U.S. Auto Industry in Depression:
Good Morning
Thank goodness we have people such as Mr. Ghosn to analyze the massive data and come up with this startling prediction. However, our King of Simple financial analyst group did the numbers just to be sure Mr. Ghosn had his facts straight…about two years before Mr. Ghosn got the news. Congress still hasn’t come around to it. That’s why we have signs saying, “Slow Adults Playing” around the D.C. Capitol area.
Let’s work out the details of the auto industry with Mikemathics. In 2007 alone, G.M. lost $38 billion and set a new Guinness record for a one year loss. Ford lost $2.7 billion and Chrysler lost $1.6 billion, not counting the multi billion dollar loss that Daimler took when they unloaded Chrysler on Cerberus Capital.
That adds up to $42 billion and change and 07 may reflect back as the good ol’ days, if 2008 continues to pan out the way that it’s getting started. This financial news is coupled with the fact that GM is offering buyouts to all 74,000 of their remaining union workers. Many auto analysts believe that neither Ford nor Chrysler can continue as stand alone companies.
So taking this all into account, Yep, the auto industry is in trouble and recession is not the word that comes to mind; “depression” seems to fit the situation nicely. And, we can get quick agreement on that fact by asking any number of the more than 250,000 people who have lost their jobs as a result of this conundrum. (The actual number of job losses is much higher than 250,000, due to the ripple effect of those job losses in peripheral industries).
I’m thinking that the depression in the auto industry is going to ultimately affect the self storage business. It will become cheaper to buy a mega sized SUV to store your stuff in than to rent a storage unit. I’m also envisioning stacking motor homes and selling them as cheap condos.
So how is this all going to shake out? The easy answer is, “not very well.” The hard answer is, the auto industry will never be the same. Like general aviation, we have reached the summit in that particular industry, it was nice while it lasted, but the other side of a summit is downhill.
The cost of producing an auto in the
Those folks in
You don’t have to be an executive from a foreign car manufacturer to determine that the
The auto industry is nothing more than a symptom of the issues that face all of
Wake up
Subscribe to this blog
Hey Mike, Outside of stupidity in management, lousey styling, and thinking that they can still control the consumer, the American car companies are doing great. That’s if you consider it great to be crashing brilliantly! Without airbags and seatbelts too! I am not sure which came first, the slavish American car buyer or the “if we build it they will buy it” companies. American companies, particularly GM have had the mindset that whatever they build, we will buy. I don’t know if you remember Al Capp’s Lil’ Abner but he was always mocking GM with his character General Bullmoose(If it’s good for General Bullmoose, it’s good for the USA). Our car companies continued to build fat, un-technical cars long after the rest of the world was forced to advance auto technology into hyperdrive. Even now they are having to learn/buy most of their technology from outside our country.
An even bigger problem for them is the timing. The time we all knew was coming is here. Anything relying on oil is fast approaching it’s time stamp expiration. Hybrids and electrics are going to be the way to go now and in the future. No matter how much ethanol they can grow it will not replace enough gas to be off any real assistance. MPG has become they key to selling vehicles. All vehicles will be forced to lose weight and use much more efficient engines/motors. The nostalgia for the wonderful V-8’s will become even more in the past. GM is reviving the Camaro but has already had to drop the number of V-8 models it can make even before it is introduced due to the mpg regs coming. As we have discussed recently large metropolitan areas will be needing to upgrade and expand their mass transit to help employees get to their jobs. With the recession/depression employees will have difficulty getting to their jobs, providing they have one to start with.
Recessions/depressions are at their most scariest due to the ability they have to expand at exponential rates and our car industry is definitly one of the leading contributors to this expansion. Have a good one Mike!
Hi Mike,
Finally an answer to the homeless crisis. Just give them all an R.V.
Seriously, the auto makers have only themslves and the unions to blame. With outrageous wages and benefits for current and retired workers, along with government regulations, they simply can’t produce an affordable vehicle. They have become health care providers instead of auto makers. The easy answer; send them overseas.
All of the good lessons I’ve learned in life have been very painful. I assume corporations work the same way. When not enough money is coming in you raise prices (bad idea) or cut costs. I also think it’s possible that we just have way to many vehicle being manufactured.
I’m sure that’s very simplistic thinking ,but after all this is the king of simple site and if nothing else, I am simple. Larry-
King of Simple is correct! Growth seems to be at the bottom of all the smelly stuff. Selling America on the Mega SUV, a Cadillac, Lincoln and Mercedes model, while at the same time, knowing that fuel was running out…was shameless. But even more shameless, were the dumb bunnies that bought them with a 60 month payment plan.
The former Big-3 were guilty of exactly what Michael said, “If we build them, they will buy them.”
I bought a new Datsun in 1971 for $2200. It had rack and pinion steering, four wheel independent suspension, overhead cam, radial tires, high voltage duel point ignition and got like 30 MPG.
None of the things mentioned were standard on U.S. autos. Even radial tires were laughed at. Who would want those dumb things that look flat all the time?
But the auto’s are only the tip of the iceberg, Our entire economy is on the skids. Steel, textiles, family agriculture, small manufacturing…all gone.
We need to go back to repairable products. Remember the fix it shops who would even fix a lamp cord or a broken toaster? Not today, even cars are disposable.
I continue to say that this is no drill, this is the real thing, ask an auto worker.