Auto Maker Fantasy Land
Posted by Jeff Pruitt - 2/18/09 @ 1:46 am - Filed Under Uncategorized
I’ve actually read both Chrysler and GM’s viability plans submitted to the Department of Treasury alongside their second round of bailout requests. First, Chrysler’s plan is lame. The document they released is about 4 pages long with next to nothing in detail. I guess they didn’t want to write the truth - they are bankrupt and have no hope of long term viability.
GM’s plan is much more detailed but the analysis is the same - they are bankrupt. Their US industry sales assumptions are ridiculous. They conveniently assume that the market bottoms out in the 1st Quarter of 2009 and gradually builds back up to bubble-economy numbers. And even under that rosy scenario they are still only breaking even by 2012 and paying off their loans by 2017.
I cannot imagine auto sales gaining the rest of this year - it makes no sense. Who is going to be buying them? Millions will lose their jobs and people will continue to hord cash - like everyone else GM seem to be banking on the magic stimulus bullet to save the day - it won’t happen.
They also assume they will maintain or slightly increase their market share - again, I find that highly unlikely. The talking point has been that people won’t buy cars from a company in bankruptcy:
Consumer confidence is essential to the Company’s future success. For most consumers, the purchase of a vehicle represents their second largest expenditure (after housing). Consumers view resale value and the assured availability of warranty coverage and long-term parts and service as critical inputs to their purchase decision. It is the judgment of the Company that a bankruptcy filing would substantially, if not completely, erode consumers’ confidence in GM’s ability to deliver on those requirements. The consumer, with a choice of a comparable product backed by a manufacturer operating outside bankruptcy, is substantially less likely to opt for the bankruptcy tainted product.
But they think consumers will buy them from a company that must continue to get massive government bailouts just to operate?
Eh, I could go on but you get the point. GM is dead. Only a government-provided Iron Lung will keep them alive…
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5 Responses to “Auto Maker Fantasy Land”
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I agree that neither GM nor Chrysler will survive without a massive taxpayer funded bailout; something I obviously do not support.
It is amazing to me that GM is saying they already need several billion more dollars or they may fail next month. Heck just a couple of months ago they thought the amount they asked for late last year would last them through the end of 2009.
Their business model has failed.
They need to go bankrupt and let their competitors “swallow them up.”
Mike
My guess is they won’t have to file for bankruptcy. Odds are much better they’ll continue to receive gobs of dough from congress which in turn will be mandating what cars they build, where they build them, and who builds them (UAW, duh).
This a democrat congress dream come true, they have the big three (at least Chrysler & GM) by the balls and they will not squander the opportunity to get the cars built THEY know are best for us,and you can bet your ass they’ll still be built by UAW workers, and they will NOT be making any concessions, as they won’t need to, we’ll be subsidizing their wages just a little more directly is all.
What we’ll end up with is a “nationalized” or “subsidized” auto company with subsidized well paid UAW members making little teeny Pelosimobiles. So if you want to buy what you actually like or need in the near future, you’ll need to look to Toyota, BMW, Hyundai, etc. for a good product. (kinda reminds me of the 70’s)
When you need a new car, you’ll get a goverment owned (and taxpayer subsidized) bank loan, on a government manufactured car, and odds are good you’ll insure it with a government owned insurance policy (AIG or similar). While you’re there at the dealership, chances are the F&I guy will be able to access your health records electronically as well.
It’s a damn shame, GM is finally building a real quality product, world class in fact, in my opinion, and the US Congress is gonna turn it back into turd motors. Swell.
Now, that’s not exactly change you can believe in, but it IS change you better get used to.
Martial Law will take place when the World & U.S. government subsides fail.
Get ready for the new World Order.
Carry On….
[...] to the treasury detailing how they were supposedly going to get back into the black. Here’s what I wrote after reading GM’s plan: GM’s plan is much more detailed but the analysis is the same - [...]
[...] of which showed they had any chance in hell of becoming viable in the long run. Here’s what I wrote at the time (more detail was in the full post): Chrysler’s plan is lame. The document they [...]