The New York Times has reported: The last Chevrolet Tahoe rolled off the line here in Janesville shortly after 7 a.m. in the 90-year-old plant, which had built more than 3.7 million big S.U.V.'s since the early 1990s. While the overall new vehicle market has dropped 16 percent so far this year, sales of big S.U.V.'s have plummeted 40 percent. Their closings leave the Big Three with only one factory each still devoted to making traditional big S.U.V.'s - Ford Motor (NYSE: F) in Kentucky, General Motors (NYSE: GM) in Texas, and Chrysler in Detroit.
The car manufacturers have been hit hard by tight consumer credit, the high cost of fuel and an overall slowing of the economy. All three manufacturers have been pleading with Congress and the White House for financial support and with the UAW for contract concessions. After Two of the three (Congress and UAW) failed to act, President Bush stepped in to provide an aid package of $17 billion to get the auto companies through the first quarter of 2009.
Despite the rescue package finally coming through Wall Street has not been impressed. The stocks of GM (NYSE: GM) and Ford (NYSE: F) are down 35% since the announcement. Ford closed yesterday at $2.19, down -0.40, losing -15.44% in one day. GM closed at $3.00, down -0.52, losing -14.77%.
Can either of these companies avoid bankruptcy if they cannot stay off the pink sheets? Is bankruptcy inevitable? Are you buying these stocks with hopes of a recovery?
It is simply a race against the clock. Interest rates and fuel prices have crashed, hopefully bringing some relief. While this may help consumers, homeowners, and companies with better balance sheets, will it be enough to sustain the American auto industry?
If Congress does not act they will fail. If we Americans do not support our own companies they will fail. If the UAW and the corporate management don't make tough compromises they will fail. And if everyone works together they might make it. Because Wall Street thinks that all this effort would assure nothing, the stocks are languishing.
I hope for everyone's sake the industry becomes a Phoenix, and unlike the SUVs and dinosaurs, can rise again.
Happy Holidays -- Health and Prosperity to all!
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of GM or F











Reader Comments (Page 1 of 1)
12-24-2008 @ 12:50PM
Mike Sanders said...
Some townships are now offering an SUV turn-in program... You bring in any SUV, turn it in (with no questions asked), $100 cash! It's a good way to get these things off the road and raise a little cash, at the same time. If you feel embarrassed, some places will even come out and pick it up for you ($25 convenience fee).
12-24-2008 @ 1:22PM
Rob said...
Get ready cause China is making a plug in car for half the price of GM's new Volt. Why pay 40,000+ when you can buy one for 22,000? Most of us are in such a bind with money that we cannot afford a nice, new car that costs over 20,000. Think smart big 3. Now is the time to use your noodles and not stuff your pocket books
12-24-2008 @ 6:22PM
JW said...
Wake up UAW leaders! Isn't it a better outcome for your members to continue working at somewhat lower wages and some concessions to the benefit package than to have all the members and leaders unemployed because of UAW leaders' arrogance?
12-24-2008 @ 7:23PM
william lindblad said...
To the contrary, I doubt that large vehicles have gone the way of the Dodo. The price of oil continues to slide and likewise all products that are distilled from this source.
However, while the present is not a repeat of 1972 it does have some similar aspects. A year ago the push to alternative energy was strong, Pickens spent a great deal on commercials pushing wind. Great idea, good idea, but with bad timing. He is going to lose a pile of dough. Many inroads were made in solar technologies and they may remain strong in Europe and other parts of the world, but not here. The U.S. moves with the price and abundance of oil. All else will be a hard sell. The electric car is a reality in the sense that battery tech has improved enough to warrant this possibility. Another poster seems to think that China will soon be able to produce a plug in with lithium-ion power source, cheap and soon.
I think you should check on how this battery gets made and when you do, remember that we have a large and highly vocal environmental lobby. Cell phones are one thing, but a car will equal 20,000 cell phones. Get the picture.
There is yet another blog suggesting at 10.00 per barrel tax on oil. Pushing that, even if it's use were to be infrastructure, (badly needed) would be hard for Congress to digest.
Another just realized the the economy is Iceland is in a deep freeze. You don't have to worry about selling SUV's over there - no vehicle are selling - period.
The auto business is in deep trouble - world wide - all makers except Renault (they will get hit too). Even the Yugo is no more.
Yes Sheldon, SUV's may be gone, temporarily or forever. What is for sure is jobs - all over. Stalin's great steel plant is from 80% to 20 capacity over the last year. China - masses going back to the rural enviro as the factories keep closing. Spain has the highest unemployment in the EU and the real estate market there is in free fall, plus they have major water shortages.
Will any or all of the big 3 go under? You are not alone with this question. Some say yes, and think it a great idea. I so no, as it is a very bad idea. Regardless of what anyone thinks, good, bad, or indifferent, the facts are that there are so many industries that are subservient as suppliers that a failure will have world wide implications - all bad.
There is already an abundant amount of trouble, why make more?
As a foot note: If anything, I would like an answer to the ongoing statement of the media that this is a "once in a hundred year event". I sure as hell would like to know what they are comparing this to? The only thing that I am aware of is the banking crisis of 1908-09 and J.P. Morgan solved that. He let the bozos fail and kept the good banks going. It is also the birth of the Fed as we know it. Only problem is that in comparing scope, the 1909 one is like a pimple on an elephants butt and the present is the animals posterior.
12-25-2008 @ 12:56PM
joviski said...
It is interesting that others find out what is important to others. Usually Northeasterns and Left Coasters seem to think people are interested in a small JPOS to drive. Economics has always driven change (not PC). When alternative energy is cost effective, change will occur. Until then, inteligent free thinking people will buy what fits their family.
12-27-2008 @ 1:00PM
Scott said...
Well, I have to disagree with some of the posts. Why buy American, when foreign cars are cheaper? One reason is pride, my father was not a GM or a Ford Fan or a Chrysler fan. He was a proud American and past that on to my brothers and I. All of us have American cars in our Families. We have always had good luck overall. I just traded in a Ford Taurus that had 320,000 miles on it, All i ever did was change the oil, tires brakes and general maintenance. I traded that in for a GM Chevy Cobalt Sport. It is fully loaded, I walked off the lot at 20k, too expensive>? I would think not. We also have a big SUV from one of the big three as well, have had good luck with that as well. I agree, GM, Ford, Chrysler need to negotiate with the UAW, as they are paying higher wages per employee. Buy no matter who you are on posting on here, how would you like it if someone comes on here and says " Why should I buy your product when I can get it overseas for cheaper ? " A comment like that is downright foolish. Take some pride in America, support local businesses, because in the end, your job could be shipped overseas as well. Oh, go spend some money!!!!! Help the economy. Merry Christmas.
12-28-2008 @ 2:59AM
DZ said...
Its funny GM and the other American companies want us to support them while they have fought to pay their employees a living wage since the 80's. They are more concerned with shareholders and dividens then they are about employees and building a decent product, why would a company as GM shut down a plant that built the EV-1 and take its profits to buy Hummer. They deserve what they get, you reep what you sow GM. I feel sorry for the displaced workers in these factories that depend on these jobs to take care of their families, maybe if GM was more worried about keeping American jobs in America more Americans would buy their product, I know the last two GM cars I purchased, one was built in Canada the other in Mexico.......Go figure.