CNN Money: Big Three Could Return to Profitability in 2010

Justin Berkowitz
by Justin Berkowitz
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cnn money big three could return to profitability in 2010

CNN Money’s Chris Isidore writes that if all the stars aligned, the Big Three could return to profitability by 2010. He qualifies his comments often, with phrases like “if they make it to 2010,” but the bigger issue is the specious nature of his explanations for how the companies would return to profitability. Isidore’s claims are essentially underpinned by the philosophy of “cutting your way to profitability” — as such, he highlights the Big Three’s smaller workforces, supposedly reduced pension obligations, and cuts in overcapacity. The only actual increase in income Isidore speculates about is increased new car sales, an argument barely more sophisticated than “they’re really bad now, so obviously they have to get a lot better.” This kind of journalism is dangerous, not just because it’s overly optimistic (in spite of its own acknowledgements to the contrary), but because it’s wrong. There is no reason to believe sales will be up to 14 million units in the US by 2010; there’s even less reason to believe that GM’s share of those 14 million units would be the same percent that it was in 2007. Isidore’s math on the potential savings from cost cutting is calling the glass 1/8 full at best, by assuming the UAW will allow GM to just defer its contribution to the pooled-benefit VEBA account to another year. That might work in accounting ledgers, but the bottom line is that this is the kind of nonsense that contributed to GM’s collapse in the first place.

Justin Berkowitz
Justin Berkowitz

Immensely bored law student. I've also got 3 dogs.

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  • Mcs Mcs on Nov 29, 2008

    2010? I suppose the Lions win the 2010 super bowl and the shoreline of Zug Island makes the Conde Nast list of top ten beaches.

  • GM Retiree GM Retiree on Nov 29, 2008

    DEATH SENTENCE! THE HEALTH CARE BETRAYAL AND SELL-OUT OF AMERICA’S DEFENSLESS AUTO RETIRES? Today’s dependant struggling auto retirees who spent their entire lives working to support this nation are now being condemned daily by the callous media, corporations and government who call them expendable. Even their own union officials have been silent in their defense and have called them “legacy costs”. These union officials have recently used legal means to raid and meaningfully slice their pensions. These are the same union officials who refused to vest their vital health care benefits or keep pension buying power up with inflation. Health care is clearly not affordable to older auto pensioners on their meager pensions and stealing their health care will be repaying their lifetime of contributions with a death sentence. UAW OFFICIALS BETRAY AUTO WORKERS [2007]... VICTOR REUTHER SPEECH 50TH ANNIVERSARY OF THE UAW FLINT RALLY [1987]... MIKE WESTFALL SPEECH 50TH ANNIVERSARY OF THE UAW FLINT RALLY [1987]... HISTORIC UAW LEADER SPEAKS OUT FOR RETIREES AND WORKERS [2007]… EASTERN ECONOMIC MANUFACTURING SPEECH [1985] … ROGER & ME –FLINT CONTROVERSY [1990]… ARCHIVES AND ADDITIONAL INFORMATION [1976-2008]…

  • Davey49 Davey49 on Nov 29, 2008

    If the Jets win the 2009 Super Bowl the Lions can win in 2010. I say 14 million in 2010 is easy. 18 million in 2012. possibly 20 million Demand will be high, immigration is increasing, people are having lots of kids. Look around, there's a baby boom going on Minivans and large crossovers for everyone. Your cars you bought from 2000-2007 (big years) will be old by then. No patriotism is possible, cars are made everywhere. Parts are made everywhere, If you can buy products made in your country of residence by a company based in your country of residence than go for it, if you can't you can't. (Try to find USA made clothing at the local store, it's fairly difficult) I'm always a bit confused by the order of my buying habits #1 buy American made, American owned #2 buy American made foreign owned #3 buy foreign made, American owned 2 and 3 I could switch #4 buy foreign made and foreign owned #3 and #4 can be split into a. made in a country with decent labor laws and standard of living (UK, Germany, Belgium, Sweden, Canada, Korea, Japan) b. made in a country with a poor standard of living (China, Mexico)

  • Landcrusher Landcrusher on Nov 30, 2008

    GM Retiree, You sound angry, and I don't blame you for being that way. Not one bit. I am curious though, what path you now think you should have taken in life, work wise, that would have avoided your current situation. Would you still take a union job? Do you still think the labor laws in your state did you a favor? How do you think we should avoid the next generation of people ending up in your shoes? You realize of course that your pension will go to the PBGC and that you will still get government healthcare. It may not be what you agreed on, but that happens to people everyday in our country. We all make agreements with people who don't keep them, and we suffer for it. I have made a few bad deals myself, and it's gonna mean extra years working on top of all the ones this economy just handed me. I may never retire at this rate. I wish you and your family better fortune in the future.