Linked below is one of the most astute analyses of the decline of the Big 3 U.S. auto companies. The article linked below by NY Times chief financial writer Floyd Norris focuses on one of several factors that led to the decline--going farther and farther into debt as a result of failure to adjust capacity to declining market share.
I would add that the market share decline was inevitable as the trickle of imports in the 1970s became a torrent in the 1980s and 1990s and "transplant" assembly plants popped up like mushrooms in the right-to-work states in the South. The Big Three managers apparently didn't see the handwriting on the wall that they were facing a big decline in market share as a result of free entry of imports into the U.S. car market (and their own failure to deal with product quality and durability issues).
Norris points out the irony that the government is now teaching capitalism to GM and Chrysler, forcing them to bite the bullet and reduce their production capacity and dealer network to match their market share.
"U.S. Teaches Carmakers Capitalism" by Floyd Norris in the NY Times, November 20, 2009 (Floyd Norris, chief financial writer of the NY Times, is, in my opinion, the best in the business.)
http://www.nytimes.com/2009/11/20/busin … .html?_r=1
I'm English and it's been the same over here. Seems like the trick was to build small affordable cars that are good all-round instead of big V8's, V10's etc. American manufacturs tried to counter this with cheap materials but the build quality was never there. The Caddy SVT is like plastic parts stuck together compared to the Germans who have much higher standards.
I just wrote a hub - "Why cars are expensive" and the source article is explaining a lot about the (American) auto industry.
You can read the full article here:
http://www.cars-10.com/2010/03/why-cars … g-premium/
http://www.freep.com/article/20100420/B … P-autonews
GM keeps loan promise
BY JUSTIN HYDE
FREE PRESS WASHINGTON STAFF
WASHINGTON -- General Motors CEO Ed Whitacre is to announce Wednesday that the automaker will soon pay off $5.8 billion in loans from the U.S. and Canadian governments well ahead of a June 30 deadline, a move it has promised since last year.
Whitacre is to announce the payment at GM's plant in Kansas City, Kan., and then fly to Washington to meet with House Speaker Nancy Pelosi and Michigan's congressional delegation, people familiar with the plans said Monday.
GM is to use the move to highlight its steps toward issuing shares to the public and helping the U.S. government get out of its 60.1% ownership stake in the automaker. GM officials have said the company could break even this year, thanks to massive cost cuts under bankruptcy. The automaker reported a $4.3-billion loss for the last half of 2009.
The automaker's payments are to include $4.7 billion to the U.S. Treasury and $1.1 billion to the Canadian government; it had already paid $2.3 billion on both loans. The money comes from a $16.4-billion escrow fund set up by the two governments as part of GM's bankruptcy that the automaker is required to pay back by June.
The U.S. government has put nearly $50 billion into saving GM from collapse, an amount Obama administration officials have said was unlikely to be returned entirely when GM begins to sell shares publicly. Based on analysts' estimates, the government's stake could approach the $30.1 billion spent by the Obama administration solely on GM's bankruptcy.
by pgrundy8 years ago
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