Can the US Auto Industry Survive?

[PanzerJaeger]

The US auto industry(GM, Ford, Chrysler) has been suffering lately, and according to some, it is close to the brink of collapse.

Mercedes(Daimler) was unable to make Chrysler profitable and has sold it to private interests and both GM and Ford are sinking in astronomical debt. Both have new CEOs who are trying to turn things around.

So what do you think? A temporary downturn or the loss of the big 2.5?


Here is some perspective from www.thetruthaboutcars.com .

General Motors Death Watch 141: No Respite in Sight
By Robert Farago
August 1st, 2007 418 Views

In the second financial quarter, General Motors made $891m. The General's camp followers have been delighted with the slim not to say two percent profit. Meanwhile, GM North America (GMNA) lost $39m. The General has been almost universally commended for this fact, as it compares with a $3.95b loss in ’06. Supposedly, the division's move “close to profitability” indicates that management has stopped the rot, as a prelude to rebuilding a framework for success. But lessening losses is not the same as making money, especially when you need money.

And make no mistake about it: GMNA needs LOTS of money. It needs tens of billions of dollars to eliminate the mountain of debt and future obligations the company incurred in the downsizing process. Union buyouts, plant closures, pay-offs to former parts maker Delphi, the upcoming Wall Street requisite United Auto Workers pay-off, and more. Again, GMNA ain’t making it. Literally and figuratively.

At best, GM CEO Rick Wagoner’s $9b worth of operational cuts have brought the automaker's U.S. expenditures in line with its income. That’s fine, if you assume that income will increase from here on out and expenditure won’t. Both of which are false assumptions.

Next financial quarter, GMNA will shell-out $1b in capital expenditures. Annual plant closures and scheduled production cutbacks will also take their toll on revenues. More critically, if the two-month sales drop (July down 18.5%) is any indication, The General will continue to shed market share in [what analysts predict will be] a contracting market. Do the math. GMNA is about to make less money selling fewer vehicles.

What then? Rabid Rick has two choices. He can cut even more capacity from the system, continuing GM's death spiral. Or he can instruct his troops to cut prices to move the moribund metal, further eroding his employer’s too-slim profit margins. Which are already crumbling under direct assault from Toyota et al.

On Saturday, GM announced zero percent financing for up to 60 months on crew cab and extended cab Silverado pickup trucks. The move will wipe-off some $2500 - $3000 off their margins, halving GM's per truck profits. This after cutting back on Silverado production by 10 percent. And truck inventories continue to rise.

Once again, still, GMNA’s future depends on selling a lot of something that makes the company a lot of money; something other than what they’re already trying to sell. Now that GM’s new pickup trucks have failed to generate the anticipated turnaround bucks, GMNA must pin its hopes on the new Pontiac G8, Cadillac CTS, Saturn Astra and Chevrolet Malibu.

The General is only planning on importing, at best, 30k to 50k Aussie-built G8s for beleaguered Pontiac/GMC/Buick dealers. The Cadillac CTS has sold just 24k units this year. Even if the new, spizzarkle-prowed model doubles that total, it’s still a drop in an ocean of red ink. The Saturn is imported from Europe at a loss. Which leaves the hopes of a company resting squarely on the shoulders of the new Chevrolet Malibu.

So far this year, GM sold 60k Malibus (many of which were discounted to fleets). In the same time period, Toyota sold 212k Camrys and Honda flogged 180k Accords (hardly any of which sailed with the fleets). If GM thinks it’s going to slay the competition with the new model– whose form and greasy bits are not a million miles away from the slow-selling Saturn Aura– it’s sorely mistaken. Even if the Malibu is significantly better than the Camry and Accord (also set for a refresh), conquest sales will be like pulling teeth. The demand for an alternative simply doesn’t exist.

All of which leaves GM where it is now: depending on sales abroad to generate enough cash for the corporate mothership to stay afloat. This quarter, 58 percent of GM’s revenue originated overseas. That’s all fine and dandy (especially if you’re a United Auto Workers’ negotiator), but what happens if GM’s foreign operations go sour? Amid all the jubilation over GM’s foreign-sourced profits, there are signs of struggle and danger.

According to GM’s number, their Asia Pacific market share is decreasing– in an expanding market. GM Brazil has hit a production capacity wall. And Shanghai Automotive’s hook-up with countryman Nanjing Motors suggests The People’s Republic of China wants the lion’s share of their domestic market for themselves. And last but not least, the lean, mean, lean production machine known as Toyota is beginning to turn its attention to these ripe pickings– which could turn moldy in the face of an international economic downturn.

In short, GM’s overseas profits are not guaranteed; whereas ongoing and increasing U.S. losses are a sure bet. On balance, the automaker isn’t. Even if the rest of world continues to make enough cash to subsidize GMNA, we’re heading towards the point where GM’s Board of Bystanders must contemplate declaring GMNA bankrupt to save the corporate mothership.

[HoreTore]

Let's face it: the japs make the best cars. The US ones are crap.

Although the Korean-made chevrolets are quite nice... Well, at least the Nubira...

[Strike For The South]

Were America and these are hallmark compaines. We will find a way. We always have and always will. not going to let the losers of WWII make me drive there cars.

[Incongruous]

As HoreTore said, the US makes rather shabby cars. Id much rather prefer I nic Jap import. But I can't see the BIG companies going down any time soon.

[PanzerJaeger]

Were America and these are hallmark compaines. We will find a way. We always have and always will. not going to let the losers of WWII make me drive there cars.

Unfortunately, these companies have abused their patriotic edge for far too long.

When Japan first invaded, the anti-imperial attitude was thick. Americans aren't stupid however, and while buying a slightly less reliable American product would be acceptable to millions, the crap Detroit has put out over the last 30 years would make John Wayne trade his whiskey for saki. Not to mention the Germans and Koreans do it better as well.

Despite Texas, GM and Ford cannot exist on pickup and SUV sales alone, not that Toyota isn't giving them a run in those sectors as well. They are deliberately selling Tundras for rock bottom to undercut the US's last profitable market.

[Marshal Murat]

Well....
Ford and GM did post a profit, so it indicates an up-turn in recent events.
If GM and/or Ford find the edge of the tide, they can get profit. Especially the renewable-energy cars. They just have to find the cheapest, most available fuel source *cough hydrogen cough* that everyone can use.

[Uesugi Kenshin]

I can't see the US auto industry ceasing to exist, and I don't think it's very likely.

That being said the first car that I buy will probably be a Subaru. I can't see much of an alternative to them where I live, and since every other Vermonter who doesn't drive a truck drives a Subaru I should be able to find a used one that isn't too expensive.

[Papewaio]

Toyota utes are what were used in virtually every minesite I went to when I was working... light and reliable.

What I would like to see is a breakdown of who owns these companies... sure a company that is branded as US, could in fact be what 40% foreign owned... likewise a few of the foreign companies could be 40% American owned... So I don't see it as a US vs Rest... its where the investors choose to invest.

[Don Corleone]

Can it? Sure. But it won't. There's no one person to blame over here, the whole industry is crooked as a dog's hind leg. Unions demanding guys get $60/hour to sit and read newspapers and smoke cigarettes while they're "downsized", executives getting a $5,000,000 grant of post-dated options... it's from top to bottom.

American car industries could theoretically start making the hard decisions and start making better cars. They cost more to make and they'll recognize less of a profit, so most likely they won't. Maybe after they've been knocked down a few more pegs, they'll turn it around.

[Alexander the Pretty Good]

It's not like you can afford anything but a used car anyway. :book:

[Csargo]

I can't see the US auto industry ceasing to exist, and I don't think it's very likely.

That being said the first car that I buy will probably be a Subaru. I can't see much of an alternative to them where I live, and since every other Vermonter who doesn't drive a truck drives a Subaru I should be able to find a used one that isn't too expensive.

Toyota:beam:

[Gregoshi]

It is kind of hard to talk about the US auto industry without telling a Saab story. ~D

[Uesugi Kenshin]

Toyota:beam:

Why Toyota? I need AWD, every Subaru has AWD, I may need room for dogs and or moving to/from college, so a used Outback (practically the state car of Vermont) is pretty much perfect. I could shop around of course, which I will do when I buy my first car, but since it will be used it will probably be a Subaru Outback. Oh yeah and I don't want a truck. I probably don't need one until after my first year of college though, so it won't be a problem for a couple of years.

[lars573]

*cough hydrogen cough*
*cough* hydrogen isn't practical for cars *cough*

[Csargo]

Why Toyota? I need AWD, every Subaru has AWD, I may need room for dogs and or moving to/from college, so a used Outback (practically the state car of Vermont) is pretty much perfect. I could shop around of course, which I will do when I buy my first car, but since it will be used it will probably be a Subaru Outback. Oh yeah and I don't want a truck. I probably don't need one until after my first year of college though, so it won't be a problem for a couple of years.

I'm not really picky it might not be a Toyota, but it might. I'm currently looking for a car or possible a truck. The reason I said Toyota is because I'm looking at a Toyota car as a possible buy.

[Uesugi Kenshin]

I'm not really picky it might not be a Toyota, but it might. I'm currently looking for a car or possible a truck. The reason I said Toyota is because I'm looking at a Toyota car as a possible buy.

I don't really care if it is a Subaru either, but we haven't had any real major problems with our Subarus, and we've had three of them, unless they happen to have run into something, or been run into. We totaled a Forester and got the bumper ripped off of our Outback in the same day. I would never buy something as big as a Tribeca though. My current dream first car would be a used, but good condition, Subaru Legacy. It's basically a normal car with AWD and I believe almost always ABS, which is pretty nifty for Vermont standards.

[Csargo]

I don't really care if it is a Subaru either, but we haven't had any real major problems with our Subarus, and we've had three of them, unless they happen to have run into something, or been run into. We totaled a Forester and got the bumper ripped off of our Outback in the same day. I would never buy something as big as a Tribeca though. My current dream first car would be a used, but good condition, Subaru Legacy. It's basically a normal car with AWD and I believe almost always ABS, which is pretty nifty for Vermont standards.

I'm looking at a Toyota Solara I think that's what it is.:sweatdrop: Good condition. 5000 bucks though.

[Gregoshi]

Ichigo, my mom owns a Solara for a few years now. Nice car and I don't think it has caused her much grief in the repair department. :thumbsup:

[Csargo]

Ichigo, my mom owns a Solara for a few years now. Nice car and I don't think it has caused her much grief in the repair department. :thumbsup:

Good to hear. Not sure if I'm going to get it depends on my dad. The guy actually wants 6000 for it, but my father plans on offering 5000 cash. We'll see how it goes, hopefully well.

[spmetla]

Perhaps if the US auto industry started building good trucks and cars again they could rebound. Right now the only alright american cars besides the handful of sports cars are SUVS which despite hype are just aren't all that much of the production numbers. The basic entry cars (Cavaliers, Escorts) are crap compared to the Japanese and Korean entry cars. The imports have better body designs, more fuel efficient, and are cheaper. Same goes for comparision of mid end cars. Heavy trucks used to be an exclusive American product but the Japanese are now edging out the US competition in that market as well. My dad drove a big 'ol GMC truck for a good ten years but when he needed to finally replace it he found a Nissan truck to be the best for him instead of new GMC.

Believe it or not I'm partial to some American cars but they tend to only be our GTOs, Mustangs, Shelbys, and so on. For some on when making cars for someone without cash to blow or a midlife crisis the US auto producers just aren't up to par. I drive a Neon but am certainly not proud of it, a Civic would be a far better car. The Neon does its job but when you compare its numbers to the import I have the inferior automobile.

[doc_bean]

There's always a way. That said, you guys make rather crappy cars compared to Japan and Germany (and some other Asian and European countries), it's better to focus on something you're actually good at.

I'm probably going to buy my first car soon, I'm looking at a Toyota (Yaris) or a Renault (Modus).

[Odin]

American cars are fine, the big 3 auto makers here in the states are getting killed by thier labor unions and past deals. Toyota makes excellent cars, so do the germans for that matter but I dont think the american auto industry will fold, it just requires a few buyouts for its labor overhead.

The government will step in at some point and offer some form of assistance should it get dyer (see airline industry as reference). I suspect that the big 3 will wise up and offer more fuel effiecent cars.

It wasnt long ago that the SUV market was booming, and those companies were doing quite well. After all the toyota my wife drives was put together in huntsville alabama by an american worker so a good portion of the process and proceeds of her particular vehicle are directly american.

And lastly, there are plent of people with disposable income who want there chargers, mustangs and corvette's, there will always be a niche market for those brands here.

[doc_bean]

After all the toyota my wife drives was put together in huntsville alabama by an american worker so a good portion of the process and proceeds of her particular vehicle are directly american.


I thought all Toyotas for the American market were made on American soil ?

Which goes to show that protectionism (government support of the big three) will only benefit the rich stockholders, who might or might not be Americans.

[Odin]

I thought all Toyotas for the American market were made on American soil ?

I honestly dont know, I know hers was.


Which goes to show that protectionism (government support of the big three) will only benefit the rich stockholders, who might or might not be Americans.

Well yes and no. Yes it will benefit rich stockholder, no (the only bit) because these big three companies have thousands and thousands of retired workers in thier pension system and on thier healthcare.

Thats the real problem here is the companies liability over the long haul with these retiree benefits (its a result of thier own negotiation BTW). So the choice of letting them fold isnt a very sexy one for the government. I dont think a big bail out is necessary anyway, the big 3 were swimming in profits with SUV sales in the U.S. and there overall fleet of cars arent to bad, they just happen to be inferior to honda and toyota who have superior vehicles.

When gas was cheap, and CO2 emissions were not mainstream no one cared if the vehicles got 20mpg. The business climate has changed due to customer demand and recognition of both factors, the auto industry can adapt to this it will just take time.

However there is no easy bullet that will get them out from under there labor deals.

[Strike For The South]

There is a huge toytya plant on the southside of town.

[HoreTore]

Believe it or not I'm partial to some American cars but they tend to only be our GTOs, Mustangs, Shelbys, and so on. For some on when making cars for someone without cash to blow or a midlife crisis the US auto producers just aren't up to par. I drive a Neon but am certainly not proud of it, a Civic would be a far better car. The Neon does its job but when you compare its numbers to the import I have the inferior automobile.

All I can say is.... Alfa Romeo ~:flirt:

(btw, we need a love-smiley!)

[Ice]

I thought all Toyotas for the American market were made on American soil ?

Which goes to show that protectionism (government support of the big three) will only benefit the rich stockholders, who might or might not be Americans.

I bought the Toyota Scion TC 06, when it first came out. I think mine was made in Japan.

Anyway, DON C and ODIN, are correct in what they are saying. The unions and high priced employees were/are killing the car companies (I wrote a couple paragraphs on this in the Marxist thread). The government will probably give them aid if they reform their ways a bit.

[Marshal Murat]

Why doesn't Honda change their name to 'Ford'
Toyota changes to 'General Motors'
Subaru ' Chrysler'

Problem solved. Sorta.

[Spetulhu]

Why doesn't Honda change their name to 'Ford'
Toyota changes to 'General Motors'
Subaru ' Chrysler'

Problem solved. Sorta.

Why would they abandon recognized and respected brands for something else?

Buying out someone is another matter. IIRC the South Korean Daewoo motors were bought up by their old partner GM. Now they're rebranded as Chevrolets and so on, but then they were often based on obsolete GM cars to begin with.

[Marshal Murat]

*cough* hydrogen isn't practical for cars *cough*
Wikipedia Disagrees (http://en.wikipedia.org/wiki/Hydrogen_vehicle)

Seems like Hydrogen has a future.
As well as sugar ethanol, but then again, there is corn.
:laugh4:
:hanged:

[Samurai Waki]

Well, I certainly don't think the US Auto Industry is quite on the brink of collapse yet, hence the major cutbacks in employment and so forth. Being a business minded individual, one might hazard to guess that the reason behind the cutbacks and the government loans is to change wind and rebuild itself entirely. If the consumer market shifts directions, like it has with the gas price ordeal, the US Auto Makers no longer needs the employment for departments it once needed before. What the US automakers greatest fault was, is that they didn't recognize the change of wind like Honda, Toyota, et al. did back in the seventies with the oil embargo. Without the foresight to change (and to some degree they didn't want to take the hit in prestige) They continued like they always had. Now they're playing catch up with auto industries that had since the seventies worried about high gas prices, and so to the reliability issues. BUT! the American Consumer didn't have to worry about higher gas prices until recently (the last six years), so it wasn't the US Industry that was entirely at fault, it was the American Economy hiding behind a facade that it couldn't maintain, and Big Three didn't have access to that kind of information, or if it did, kept rather quiet about it hoping it was just a phase. Now, if they did know, then they gambled wrong, but it isn't the knockout punch. The US auto industry STILL has a much higher Consumerist Market on it's home turf than it's foreign adversaries and to some degree this could be fanned from fifty years of Consumerist Loyalty. The US Automakers are silently rebuilding, researching, and so forth, they are biding their time, but the clock is certainly ticking and they know this. They want to get to be able to build a satisfactory competition to their Japanese counterparts, and this could take time, the Japanese, and Germans have thirty years of experience in this field, and its unlikely that the American auto industry will be able to trump this. So they are building a uniquely American Car, with some of the Dependability Clout the Japanese and Germans have, and I suspect by 2009 they will deliver a Car that has the Typical American Muscle(though not as much as it had before), with the Low Gas Mileage and Dependability to match a Foreign Automaker. This could be a make or break situation we're now predicting, but I'm going to say that at least one American Auto Maker is going to pull through it all, and stand tall atop the pedestal. And if I could choose between any one of them, I would say GM has the money and necessary drive to do it.

But this is just the predictions of a Humble Economics Student.

[spmetla]

All I can say is.... Alfa Romeo ~:flirt:

(btw, we need a love-smiley!)

Although it's not the '67 Mustang GT I once wanted I am currently rebuilding a '76 MGB tourer. Though the cheapest of sports cars even when it was new it has a look (beside the rubber bumper) that I like and I feel I can get some help to tweak a bit more power than it has now.