More Cruel, Please
By JAY PALMER |
Ford might emerge as a winner -- if the auto market recovers next year. But GM won't survive without help, and Chrysler seems a lost cause.
IN DICKENS' FAMOUS NOVEL, Oliver Twist is smacked across the head with a ladle after asking for more gruel, please, in the workhouse in which he miserably resides. Despite this, he survives and, after many more misadventures, ultimately thrives.
The Obama auto-industry panel might keep that in mind as it ponders whether to give
General Motors and Chrysler the additional aid they seek of as much as $21.6 billion, atop the $17.4 billion they have already received. In truth, a smack in the head, in the form of government-backed bankruptcy, might be the only thing that can save GM. And it is doubtful that anything can save Chrysler.
On the other hand, it is possible that
Ford(ticker: F), the only member of the erstwhile Big Three that hasn't gone begging to Uncle Sam, might emerge as a winner if the auto market recovers next year.
LAST WEEK, GM AND CHRYSLER presented turrnaround plans that call for shrrinking their operations. GM would sacrifice four brands: Saturn, which would be spun off and become a distributor of vehicles made under its name by various manufacturers; Pontiac, which would become a niche brand within Chevrolet; Saab, which would be sold or closed and which filed for bankruptcy protection in Sweden Friday (see
European Trader); and Hummer, which would be shut if no buyer is found. GM (GM) also would lay off 47,000 more workers worldwide and shutter 14 of its 38 North American plants by 2012. General Motors also said it is willing to sell a stake in, or seek partners for, its European Opel and Vauxhall brands.
GM would be left with Chevrolet, Cadillac, GMC and Buick, a big step toward bringing its vehicle output in line with a U.S. market share that has slid to 19.5% from 28.8% since June 2000, when Rick Wagoner became chief executive. Under this plan, Wagoner says, the company would break even by 2010 and start paying back its loans by 2012. GM wants as much as $16.6 billion in new aid.
In its presentation, the auto maker argued bankruptcy would be a "highly risky and costly process" that could require perhaps $100 billion of U.S. money. Customers won't buy cars from a bankrupt firm, Wagoner insists.
Chrysler, which is much smaller than GM and is about 80%-owned by private-equity giant Cerberus Capital Management, with around 20% held by Germany's
Daimler (DAI), wants $5 billion in additional help. It, too, outlined extensive labor and other cuts, plus sourcing of small vehicles from a new-found potential ally, Italy's Fiat.
But there are lots of moving parts in both plans, so many they seem unworkable without the aid of someone who can wield a mean ladle -- a bankruptcy judge. GM's plan is the most complex. It depends on getting the UAW to accept $10 billion in GM stock as part of its scheduled $20 billion contribution to a fund to pay for future medical care for union workers and retirees; the union is balking at that. GM also wants bondholders to convert a big chunk of the $28 billion it owes them into equity; those talks are bogged down. And the company must shut thousands of dealerships, not easy, given that state laws afford lots of protection to dealers. Shuttering Oldsmobile took several years and cost around $2 billion. As for whether a bankrupt company could sell cars, it could if its warranties were backed by Uncle Sam, who also would provide debtor-in-possession financing to help the company until it can leave bankruptcy.
While there is no assurance that GM could recover under a bankruptcy plan -- its fate also depends on an upturn in the auto market no later than early 2010 -- a nonbankruptcy rescue effort appears likely to ultimately result in the company's liquidation.
Asserts one auto analyst: "Just as GM found it easier over the past 30 years to avoid labor strife and give the union what it demanded, GM management has every reason to take the easy path, writing checks to pass on the government handouts and not demanding real change. These guys are egotistical, arrogant and in bed with the union. Only bankruptcy would change that."
CHRYSLER IS ANOTHER, EVEN SADDER STORY. It now has just 10% of the U.S. market, down from 14.4% in mid-2000. And, in contrast to GM and Ford, which have some well-regarded vehicles (Cadillac CTS, Chevrolet Malibu and Corvette, Buick Enclave, Ford Fusion, Flex and Focus, to name a few) and have boosted quality greatly, it lags behind in both areas. Having been starved of development funds when Daimler was its owner, the company has a pretty bare future-product shelf. Its great hope is an alliance with Fiat, to provide small cars. But if Daimler, with a lot more resources, couldn't make Chrysler a success, why would anyone think that Fiat, which ignominiously left the U.S. years ago, would do better? In reality, Chrysler's sole valuable asset is its Jeep brand.
Regardless of what happens, Ford, which has a 12.3% market share, down from 25.8% in mid-2000, could emerge better-positioned than its rivals -- if it can squeak through 2009 without visiting Uncle Sam's money trough. It will get any concessions the UAW makes, it won't owe billions to D.C. and it will offer some promising new models, including the next-generation Focus, in 2010.
A Ford comeback, of course, assumes annual car sales do rise significantly next year from their current level near 10 million. If sales stay in the dumps through 2010, even bankruptcy won't offer much protection to Detroit, with or without more federal gruel.
http://online.barrons.com/article/SB123518060906238403.html?mod=yahoobarrons&ru=yahoo
), ma non vedo perchè volere convincere la gente che è consentito dal piano regolatore, piegando le norme ad interpretazioni errate.
- comunque ne avevano già discusso qualche giorno fa, concludendo che le agenzie di rating dovrebbero stare zitte, dopo Lehman, e leggere il FOL... 