GM, Ford: Big Mistakes Keep Piling Up
By Michael Shedlock
Mistake after mistake keeps piling up at these companies. Let's take a look at some recent examples before we get to the latest news.
- August 5, 2008 Default Risk on GM, Ford, Chrysler Hits 95%; Automakers Ask For Taxpayer Handout
- July 1, 2008: Auto Sales Dismal At GM, Toyota, Ford, Chrysler
- June 25, 2008: Can Battery Technology Save GM?
- June 24, 2008: GM's Ridiculous Bluff
- May 8, 2008: GM About To Throw Away More Money
The above articles are on GM's ineptitude at selling cars, sticking with SUVs and Hummers too long, squandering leads in battery technology, failing to dump GMAC and Rescap when GM could have, and announcing ridiculous bluffs about raising prices on 2009 models.
GM management cannot seem to get anything right. Ford is in a similar boat. Let's take a look at the most recent news, Ford first.
Ford Abandons 2009 Profitability Goal
Ford had no chance of reaching profitability in 2009. Check out the 2008 second quarter results: Ford reports $8.7 billion loss for second quarter 2008. Furthermore, Ford has no chance of profitability in 2009, 2010, 2011, or 2012.
Ford Is Light Years Behind In Battery Technology
Ford is woefully light years behind GM and Toyota (TM) in battery technology. Indeed, Ford is asking for taxpayer handouts just to stay in the game. From Ford: Plug-in hybrids must become ‘a national priority’:
Unlike Toyota and GM, which hope to deliver plug-in hybrids by the end of the decade, Ford is taking a more cautionary approach and doesn’t expect to launch such a vehicle for another five to ten years.
Ford is calling on the government to introduce tax breaks for plug-in hybrids as well as a $500 million fund for advanced battery research. Both options have been considered by the government but no green light has been given.
The announcement has coincided with Toyota’s promise to have its first plug-in hybrid vehicle on the market by 2010.
Ford Plans New Luxury Crossover Vehicle
Reuters is reporting Ford plans new luxury crossover vehicle.
Ford Motor Co (F) is expected to announce Friday that it will build a new seven-passenger luxury crossover, the Wall Street Journal said, citing two people familiar with the automaker's plans.
The three-row Lincoln MKT crossover, which is due to go into production next year, will share the same architecture as the new Ford Flex, but will feature a much sleeker design compared with the boxy Flex, the Journal said.
The Acura MDX, the Audi Q7 and the Mercedes R class would be among the competitors for the new luxury crossover, the paper said, citing people familiar with the matter.
MKT is not designed to be a large production run and the company expects annual sales in the range of the mid-20,000 vehicles, the paper said.
Earlier this year, Ford abandoned a longstanding goal of returning to profitability in 2009 and accelerated plans to restructure its North American operations to produce more cars and cut back on slower-selling trucks and SUVs as fuel prices climbed.
Can Ford Compete In The Luxury Market?
OK so there will be some demand for luxury, but why would any luxury buyers consider anything with a name plate of Ford? Perhaps they might in some other market climate. However, this is hardly a normal market climate.
I have no idea what Ford is thinking, given that demand for luxury vehicles is going to suck wind big time. And what little demand there will be for luxury, it is highly unlikely to be for vehicles sporting a Ford nameplate. Ford's strategy is all the more difficult now that affluent pretenders are completely out of the game.
The words "Ford" and "Luxury" combine about as well as oil and water. More importantly, Ford has simply not gotten the message that The Future Is Frugality.
GM's XFE (Extra Fuel Economy) Models
Let's now turn our attention to GM. Inquiring minds may wish to consider GM Reduces Carbon Footprint by .0000001mm:
Call it the 1 mile-per-gallon solution - and try not to laugh.
General Motors (GM) plans to release new versions of its full-sized pickup trucks and SUVs later this fall. Both space-age editions get an extra mile per gallon in both city and highway driving.
The new models are designated XFE (for “extra fuel economy”). That’ll scare the bejabbers out of Toyota (TM) and Honda (HMC), eh?
On the new XFE models of Chevrolet Silverado, Chevrolet Tahoe, GMC Sierra trucks and GMC Yukon SUV models, GM extended the front lower air dam, lowered the suspension and revised the chassis to cut aerodynamic drag. GM also cut vehicle weight by using more aluminum parts, including an aluminum spare. The engine is a 5.3-liter V-8 with aluminum cylinder block and heads that can run on ethanol, surely one of the great boondoggles of our time.
All this creates a net savings of 1 mpg - a great selling point to the math challenged.
Even with an additional 1 mpg from the XFE models (the new models get 15 mpg in the city and 21 on the highway), it looks like it’s still a long way back to profitability.
GM's clearly behind: What’s the level needed to catch buyers’ attention? Maybe 20 mpg in city driving and 25 on the highway, or even 25 and 30? We’ll see.
GM's Second Quarter Results
GM reported a net loss of $15.5 billion, or $27.33 per share, for the second quarter. Sales of GM trucks and SUVs dropped 23% in the first seven months of this year.
Why anybody would keep funding Ford and GM is beyond me. Then again, perhaps banks and China think that if they load up on enough of GM's and Ford's crappy bonds, that a too big to fail situation will be created, just as happened with Fannie Mae and Freddie Mac.
At this juncture, I would not be surprised by any government bailout attempts on anything. On the other hand, I can guarantee that all such efforts will produce a negative economic benefit.