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business newsDeadline Looms for GM, Chrysler
By
Scott Reeves Feb 17, 2009 3:00 pm
Brief scrutiny of today's headlines.
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This raises a basic question in the global economy: Just what is an American car?
After World War II, the US auto industry reflected American confidence with gaudy land arks known for huge engines and lots of chrome. Muscle cars were the dream of many teenaged boys, and more than a few men who never quite made it out of puberty.
Today, about 65% of the parts used to build a Honda (HMC) Accord are made in the US or Canada while about 50% of the parts in a Chevrolet HHR are produced domestically.
The Accord is assembled in Marysville, Ohio. The Chevy HHR is built in Mexico. Which car is more American? Does it matter?
All automakers are hit by the global recession, but the heavily unionized companies based in Detroit have been clobbered. The unions have failed to adjust to worldwide markets, and the automakers have profoundly misjudged what buyers want. As a result, Detroit has seen its share of the US market drop to about 50% of new vehicles in 2008 from about 80% in 1984.
Toyota (TM) beat Detroit to market with a gas-electric hybrid, the Prius. General Motors is attempting to counter with the Volt, a plug-in hybrid that now offers about 40 miles of gas-free driving. GM plans to have the car in production by late 2010.
In part, Detroit was slow to move into compact cars because larger vehicles offer fatter profit margins. It's not difficult to imagine that GM and Chrysler will reorganize under Chapter 11 bankruptcy protection, a step that could have been taken months ago - and would have saved taxpayers billions.
So far, Ford (F) hasn't taken federal bailout funds, and this may give them more room to maneuver in the future.
Red ink and politics aside, nearly everyone has a nominee for the all-time worst cars in creation. Let's hope none of the models Detroit is counting on for its renaissance make the list.
In the meantime, GM and Chrysler have to present a plan to Congress showing how they'll regain their competitiveness. Heh. Somehow, most people don't associate Congress with innovation and competitiveness. If Congress screws this up, it will be easy to identify American cars - they'll be the ones no one wants to buy.
No positions in stocks mentioned.
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