"Chrysler Avoids Bankruptcy as GM steps toward it" is the Marketwatch.com headline. According to the article, Chrysler has a deal to manage its debt while Ford has never been as close to the edge as its two brethren. But GM is trying to get bondholders to take a 60% value reduction AND exchange the bond value for equity value – which of course has no assurance and could easily go to zero. The bondholders are squawking, and it's unclear they will agree. Which would plunge GM into bankruptcy. Are the bondholders just greedy? Or do they see the chance of getting some of their money back better via liquidation?
Ford has some of the most popular and fuel efficient vehicles in the world. They just aren't sold in the USA. But they've long had high share in Europe, where Ford has built smaller cars with both diesel and gasoline engines that have met market needs. Now Ford is preparing to build and sell those cars in the USA, which would move them a lot closer to recent market shifts than the worn out Lincoln line and the renamed 500 (rebadged as Taurus under the guise of the name making all the difference.) These European cars offer an opportunity for Ford to Disrupt the U.S. market and regain a positive footing.
Meanwhile, Chrysler has some of the most innovative cars on the market. Its 300, Charger and Challenger cars use technology that allows V8 engines to shut off 4 when not needed – allowing them to achieve over 30 MPG in a "large" and "performance" format. Further, for those seeking safety and control, the 300 and selected other models are available in all wheel drive, which has been proven to be the #1 safety enhancer possible. And of great value in northern climates where foul weather (rain and especially snow or ice) makes driving treacherous. All included in dramatic styling that appeals to American consumer tastes.
But GM? "GM to focus on four keeper brands" is the MediaPost.com headline. Most GM innovation is concentrated in Pontiac, Hummer, Saturn and Saab. The first of these is to be closed down for sure, and the latter 3 either sold or closed. As the CEO says "the company will focus on four brands it defines as core: Chevrolet, Buick, Cadillac and GMC." Anytime the CEO of a failing company says he plans to save the place by "focusing on the core" and thereby cutting back to some aged part of the company RUN, RUN, RUN. The past is the past, and you NEVER regain it. Making these brands exciting is about as likely as making Holiday Inn a high-end hotel chain.
Think about it. Remember Izod with those alligators on the breast plate? Would you consider buying those shirts in Macy's? Or how about resurrecting Howard Johnson's as the place to stay and eat while traveling? Or shopping at KMart? Or taking instant photos on a Polaroid? When the market moves on, it's moved on. No business can recapture past profit levels by "focusing" on old brands and products that were once great. The clock never runs backward. T he market has shifted, and companies have to shift with it – not try to pretend "focusing on the core" will create profits simply because they are dedicated and focused.
It's Ford's offshore innovation that may save the company. It's Chrysler's engine, drive train and styling innovations that may save it. But GM is getting rid of anything that looks like innovation – and anything that might look like a Disruption or White Space. It has no hope of ever regaining market strength. It's plan is faulty, and won't work. Even if bondholders accept the swap of debt for equity, in short order GM sales will continue declining (as will profits), and there's no way bondholders can sell all that equity in order to recover their invested value in the bonds.
With enough government money, GM can survive forever.
The question should be for how long will the taxpayers continue to give their money to GM?
I couldn’t help but have a tremendously, hearty, chuckle when I read Mr.Hartung’s assessment on Chrysler vehicles being being some of the most innovative products on the market?! He goes on to boast about cylinder deactivation on Chrysler’s hemi engines that achieve over 30 MPG???? My goodness, where is this man getting his information from? I know for a fact that a gently driven hemi can achieve a whopping 14 MPG in the city and on the highway the best I’ve seen is around 25MPG. No where in the 30 MPG territory. Look at the current state of Chrylser: automobiles and trucks that virtually nobody wants. The 300 is a terribly dated design with a piggish V8 and inefficient V6’s; ditto for the ungainly Charger; the Challenger is just what Chrysler didn’t need to revive. 40 year old styling, overweight, over-powered and poor fuel economy. It’s exactly the kind of car America doesn’t need. Just another niche vehicle to appeal to the over 60 crowd; Chrysler’s more rational, fuel efficient vehicles are an abomination. Chrysler’s pug ugly PT Cruiser still keeps factory workers humming along even though nobody buys the ugly PT Cruiser anymore; the Avenger and Sebring are eyesores: cheap interior materials and only popular with fleet sales; the Dodge Caliber is another example of ugly styling, cheap materials, etc. Chrysler hasn’t a vehicle that can even remotely compete with the foreign makes let alone GM and Ford. Hopefully FIAT will inject some sensibility into Chrysler and undo the stupid decisions that the damn, fool, germans from Daimler did to Chrysler.
I hope GM survive goes down the drain. They make the ugliest cars ever and if you think about it GM tax money to survive and some of that money goes to survive, which means that we are practicily giving survive money to make ugly cars.