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Suddenly, Amazon Doesn't Love Its Moms AnymoreVehicle sales in China have started to slow. In August, they were actually down almost 7% compared to the same month a year ago. That is especially tough news for General Motors (NYSE: GM) and Ford (NYSE: F) that hoped that hyper-growth in the cars sales market in the world's most populated country would make up for poor sales at home.
GM and Ford have suffered billions of dollars of losses every quarter in their North American operations. Sales in Europe and Japan are also anemic due to tough economic conditions. Which leaves Latin America, China and Russia as the "salvation markets." They have enough size and potential to support millions of new car sales a year.
But matters are getting worse for the car companies as they push off-shore. According to the FT, referring to Russia, "Analysts who cover the sector are revisiting bullish sales estimates for a country that bought 2.5m cars last year and will soon replace Germany as Europe's largest car market."
Gasoline prices are high in Russia as they are in most other countries around the world.
Late last week, GM took down $3.5 billion on its line of credit. Analysts are worried that this is a sign the nation's largest car company is headed toward a cash crisis. That could become particularly acute early next year if Congress does not offer Detroit $25 billion in loan guarantees to build new factories. With hundred of billions going to the bank bailout package, legislators have to wonder how much money is available to save other sectors of the economy.
The news about Detroit is supposed to be getting better. With sales slowing in emerging markets and the possibility of no government aid, that has radically changed.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-22-2008 @ 11:31AM
John said...
Russia, China and Latin America are the pipe dreams of General Motors (GM). If ever there was a case of too little too late GM fits it. From largest manufacturing firm in the World to wannabe dominant car manufacturer, - GM flouted it's huge war chest and has been and even now touting it's models to those who have now even more choices. They took their eye off the consumer. GM is a crickety Old Man while Toyota changes year to year with fuel efficient models and leads the World in fuel efficiency and hybrids. Only for the antiquated fuel infrastructure in the areas mentioned does GM even have a fingernail on the cliff. While not robust like America's and Europe's their undeveloped fuel infrastructure has the potential to change quickly to other fuels for automobiles. Waiting for more Government bailouts is not a strategy anyone should take as maintaining solvency in GM. Taxpayer are indeed sick of it as mentioned. Bailing out Chrysler made a nice fit for Daimler, but at least the taxpayer got back their investment. GM spent bazillions on inner engineering and IT upgrades - but it has yet to show handily where the rubber hits the road. Kerkorian should keep the pressure on until a REAL change for the consumer is obvious. Until then it's all tilting at windmills.
9-22-2008 @ 4:19PM
winslow said...
The US auto companies are run like antiquated monstrosities.Don't expect dramatic change. It's obvious what is needed. Slash production, sell off inventory at a mininum of 50% less than MSP. Start production of energy efficient vehicles at affordable pricing. What is a CEO making millions to do??????
9-23-2008 @ 12:44PM
Spending Less On Car Purchase said...
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9-25-2008 @ 7:06PM
heath said...
What about all the new car inventories the manufacturers are having to buy back from all the dealers closing their doors right now under the new car franchise act{Law#10-1-651}.Has anybody asked for the future liability on the books of these manufacturers.I just saw where one of GM's largest Chevy dealers closed 13 locations! How much inventory is GM having to redistribute if they can find other dealers to take it.