GM and Chrysler Not Viable?
McClatchy is reporting that President Obama will announce today that he will not approve additional bailout funds for either car company, saying that they have not yet gone far enough to ensure their long term viability. GM will get 60 days of operating capital to go back to the drawing board and Chrysler will get 30 days.
There are apparently two reports — one for each company — laying out the failures and the challenges:
The government laid out its case against the companies in two extraordinary documents that assessed their management structure, distribution systems, manufacturing capabilities and products — none of which drew much praise.
The government’s assessment of Chrysler’s prospects was particularly damning.
It noted that none of Chrysler’s current models were recommended in a recent article by Consumer Reports and that every one of its brands ranked in the lower quartile for quality in an assessment by J.D. Power.
It said the company is too dependent on its truck and SUV business and had only a 3 percent share of the small-car market, even though that segment makes up 21 percent of car sales overall. Noting that Chrysler’s strength is in trucks, SUVs and mini-vans, all vehicles with relatively low fuel efficiency, the government said it was unlikely Chrysler would be able to meet new government standards for fuel consumption.
GM, too, was criticized for being dependent on the sale of trucks and SUVs for its revenue.
The quality of its products also was a concern. While GM has worked hard to improve quality, “lingering consumer perception is that GM makes lower-quality cars . . . which in turn leads to greater discounting, which harms GM’s price realizations and depresses profitability.”
This report does not view the Volt as an adequate entry into the “green powertrain” market. Go read the whole thing. This is, of course, in advance of the official announcement so some caution is needed, but this is pretty detailed — and if McClatchy is right here, the Obama administration is really pushing these companies hard for some long term refocusing of their products and market focus.
Bonus Question: Why is it that the auto industry is getting this much restructuring attention and the banks are not?
Tags: Bailouts
The banks aren’t unionized.
Poor Republicans… instead of complaining about Obama handing out money without controls, now they have to pivot and complain he is meddling in GM’s business. They are writing up the talking points now which will be featured on Delaware’s righty blogs within 24 hours.
This could only have been written by and administration that is not staffed by auto industry lobbyists.
Sadly, the banking industry has one very highly placed lobbyists in this administration.
Weren’t most of the bank CEOs already replaced? I know Liddy, AIG head, was put in place recently. I also can’t understand why UAW contracts are breakable but AIGFG contracts aren’t.
Buick just took first place in J.D. Powers quality rating (tied for first with Jaguar). So much for the perception that GM makes poor quality vehicles.
http://autos.yahoo.com/articles/autos_content_landing_pages/908/jaguar-buick-dethrone-lexus-in-reliability-study/
There have been a number of industry reporters who have been saying that Detroit makes a much better car than they get credit for these days. That may be true, but they did let the impression that their cars were unreliable become calcified in the consumer’s mind. And they were not good at planning for the long term, which is how they got caught flat-footed on alternate energy vehicles.
And, UI — I think that the Citibank head is relatively new since the crash. But most of these guys are still at the head of their banks.
“Why is it that the auto industry is getting this much restructuring attention and the banks are not?”
Because the banks are much more powerful than the auto companies, and more powerful than the government itself. So far they have pretty much called the shots.
The lack of power of the auto companies is obvious as the government decides who gets bailed out and which executives can stay and which must resign. This is not true with the banks.
The banks hold us hostage by having the power to either make loans or not, as per their whim of the day.
Both Citi and BoA are moving to give back the bailout money, because they do not wish to be beholden to or encumbered by the government. Citi is buying a new fleet of corporate jet planes. Insurance giant AIG has flouted Washington with their continued excesses. Their bonus give back has been only about one third of the bonuses given. These “too big to fail” companies therefore continue to behave as they please.
So who has the power?
Cars are easier to understand than credit default swaps.
Even Homer Simpson can design a car.
Can we have a Financial Industry Commission like we had an Auto Commission?
The CEOs of Fannie Mae, Freddie Mac and AIG were forced to resign after the bailout. The Merrill CEO was forced out and the BofA CEO is in trouble as well.
now they have to pivot and complain he is meddling in GM’s business. They are writing up the talking points now which will be featured on Delaware’s righty blogs within 24 hours.
Wow, that didn’t take long.
I believe it was the Bush administration that pushed out the Fannie, Freddie and AIG CEOs.
“Even Homer Simpson can design a car”
Is that who I have to blame for the Chevette? 🙂
@anon — bet that they were cheering on the repub congresscritters who were trying to renegotiate UAW contracts from the Capital. The hypocrisy of the day is starting to not be much fun since it is ohsopredictable….