Wednesday, January 6, 2010

The Future of The American Auto Industry

Check out this article on new car sales. There is one paragraph I find particularly interesting:

Of the seven largest car companies selling vehicles in the United States, five had large, double-digit December gains. Only General Motors and Chrysler, the two companies that received federal bailouts and went through bankruptcy last year, saw sales slip. And among the seven biggest companies, only Hyundai/Kia posted a sales increase for the full year.

I wonder why these two had sales declines while everybody else had increases? And one other point that will be hard to decipher- How many of the cars sold by GM and Chrysler were sold to the government at some level?

I can see five possible reasons.

1) Consumers are afraid that because of the bankruptcies these companies won't be around long and have warranty concerns;
2) Consumers are still torqued about the bailouts and refused to give these bozos any more money;
3) They have an inferior product;
4) Their ads suck (the few I have seen for GM seriously suck; I haven't seen a Chrysler ad in months.)
5) Because of all of the dealer closings, there is no where left to buy a GM or Chrysler.

Of these I really think the dealership issue is probably number 2, right behind the bailout, at least for GM. For Chrysler I think it is number 3, behind the bailout, ads (or lack thereof).

Face it; would you drive by 3 or 4 other car dealers, both foreign and Ford, to by a GM right now?

And how do you determine what is a foreign car? They probably make more Toyotas in this country than they do Chevrolets or Buicks, percentage wise. If it boiled down to where the profits go, then buy stock in BMW and buy one.

Personally I don't see a good end to this for GM. Chrysler is already done for. Fiat will use the name plate for a few more years, milk all of the engineering they can and then in a few years morph the whole line into Fiats.

GM has only two ways to go: Out of Business entirely, or the government will sell their shares of stock to a private entity. If they are sold to a private entity, who has the cash? Roger Penske tried his damnedest to save Saturn, and GM let it die completely rather than salvage a few bucks by accepting Penske's offer. GM did manage to sell Hummer.

To the Chinese.

Who else had cash? And that will be the issue with the rest of GM. Who will want it (in this economy), and who will have the cash. It will take a few years for the economy to recover to the point where GM will become a viable entity again, and by then will it have enough reputation left to be able to recover without government support?

Would Ford want to buy Chevrolet, Buick or Cadillac? I doubt it. Would Fiat? Cadillac maybe, or maybe the truck division, but other than that, I have my doubts.

I doubt any foreign maker would want them either. The badges would be fairly worthless, and the engineering wouldn’t be worth much more. Again, maybe the truck division, but I can’t see BMW buying Chevrolet, can you?

So we are back to the Chinese.

Either way, expect GM to be gone before 2015. I doubt the Dems will still be in charge after 2012 of anything, and the bailout was not a corporation salvage move, but a Union jobs salvage move. Without the Dems to prop them up the Feds will sell off their stock, allow the company to go through an HONEST bankruptcy as soon as the adults are back in charge.

I’ll be sorry to see the GM of the ’70 Firebird go, but not the GM of ’12 Volt.

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