Auto Industry Analyst John Casesa: This Ain’t No Party

Barrons [sub] offers Inside Baseballers a lengthy interview with former Merrill Lynch auto industry analyst John Casesa,. GM’s bestest best friend thinks the GM – Chrysler merger “looks terrific on paper.” That said, JC (coincidence?) thinks the resulting mega-domestic would have too many brands and dealers. “So this is a deal that would be difficult to execute operationally, although it could happen because the motivations are so strong on both sides… Just because GM has 22% share and Chrysler has 11% doesn’t mean the combined entity will have anywhere near a 33% share.” OK then. So what does the walking quote factory make of Kirk Kerkorian’s Ford share sell-off? “He’s not one to give up easily. The sale is alarming.” Less alarmingly, Casesa likes Toyota and Honda because of their strong balance sheets and well-hedged technology bets. [ED: For that he gets paid?] Barrons offers an excellent graphic comparing the debt loads of Ford, GM and Honda per vehicle sold. Ford was sitting on almost $4k in debt for every vehicle sold LAST YEAR and GM’s number was just a few hundred dollars less. The equivalent figure for Honda: $119. Strong balance sheet: Priceless. For everyone else: Disaster.

Much of the rest of Casesa’s summary of the current situation make sense, even if it’s spoken in measured tones out of synch with life during wartime. By the end of the piece, Casesa gazes into his crystal ball and jumps off a cliff. “Gas-electric hybrids and pure electric vehicles will become commercially feasible. And if it is electric — and it increasingly looks that way — the economics of auto-making are probably going to change a great deal. There will be a lot of value in the battery and in charging batteries. Utilities are going to play a big part in the automobile value chain. That could present serious risk to automobile companies, which historically commanded good margins for the value they put in the car. The automobile itself could become a less important part of the total cost of ownership. You could see car companies partnering with electric utilities.” As I’ve said before (in jest), Exxon-Mobil should buy General Motors from petty cash.