rickholio

http://news.ft.com/cms/s/ea6601fe-a8...00e2511c8.html

They don't mention it in this article, but Ford has their bond rating at BBB-. Like GM, their corporate paper is just above 'Junk Bond' status... although unlike GM, Ford is fortunately not drowning in nearly as an immense amount of debt so it could be worse for them. Still, stock's already dipped by around 5% in after hours trading and this announcement was made only around 8 hours ago.

One thing notable in both "down earnings" announcements: They both cite soaring health costs as a major factor in their woes. You'd almost think they were acting communist and bucking for a single payer health system.

rickholio

Correction - Ford DOES have a massive amount of debt. In fact, it and GM are the 1st and 3rd largest corporate borrowers in the U.S. according to Lehman Brothers Holdings Inc.'s Credit Index. G.E. is #2.

Ouch.

smack

japanese companies, combined with a slow economy are really going to force the US auto industry to do something drastic. they really need to change the way they do buisness, from the product, up.

__________________
Cry havoc and let slip the dogs of war.

Lensman

GM and Ford have so few design hits. It's amazing they are not in even worse shape. Look at the Ford 500 and the Buick LaCrosse, what the fuck are they thinking?

rickholio

They're still designing from the 60s and 70s, best I can tell.

I remember driving around with my old man in a Ford Custom 500 he picked up after the Dodge Dart threw a rod at 2am while 40km outside of edmonton during the winter back in the 70s. I also remember learning new and highly inventive methods of cursing from him while he was constantly repairing it.

Still, it worked better than the car we got after that: a chrysler cordoba. Man was THAT shitheap a money pit. Nice veleur interior though. Pimpin' ride if you can tolerate 8 weeks out of the year in the shop getting power steering lines bled, radiators flushed, alternators alternated, starters replaced etc. Never-ending problems, and he bought the thing new!

Anecdotally crappy cars aside, Ford + GM woes are bad news. Between the two of em they employ close to 100,000 people worldwide directly, and 1000s more depend on them in ancillary services. If either of em go tits up it'd make Enron seem a calkwalk.... if BOTH of em go tits up... -shudder-

The last time any entity defaulted on debt even remotely that large was Argentina.

Juggernaut

The Europeans are going American in design, the Americans are going Euro... either way, you're fucked when buying a new car.

rickholio

Aren't you forgetting those guys to the north of you?

Juggernaut

I've always kept well clear of Asian cars.

Veterans Day

Belly up for either company will never happen, every car would be dio-diesel before they went belly up.

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

rickholio

100% belly up seems unlikely. There's just too much pork wink-and-nod money there for either of em to disappear outright. However, even a 'simple' chapter 11 would cause immense pain and suffering. Like I said, the debt, market cap and scope of these companies dwarfs that of enron, and enron was disasterous for the market.

RawAlex

You forget the most important underlying problem for both Ford and Chevy: the majority of their profits are made in pickup trucks, SUVs, and similar type vehicles. With the price of gas moving up, the demand for these trucks as "personal transportation" will certainly drop, which again eats away at the bottom line. They have spent huge percentages of their total product development on these things, and now they have a product line that isn't in keeping with $50+ barrel oil and $2 - $3 pump gallon gas.

We pay a bit more up here still, and the local chrylser deal is reporting many companies that were using minivans and such for light deliveries are moving to hatch backs or PT cruiser size cars. The diesel Jeep Liberty is outselling the gas ones.

Ford and Chevy are, well, fubar (with no insult intended for JFK!)

Alex

AlienQ - BANNED FOR LIFE

Closing factories state side has a toll.
Made in TAIWAN, outsourcing...

It will be a great day when they file bankruptcy for slitting there own throats.

__________________

eddie-executive

As long as there is contractors Ford and Chevy will be around.

99% of contractors use Ford and Chevy

These damn kids that first get their license all have to be trendy and rice out a Honda or Acura thats what is hurting sales for gm and ford. And the metrosexuals and fags that drive VW Jetta's

Don't even start and say its cause gm cars suck

I will continue to be a loyal gm buyer until I die.

__________________
Jealousy... is a mental cancer. ~B.C. Forbes

BRISK

I read that GM actually makes most of its profits from its GMAC financing unit, not car sales, and with interest rates on the way up, it will kill GMAC's profits.

Not a good sign for GM or the US economy

__________________
I post on GFY so that when people ask me what I do,
I can tell them that I work with the mentally retarded.

Veterans Day

Ask dodge how close they were to death in the 80's until Lee Ioccoa left Ford and saves their ass. No chapter 11's for either Ford or Chevy, wont happen. IMO anyway. Ford's absolute stranglehold on the truck market is astounding.

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

mb

Try living in Detroit while this news keeps cropping up every day. Each morning when I open up the paper, it's "GM lays off 3000", "Ford's credit rating cut", etc...

My property value inches down every day. I should have moved two years ago.

mb

DateDoc

When it comes to the point where a bank will not lend them money anymore the government will. They bailed out Chrysler. They've bailed out airlines. The government would never let either go broke and close down.

__________________

rickholio

I think they have been bailing them out, quietly, by allowing them to amass hundreds of billions of dollars in bond debt. A large portion of that is owned by the US Gov't (a large portion is also owned by foreign gov'ts, around 25% if I recall correctly from a graph I saw in a site now long lost...)

I suspect something a little more dramatic to come. Call me nuts, but I think the fact that both GM + Ford are saying "health care costs too much" is going to factor into future moves. It's unlikely that this administration would do anything that would be good for a plurality purely out of altruism, but if the biggest money industries in the US start demanding, say, single payer health care...

Redrob

I think nationalized health insurance for everyone would be good for the corporations.

rickholio

You bring up an interesting point, and one for which I have no direct data. I'll hunt around for market share numbers per vehicle type, but in the meantime I found these numbers for
overall share by manufacturer/country of origin that breaks down like this:

14.0% Chrysler (up 1.0% in january)
17.3% Ford (down 0.1%)
24.7% General Motors (down 2.5%)
Total share: 57.0% (down 0.6%)

32.3% Japanese Manufacturers (up 1.3%)
4.1% Korean Manufacturers (up 0.3%)
6.4% European Manufacturers (down 0.9%)
Total share: 43.0% (up 0.6%)

A choice quote:
This is all in reference to the levels of dealers incentives and how they affect purchases by end buyers. Domestic manufacturers have had to seriously pony up bucks to keep people buying domestic... and it puts the lie to their claim that the additional per-car 'health care premium' is the main reason they're swirling down the drain:



It's hard to claim that $1-$1.5k in health care-per-car is the main problem when $2-$3k per sale more than japanese automakers is being kicked back to dealers or the buyer. It probably doesn't help, but there's obviously something else at work here. I'd suggest that people are taking that $2-3k price premium as equivalent cash value to lower real or perceived quality of domestic vehicles.

I'll keep hunting for a per class marketshare breakdown, if such a thing exists online...

Veterans Day

you will notice Ford got stagnant as far as "cars" and new concepts go. They have focused solely on thier truck line, F-Series for many years now. Lets face facts, no japanese maker, currently makes a serious heavy duty work type truck for the american man. Ford has this field locked up, they know it and ran with it, but its nothing new, the F-Series has been the best selling truck for some 30 years consecutively, thats crazy you ask me. There are millions of people like myself who are fiercly brand loyal also. Hell would have to freeze over before I buy japanese or anything along those lines. Also lots of guys like fixing shit themselves and know they can run to the parts store and get the parts same day for a mere fraction of those ridiculously priced japanese parts. All just speculation on my part I guess, just my observation in the last 15 years of owning vehicles.

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

PenisFace

Domestic auto makers need to do what Japanese car companies do. Make cars that appeal to young people, that have high reving small displacement motors (cause gas prices should be considered rape now), and they need to fire the old people on the "come up with cool cars committee" and hire 20 year olds to replace them.

__________________
Need custom blog posts or articles? Hit me up: Blog And Article Writer

Yes, I can do any kind of custom orders, too!

ICQ: 641204000

iwantchixx

They did it to themselves.
<begin telling it like it is>
Making vehicles that are unreliable, drink gas at alarming rates and spend way too much time in the shop. Keep in mind. There is hardly any profit from just selling American cars. They make their money from parts and service. Example, the Ford Focus costs the dealer 19k to purchase in Canada. They then sell it for $19,600. The profit is split between the dealer and the salesman. Not much of a profit there is there? So they rely on parts and service to stay afloat. Ford produces vehicles with lesser quality parts for general things such as tie rods, sway bars, breaks, and engine support equipment such as belts, hoses, fans etc etc etc. Pretty bad when I had TWO ford salesmen tell me on separate occasions not to buy a Focus unless it's brand new and plan to sell it after a year. How can a company stay afloat when they produce products that even their salesmen won't recommend?

The same applies to GM and Daimler/Chrysler. The profit margins on sales alone are incredibly miniscule. So they need to make their money somehow and the manufacturers supply vehicles MADE to wear quicker than they should. Look at that piece of shit Dodge Caravan / Chrysler Voyager sold in the late 80's early 90's. Every single one of them spent more time in the shop than driven in their first 3 months of life. That's not good. No vehicle should behave like that. Of the 2000 Dodge Caravan that my old boss had that had the transmission fall out after 60k on it. these companies are producing crap and are paying the price for it now.

Now look at Jap and European car manufacturers and dealers. The profit margin is much higher. Look at the prices a Civic goes for. 20k for a bare minimum base model up here. Cavalier or a Dodge 2.0 go for 4-6k less. It's apparent in the prices for replacement parts too. That's why getting a Civic repaired VS a Cavalier is much much more expensive. VW is absolutely insane for parts. But you'll hardly ever see your vehicle in the shop if you have one of these. They recoup profit losses by marking up the vehicles more at the manufacturer, the dealer and the parts shops.

I'd take my super reliable Civic over any American vehicle any day, easier on gas and I know it's built to last and I know that the only thing I will ever need to repair is the alternator, brakes and occasionally a tie rod end after about 5 years of driving it. Show me an American car that can go 160k on the same set of plugs and 90k on the same serpentine belt. Hell, this thing can go 200k on the same gallon of ATF fluid. it will still purr like a kitten when it's 14 years old as well. My bro in law had a 1990 civic that sounded just the same and rode just as good as my 2001 model.
That's really why these American manufacturers are hurting, nobody is buying their sedans and coups like they used to. People are sick of shoddy cars. Of course, if you want a good truck or high end SUV go with Chevy or Ford but even then... and it's ironic...the Mazda versions of Ford's SUVs are better, more reliable and just better craftsmanship. They're hurting themselves there again. But now, Japanese manufacturers are producing big trucks and SUVs and you can bet people are going to continue flocking to them as the craftsmanship and reliability is better. People are no longer stupid, they don't pass up a quality vehicle just so American workers can keep their jobs because most American vehicles are produced in pieces all over the world and most Jap vehicles are being manufactured in our own continent. People want what they pay for, not something they have to worry about breaking down every time they go on a trip.
</end telling it like it is>

iwantchixx

That's all about to change.

Honda Ridgeline.

Check it out.

Sure it's a short bed but they'll have a full bed out soon enough.

You can bet your left nut that Toyota will be following suit too. Nissan also had a monster out now for a few years as well.

Things are changing.

People want reliability and their money's worth.

Ford, GM and Daimler/Chrysler are going to be hurting very badly very soon and I get a little chuckle out of it

Veterans Day

this dream land you live in makes me chuckle. Trucks and japanese dont belong in the same sentence.

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

Veterans Day

Honda Ridgeline? Thats an awesome rip off of chevy. 3.5 252 lb-ft of torque and its rated at 5,000 lbs capacity. I hope your going downhill

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

iwantchixx

Oh get off your all american high horse. nobody cares.

Why doesn't Japanese and trucks mix? Keep in mind, the first trucks were not american. Also, you think that Chevy trucks are America? Think again. The only thing american about it is where they were assembled. Period. The sheet metal, iron, engine parts, transmission, interrior parts etc etc all foreign made using cheaper quality materials and craftmanship.....

So tell me again, why doesn't it mix? Just because it hurts your sickening pride?

Man, people want quality and will go where quality is. Mark my words.

Give me one educated reason instead of these fucking childish antics of yours.

fl_prn_str

I am sure you have heard of Lee Iacocca and the US Govent bailout of the Chrysler Corporation right....

Veterans Day

wow the truth hurts doent it? Your gonna have a heart attack there kiddo. Like I said time and time again, Ford F-Series particularly the F-150 is the best selling truck for 25+ consecutive years, that I call success. The foreigners have had plenty of time to make a run at the market, obviously they feel incapable. It's just funny how honda brings this truck to the market and its a dead ringer for a chevy Ford sold 935,000 F-series trucks last year. Apparently doing something right wouldnt ya say?

__________________
Build a Massive Traffic Network, Hands FREE, Totally Automated

iwantchixx

I always thought you were an idiot and this proves it.

"the truth hurts doent it?"

How old are you? 12?

I know the f-150 is a beast of a truck and the best there was so far but that doesn;t mean it's the best quality. People had these choices. GM, Ford and Dodge. Not much to chose from unless you went Toyota heavy duty or Nissan but they were too expensive for people and people have pride issues with buying a foreing truck, much like youself. So of course the f-150 is #1.

Now that Honda is in the market with a truck You can bet they will be taking a big market share now. WHo knows, maybe the next genration of their trucks will out haul the f-150. They seem to out perform almost everything else in their class with reliability, usefulness and style.

My whole point of my post that got you upset and acting like a 12 year old was that American truck manufacturers now have stiff competition and somethig to worry about.

Yeah so the Ridgeline looks like a bit like the Chevy. big deal. The ONLY thing about it that looks like it is the short bed and chevy wasen't the first to use the short bed. Do your fucking research there kid.


Why do you get so upset over trivial things? Why do you act all upset and upidy about something soemthing that your personal opinion doesn;t match? Your're warning me about a heart attack? You're the one who flew off the handle and started acting like a 12 year old getting all defensive. Go see a doctor about that blood pressure of yours and act your focking age,

I'm sick of 12 year old so called webmasters.

BRISK

I would think that one of the most important lessons of the American automobile industry is to never underestimate foreign competition and their ability to one day kick your ass.

Only the paranoid survive. The minute you sit back thinking you've got a guaranteed lock on any industry is the minute that you just began the process of your own destruction.

"Market capitalisation says it all. Toyota is worth more than the American Big Three put together"

http://www.economist.com/displaystor...ory_id=3599000

__________________
I post on GFY so that when people ask me what I do,
I can tell them that I work with the mentally retarded.

rickholio

I've had opportunity to chat with a couple car salespeeps on a personal level... turns out where the REAL money is on each sale is a 'factory incentive', essentially a direct kickback to the salesperson, often more than the margin of profit off list price. It's one of those things that everyone does but few will fess up to... if you get a chance to chat to one outside of a business setting, ask about it. Very enlightening.

Even with that kickback scheme in place, domestic auto sales margins per vehicle manufactured are extremely slim compared to, for instance, japanese auto sales.

See above regarding Dodge Dart, Ford Custom 500 and Chrysler Cordoba. I'm pretty sure that learning how to swear during my childhood reached peak efficiency while listening to my old man piss and moan about his latest shitheap that he was throwing money at.

That said, the Cordoba was still a mad pimpin' ride.

Blue book values on Japanese cars bear that up... the much-maligned (in another thread here) Toyota Camry for instance retains value like a motherfucker. The blue book on a '95 camry SE with 100,000 miles in good condition is around $5k. A 95 Ford Taurus SE (which came with more baseline options, like leather interior 'n whatnot, but roughly the same sticker price) with 100,000 miles will get you $2,300... and it's highly likely that you'll have thrown much more money at the taurus to keep her roadworthy.

I've certainly seen a number of light toyota pickups around (hell, they we're popular enough to make it into pop culture references even going back a few years... like the 'YO' truck from Toy Story, f'instance). So there's some dent being made in the market, although I *still* can't find a solid source for marketshare per vehicle class aside from Class 8 heavy trucks (Mack appears to be the winner there). Still, I wouldn't underestimate the power of nationalism when it comes to buying certain types of machinery... Stereotypically, the average pickup driver is your average good ole' boy with a gun rack in the rear window and "wouldn't buy no fuckin' ve-hickle from no fuckin' slope ever" (yes, I've actually heard this said out loud).

Besides, most people I know with Ford trucks actually like them for what they need them for. They're solid performers (if lackluster on gas usage) and can take a beating. The detonating cruise-control thing from the F-100 series lately didn't go over too well though, admittedly.

I don't see myself buying a Ford for town runaround use any time soon though. Might pick up an old '64 Mustang convertable and trick it out some day as a hobby, but if I did I sure as fuck wouldn't tool around in it to pick up the kids or go get groceries.

BRISK

That's what H2 Hummers are for, at least that's mostly what I've seen them being used for

__________________
I post on GFY so that when people ask me what I do,
I can tell them that I work with the mentally retarded.

rickholio

Of course. I suggest that nowadays, instead of doing a full-on bailout (like S+L, or Chrysler) that there's been some 'backdoor bailout' by gov't quietly lending more and more coin to GM or Ford by buying corporate bonds. Problem is that it doesn't seem to be helping all that much any more, as profits still keep sinking and bond ratings keep dropping.

There was one source I was reading (if I can find it again, I'll cite it) that said GM only produced a 0.7% return on investment last year, with most of that money made from GMAC (their financing branch) offsetting loses in the auto side. The commentator quipped something to the effect of "... any local bank could do better with your money in a savings account." Not a great incentive for anyone to continue to pour money into their coffers while they continue to flounder around trying to find a design that'll sell.

Something dramatic will have to happen. I don't anticipate a total demolition (although it's not completely out of the realm of possibility!) but I can see a re-organization with a focus on building to their strengths. Ford makes a solid workhorse pickup... if they focused on building those trucks primarily and cut out the dead weight mid-line sedans and econoboxes, they could probably turn a respectable profit.