Chrysler, GM and Ford may go bust!

[hawk20]

According to esteemed credit rating agency in the US, Standard and Poors, there is a real possibility that if car sales decline much further in the recession, then Chrysler, GM and Ford may all go bust. Each have made large losses even in the boom years.

Some sources say that GM and Chrysler are in talks about a possible merger.

 

[st13phil]

If they weren't such major employers with such massive healthcare and pensions commitments (in the USA, at least) then they would have gone to the wall long ago. However, the social consequences of such a failure means that the political fallout would be catastrophic - so don't expect it to happen. Did anyone say "State Rescue"?

 

[vincenz]

Its a shame Ford europe wasnt a stand alone entity, they make profit year on year, its just the US arm that pulls it down.
As Phil says above the healthcare and pensions (especially as stock markets have gone to the wall) are a massive drain, also they do pay their workers very well.

I read on Bloomberg in the week that GM have shut a factory in Ohio whch produces the Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X, no great loss, but certainly hard times to be in the automotive industry (like me)

Bloomberg article:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOL5sFTzAWR4

 

[Mr E]

Its a shame Ford europe wasnt a stand alone entity, they make profit year on year, its just the US arm that pulls it down.
As Phil says above the healthcare and pensions (especially as stock markets have gone to the wall) are a massive drain, also they do pay their workers very well.

I read on Bloomberg in the week that GM have shut a factory in Ohio whch produces the Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X, no great loss, but certainly hard times to be in the automotive industry (like me)

Bloomberg article:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOL5sFTzAWR4

No they don't - FoE have very up-and-down performance. When I was consulting with them they went from $400m losses to $200m profits - completely up and down.If it wasn't for Ford Credit the company would have gone years ago. It's the bits like FC and GMAC that keep the companies afloat.

 

[MPG]

With demand in the US auto industry for 2009 poised to be the lowest since 1992 they're certainly in a lot of trouble. Lets face it - none of them have made a sustained profit for over three years and you're quite right that they're in effect being propped-up to avoid catastrophic effects on the US employment market. You may have seen that just last month the automakers won Congress's approval for funding $25 billion in low-interest loans to help develop more "fuel-efficient autos" - apparently it is possible to buy a petrol engined car that does over 20mpg !!!

 

[vincenz]

No they don't - FoE have very up-and-down performance. When I was consulting with them they went from $400m losses to $200m profits - completely up and down.If it wasn't for Ford Credit the company would have gone years ago. It's the bits like FC and GMAC that keep the companies afloat.

On paper FoE may have an up and down performance, but I have first hand experience of Ford hedging development costs and losses throughout all channels of their business.

I remeber Ford firing some of their top brass over Volvo turning an unexpected profit and them getting taxed loads on it before it could be chanelled through other areas.

Without the US arm Ford would be profitable.

 

[kelvyn]

I see now that GM and Chrysler are in merger talks. http://news.bbc.co.uk/1/hi/business/7664866.stm

 

[st13phil]

just last month the automakers won Congress's approval for funding $25 billion in low-interest loans to help develop more "fuel-efficient autos"

The Americans crack me up with this sort of thing.

They continually bleat about Airbus getting state subsidies and thus having an unfair advantage against Boeing while conveniently forgetting that the latter get billions of dollars in defence (sorry, defense ) contracts, and now they drop a pile of cash on their automotive industry to keep it afloat and call it a loan to develop "fuel-efficient autos". Priceless.

 

[Satch]

Basic problem is that these are not car makers: they really are car Financing companies with car making attached. So the credit crunch is hitting them hard because if they are having increasing difficulty sourcing the funding to enable Joe Sixpack (who is of course also skint) to buy the increasingly unattractive cars their parent companies make taht is a terrible place to be right now.

GM/Chrysler tie up would be no shock: GM has a 49 percent ownership stake in GMAC (their finance company) but the majority is owned by a consortium led by, surprise surprise, Cerberus, which of course already also owns the majority stake in Chrysler and really, really wants to be shot of the metal bashing bit of that business.

Ford is in a dire position . Announced that their CFO decided to "retire" yesterday to be replaced by Lewis Booth, who is chairman and CEO of Ford of Europe and generally held to have been the main force in the revival of Ford Europe and Mazda over the past 10 years. (Share price, which has been hammered of late down to 1983 levels, promptly went up by 5%.)

 

[crockers]

No they don't - FoE have very up-and-down performance. When I was consulting with them they went from $400m losses to $200m profits - completely up and down.If it wasn't for Ford Credit the company would have gone years ago. It's the bits like FC and GMAC that keep the companies afloat.

I thought GMAC had been sold off....but I may be mistaken..does anyone know?

 

[hawk20]

I thought GMAC had been sold off....but I may be mistaken..does anyone know?

Isn't the answer in posting number 9?
One of the biggest problems is that in the good ol' days, the car makers agreed to provide health care and good pensions. Then as car production became more automated, loads of people had to be laid off -but the Unions did deals that retained the healthcare and pension benefits (sometimes enhanced).

And as imports grew, yet more people had to be laid off. So now, believe it or not, Chrysler, for example, has more former employees on healthcare and pensions than the size of its current workforce. This is such a huge drain that the major carmakers cannot expect to be competitive but endless negotiations have failed to reach a deal with the Unions. IMO it is the main reason MB pulled out of Chrysler. And it will be one of the main reasons for one of the giants going under -if they do.

 

[Defiant]

[In loudest American] Lemme tell ya something.

GM spent last year advertising its new Chevrolet Malibu by telling everyone how ugly its previous version was. It has to be quite bolstering to have the company who sold you a car tell you what a load of bulk wrap it is, and then have them expect you to come into the show room for another. Is this a sounding for the depth of your stupidity?

From my view, I saw the auto manufacturers here start down the drain in the eighties when the union was getting not only very comfortable wage levels for what were essentially drone-bees, but also full coverage of whatever ails they and their families might encounter. And you can imagine the hue and cry when robots came along.
At least robots don't comprehend sloth-based sabotage.

I surely sound like a broken record, but the amount of hurt we're hurtling toward isn't even suspected.

As for these "giants" going under, I admit I mutter "Good riddance" to myself about them. Perhaps Tata will bring us cars worth buying.
And ask United Airlines employees what pension promises are worth.

 

[hawk20]

If GM, Ford etc do get in real trouble, Defiant, do you think the govt will seek to bail them out?

 

[Birdman]

It looks to me as if GM is a giant sub prime CDO scheme that happens to trade cars, not property. Maybe that describes the entire US auto industry. And unless Paulson or his successor steps in it's probably curtains for the big three. How are they going to restructure without more risk capital and who would take that risk - except government (ie the taxpayer)?

Maybe the auto makers are just holding their collective breath until after the US elections because let's face it, if they let go now there isn't the political will on Capitol Hill to rescue them. They've been in denial for years, now they are pure basket cases which the credit crunch has finished off. It is a mercy killing whichever way you look at it since for years now it's been a caase of when, not if.

If Daimler had not pulled out when it did, it might have been dragged under with Chrysler and at best mortally wounded. Thank goodness Cerberus stepped in (unless you part-own Cerberus that is) or it might have been goodbye Mercedes.

 

[Defiant]

If GM, Ford etc do get in real trouble, Defiant, do you think the govt will seek to bail them out?

We may be finding out as soon as next week. I fully suspect they will- the ripple effect emanating out from the automotive construction business in the US is very large.

Meanwhile, I'm keen on getting a Tata dealership.....

 

[hawk20]

The news today looks worse and worse. GM, Ford and Chrysler in talks with Congress re need for help. GM losing about one billion dollars per month! And Ford losing nearly as much.

The US really pioneered, through Ford, the mass production of cars and GM became the worlds biggest car producer. Incredibly sad to see such giants of the industry in what look like their death throes unless the government intervenes at massive cost.

Free trade has many benefits but it has also destroyed many firms, and many jobs. Hard to believe that after allowing for inflation, the average US worker now earns less than they did twenty years ago. Despite that level of sacrifice, they still find it hard to compete with low cost imports.

 

[oldcro]

I thought GMAC had been sold off....but I may be mistaken..does anyone know?

GM owns 49% of GMAC; a consortium led by private-equity firm Cerberus Capital Management LP, parent of Chrysler LLC, bought 51% of GMAC in 2006 for about $14 billion.

 

[hawk20]

This will presumably now be one of Obama's first major headaches. Change is not a destination; hope is not a strategy. Hard decisions needed and soon.

GM will be out of money before winter is over.

 

[Birdman]

Insider discussion about Chrysler becoming purely an auto design team subcontracting production to surplus GM manufacturing capacity is fantasy.
If the Obama financial crash-team offers triage, who will they elect to be the basket case?

FUBAR - GM
BAFUBUNDY - Chrysler
SNAFU - Ford

Without a bailout it's three DOAs and another two milion out of work so that ain't gonna happen. But one of the big manufacturers must drop and it won't be Toyota. Or the germans...

 

[Dieselman]

Hard to believe that after allowing for inflation, the average US worker now earns less than they did twenty years ago.

And how does that compare for UK workers.?

Despite that level of sacrifice, they still find it hard to compete with low cost imports.

Isn't that an indication that they were overpaid and inefficient.?