Bailout of Bust? Who will drop off first GM, Ford or Chrysler?
By bayernfan
@bayernfan (1430)
Canada
November 10, 2008 9:32pm CST
GM tumbled 23 percent(3.36 USD at the close) to a 62-year low today after a downgrade by Deutsche Bank. Deutsche bank has a target price of $0 for GM and Barclays cut GM to "underweight" from "equalweight" and lowered its price target for the stock to $1 from $4.
Do any of the "Detroit three" deserve a federal government bailout? If the feds bail out the auto industry, who won't they bail out and where will the money come from? Do you think foreign countries will still be willing to lend to the U.S.?
Without a bailout, the "Detroit three" will surely go bust. Who do you think will file for chapter 11 bankruptcy first? My money is on GM as they are said to only have enough money to continue operation until Spring 2009.
3 responses
@Taskr36 (13963)
• United States
11 Nov 08
Well GM hasn't made anything worth buying since I was a teenager. They've consistently been rated as having the worst cars in consumer reports. Ford occasionally puts out a decent vehicle and they have a nice hybrid diesel in Europe right now. I'm not about to buy a Ford since I still see them as inferior to Japanese and Korean cars, but I know they're improving. If GM crumbles, its factories could be bought by another car maker who would supply new jobs for Americans. That's how capitalism works and I have faith that's how it will work.
I understand the wall street bailout, although I disagree with it because common people were actually suffering due to what happened there and there was fear they would suffer more without the bailout. I don't see that if GM shuts down because other companies, with better management, will bid to take over their operations.
@bayernfan (1430)
• Canada
12 Nov 08
It's hard to make money when nobody wants what you are selling. I don't see have the "Detroit Three" would ever be able to revive their names and earn back the consumers' trust even if they did survive somehow.
You are exactly right. The bank bailouts may or may not end up being worthwhile. Time will tell and the debate will go on for years I am sure. But, at least the argument could be made that if the banking system collapsed then the economic engine would immediately grind to a halt because the banks provide the liquidity that keeps the system running. The automotive sector is not important to the American economy in the same way. If the feds bailout the "Detroit three", then who can they say no to? Isn't it hard enough convincing people around the world that the American economy is still a capitalist system with all the government interference to date? How will capitalism survive if the government backstops everyone?
@james3302 (91)
• United States
11 Nov 08
I recently read that GM does not have enough operating capital to run them until the end of the last quarter of this year. If they do not get a bailout then the economy is going to go downhill fast. Everyone working for them would lose their job. That's around 65,000 people. In my opinion GM has been the least reliable of the three and have had the most problems. I would buy an american made car if I liked them. The new Focus is just down right ugly, I will not buy a chevy because I don't want to be sitting on the side of the road. But Honda is making Chevy's I4 and V6 engines so maybe they are better now. I don't like Dodges either. I typically like small cars and neither Dodge, Ford or Chevy have nice looking small cars. Also have to think about American reliability compared to Foreign reliability. Honda's will run for 15yrs, but who wants to drive the same car for 15yrs? Although the resale value is alot higher on them compared to american made cars. But it all goes back to quality. Some guy(can't remember his name) talked about making quality products and the car company(not sure which one) said let focus on quantity instead. So he took his idea overseas and sold it there. The rest is history.
@spalladino (17891)
• United States
11 Nov 08
I don't know which one will fall first but I would be willing to bet that if any of them knocked half off the price of their existing inventory and started selling new vehicles at a more reasonable price, they'd stay in business. I used to trade in my car for a new one every two years but stopped a long time ago when the price started to bug me. There's no such thing as a reasonably priced American made vehicle anymore. 
@bayernfan (1430)
• Canada
11 Nov 08
Knocking 50% off the price of their cars would be an incredibly difficult thing for the "Detroit three" to do and stay in business even until the end of this week. From what I hear, the American auto manufacturers lose $2000-$3000 per car even before they even roll off the assembly line due to worker healthcare and benefits.
Would you be willing to buy one of the "Detroit three's" cars if they were the same price as a Japanese or Korean car even? Do American auto manufactures make the type of vehicles that Americans want to drive still?
There are no quick fixes for the American auto manufacturers and I wonder if any bailout is just delaying the inevitable and throwing hard earned tax dollars away.
