quote:

Originally posted by She_Fitz From what I have heard .. GM's sales are still higher than that of the other car makers (Honda, Toyota) but they mass produce before cars are actually purchased whereas the Japanese wait to build until the car is sold. Bad business model and US health and pensions are killing them... I think there needs to be consessions but ultimately the loans are needed.

You also have to look at profit margins.

Sure, you could sell 10000% more cars then you're competition, but if you're selling all of your cars at a loss, then it isn't to smart is it.

This is EXACTLY why the US auto companies need to fail on their own.

Let the good companies and people who know how to management a company pick up their BUs once they file for bankruptcy and restructure their business model to become more competitive.


An article in the Globe & Mail a few weeks ago predicted the future of the car companies in 2012.

I think it was Ford (one of the 3) where they stated that they would be teamed up with Wal-Mart and other large retailers to sell their vehicles. They would have 90% fewer dealerships and most of their cars would be sold at Wal-Mart. You would use a computerized system to custom make your car, and it would be delivered in 2 weeks following the classic JIT management system. Ford/GM/Chrysler need to get rid of their Inventory costs!

JIT is a thing of the past. Lean enterprise is very well present at most large scale manufacturers (late 80s movement). Hardly a novelty and is a necessity for business today. A couple of points:

1) These are great companies and are leaders in the industry. You do not see the years of investment, valuable innovation and progression in R&D that does not materialize in their products/into commercialization. Some of these things are at the most fundamental level. There are years of heritage and capability; they hold a comparative advantage and provide a net benefit gain.

2) To the conspiracy theorists: You should have bought GMs electric car in 1998...when it lacked the 'bling and muscle', maturity in technology and reliability. During the years of great SUV sales everyone had praise for these firms. Just look during the past 8 years at how many Yorkdale Parasitic Shop-a-holic MILFs that looked like they were climbing down a step ladder from the pitt of a fighter jet...the Navigators, Durangos, Explorers, Escalades, X5s etc. When fuel prices were cheap, no one said a thing. GM even paid lofty dividends. Consumers drove choice and demand.

3) These companies can be profitable operations. It's not to say that consolidation should be disregarded. Casually looking...GMs cash flow from operations was positive (and not just attributable to depreciation & amortization).

4) There will always be a trade off between robustness, reliability, quality, cost and time to market.

5) Chrysler's experiment in the 80s (Lee Iacocca era) yielded great returns for the government. Good government partnerships can bring on great results. Secured loans (with guarantees), the right direction and coordination can turn these companies into global leaders again. I have full faith in Alan Mulally (Ford's current CEO). He was Boeing's VP of Commercial Aircraft and led the development of the 777 and the 787, so he has a very high pedigree for quality. I don't see why a similar arrangement can't be achieved as the they did with Freddie & Fannie (preferred stock with warrants).

6) Current market conditions have also contributed to their situation. You've cut out the consumer (high borrowing costs), and more likely than not, their working capital is constrained...likely to have become costlier (hence the Treasury's establishment of a commercial paper/credit facility)...no sales...clearly liquidity issues. No market for their receivables either... for ABS. The consumer is sick. Credit market is sick.

quote:

Originally posted by SSSanchez I don't see why a similar arrangement can't be achieved as the they did with Freddie & Fannie (preferred stock with warrants).

Interesting post.
But the F&F rescue is quite a bit different - those were government backed lenders. The car companies are not, and therefore the gov't responsibility is nowhere near the same.

Regarding JIT, did you forget about GMs bloated dealer network? Or perhaps the car lots that sit along the 403 outside Ford's plant? Those aren't part of a well functioning JIT system.

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Originally posted by Skipper Interesting post. But the F&F rescue is quite a bit different - those were government backed lenders. The car companies are not, and therefore the gov't responsibility is nowhere near the same. Regarding JIT, did you forget about GMs bloated dealer network? Or perhaps the car lots that sit along the 403 outside Ford's plant? Those aren't part of a well functioning JIT system.

Fannie & Freddie were perceived to be 'backed' by the full faith of the U.S. government. They were also publicly traded: classic principal-agent problem. GMAC is equally a large lender. A short term loan is not being 'socialist'. It's fully repayable. It's just secured and guaranteed. Here is another example: Chinese government lent Huawei (one of Nortel's former suppliers) $6 billion line of credit a few years ago to go off and achieve scale. The same thing will be needed for new trendy enviro-weenie cars.

There are Japanese & European cars piling by the tonnes too in Long Beach. It's also dependent on location, size and cost. It could well be to their benefit to utilize that space versus elsewhere. It's not to say that their inventories (atleast on the distribution side) do not need improvement. There are transients. JIT is not seamless and varies with the scale of the supply chain and complexity technology (e.g., circuit boards versus cars).

I have a hard time believing that an emergency loan will be enough to do the kind of restructuring that needs to be done for these companies to be viable in the long term.
Might as well take a match to that $25B as far as I am concerned.

unions protect lazy people.

___________________
kantina

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Originally posted by miljan unions protect lazy people.

There are plenty of non-unionized individuals that also get affected. The trouble is, if there a large displacement of employees, what are you going to do with them? I'm one for free markets. However, you must also sympathize with individuals that have depended on a stable livelihood. It takes enormous resources to provide immediate training and new skills for opportunities that may not even exist. If Marie in No-name-town, NFLD works at a fish processing plant cleaning out fish guts her entire life (a woman in her mid 50s) and you shut the plant down, she'll suffer with some severe consequences. I'm speaking of bare necessities.

Don't forget that the Eurozone auto manufacturers have asked for €60 B too.

Last edited by SSSanchez on Dec-12-2008 at 19:08

Sad thing that 1 out of every 10 of us is directly affected if they are not bailed out... some experts have even sauid 1 in 7.

My company is bracing itself to the extreme, and it's all about saving costs right now, bailout or no bailout.

___________________

Short time TA, Long time Guver, Good time giver.

LOLing @ the car exec (forget which one) that was quoted in the globe as saying "I don't even want to look at Wall Street tomorrow, it's going to be a disaster!" Meanwhile the markets look like they'll be closing up on the day.

Way to bet the wrong way! AGAIN!

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Originally posted by Skipper LOLing @ the car exec (forget which one) that was quoted in the globe as saying "I don't even want to look at Wall Street tomorrow, it's going to be a disaster!" Meanwhile the markets look like they'll be closing up on the day. Way to bet the wrong way! AGAIN!

It wasn't an exec. It was Sen. Reid.

canada should seize the opportunity and get their deal in now. Basically the canadian government can look like the good guy and in the process, guarantee jobs stay in canada before the US turns around with the next deal and demands the same thereby screwing us. But we will probably be canadian and wait to see what our big brother does.

Stupid move