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More gloom and doom about Ford's competitive disadvantage.


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http://money.cnn.com/2009/06/01/autos/ford...on=money_latest

 

 

They still don't get it. Ford has already done a substantial amount of restructuring while the other two were sitting on their hands. Nows its time to kick some serious butt. :reading:

 

I hope Ford takes nothing from BO. What little advantage Chry and GM MAY have just might be balanced out by the fact that BO, Harry Ried and Nancy Pelosi will be designing their cars and Ford can continue to build what buyers want.

 

BTE Where has "Round Eyes" been lately???. Maybe only the CIA knows.....

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I don't think Ford will have a problem getting the same 'deal' from the UAW that GM and Chrysler have recently negotiated. The problem is you may have a situation where GM is basically debt free and competitive when/if they exit Chapter 11. Ford has borrowing has kept them out of the Government's pockets and backruptcy, but that money will eventually have to be paid back. Even without a GM resurgence, Ford could still be in trouble if the auto market does not significantly improve soon. If Ford Credit can become an Industrial Loan Corporation, that would help some. Just have to wait and see on all this.......

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I don't think Ford will have a problem getting the same 'deal' from the UAW that GM and Chrysler have recently negotiated. The problem is you may have a situation where GM is basically debt free and competitive when/if they exit Chapter 11.

 

And I'm sure people will be lining up to buy a car from a Bankrupt company that taxpayers just sunk $40billion into.

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And I'm sure people will be lining up to buy a car from a Bankrupt company that taxpayers just sunk $40billion into.

 

The America car buying public has short memories. Last summer, the price of gas was $4.25/gallon and people lined up around the block to buy a Prius while you couldn't give away a full-sized pickup. Six months later, when gas fell to $1.50 gallon, hybrid sales were dead in the water while pickup sales increased. If a newly reorganized Chrysler or GM offers an attractive, quality product at a good price, I suspect people will buy them.

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The America car buying public has short memories. Last summer, the price of gas was $4.25/gallon and people lined up around the block to buy a Prius while you couldn't give away a full-sized pickup. Six months later, when gas fell to $1.50 gallon, hybrid sales were dead in the water while pickup sales increased. If a newly reorganized Chrysler or GM offers an attractive, quality product at a good price, I suspect people will buy them.

 

If people had such short memories, the domestic's would have been in such bad shape to begin with. After all, people stopped buying them becasue of horror stories they heard years earlier

 

Time will tell, but GM and Chrysler face a huge uphill battle. Bailed out companies left a sour taste in the mouths of taxpayers. We'll see...

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And I'm sure people will be lining up to buy a car from a Bankrupt company that taxpayers just sunk $40billion into.

 

But the other side of that is people should buy cars from the company tax money bailed out. How else will they get their money back?

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But the other side of that is people should buy cars from the company tax money bailed out. How else will they get their money back?

 

How does buying a car from a company recoup lost investment?

Are they giving you the car for free?

A discount for the tax dollars you paid in?

 

I'm sure initially they'll be heavily incentivized, but at whose expense? They just got another $19billion today.

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The America car buying public has short memories. Last summer, the price of gas was $4.25/gallon and people lined up around the block to buy a Prius while you couldn't give away a full-sized pickup. Six months later, when gas fell to $1.50 gallon, hybrid sales were dead in the water while pickup sales increased. If a newly reorganized Chrysler or GM offers an attractive, quality product at a good price, I suspect people will buy them.

 

First, I don't see how you compare the price differences of gas over the short term to the long term impact that the GM bankruptcy will have (plant closures, layoffs, taxpayer anger, etc). GM will be stuck with the stigma of this for many years.

 

Secondly, I suspect GM will have to position itself as the value proposition post-bankruptcy. This will hurt Cadillac and Buick the most although it could benefit Chevy.

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The industry sales rate is down to about 9.5 million units. At that sales rate, no car company can make money, not even the new GM or the new Chrysler.

 

With the additional permanent layoffs from Chrysler and GM, plus layoffs from closed dealers, plus the layoffs from all of the second, third and fourth level "suppliers" (local news had an interview with the owner of a sandwich shop 2 blocks from the soon to be closing GM Powertrain factory in Livonia, MI) I expect car sales to keep getting worse. 10 million units for 2010CY seems like a dream.

 

At 9 million units per year, Ford would have to pickup a HUGE chunk of market share (several times more than they already have) before they can even think about being profitable. Ford is now "debtor in possession" (although I don't fully understand that term) of Visteon. How many other supplier are going to go Chapter 11.

 

It is nice to dream, but it is only a dream. If you don't live in MI, you have no idea just how bad things really are. I expect unemployment to hit 20% in July. It could go higher than that.

Edited by theoldwizard
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At 9 million units per year, Ford would have to pickup a HUGE chunk of market share (several times more than they already have) before they can even think about being profitable. Ford is now "debtor in possession" (although I don't fully understand that term) of Visteon. How many other supplier are going to go Chapter 11.

Debtor in possession financing means Ford finances Visteon on the purchase ofthe good assets in CH 11,

all the debts and worthless assets get left behind in CH 11 court and the new Visteon emerges and is owned by Ford.

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Debtor in possession financing means Ford finances Visteon on the purchase ofthe good assets in CH 11,all the debts and worthless assets get left behind in CH 11 court and the new Visteon emerges and is owned by Ford.

 

Why would Ford take control of a new Visteon and get back into the parts making business?

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And I'm sure people will be lining up to buy a car from a Bankrupt company that taxpayers just sunk $40billion into.

Keep going, $19.4 billion before bankruptcy, $5 Billion operating costs in June, $30 billion Debtor in Possession Finance,

$25 Billion New GM cash Float and $10 Billion Revolving Line of Credit.

 

Almost $85 billion by my count....

Edited by jpd80
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Keep going, $19.4 billion before bankruptcy, $5 Billion operating costs in June, $30 billion Debtor in Possession Finance,

$25 Billion New GM cash Float and $10 Billion Revolving Line of Credit.

 

Almost $85 billion by my count....

 

I was trying to go easy on them! :hysterical:

As Tom Servo said: They've had a bad day.

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Why would Ford take control of a new Visteon and get back into the parts making business?

Sorry, that was a short hand answer I gave Wizzard.

Ford as DIP are protecting a strategic supplier and they may have no intention of owning them at all.

The deal could be Financing the restructuring and no more.

Edited by jpd80
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I was trying to go easy on them! :hysterical:

As Tom Servo said: They've had a bad day.

Throw in the helmet factor of numerous legal teams and it should be an unending nightmare played out on people's TV.

I could be the next reality TV Hit on Fox.

 

PG over on Disney:

Harry (Obama) and the (Fritz) Hendersons?

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How does buying a car from a company recoup lost investment?

Are they giving you the car for free?

A discount for the tax dollars you paid in?

 

I'm sure initially they'll be heavily incentivized, but at whose expense? They just got another $19billion today.

 

If GM goes out of business, everything is lost. The $30B or so tax dollars are gone forever. GM comes out of backruptcy and prospers, the government sells off their interest at a profit. Remember that the U.S. Government is going to hold 60% of GM. At some point, they will sell it. Basically, it's a debt for equity deal. There is a chance this could be quite profitable for the Feds..

Edited by 7Mary3
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If GM goes out of business, everything is lost. The $30B or so tax dollars are gone forever. GM comes out of backruptcy and prospers, the government sells off their interest at a profit. Remember that the U.S. Government is going to hold 60% of GM. At some point, they will sell it. Basically, it's a debt for equity deal. There is a chance this could be quite profitable for the Feds..

And that's what people aren't getting here, the government isn't giving the money away, they want all of it back plus interest.....

 

That's why the banks are so keen to give those TARP billions back, the government is hitting them with interest, shock/horror.

Edited by jpd80
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If GM goes out of business, everything is lost. The $30B or so tax dollars are gone forever. GM comes out of backruptcy and prospers, the government sells off their interest at a profit. Remember that the U.S. Government is going to hold 60% of GM. At some point, they will sell it. Basically, it's a debt for equity deal. There is a chance this could be quite profitable for the Feds..

 

Let's not forget that the entire Chrysler sum was forgiven.

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I don't think Ford will have a problem getting the same 'deal' from the UAW that GM and Chrysler have recently negotiated. The problem is you may have a situation where GM is basically debt free and competitive when/if they exit Chapter 11. Ford has borrowing has kept them out of the Government's pockets and backruptcy, but that money will eventually have to be paid back. Even without a GM resurgence, Ford could still be in trouble if the auto market does not significantly improve soon. If Ford Credit can become an Industrial Loan Corporation, that would help some. Just have to wait and see on all this.......

 

A good portion of it already has been. What do you think that huge debt-for-equity swap was all about? Not to mention they have already been servicing those loans since the day they were taken out.

 

If Ford can simply lower the costs of servicing its debt (which it seems plenty capable of doing thus far) then neither GM nor Chrysler will really hold any financial edge on them.

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I will rest easier about Ford when they finally come out with the Fiesta and the new Focus with hatchbacks for both. Until then, Ford still doesn't have a complete lineup to compete and is still doing a cash burn even though it's increasing market share. I'm basically writing off 2009 and just hope auto sales at least hang in there at present rate and Ford can increase market share enough to hang in there until Fiesta and new Focus hit market. That's all one can hope for in this market. Cash for clunkers would help new vehicle sales also and would lessen the cash burn even more. There is a second wave of home foreclosures coming, and second half of 2009 may not be as good as analysts are saying. It's still a bear market rally.

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