More Auto News.. and its not good
So.. yeah.. been pretty heavy on the auto news recently, but it is something that I am really into, and we are in a market changing time.
The UAW has claimed in testimony to Congress that GM could fail this month if there are not loans approved. This is not actually that bold of a claim, as if the US govt. does not give them a loan, no one else will take on the counterparty risk, and GM is screwed.
On the other side, Ford, which has claimed it can survive without the govt. (good for you Ford), is now putting Volvo up for sale. The last of Fords "Premier Auto Group," this means that Ford will be left with Ford, Lincoln, and Mercury as brands, though the last of those hardly deserves the title, as it has essentially been a trim level for the last 20 years. Ford is hoping to get $6 billion for the generally unprofitable Scandinavian firm. One thing does have to be said though, unlike GM which has essentially killed Saab since taking it over, Ford has done good work with Volvo, pushing it into the modern era by hiring more than children playing with blocks into the design department, and supplanting agricultural equipment engine designers with people who have heard of power to weight ratio. I quite like Volvo's now, and though they are overpriced (largely blame the exchange rate for that one), they are nice cars.
So Ford will hopefully make it through, but it would be like GM selling off Saab, Wuling, Holden, and Daewoo, or something like that. The reality is that Ford is now looking to model itself after the wildly successful Toyota, by focusing its energy on a general brand, and luxury brand, and not taking the shotgun approach so long favored by the US automakers. If Toyota and Honda have proved anything is it that you can base a car company on one or two models (the Corrolla and Camry, Civic and Accord). Ford I think will go down that route, with the next gen taurus and fusion/mondeo, along with the supporting case of focus, flex, and fiesta (yes, the f thing was intentional, but they gave up on it after realizing that the fivehundred was a way crappier name than the loved but long abused name "taurus.")
The basic problem with the US automakers is that they did not make any money selling cars. They made it on trucks, SUV's, leases, financing, and all that extra crap. Long ago the actual selling of the cars stopped being profitable. Which means that when leases and loans go to crap, SUV and truck sales tank, and no one wants to buy your debt, you are in deep shit. And the thing is, there is little hope for them.
Today, all three big three CEO's drove to Capital Hill instead of flying, and they all drove in hybrids (the most impressive being Wagoneer's Volt test mule). The problem with that is, no one will car in two years when they all release their next gen hybrids. Oil is falling faster than you can say "hedge funds are screwed," and by the time the Volt is released, it may have picked back up some, but I am betting it will stay around $60 a barrel for a while.
And that means, why the hell would you pay $10,000 extra for a car which it will take you 10years to recoup your investment. It just does not make sense. Crappy economy + low oil price means more used cars please. Because of the fall off in loans to low-income and poor-credit buyers, the cheap new car segment has tanked. New car purchases are usually because of desire, not absolute necessity, and so they are one of the easier things to hold back on. When the Volt comes out, it is going to recognized as an economic disaster for GM. Wrong car at the wrong time.
So what can they do? Build their normal cars better, and compete on value. Cut back the number of models, cut back development costs on niche cars, and focus on getting the formula right on the ones that really count. We dont need more Chrysler crossfires, 6 versions of GM's Lambda platform, or the Taurus X (Freestyle) as well as the Flex. We can go without Pontiac G3's and G5's (the Chevy Aveo and Cobalt rebadged), we dont want the old Focus and pretty good Fusion when there is a new Focus and amazing Mondeo across the pond. The Jeep Commander, Dodge Nitro, Chrysler Crossfire and Avenger, GM Impala, and the entire brands Mercury, Hummer (sadly), and GMC should be taken behind the shed and shot, along with all but one of each set of GM triplet, quaduplets, quintuplets, sextuplets, and for a while they even had a septuplet off the Trailblazer platform. Thats just ridiculous.
I hope the US automakers make it, because they have started to produce good cars again, after many many years of turning out unremarkable crap. The new muscle cars, the Chrysler 300, the Chevy Malibu, Ford Mondeo, these are good cars. Imagine what the big three could do if they each designed one mid-size sedan, not five, if they paid workers, not the unemployeed and retired, and if they made money selling cars, not financing them.
The UAW has claimed in testimony to Congress that GM could fail this month if there are not loans approved. This is not actually that bold of a claim, as if the US govt. does not give them a loan, no one else will take on the counterparty risk, and GM is screwed.
On the other side, Ford, which has claimed it can survive without the govt. (good for you Ford), is now putting Volvo up for sale. The last of Fords "Premier Auto Group," this means that Ford will be left with Ford, Lincoln, and Mercury as brands, though the last of those hardly deserves the title, as it has essentially been a trim level for the last 20 years. Ford is hoping to get $6 billion for the generally unprofitable Scandinavian firm. One thing does have to be said though, unlike GM which has essentially killed Saab since taking it over, Ford has done good work with Volvo, pushing it into the modern era by hiring more than children playing with blocks into the design department, and supplanting agricultural equipment engine designers with people who have heard of power to weight ratio. I quite like Volvo's now, and though they are overpriced (largely blame the exchange rate for that one), they are nice cars.
So Ford will hopefully make it through, but it would be like GM selling off Saab, Wuling, Holden, and Daewoo, or something like that. The reality is that Ford is now looking to model itself after the wildly successful Toyota, by focusing its energy on a general brand, and luxury brand, and not taking the shotgun approach so long favored by the US automakers. If Toyota and Honda have proved anything is it that you can base a car company on one or two models (the Corrolla and Camry, Civic and Accord). Ford I think will go down that route, with the next gen taurus and fusion/mondeo, along with the supporting case of focus, flex, and fiesta (yes, the f thing was intentional, but they gave up on it after realizing that the fivehundred was a way crappier name than the loved but long abused name "taurus.")
The basic problem with the US automakers is that they did not make any money selling cars. They made it on trucks, SUV's, leases, financing, and all that extra crap. Long ago the actual selling of the cars stopped being profitable. Which means that when leases and loans go to crap, SUV and truck sales tank, and no one wants to buy your debt, you are in deep shit. And the thing is, there is little hope for them.
Today, all three big three CEO's drove to Capital Hill instead of flying, and they all drove in hybrids (the most impressive being Wagoneer's Volt test mule). The problem with that is, no one will car in two years when they all release their next gen hybrids. Oil is falling faster than you can say "hedge funds are screwed," and by the time the Volt is released, it may have picked back up some, but I am betting it will stay around $60 a barrel for a while.
And that means, why the hell would you pay $10,000 extra for a car which it will take you 10years to recoup your investment. It just does not make sense. Crappy economy + low oil price means more used cars please. Because of the fall off in loans to low-income and poor-credit buyers, the cheap new car segment has tanked. New car purchases are usually because of desire, not absolute necessity, and so they are one of the easier things to hold back on. When the Volt comes out, it is going to recognized as an economic disaster for GM. Wrong car at the wrong time.
So what can they do? Build their normal cars better, and compete on value. Cut back the number of models, cut back development costs on niche cars, and focus on getting the formula right on the ones that really count. We dont need more Chrysler crossfires, 6 versions of GM's Lambda platform, or the Taurus X (Freestyle) as well as the Flex. We can go without Pontiac G3's and G5's (the Chevy Aveo and Cobalt rebadged), we dont want the old Focus and pretty good Fusion when there is a new Focus and amazing Mondeo across the pond. The Jeep Commander, Dodge Nitro, Chrysler Crossfire and Avenger, GM Impala, and the entire brands Mercury, Hummer (sadly), and GMC should be taken behind the shed and shot, along with all but one of each set of GM triplet, quaduplets, quintuplets, sextuplets, and for a while they even had a septuplet off the Trailblazer platform. Thats just ridiculous.
I hope the US automakers make it, because they have started to produce good cars again, after many many years of turning out unremarkable crap. The new muscle cars, the Chrysler 300, the Chevy Malibu, Ford Mondeo, these are good cars. Imagine what the big three could do if they each designed one mid-size sedan, not five, if they paid workers, not the unemployeed and retired, and if they made money selling cars, not financing them.
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