Of all the missing-the-forest-for-the-trees, rose-colored glasses stories I’ve read, hell, probably even written, this story in the NY Times Friday about the Big Three auto makers is one of the worst offenders I’ve seen in a long time.
Start with the headline, “Detroit Goes From Gloom to Economic Bright Spot.” When I first saw that, I thought, the city of Detroit? They have got to be kidding. The city of Detroit is the most depressed American city I’ve ever been in, and I live outside Newark, N.J. I haven’t been to the Motor City since the 2007 auto show, but last time I was there it shocked me how abandoned downtown was. I am not kidding, I’ve seen Third World cities more vibrant than Detroit.
But, no, they weren’t talking about the city of Detroit. They were talking about the car companies: GM, Ford and Chrysler.
After a dismal period of huge losses and deep cuts that culminated in the Obama administration’s bailout of General Motors and Chrysler, the gloom over the American auto industry is starting to lift.
You know what? I’d be feeling pretty un-gloomy too, if the government gave me $50 billion and shepherded me through bankruptcy court. Covered my mortgage, paid my grocery bills, let me lay off the kids, then bring them back at half wages (that’s John’s joke, by the way.) I mean, come on, let’s get real here. Don’t sell me some fairy tale about the Phoenix-like rise of the scrappy American auto industry. It’s just not happening, Jack.
Posted by Steven Russolilloon March 30, 2010 Autos, China, Economy /
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Ford (F) unloading its Volvo unit to Chinese car maker Geely for a fraction of what it originally paid is a big deal for China as it looks to elevate its presence in the global automotive market. From yesterday’s Journal:
Geely’s acquisition of the Swedish brand is the latest example of how China’s economic rise is reshaping large swaths of global business. Its huge market and increasingly powerful companies are playing a growing role around the world in industries ranging from cars to natural resources to telecommunications equipment.
The Volvo deal—which comes after China surpassed the U.S. last year as the biggest auto market—puts a Chinese company for the first time in charge of a major global car brand.
The Journal also notes the sale marks Ford CEO Alan Mulally’s latest effort to rid the auto maker of non-core brands.
But Ford selling Volvo for only $1.8 billion looks like a steal for Geely, especially considering Ford bought Volvo back in 1999 for $6.4 billion. So all the praise Ford has received combating the financial crisis seems to overlook the mishandling of Volvo.
“There’s been a lot of ink spilled over how well Ford has managed through the financial crisis and the bankruptcies of General Motors and Chrysler,” Matthew DeBord writes at The Big Money.
Ford deserves some flack for how it handled Volvo throughout the years. “It has to be said: Ford completely destroyed the massive brand value that Volvo had built up over the years,” DeBord adds. “Geely is getting Volvo for next to nothing. Ford might as well be giving the brand away.”
- Auto sales are “crawling forward,” but still remain weak, James Hamilton says. “On a seasonally adjusted basis, we’re not making any progress from December…Whatever the explanation, auto sales so far this year remain 40% below the average seen for January and February over 2005 to 2008.”
- Small, mid-cap stocks leading the rally. As confidence about the global economy wavers a bit, some investors and traders are actually turning their attention to companies heavily dependent on the US economy, Tom Petruno writes.
- S&P 500 and US Dollar index are about as negatively correlated as they’ve ever been, Michael Panzner notes. But the equity-dollar relationship typically isn’t sustainable when it hits historical extremes, meaning investors may need to look beyond the currency markets for hints about the stock market’s next move.
- “Amazon’s MP3 store hasn’t done much to weaken Apple’s grip on the digital music business,” MediaMemo blogger Peter Kafka reports. “But that doesn’t mean Apple isn’t paying attention.”
- Since there are no assurances that new regulations will prevent a future financial crisis from occurring, regulators should take the next best step and break up the nation’s biggest banks, James Kwak says. “Politically, breaking up TBTF banks is something that should on paper be able to attract a bipartisan majority.”
- A consumer finance protection agency is a great idea, but it’s a shame that a simple mandate in the original plan — compare all mortgages to plain vanilla 30-year fixed contracts — was rejected, FusionIQ CEO Barry Ritholtz says.
- Millions of homeowners haven’t benefited from lowest mortgage rates in nearly a half-century because they can’t or won’t refinance, WSJ reports.
- Auto veteran Bob Lutz plans to retire from GM after four decades in the business and a career that included executive positions with each of the big three Detroit automakers.
- “It seems like governments are doing a lot of poking, probing and investigating of large investors in the markets recently. Especially when it comes to bets being made that have major implications for governments, i.e., positions taken on currencies and government debt,” WSJ’s MarketBeat says.
- NY Gov. David Paterson finds himself in the middle of yet another scandal.
Car talk (not the NPR show, by the way,) another Grecian burn and the commodities guys, Canada and Australia, are sitting pretty. That’s what we’re on about today on Tomorrow’s News Today.
The Detroit auto is a wild time, or at least it used to be. Auto companies went over the top trying to outdo each other with their elaborate stage shows. In 2007, Chrysler actually hired a team of cowboys to parade bulls through the streets of downtown Detroit to introduce a new Jeep model.
(The stunt didn’t work out so well. First off, it forced hundreds of journalists out into the freezing cold, which we didn’t exactly appreciate. Second, some of the bulls got, shall we say, amorous outside Cobo Hall, which clearly diverted attention away from the car.)
After the worst year for the auto industry in, well, probably ever, and the historic bankruptcies of GM and Chrysler, this year’s show, from what I’m reading, is a scaled-down version of its former self, much like the Detroit auto industry is a scaled-down version of itself. The “life after death” metaphors are flying all over the much-beleaguered city (as an aside: I was shocked by Detroit the first time I went there for the show. It seemed like half of downtown was just flat-out abandoned. I have never seen a major American city that looks quite like it.)
- Reuters blogger Felix salmon chronicles the changing state of the TV industry. “Pretty soon, the consumer is going to have a lot more power, and that’s going to change the game in profound and fundamental ways.”
- Keep an eye on stocks during the first five trading days of the year, Tom Petruno writes at LA Times’ Money & Co blog, as Wall Street’s tone at year’s beginning is typically a reliable indicator of market’s direction for remainder of the year.
- Don’t expect housing prices to return to the mid-2000s boom levels for years, if not decades, Harvard economist Edward Glaeser writes at Economix. Prices were essentially flat between September and October, which isn’t a bad thing.
- Is Apple’s history repeating itself? Henry Blodget offers an interesting take on whether Apple is making the same strategic mistake it made in the 1990s.
- About 85% of stocks in S&P 500 are trading above their 50-day moving averages. “The fact that breadth has caught up with the new highs in the overall market is a good thing for the health of the bull market,” Bespoke Investment Group says.
- The economy’s path to prosperity is still clouded by government stimulus, Tim Duy says.
- Berkshire Hathaway gave a public warning to Kraft over its pursuit of Cadbury. The move came after Kraft sweetened its hostile takeover offer.
- Ford posted a 33% rise in December US auto sales, while both GM and Chrysler registered single-digit declines.
Posted by Paul Vignaon September 14, 2009 Autos, Markets, Media /
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So I caught GM’s new ad over the weekend, the one with freshly minted CEO Ed Whitacre walking through what looks like a set that’s supposed to look like a real engineering lab and touting GM’s cars.
Let’s be charitable and say that in his first try out of the box, he’s a little stiff. While the braintrust at GM probably hoped he’d be a latter-day Lee Iaccoca, he’s doesn’t quite manage the swagger of the old Chrysler chieftain.
Back in the ’80s, when Chrysler had, as Iaccoca put it, “one foot in the grave,” he became the face of the company, and in some ways, the face of America, an America struggling to keep up with the competition, which was handing us our lunch.
Iaccoca was a natural pitchman. Whitacre, meanwhile, well, he’s just not a natural pitchman. It’s not that the messages are that far off, actually. But there is one key difference.
“A lot of people think America can’t cut the mustard anymore,” Iaccoca starts off, dismissively. He’s loose, he’s charismatic, he’s bold. He brags about his cars with such an easygoing manner, you don’t realize the outrageous claims he’s making. He says, we’ll build cars as good as BMW and Mercedes. He says, we’re going to beat Japan at its own game.
In one episode of AMC’s “Mad Men,” ad exec Don Draper and his wife Betty are driving home late at night from a business dinner. Betty’s in the passenger seat, crying, because she’s realized Don’s having an affair with one of the women they just dined with.
Rather than confront her husband (something she’ll get around to later,) she slides across the car’s bench seat and nuzzles up next to him, and that’s how they ride off, Don with one arm around his wife, one hand on the wheel.
Somewhere in that front seat, somewhere on that road, even as her marriage is falling apart, Betty finds comfort.
It seemed to me, re-watching the episode recently, that there’s something quintessential about that image. A man driving one of those big old Detroit dinosaurs, one arm around his girl, one hand on the wheel. It’s uniquely American: the open road, the wide-open future. Even if that future never quite comes.
The American love affair with cars began its slow death somewhere around the point when Detroit started putting bucket seats in their cars instead of bench seats. Bucket seats are utilitarian. There’s a reason they put them in race cars. Once Detroit traded efficiency for adventure, once they started competing on their competitors’ terms, they were done for.
Did you really say "TARP profit? Are you sure about that?
We’ve been critical of the supposed TARP profits everyone’s been talking about over the last few weeks. And now there’s more evidence to back up our skepticism.
Treasury Department likely won’t recover all of taxpayers’ investments in GM and Chrysler, according to the Congressional Oversight Panel. The Treasury has given nearly $80 billion in aid to the entire auto sector. Some loans have already been repaid, but it’s doubtful all loans to GM and Chrysler will be paid back in full.
Look, the Treasury may have made money off the eight biggest banks that repaid their TARP obligations. But it’s irresponsible to call the government’s bailout plans profitable at this point in the game without considering all the parties involved. Losses from from AIG, Fannie Mae (FNM), Freddie Mac (FRE) and the auto makers, not to mention other costs such as stimulus plans and lost tax revenue, were largely ignored when pundits were talking about TARP profitability.
So why have several financial firms been able to repay TARP, but the auto makers can’t? Part of the reason is GM and Chrysler were losing market share before the crisis ensued, whereas financial firms were doing well, Time’s Curious Capitalist blogger Justin Fox says.
“The banks simply aren’t in the same competitive bind GM and Chrysler are,” he says.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
Michael Dorff, a professor at Southwestern Law School in Los Angeles, says CEOs are paid for performance – but it’s usually not their own performance. They’re paid millions for the performance of the economy, their industry, their employees, and sometimes just for having good luck. For years boards of directors – often made up of CEOs who believe in […]
