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Detroit realises that it needs to shrink
November 18, 2008
Rick Wagoner, chairman of General Motors, just told the Senate banking committee that the US market for cars and light vehicles could be 14.5m or so a year in the long-term, compared with a peak of 17m.
GM’s estimate of market size is as much a guess as that of any informed observer, but that indicates a realisation that Detroit will not be able to boost demand in future to anything like the level of the past.
One reason the big three are in so much trouble is that vehicle sales have plummeted, and GM now expects US sales of only 12m next year and about 13m the year after.
In answer to questions, Mr Wagoner first said that the long-term stable rate of sales could be “15.5m or 16m”. A few minutes later, he reduced that to a prediction that sales might level out at “14.5m or 15m”.
Alan Mullally, chief executive of Ford, conceded that “in the long-term, could be a lot less than 17m”, while Bob Nardelli, chief executive of Chrysler, admitted that “there was this unbelievable bubble” of sales over the past few years.
“The mistake that Chrysler probably made was that we were responding to customers who wanted bigger, more expensive, higher horsepower vehicles to go with their second homes and boats,” Mr Nardelli added.
If this is true, which I believe it is, then Detroit and the US industry as a whole faces having to keep cutting capacity and shedding jobs for a long time to come.
Almost every company in the U.S. is having trouble. 9,000 homes per day are going into foreclosure. Tens of thousands of jobs are also being lost every day. The population no longer has the money to buy anything. The auto industry is not immune to this and to assume that their problems are all of their own making is to ignore the big picture.
We have known about the problems in the American industry for decades. Now is not the time to try to fix them. We don’t have time. If the American auto industry is not immediately helped, the economy won’t just be suffering. It will be gone.
http://ewebsmith.com/auto/autobailout.html
Posted by: Web Smith | November 19th, 2008 at 1:14 am | Report this commentI used to work at Ford Motor on the business side of the company. There was a lot waste, lots of people protecting their jobs by coming up with idiotic projects that were not needed. If I wanted to hang a picture in my office, I could not do it myself, I had to call in a union person to hammer one nail into the wall for me. I say, let them go Chapter 11. That’s the only way they will trim the fat.
Posted by: Leah Field | November 19th, 2008 at 2:48 pm | Report this comment