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There was a lot of car company news recently. Chrysler management elected to close the company for two weeks this summer to save money. Negative comments from Wall Street analysts pushed Ford (NYSE:F) and GM (NYSE:GM) to multi-year lows.
According to The Wall Street Journal, "Auto makers have been expecting a difficult first half in 2008, but new data suggested an even grimmer outlook." A Lehman Brothers report earlier in the week said that rising metals costs will add $350 to the expenses of each car made this year. Gas prices are keeping buyers out of dealers.
Detroit's answer to this will be to try to cut costs again. But, that may not be possible. Of course, some jobs can be cut and factories closed, but most of the big savings came with a new UAW contract and huge layoffs and down-sizing that began in 2006.
Both GM and Ford expected 2009 to be the year when they would make money in North America. That is not going to happen. The stocks in both companies trade where they did when there was talk of bankruptcies two years ago. Things could be almost that bad now. GM and Ford may have to raise more money toward the end of this year or beginning of next.
That will kill the share prices of both companies for a long, long time.
Douglas McIntyre is an editor at 24/7 Wall Street
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Reader Comments (Page 1 of 1)
3-16-2008 @ 8:28PM
gumby said...
Do you know that a car made of aluminum will look as big as a car made of steel yet weigh half as much or a bit more...??? Aluminium is one third as heavy as steel but needs to be a bit more than one half of the mass of steel to be as strong. If a car of aluminium weigh as much as a car of steel, the aluminium car will be three times as thick as the steel car in every part you see... take sheet metal, engine block and all the works... Aluminium can be three times as thick yet weigh same as steel.. Aluminium is the future... Car makers needs only one half of the weight in metal to build an car of aluminium. Now aluminium can be half as expensive as originally thought if based for pound on pound between aluminum and steel... Look at aluminium motocross bikes, you would notice the frame much thicker than regular steel bikes yet are lighter... Why are we still so slow to grow aluminum production??? Look at aluminum wheels, they are thicker than steel wheels yet weighs the same... or less...
3-16-2008 @ 8:28PM
gumby said...
I remembered about ten years GM and probably Ford approached aluminium producers for a long term supply contract fixed at 80 cents.. Aluminium producers balked because it was not reasonable to sign that contract... That was what did GM and Ford in...