Last week I saw a television ad for the Chevy Volt, an electric car design that has been sat on for years and years. Release date is 2010. Too little, too late.
The optical challenge for major American car companies is that they appear to have been doing nothing for too long. Basically their situation is that they’ve been making vehicles that no one wants for the last 15 years, and now they’re looking to stall that failure by asking the government for more money, or go bankrupt. So we see advertisements for an electric car that isn’t due out for two years. Not really surprising, but is this the most they can do?
Personally, I hope these major companies go down. I know it will be bad for the economy short term, but have a look at what it would mean long term to give them a loan.
- GM, Ford and Chevrolet will continue to make vehicles no one wants (read: Escalade, Hummer etc)
- Sales will continue to plummet
- The bear market will be preserved because these companies will not be worth investing in as long as their product line remains the same (out of touch with the environment and with the needs and interests of the world)
- The economy will re-crash when these companies finally reach the bottom of the government well
For the Big Three, it may be nice to have a fantasy supply of vehicles that make their ideal target market feel big by being 20 feet long and 8 feet tall – and by using more gasoline than the Queen of Saanich – but these are not vehicles that address the environmental needs or the financial picture of the economy we live in. There is a real world with concrete demands out there. GM, Chevrolet and Ford need to step in with both feet to make their supply match it.
What do you think?
While I agree that the big three have had their heads in the clouds for too long, but I do hope they can get their finances in order. Though the auto industry’s percentage contribution to Canada’s GDP has been in decline in recent years, it still employs (directly or indirectly) hundreds of thousands of Canadians. It would cause a huge recession if they failed. Ironically, Canada’s branch plants are in better fiscal health than the parent companies. What’s scary is that they ignored the writing on the wall for so long. I saw an auto dealership in the Okanagan advertising buy one get one free trucks this summer! And still, nobody was buying. GM has been trying to unload the Hummer division for sometime, but surprise surprise they haven’t had much luck. What we all need is leadership from government and from the auto sector to develop a viable market for alternative fuel / zero emission cars. I highly recommend a read of David S. Friedman’s book WINNING OUR ENERGY INDEPENDENCE. It’s a fascinating read. He takes on the auto industry directly.
Those are some very valid points. The need for alignment in leadership from government and the auto sector is particularly poignant. I’ll look out for that book!
Yeah, it’ll be interesting to see what happens now that they’re approaching Congress to ask for money.
I think that whole process is going to take a while, because in order for the government to justify giving out bailout money, they need to see some kind of plan to pay it back, and it’s really not looking like the car companies have one (did you see the story about their execs flying their private jets to a meeting to figure out how to save money?). But I think the American public holds these companies too dearly to let them die. So those two things are at odds with each other.
I highly recommend NPR’s Planet Money podcast; they just answered a question I had for a while: why don’t the car companies just declare bankruptcy like the airlines (short version: people don’t stop buying an airline’s products because of financial health but they WILL a car company’s; at worst, for an airline you’ll lose a few hundred dollar vs. a $20-50k and multi-year support).
Update: They’re selling the jets.
Correction: that wasn’t a private meeting on how to cut costs or restructure they went to in their private jets… that’s how they went to Washington to meet Congress about the bailout. Wow.
I recommend watching the movie “Who Killed the Electric Car” form 2006. It demonstrates that GM particularly had electric cars in the early 90s and in my opinion systematically ‘removed’ the idea so they could make billions out of gasoline powered cars.
It’s another example of where Corporate America has held back technological advancement in the name of greed. Now we have a more pronounced environmental backdrop I find adverts for electric cars in 2 years time are the death throws of a failing model.
I agree. North American vehicle manufacturers have been subsidized far too long and are completely out of touch with the economy and environment. If they could re-structure and re-organize and start making a product that everybody need/wants (ie electric, hybrid whatever) without folding, or asking for a huge bailout package, that would be great. BUT seeing how corporate entities have a horrible track record of making good use of gov’t money, the most feasible option is for the gov’t not to give them a bailout, let them fold and start anew.
I think there needs to concessions on both sides. If these companies, who used to be amongst the most important businesses in the USA, can fail on their own and squander their own money, what kind of confidence do you think Congress has that they won’t squander any bailout money?
I think what ought to happen is two of the three companies should merge and any bailout money should be considered a government buy-in so they control a certain percentage of the auto companies. With two of them merging, ideally they would be strong enough to stand on their own feet for a while.
I also think it’s a slippery slope when you start handing money out to private business. It’s one thing to give it to banks who control mortgages of millions of the public, but no taxpayers’ money is tied up in auto manufacturing (you could make a case for shareholders, but the idea there is you have a buy-in, sell-off opportunity). What happens next – when Obama kicks off a green energy plan and in 15 years when Exxon is going bankrupt, what’s stopping them from seeking a bailout, because they employ tens of thousands of Americans…
It’s a tough call.
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