Automakers Suffering, Regardless of Their Business Model

By
Tuesday, December 16, 2008 at 12:40 pm

In a move that spells nothing but bad news for Detroit’s struggling automakers, Toyota announced yesterday that it’s suspended plans to produce its Prius hybrid in the United States.

Why is that bad news for the Big Three? Because there’s been this line of argument that Ford, General Motors and Chrysler would be performing splendidly right now if only they’d focused more resources on the production of gas-sippers instead of gas-guzzlers. While there’s certainly truth in that criticism, Toyota’s announcement indicates that auto companies are suffering across the board, regardless of what models they’re able to produce. Indeed, Prius sales in November dropped more than 48 percent relative to the same month a year ago.

So even if GM were shooting its plug-in Volt off the assembly line like Pez, it still wouldn’t solve the company’s troubles because the credit crunch and lack of consumer confidence means no one’s buying anyways. That’s a tough message for supporters of the Detroit bailout, who’ve been arguing that the Big Three will be fine if they just get some help retooling their factories to make higher mileage cars.

As David Cole, chairman of the Center for Automotive Research, said just a few minutes ago in what’s probably an understatement, “All automakers are in big trouble right now.”

Comments

9 Comments

Colin
Comment posted December 16, 2008 @ 11:24 am

Although I agree that the business model wouldn't really save these companies at the present had they had developed practices to produce hybrid models 10 years ago they would be alright.

If they are able to produce more efficient cars, while replacing their current models people may be more willing to buy hybrid vehicles.


Eric
Comment posted December 16, 2008 @ 2:46 pm

I don't think that the message is that the big three will be fine. I think that the message is that Ford needs a line of credit in the event that failure of the remaining two disrupts its supply line and the credit crisis hits them too, GM will have a chance if it can retool and restructure its business and a normal chapter 11 proceeding is not possible for them now (and it would have unacceptable consequences for the rest of us), and now is not a good time for Chrysler to go bankrupt (although it's almost surely inevitable). I believe that every other automobile company in the world is similarly pressed, and that the other nations fortunate enough to have an automobile industry are working out similar credit support programs.


Elsie M Aiken
Comment posted February 3, 2009 @ 11:03 pm

Excellent, entertaining, useful reading, Thanks !!


Helen Atwood
Comment posted February 16, 2009 @ 12:15 am

your blog is awsome


fourby4
Comment posted March 4, 2009 @ 7:09 pm

“So even if GM were shooting its plug-in Volt off the assembly line like Pez, it still wouldn’t solve the company’s troubles because the credit crunch and lack of consumer confidence means no one’s buying anyways” Yeah. I agree. Whos gonna buy nowadays with this kind of crisis. And who has the money to buy one? And lastly, I think this is being parceled and sold as a bailout of General Motors and Chrysler but it is not.


TOMAS
Comment posted April 1, 2009 @ 5:00 am

western country should concentrate in africa because companies in those countries are making billion profit yet most are multinationals and have subsidiary in africa which are performing better than parent companies in u.s.a etc


fleshbone
Comment posted May 15, 2009 @ 1:39 am

The big 3 lost their innovation and desire to be creative. I think they deserve to sleep in the bed that they have made for their selves.


123honda
Comment posted June 5, 2009 @ 1:03 am

I don't think that The Big Three can make their sales high. The key to automobile manufacturing is flexibility and product placement. The right cars to the right market at the right price, they should understand that.


honda accessories
Comment posted June 5, 2009 @ 8:03 am

I don't think that The Big Three can make their sales high. The key to automobile manufacturing is flexibility and product placement. The right cars to the right market at the right price, they should understand that.


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