue to founder and lose share. History and the long term view of the financial markets is a pretty good indicator. It's death by a thousand cuts.

I hate to be so negative but if you look at it pragmatically, this is not a tactical situation and the downward spiral has been going on a long time.

[checkthisout]

Originally Posted by BoulderGT3

IMO, the Big 3 are slow moving and inbred. They laughed at Honda and Toyota. Who's laughing now?

The decline has been steady for 30 years or so. Inability to see what the market will want. Wretched brand management by GM. By the time they do come out with something it's late and me too at best. Witness Saturn. Labor structures are a cost burden and too much capacity. The dealer network it old and crotchety. The list goes on and on. You can pick up some bright spots; I would hope so with the thousand model variations they have.

There is a very good reason that GM is trading at 50 year lows. They have been unable to deliver in a competitive market. Take a look at Honda and Toyota stock prices by comparison in the same market.

They will continue to founder and lose share. History and the long term view of the financial markets is a pretty good indicator. It's death by a thousand cuts.

I hate to be so negative but if you look at it pragmatically, this is not a tactical situation and the downward spiral has been going on a long time.

The Japanese had the upper hand because of exchange rates.

Japanese cars have become more and more decontented over the years while the quality of American cars has gone up.

The big 3 will not fail. If the government can provide endless lines of credit to prop up the speculative values of a bunch of junk debt, they can certainly provide Ford, GM and Chrysler with the line of credit they need to stay afloat.

America needs those companies or America isn't America anymore.

[BoulderGT3]

Originally Posted by checkthisout

The Japanese had the upper hand because of exchange rates.

Japanese cars have become more and more decontented over the years while the quality of American cars has gone up.

The big 3 will not fail. If the government can provide endless lines of credit to prop up the speculative values of a bunch of junk debt, they can certainly provide Ford, GM and Chrysler with the line of credit they need to stay afloat.

America needs those companies or America isn't America anymore.

It's much more complicated than exchange rates or unions but if you have to look to a single issue it's undesirable product. Exchange rates factored in the big 3 still have price leadership in every class so your rate argument does not hold water. A Monte Carlo is cheaper than a Camry or Accord. The issue is that the Monte Carlo is less desirable than the other two. The sales numbers are the proof point.

As for supports, I say let them sink or swim. It's not the taxpayer obligation to support old line businesses that are underperforming. Subsidies for new technology yes.

[checkthisout]

Originally Posted by BoulderGT3

It's much more complicated than exchange rates or unions but if you have to look to a single issue it's undesirable product. Exchange rates factored in the big 3 still have price leadership in every class so your rate argument does not hold water. A Monte Carlo is cheaper than a Camry or Accord. The issue is that the Monte Carlo is less desirable than the other two. The sales numbers are the proof point.

As for supports, I say let them sink or swim. It's not the taxpayer obligation to support old line businesses that are underperforming. Subsidies for new technology yes.

In the 70's and 80's it was not much more complex than exchange rates. The Japanese could offer more and better for less. Now they can't

It's not taxpayer obligation to support fictitious values of debt that Hedge Funds are holding for Millionaires and Billionaires.

The U.S. Auto Industry isn't something that you just let collapse. It's the only sovereign machine-tool sector we have left, not to mention the 100's of thousands of jobs that go with it.

Sorry, it's just too valuable to let tank.

Besides, it creates jobs. It's not a "bailout", it's an investment. That is the difference between subsidizing the financial sector VS the actual sectors that matter.

[BoulderGT3]

Originally Posted by checkthisout

In the 70's and 80's it was not much more complex than exchange rates. The Japanese could offer more and better for less. Now they can't

It's not taxpayer obligation to support fictitious values of debt that Hedge Funds are holding for Millionaires and Billionaires.

The U.S. Auto Industry isn't something that you just let collapse. It's the only sovereign machine-tool sector we have left, not to mention the 100's of thousands of jobs that go with it.

Sorry, it's just too valuable to let tank.

Besides, it creates jobs. It's not a "bailout", it's an investment. That is the difference between subsidizing the financial sector VS the actual sectors that matter.

So how is your exchange rate comment relevent to the here and now? That's old Detroit whining from decades ago.

As far as mortgage,CDO and other debt bailouts. I'm opposed to those as well. The lenders, those that secured them, those that bought them and the nitwits that signed up for mortgages they couldn't afford should be left to the free market. To do otherwise will prolong the end result.

The auto industry and supporting businesses should be left to survive on their own They will survive but it will be in a differant form than now. Not my desire to pay for their extra capacity. As far as an investment you've got to kidding. Look at the people that make investments and the stock prices will tell you it's a bad one. An investment assumes a favorable return at some point. I think you are talking about a grant.

[checkthisout]

Originally Posted by BoulderGT3

So how is your exchange rate comment relevent to the here and now? That's old Detroit whining from decades ago.

It's not relevant today which is why the quality gap has closed. The "trouble" is winning buyers back that have become loyal to other products. They were all headed down that path until high prices and a tanking economy stifled their efforts.

Discuss

Originally Posted by BoulderGT3

As far as mortgage,CDO and other debt bailouts. I'm opposed to those as well. The lenders, those that secured them, those that bought them and the nitwits that signed up for mortgages they couldn't afford should be left to the free market. To do otherwise will prolong the end result..

There is more to it than that. If it were as simple as letting them eat their losses then ok but it's not that simple. Letting those worthless values tank would take down the entire banking system because it's not isolated to mortgages and it wasn't their money the investors are/were gambling with.

Originally Posted by BoulderGT3

The auto industry and supporting businesses should be left to survive on their own They will survive but it will be in a differant form than now. Not my desire to pay for their extra capacity. As far as an investment you've got to kidding. Look at the people that make investments and the stock prices will tell you it's a bad one. An investment assumes a favorable return at some point. I think you are talking about a grant.

There is a favorable return for America in the form of jobs, the ability to still build things here, the massive tax base that goes with it, along with places of employment for skilled blue and white-collar workers alike who do the things that America needs to survive in any relevant capacity.

So yes, there might not be any meaningful monetary return for any "investor" but there is for the country and there would actually be a measureable monetary return for the fed if they set the interest rate low enough.

This in the same spirit that say Grand Coulee Dam did not generate any meaningful monetary return for years upon years after it was built. Should it not have been built just because some investor could have made more money speculating in Soy futures?

[BoulderGT3]

Originally Posted by checkthisout

It's not relevant today which is why the quality gap has closed. The "trouble" is winning buyers back that have become loyal to other products. They were all headed down that path until high prices and a tanking economy stifled their efforts.

Discuss



There is more to it than that. If it were as simple as letting them eat their losses then ok but it's not that simple. Letting those worthless values tank would take down the entire banking system because it's not isolated to mortgages and it wasn't their money the investors are/were gambling with.




There is a favorable return for America in the form of jobs, the ability to still build things here, the massive tax base that goes with it, along with places of employment for skilled blue and white-collar workers alike who do the things that America needs to survive in any relevant capacity.

So yes, there might not be any meaningful monetary return for any "investor" but there is for the country and there would actually be a measureable monetary return for the fed if they set the interest rate low enough.

This in the same spirit that say Grand Coulee Dam did not generate any meaningful monetary return for years upon years after it was built. Should it not have been built just because some investor could have made more money speculating in Soy futures?

I can't follow your line of thinking. In an earlier post the exchange rate is relevant and now it isn't. You've said before that bailing the banks out is wrong but now you offer that we can't let them collapse.

The investment logic you raised is flawed as well IMO. Grand Coulee Dam, WPA and projects of that ilk are public works project not private enterprise. Big difference. If we should "invest" taxpayer money to build things I think it should be something better than cars from an industry with a poor track record. Public funding of the car companies is throwing good money after bad and relieves them of the pressure to do things better. They have a demonstrated history of smoking through massive amounts of their capital. I'd rather it not be taxpayer funded.

Let's fund the airlines too. How about the telcos that are losing land lines? I could go on.