How Ford and GM were ever able to raise money as they did through bond
offerings over the years remains somewhat of a mystery, even in a world
of too much liquidity of the world.
Mistake after mistake keeps
piling up at these companies. Let's take a look at some recent examples
before we get to the latest news.
Previous Articles On Autos
- August 5, 2008 Default Risk on GM, Ford, Chrysler Hits 95%; Automakers Ask For Taxpayer Handout
- July 1, 2008: Auto Sales Dismal At GM, Toyota, Ford, Chrysler
- June 25, 2008: Can Battery Technology Save GM?
- June 24, 2008: GM's Ridiculous Bluff
- May 8, 2008: GM About To Throw Away More Money
The
above articles are on GM's ineptitude at selling cars, sticking with
SUVs and Hummers too long, squandering leads in battery technology,
failing to dump GMAC and Rescap when GM could have, and announcing
ridiculous bluffs about raising prices on 2009 models.
GM
management cannot seem to get anything right. Ford is in a similar
boat. Let's take a look at the most recent news, Ford first.
Ford Abandons 2009 Profitability Goal
Ford had no chance of reaching profitability in 2009. Check out the 2008 second quarter results: Ford reports $8.7 billion loss for second quarter 2008. Furthermore, Ford has no chance of profitability in 2009, 2010, 2011, or 2012.
Ford Is Light Years Behind In Battery Technology
Ford
is woefully light years behind GM and Toyota in battery technology.
Indeed Ford is asking for taxpayer handouts just to stay in the game.
Please consider Ford: Plug-in hybrids must become ‘a national priority’.
Unlike
Toyota and GM, which hope to deliver plug-in hybrids by the end of the
decade, Ford is taking a more cautionary approach and doesn’t expect to
launch such a vehicle for another five to ten years.
Ford is
calling on the government to introduce tax breaks for plug-in hybrids
as well as a $500 million fund for advanced battery research. Both
options have been considered by the government but no green light has
been given.
The announcement has coincided with Toyota’s promise to have its first plug-in hybrid vehicle on the market by 2010. Ford Plans New Luxury Crossover Vehicle
Reuters is reporting Ford plans new luxury crossover vehicle.
Ford
Motor Co (F) is expected to announce Friday that it will build a new
seven-passenger luxury crossover, the Wall Street Journal said, citing
two people familiar with the automaker's plans.
The three-row
Lincoln MKT crossover, which is due to go into production next year,
will share the same architecture as the new Ford Flex, but will feature
a much sleeker design compared with the boxy Flex, the Journal said.
The
Acura MDX, the Audi Q7 and the Mercedes R class would be among the
competitors for the new luxury crossover, the paper said, citing people
familiar with the matter.
MKT is not designed to be a large
production run and the company expects annual sales in the range of the
mid-20,000 vehicles, the paper said.
Earlier this year, Ford
abandoned a longstanding goal of returning to profitability in 2009 and
accelerated plans to restructure its North American operations to
produce more cars and cut back on slower-selling trucks and SUVs as
fuel prices climbed. Can Ford Compete In The Luxury Market?
OK
so there will be some demand for luxury, but why would any luxury
buyers consider anything with a name plate of Ford? Perhaps they might
in some other market climate. However, this is hardly a normal market
climate.
I have no idea what Ford is thinking given that demand
for luxury vehicles is going to suck wind big time. And what little
demand there will be for luxury, it is highly unlikely to be for
vehicles sporting a Ford nameplate. Ford's strategy is all the more
difficult now that affluent pretenders are completely out of the game.
The
words "Ford" and "Luxury" combine about as well as oil and water. More
importantly, Ford has simply not gotten the message that The Future Is Frugality.
GM's XFE (Extra Fuel Economy) Models
Let's now turn our attention to GM. Inquiring minds may wish to consider GM Reduces Carbon Footprint by .0000001mm.
Call it the 1 mile-per-gallon solution - and try not to laugh.
General
Motors (GM) plans to release new versions of its full-sized pickup
trucks and SUVs later this fall. Both space-age editions get an extra
mile per gallon in both city and highway driving.
The new models
are designated XFE (for “extra fuel economy”). That’ll scare the
bejabbers out of Toyota (TM) and Honda (HMC), eh?
On the new XFE
models of Chevrolet Silverado, Chevrolet Tahoe, GMC Sierra trucks and
GMC Yukon SUV models, GM extended the front lower air dam, lowered the
suspension and revised the chassis to cut aerodynamic drag. GM also cut
vehicle weight by using more aluminum parts, including an aluminum
spare. The engine is a 5.3-liter V-8 with aluminum cylinder block and
heads that can run on ethanol, surely one of the great boondoggles of
our time.
All this creates a net savings of 1 mpg - a great selling point to the math challenged.
Even
with an additional 1 mpg from the XFE models (the new models get 15 mpg
in the city and 21 on the highway), it looks like it’s still a long way
back to profitability.
GM's clearly behind: What’s the level
needed to catch buyers’ attention? Maybe 20 mpg in city driving and 25
on the highway, or even 25 and 30? We’ll see. GM's Second Quarter Results
GM
reported a net loss of $15.5 billion, or $27.33 per share, for the
second quarter. Sales of GM trucks and SUVs dropped 23% in the first
seven months of this year.
Why anybody would keep funding Ford
and GM is beyond me. Then again, perhaps banks and China think that if
they load up on enough of GM's and Ford's crappy bonds, that a too big
to fail situation will be created, just as happened with Fannie Mae and
Freddie Mac.
At this juncture, I would not be surprised by any
government bailout attempts on anything. On the other hand, I can
guarantee that all such efforts will produce a negative economic
benefit. Originally posted at: http://globaleconomicanalysis.blogspot.com/
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