The Big 3 and The Recession

[sjwaste]

I thought this might be a good conversation here. We talk about cars a lot, but the business side of it really interests me too.

With the state of the economy and varying financial health of Ford, GM, and Chrysler, what are your opinions on who makes it out alive and best positioned to take back some market share when consumers have more to spend?

My bet is on Ford. I think they have the right leadership in place, even if Mulally isn't a "car guy". They exercised a large line of credit before it evaporated, and it's kept them from having to take federal funds -- Ford has an untapped "bailout" credit line, which they've stated they do not plan to use.

The product line has improved. I think it was critical that Ford get to the 2nd iteration of the Fusion, because the first was well-received, but had some limitations. It looks like they're addressing those with a status model (hybrid), keeping the manual (see the other thread), and various packages and engines to span various price points. They've also worked out, it seems, the best concession packages with UAW.

GM and Chrysler will make it out, I think, but it's now been demonstrated that they will be subject to government management. What could possibly go wrong with that?

For what it's worth, full disclosure: I'm definitely betting on Ford. I bought at 1.76 and tripled my position at 2.05.

What are everyone else's thoughts?

 

[boomerang]

Well, I've expressed my thoughts here before but here goes.

The economy in general is going to have to do an about face real quick for all three domestic automakers to survive. They're in the business of selling cars. If cars aren't selling, no amount of money, wishing or hoping is going to keep them afloat. There are too many bad situations coming down the pike for a quick turnaround in our economy. We've only seen a portion of the bad juju that's coming.

Chrysler - The line has been drawn in the sand. Merge with Fiat or down you go. IMO a Fiat merge is not going to save Chrysler. Even if they pulled it off before the end of the month, the car market has fallen too far. The economy is not going to magically turn around in that time frame. Fiat has a reputation for building shit cars and they don't have cars that can be sold in this market right now due to regulations, emissions etc. They're a goner.

GM - The only people that don't know the company is dead is the feds. They've got them positioned to be their bitch and do their bidding. Reality is going to set in soon if it hasn't already. GM cannot start turning out the green, lean cars the feds are mandating they build fast enough to pull them out of the dire straits that they're in. Combine that with the fact that the type of cars the feds want them to build are going to cost many thousands more than the cars they've been producing. People are losing their jobs, their homes, their pay and benefits are being cut, the lenders have tightened lending restrictions, etc., etc. Who can afford to pay 3K to 4K more for a car than they used to? It's batshit crazy, but our government (who knows nothing about the car business) thinks it's a wonderful plan. They'll file for bankruptcy and never pull out.

Ford - Will be the only survivor - for a while. They're going to be forced to get bailout money sometime this summer and the feds will have a new bitch. Read my thoughts on GM above to get an idea of what they'll be up against with fed money.

Everyone forgets about the suppliers. I've got a post in a thread here in the Garage (IIRC) where I tell of the dire straights GM is in regarding suppliers. They've got cars they can't build now because they can't source the parts. Too many suppliers have shut their doors, gone bankrupt, etc. The suppliers that could do the work don't want to because they figure GM is going under and those that do want to do it can't because they can't get financing. GM absolutely cannot be alone in regards to supplier problems. Sure, supplier bailout funds are coming next week. How will they be doled out?

Brace for impact.

 

[Greenman]

GM and Chrysler are toast, the feds are dictating what they can and can't do. Think Yugo with a 50k price tag.

 

[maddogchen]

Originally posted by: Greenman
GM and Chrysler are toast, the feds are dictating what they can and can't do. Think Yugo with a 50k price tag.

a more environmentally Green Yugo.

 

[sandorski]

Ford>>>>>>>>>>>GM>>Chrysler>Edsel

 

[Bignate603]

Ford will survive and GM will to some extent. Even if GM goes into bankruptcy I think there will still be enough pieces left to make a company out of. Chrysler as we know it will probably die.

 

[Pliablemoose]

All I can say is buy stock in salvage yards, there'll likely be a shitload of orphaned product lines people are going to be trying to keep on the road, with the suppliers drying up, used part prices will skyrocket.

 

[Greenman]

Originally posted by: Pliablemoose
All I can say is buy stock in salvage yards, there'll likely be a shitload of orphaned product lines people are going to be trying to keep on the road, with the suppliers drying up, used part prices will skyrocket.

I don't think so. Obama say's the feds are going to honor the warranty's on new GM's. So if you own one and it breaks down, all you'll have to do is go down to the local DMV, stand in the new car warranty repair line for an hour or so, fill out a warranty request form, pay the small service fee (this money will be used to fund research into alternative fuels), and schedule your warranty request inspection. After the inspection, the DMV will notify you by mail with the results of the inspection. If the problem is indeed covered by the warranty, you'll be given instructions on how to obtain a warranty work order, and how to schedule your repair appointment. Because this service will be very streamlined, we should expect most repairs to be completed within 90 day's of the original inspection. There will of course be an arbitration board to hear your case should the warranty repair be declined, all challenged warranty rulings WILL be heard by the board within 90 days of receiving the hearing request.

GM is fucked.

 

[MikeMike]

Ford is in the best situation... GM is in second.. Chrysler is dead to almost everyone who has been watching the industry...

GM has products coming out that are phenomenal... Chrysler... not so much.

 

[Pliablemoose]

Originally posted by: MIKEMIKE
Ford is in the best situation... GM is in second.. Chrysler is dead to almost everyone who has been watching the industry...

GM has products coming out that are phenomenal... Chrysler... not so much.

Chrysler needs to divide into 3 product lines, Jeeps, Pickups and mini vans.

 

[Bignate603]

Originally posted by: Pliablemoose

Originally posted by: MIKEMIKE
Ford is in the best situation... GM is in second.. Chrysler is dead to almost everyone who has been watching the industry...

GM has products coming out that are phenomenal... Chrysler... not so much.

Chrysler needs to divide into 3 product lines, Jeeps, Pickups and mini vans.

I'd say that cars and minivans should go in the same division, the challenger is at least interesting.

Honestly, I wouldn't be surprised if Jeep is sold/spun off and the rest of the company dies. Jeep is the only strong brand they have.

 

[desy]

Their trucks are good Nissan can pickup that division as they are having Dodge make their trucks in the future anyway
Minivans can go to VW as they are using them anyway
Somebody could pick up Jeep

Sadly, everything else will go

 

[Bignate603]

Originally posted by: desy
Their trucks are good Nissan can pickup that division as they are having Dodge make their trucks in the future anyway
Minivans can go to VW as they are using them anyway
Somebody could pick up Jeep

Sadly, everything else will go

I think Ford should take jeep. They made some of the WWII jeeps so it would be fitting if they ended up with the brand. Foreign ownership under Mercedes trashed the brand, it gave us the Liberty, Compass and Patriot. The new Grand Cherokee is decent and the Commander is passable but neither really is better off road than other things in their segment. The brand has been diluted. Enzo Ferrari called it the only true American sports car but the Mercedes ownership tried to capitalize on it and almost killed the brand.

 

[desy]

I think Honda should buy Jeep
They don't have any real 4X4s and their conservative culture would keep from screwing with it, aka Daimler

 

[JMapleton]

Originally posted by: Bignate603
I think Ford should take jeep. They made some of the WWII jeeps so it would be fitting if they ended up with the brand. Foreign ownership under Mercedes trashed the brand, it gave us the Liberty, Compass and Patriot. The new Grand Cherokee is decent and the Commander is passable but neither really is better off road than other things in their segment. The brand has been diluted. Enzo Ferrari called it the only true American sports car but the Mercedes ownership tried to capitalize on it and almost killed the brand.

Do you honestly believe people care about "off road" performance? Seriously?

 

[Bignate603]

Originally posted by: desy
I think Honda should buy Jeep
They don't have any real 4X4s and their conservative culture would keep from screwing with it, aka Daimler

I sure hope they don't buy jeep. Then I'd actually find myself agreeing with Louissss once and a while and I'm not sure I could stand that.

It would make a nice addition to Ford or GM but GM is not in the position to absorb it. Ford might be able to pull it off. Toyota has a decent idea how to do 4x4 vehicles so they could probably do ok with it.

 

[Bignate603]

Originally posted by: JMapleton

Originally posted by: Bignate603
I think Ford should take jeep. They made some of the WWII jeeps so it would be fitting if they ended up with the brand. Foreign ownership under Mercedes trashed the brand, it gave us the Liberty, Compass and Patriot. The new Grand Cherokee is decent and the Commander is passable but neither really is better off road than other things in their segment. The brand has been diluted. Enzo Ferrari called it the only true American sports car but the Mercedes ownership tried to capitalize on it and almost killed the brand.

Do you honestly believe people care about "off road" performance? Seriously?

I live in Arizona and its a big selling point here. The new wrangler was selling like crazy out here until the recession got bad. There's thousands of miles of forest roads and trails and a population that likes to go camping, hiking, hunting and fishing. My cherokee and '71 CJ-5 see a decent amount of trail use and its not uncommon to run into 20+ other vehicles out on some of the popular offroad trails.

 

[Elfear]

It's a shame that the recession had to hit when the horsepower wars were just getting into full-swing. I have this fear that in a few years everyone will be selling Smart4two clones and the retro muscle of today will be a distant memory.

 

[zerocool84]

Chrysler is done. No one will buy from them no matter what.

 

[LOUISSSSS]

pretty sure honda will NOT buy Jeep, or any other division of Chrysler. Honda SUV's consistently outsell Jeep's, The Pilot and CR-V are near or at the top of their division, whereas the wrangler and compass are mid-low pack. nobody really cares for real 4x4's. i'd guess less than 10% take any suv of theirs off road. (no, not camping at some camp resort; like real off-roading, some place that cars and minivans can't go...)

 

[Bignate603]

Originally posted by: LOUISSSSS
pretty sure honda will NOT buy Jeep, or any other division of Chrysler. Honda SUV's consistently outsell Jeep's, The Pilot and CR-V are near or at the top of their division, whereas the wrangler and compass are mid-low pack. nobody really cares for real 4x4's. i'd guess less than 10% take any suv of theirs off road. (no, not camping at some camp resort; like real off-roading, some place that cars and minivans can't go...)

Thank goodness they won't. They attempted to do a sort of offroad capable vehicle with the ridgeline but it really didn't go anywhere. They designed a vehicle that is kind of like offroad lite. If you want to go camping on a dirt road it will work but much more than that is beyond it.

Anyways, let's take a look at your own math. So you say 10% of suv owners take their vehicles offroad? Let's say there's 250 million in the US and 1/5 of them own SUVs. That means 5 million people want their vehicles to be offroad capable. If they replace their vehicles every 10 years that's 500,000 vehicles a year to fill that segment in the US alone. That's easily a large enough segment to support 3-4 competing models from different makers.

You may not take your car off pavement but there is a large segment that does. My grandfather needs one just to get around his property. My in laws need one to get up their driveway in the winter. I use one to get down the trails around Arizona. My buddy uses his to go hunting. There's a noticeable market segment for it. The resale value of the wrangler attests to that. Top car resale If there wasn't a market for it people wouldn't be willing to pay as much for a used vehicle.

 

[PricklyPete]

Ford and GM will survive. Both will eventually need bailout money and will be forced to create cars in mass that people actually don't want as long as gas prices are low. Chrysler will disappear. The tax payer will be paying for Chrysler warranty service for a while.

 

[MBrown]

Ford will survive. GM might be able to survive. Chrysler will die and should imo. Their cars are trash except for the viper and challenger. Ford and GM are producing quality cars.

I think GM needs to trim down big time. There is no need for all of its 8 brands. All they need is Chevy, Caddilac, and either buick or pontiac.

 

[Fenixgoon]

Originally posted by: MBrown
Ford will survive. GM might be able to survive. Chrysler will die and should imo. Their cars are trash except for the viper and challenger. Ford and GM are producing quality cars.

I think GM needs to trim down big time. There is no need for all of its 8 brands. All they need is Chevy, Caddilac, and either buick or pontiac.

agreed.

personally, i'd make buick china only since they sell so well over there and keep pontiac as the performance brand here - just import holdens, maybe? the only buick i'd keep around is the enclave, which is gorgeous. too bad it can't be made into a caddy - i think the SRX is lame.