That was beautiful, insightful.

When I read the title of article I thought it was about a handyman who was a real jerk.

Heh heh, Since the hard times hit me back in ‘86, that’s been my survival strategy. Buy used or get free, repair, improvise, and make do. About the only thing I buy new is food.

Thanks!

Chrysler’s going away will help Ford and GM, but gas prices are rising so fast, it may not be enough. The fact that now even Toyota has extra capacity in the US means they can soak up a bit of the ex-Chrysler demand as well, which wasn’t the case until recently.

As usual, beautiful and brilliant! I’ve missed your voice. Good to see you back.

Didn’t GM have 54% of the market share in 1972? I can’t find a market share timeline to save my life right now, but a guy that I work with who was at GM at that time made that claim. That would make it closer to losing 1% market share out of a mostly growing market each year since then.

And since when has a CEO making proclimations about how many months (weeks?) his company has to survive boosted morale? There’s less than 7 months left to the year, how is this good news for anybody?!!

I have to disagree with this assessment. Chrysler is basically Chp. 11 now that, when they finally file, it won’t help either of the other 2. If anything, them actually filing for Chapter 11 should save them. But it won’t be until GM goes down that Ford can take off.

I just don’t interpret what you just said with what’s stated in the article. Although I think your recent statement is definitely accurate. Although I do have different experiences than you do. Auto finance companies do have to acquire the liquidity that enables them to supply the monies for the dealers (and this is getting to be very difficult). R&D is definitely nowhere near that of a manufacturing outfit. But you definitely have tons of new products and niches that are designed to serve different dealers and customers. Cap One for instance has used a ‘blank check’ product that allows superprime customers to buy whatever car they like up to a specific amount. Today this is starting to become more commonplace but five years ago it was truly a revolutionary idea.

Money may be a commodity. But the varying levels of risk and reward for dealers and financial institutions is almost infinitely variable.

I have a pretty good idea what it takes to keep a financial institution going, I’ve worked at more than a couple (one of which shared some space with BMW’s financing arm). The point (which gets smoothed out at 800 words), is that a finance arm’s overhead is nothing compared to auto manufacturing. No suppliers to deal with, not much R&D, no comodity issues, etc. So while it can look like the finance arm is so much more profitable, it’s partially because of lower overhead and partly a result of accounting practices.

Also, while actuaries etc. aren’t cheap, they don’t make that much more than the basic line workers. And finance doesn’t require anywhere near the people manufacturing does (one factory’s worth, two max).

So, when GM and GMAC were both making billions, GMAC looked much more efficient. But that was mostly book keeping and structure. GMAC depends on GM feeding it business.

Of the few people on the lots these days, many of them are so far beyond being qualified for any kind of financing that it’s almost funny.

Basically, the Big 3 pulled ahead so much demand via artificial credit and pricing standards that the current drought is going to be far more severe than it might be otherwise.

Andrew, I like a lot of what you wrote but this is not a well researched statement.

Most medium to large finance companies have thousands of employees doing everything from generating and managing relationships with car dealers (which is much harder than you imagine), to developing software programs and models to decipher a good risk over a bad risk ( which is incredibly complex), to those who trade information and loans to find new clients and new opportunities. You also have the originators, the remarketing department, the collections department (huge), the bankruptcy department, auto finance marketing department, internal IT, the finance department, the marketing of these debt obligations… I think you may be getting the idea.

The auto finance business is by no means a high profit and low risk venture. In fact, even before the subprime crisis hit there were literally dozens of firms that had already gone belly up…. and that was during the ‘good’ times.

You may want to chop this portion off. It makes for good automotive sci-fi but it’s not how the industry is structured.

http://www.carofthecentury.com/answer_to_gm’s_market_share_plunge.htm

It seems that the premise of the article is that sales for the 2.8 have gotten so bad that they can no longer finesse the thing with gimmick sales and ill-considered loans. Thus they are forced to take their medicine. A provocative point-of-view, but one I do not share.

What would have been good would have been for management to get it’s act together starting years ago. It was not handed down on a stone tablet that the 2.8 would hand market share over to Toyota and Honda. That did not have to happen. It happened because of bad decisions.

Actually, the finance units have been the biggest and most reliable source of income for the 2.8 (except of course, those that got into real-estate loans). They consistently make money on car loans. If the manufacturer offers low/zero interest financing, that comes out of the manufacturer’s marketing budget (like rebates), as a subsidy to the finance unit. The was a reason Cerberus wanted into GMAC; they just didn’t anticipate the real-estate loan melt-down.

Huh? Maybe I’m dense, but I don’t understand what you’re trying to say.

You seem to be saying slower sales are a good thing because dealers will be able to clear their overstocked position.

You seem to be saying the finance companies can recover from making bad loans by making fewer loans in a worse market.

You seem to be saying that Americans will buy more vehicles if they have only two companies’ products to choose from rather than three.

If I’ve understood this article, I don’t agree with it. If I’ve misunderstood it, I apologise.

There is room for one domestic manufacturer with about 10% of the market for pickup buyers, government fleets, and traditionalists, even with noncompetitive products.

Because my car of the day today is American-ish, well, at least it is under the GM umbrella.

http://www.caroftheday.org/2008/06/04/saab-turbo-x-1-of-600/