AOL Money & Finance

Going down in flames: Ford and GM

Posted Aug 22nd 2008 6:16PM by Bruce WatsonBruce Watson RSS Feed
Filed under: Ford Motor (F), General Motors (GM)

I know, I know: forecasting the imminent demise of America's car companies is nothing new, but recent events have highlighted the kind of shortsighted planning that has plagued Ford Motor Company (NYSE: F) and General Motors Corporation (NYSE: GM) for years. While the gas crisis has exacerbated the shortcomings of the automakers, the companies' failures to understand their core audience, invest in R&D, and ensure the quality of their finished product are long-term, endemic problems that make them a very questionable bet.

Recently, for example, General Motors' decided to offer incentives, extended protection plans, and employee pricing to draw buyers to the line; these innovations, however, have had the added impact of massively undercutting revenues. As Williams-Sonoma could now point out, slashing your profit margin is not really the best way to make a profit. While their decision to get rid of Hummer should help GM shed a pricey and currently unpopular line, by the time the sale is finished, gas prices will be back down and everybody will be driving hydrogen-powered cars.

Ford, meanwhile, has decided to focus its attention on cars, a long-term plan that doesn't seem very well thought out. While the Mustang is, perhaps, Ford's most famous model, their trucks have long been an iconic symbol of the company. Rather than invest in making their strongest sellers more fuel-efficient and thus more attractive to consumers, Ford seems to be placing its eggs in a somewhat unreliable basket.

Of course, reliability is another issue entirely. Ford's greatest problem lies in the questionable quality of their cars. Having driven a "Fraud" Mustang for a few years, the best thing I can say about the car's quality was that it was easy to repair, which means that I generally just had to pay for parts. Since then, I've watched as the brand has repeatedly been plagued with reliability issues, the latest of which was the Explorer/Firestone tire scandal.

Another problem is the (somewhat justified) perception that American cars are unreliable, poorly-designed gas guzzlers. They cost more than their overseas counterparts, and are usually a few years behind on engineering. This, in particular, has been highlighted by the recent advances in hydrogen cars: while Honda's FCX Clarity fuel cell car is out this summer, GM doesn't plan to unveil theirs for another two years and, although Ford's fuel cell vehicles have gained near-legendary status, they still aren't being offered for consumers.

While it will be a while before hydrogen cars will be a major market force, it's already pretty clear that the United States will, once again, be playing catch up in a strategic part of the automotive industry. In the meantime, rather than improve the quality of their engineering and reduce the gas consumption of their top sellers, Ford is dropping its truck line. With decision making like this, it it any surprise that foreign car companies are dominating America's roads?

Tags: auto, ford trucks, FordTrucks, suv, trucks

  • Permalink
  • Email this
  • Print this
  • Comments [38]
Get the latest on cars and trucks
from GM and all brands at AOL Autos.

Reader Comments (Page 1 of 2)

| 1 | 2 | Most Recent | Next 20 Comments
Symbol Lookup
IndexesChangePrice
DJIA-17.2410,433.71
NASDAQ-6.832,169.18
S&P 500-0.591,105.65

Last updated: November 24, 2009: 09:02 PM

BloggingStocks Exclusives

Hot Stocks

Learn More About GM Cars

General Motors Brands:
Find Your Next Car
AOL Autos New Cars and Used Cars

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

  • My Portfolio
  • Create a New Portfolio

BloggingStocks Partners

More from AOL Money & Finance

WalletPop Headlines