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March 15, 2006
Reading the graffiti on Detroit's walls
An interesting post over at Joe Sherlock's blog, View Through the Windshield.
Sherlock has an update on the rumored impending bankruptcy of GM, an event made less unimaginable by the list of once mighty, now defunct corporations.
[W]e've seen a lot of large and well-known companies declare bankruptcy in our working lifetimes - Penn Central, Studebaker, Texaco, Atari, United, Kmart, Macy's, Braniff, Polaroid, U.S. Steel, National Gypsum, TWA, Allis-Chalmers, Johns-Manville, Lionel, Nucorp Energy, Continental Airlines, Southland Corp., PanAm, Owens Corning and many more.
Sherlock has been involved in the automotive industry for a long time, and his observations are well worth pondering.
All of us are convinced that GM is well on its way to bankruptcy. Forget sophisticated cash flow analysis, reading the details of 10-K filings, etc. It's a gut feel -- based on lack of good product, GM's severe and continuing misreading of the market, the number of GM cars seen in rental lots, the substantial off-price deals being offered on most models ('March Madness' being the latest) and the lack of interest by any of our friends in owning anything made by GM. Oh, and the fact that it's trying to sell GMAC - its most profitable entity - is a big signal, too. Another tip-off is the bankruptcy of several key Tier I suppliers. And the reported financial losses of other Tier I vendors that have not (yet) gone Chapter 11. The bankrupt suppliers will soon force price increases on GM - a company which can't seem to raise its own prices in the marketplace because of low perceived value by prospective customers. That makes the squeeze tighter.
He goes on to say that a GM bankruptcy might push Ford into receivership, too, which leads one of his friends to advise new car buyers to be very cautious.
One of my car buddies remarked, "Because of warranty issues that might result from these bankruptcies, I can't - in good conscience - recommend a Ford or GM product to anyone. It hurts me to do this (he's been a loyal Ford man for 40+ years) but I'm telling people to check out Honda and Toyota if they're thinking of a new car."
Sadly, I have to agree with him.
Given that none of the top-rated cars in Consumer Report's annual auto issue are U.S. marques, I'm afraid I also agree: for now, American cars are a sucker bet.
Posted by Mike Lief at March 15, 2006 12:26 AM
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Comments
Such as the Zuzzle?
Posted by: Anonymous at March 15, 2006 11:36 AM
That would be the Lincoln Zuzzle, the latest in a series of forgettable products from the former luxury automaker.
Posted by: Mike at March 15, 2006 11:41 AM