Back in 2005 a reporter took a tour of General Motors’ headquarters, and in the resulting article one thing stood out: The executives and engineers the reporter interviewed were only modestly enthused about their sedans and sub-compacts. But they really liked talking about their expanded line of Hummers.
Then oil spiked and gas prices hit records. And GM’s bet on massive gas guzzlers blew up in its face. In 2009:
GM bankruptcy: End of an era
(CNNMoney – General Motors filed for bankruptcy protection early Monday, a move once viewed as unthinkable that became inevitable after years of losses and market share declines capped by a dramatic plunge in sales in recent months.
The bankruptcy is likely to lead to major changes and job cuts at the battered automaker. But President Obama and GM CEO Fritz Henderson both promised that a more viable GM will emerge from bankruptcy.
In the end, even $19.4 billion in federal help wasn’t enough to keep the nation’s largest automaker out of bankruptcy. The government will pour another $30 billion into GM to fund operations during its reorganization.
Taxpayers will end up with a 60% stake in GM, with the union, its creditors and federal and provincial governments in Canada owning the remainder of the company.
GM will shed its Pontiac, Saturn, Hummer and Saab brands and cut loose more than 2,000 of its 6,000 U.S. dealerships by next year. That could result in more than 100,000 additional job losses if those dealerships are forced to close.
Assembly lines at a plant in Pontiac, Mich., which make full-size pickup trucks, will be closed later this year. A Wilmington, Del.-based facility that makes roadsters for the Pontiac and Saturn brands will also close later this year.
Pain for retirees, investors
More than 650,000 retirees and their family members who depend on the company for health insurance will experience cutbacks in their coverage, although their pension benefits are unaffected for now.Investors in $27 billion worth of GM bonds, including mutual funds and thousands of individual investors, will end up with new stock in a reorganized GM worth a fraction of their original investment.
Owners of current GM (GM, Fortune 500) shares, which closed at just 75 cents a share on Friday, will have their investments essentially wiped out.
Now fast forward to this week, when conditions are similar to those of 2005. Gas has been relatively cheap for a few years and Americans – always ready to extrapolate short-term trends into the indefinite future – only want SUVs and pickups. So Ford is adopting the GM strategy of betting its corporate future on continued cheap gas and profligate customers.
Ford Will Be A Truck Company By 2020
(CNN Money) — Car buyers these days love SUVs. They don’t, however, love actual cars like hatchbacks and sedans – as Ford has learned.
Ford said on Wednesday the only passenger car models it plans to keep on the market in North America will be the Mustang and the upcoming Ford Focus Active, a crossover-like hatchback that’s slated to debut in 2019.
That means the Fiesta, Taurus, Fusion and the regular Focus will disappear in the United States and Canada.
Ford will, however, continue to offer its full gamut of trucks, SUVs and crossovers.
By 2020, “almost 90 percent of the Ford portfolio in North America will be trucks, utilities and commercial vehicles,” the press release says.
Ford has hinted it might decide to retire much of its sedan portfolio. Earlier this year, James Farley, the company’s president of global markets, said Ford is “shifting from cars to utilities,” which have been a bigger profit driver. It also reallocated $7 billion of research funds from cars to SUVs and trucks.
And it’s not just Ford. Fiat Chrysler did away with the Dodge Dart and Chrysler 200 more than a year ago. And General Motors decided to scale back production of the Chevy Cruze, Chevy Impala, Buick LaCrosse and the Cadillac ATS and CTS.
Meanwhile, out in the real world:
The conclusion: Detroit may have handed short sellers yet another sure thing.
5 thoughts on "America’s Dumbest Companies Repeat Their Biggest Mistakes"
I feel Ford is trying to avoid a super low margin cutthroat environment controlled by foreign low cost auto makers. The road ahead looks very challenging for automakers with problems
building and lurking around every corner. The combination of overcapacity coupled with high consumer debt and higher interest rates paint an ugly picture going forward. When you add in the fact millions of vehicles are coming off leases the challenge facing automakers becomes formidable.
Delinquencies on subprime loans made by non-bank lenders are soaring toward crisis levels just as some of the big banks long friendly to this sector have pulled back from the auto lending business. To top it off, state regulators are circling the industry and looking at whether it preyed on borrowers and put them in cars they couldn’t afford. More on the problems automakers face in the article below.
http://brucewilds.blogspot.com/2018/02/automakers-face-ugly-and-bumpy-road.html
nanoTechnology as a disruption. using that post for www MetalC2 com on a previous comment, for $30.00 I was able to increase my SUV mileage around 22%.
Did the background and it is an American Made new technology being adopted industry wide.
I hope people can choose to use technology to reduce the emissions without the Federal Government being involved. While intentions are good, the inefficient application will put auto workers out of a job.
Appreciated that feedback. I have been sending messages to ask how to advertise here. I feel a lot of people feel the same way. Reducing the friction on metal 90+% is more efficient, reduces fuel consumption and increases horsepower.
The biggest downside is that it really reduces wear, so there will not be a need to replace a car, truck, tractor as often. That won’t exactly help manufactures.
I disagree as customers like the 4 cylinder SUV. So I believe they will actually be replacing the sedan. Actually smart move. Need more hybrids to increase MPG on all these vehicles.