Carmageddon '09

When I last looked at the situation with the US car industry in Two flat's and a fast leak, the jury was out on how GM & Chrysler were performing after the first round of government funding.

The update from early April is that GM is racing a 60-day deadline Obama announced on March 30, while Chrysler has 30 days to complete a tie-up with Italy’s Fiat SpA. The article What's Next For GM and Chrysler has a pretty good summary of the individual challenges each company faces in the next 30-60 days.

In this same news, GM's Rick Wagoner became one of the latest members to the GFCRV club (Global Financial Crisis Redundancy Victims). As Deborah Yedlin writes for CBCnews:
"it remains somewhat unsettling that it was his administration, and not the GM board of directors that forced the resignation of the company’s president, Rick Wagoner.

As Obama rightly said, the workers at these companies are not to blame for today’s problems - it’s the lack of leadership on the part of management and the boards of directors that have brought the once proud companies to their respective knees."

As Shikha Dalmia suggests in GM Should Run To Bankruptcy Court, GM needs to run to bankruptcy court and get this stuff over an down with now - especially as the government has now guaranteed warranties:
"...GM should demur and file for bankruptcy now. For starters, waiting 60 days will mean it will be about $8 billion or so more in the hole given that it costs about $ 3 to $4 billion to keep it afloat for a month. Borrowing more money is not a smart move for a company whose debt--not counting its pension obligations--is already more than 24 times its market capitalization. But it's an especially bad idea to get in deeper with the government. Why? Because if GM ends up in bankruptcy anyway, the court will be able to write off its debt to unions and creditors. But Uncle Sam will take its pound of flesh. This means that GM will have less on its back to start anew once it emerges from bankruptcy.

But GM has to fear the government even if it doesn't go into bankruptcy. In that case, the oversight for its restructuring plan will be supervised not by a court but by the Obama auto task force. And the odds that the task force will be guided solely by GM's bottom-line interests rather than Obama's political agenda are about the same as pigs flying."

To round out the perspective on GM's woes, I agree wholeheartedly on the point made in UAW President Should Share Wagoner's Fate, in that the UAW bosses should be crucified for their part in this fiasco - particularly the failure to collaborate to produce a long-term, sustainable industry.

Yet, as I've noted from the get-go, Ford is enjoying the benefits of foresight (in mortgaging everything they had before the excrement hit the fan), the moral high-ground (in not asking for US funds) and making the hard calls on their business needed to emerge out the other end.

The Ford Advantage Plan is a great piece of consumer incentive marketing (if you ignore the basic issue of *should* they be offering people more cheap consequence free credit).
In a nutshell: The Ford Advantage Plan is effective on vehicles delivered from March 31 through June 1. The Plan offers payment protection up to 12 months for up to $700 per month on any new Ford, Lincoln or Mercury vehicle if a customer loses his or her job. Plus, 0 percent financing from Ford Motor Credit is available on select vehicles.

If you think about a key concern for any potential car buyer right now, it's that they may lose their job and be unable to afford the repayments. Great solution !

As usual, Jon Stewart has a humorous take on the situation:

The Daily Show With Jon StewartM - Th 11p / 10c
Carmageddon '09 - Lemon Aid
Daily Show Full EpisodesEconomic CrisisPolitical Humor

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posted by Lee Gale @ 2:58 AM,


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