Detroit is doing what it does best… lying and losing money
Today's Financial News - Posted January 29, 2009
The Big Three have shown no signs of improvement, but they sure are pumping out press releases. Need proof of impending doom? Just look at Ford’s (NYSE:F) horrific quarterly report.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is business as usual for the Big Three. Instead of working on true improvements to an obviously broken business model, the Detroit trio are up to their same old tricks.
I am not sure which news is more concerning: Ford (NYSE:F) losing nearly $6 billion in the last three months, General Motors (NYSE:GM) rehashing an old deal with the UAW or Chrysler threatening its suppliers.
I will start with the obvious. Even though it has a financial head start over its automaker brethren, if Ford keeps bleeding money like it did last quarter, it will not be long until it is on its knees, begging before Congress.
Through the course of last year, Ford lost a total of $14.6 billion. It is a scary figure, but we have to remember, this crisis did not kick into high gear until halfway through the third quarter. The next twelve months will be even worse.
That would mean Ford would join the ranks of GM, or even worse, Chrysler.
Down the street, GM is trying to woo supporters this week by telling us it has officially laid off all workers from its UAW-created job bank. That’s great, but is certainly not news.
Once again, it is the same old corporate politics from Wagoner and his troops.We were told this move was coming in December, yet apparently it gives the company one more piece of ammunition when it heads back to the nation’s capital next month.
If GM’s moves are the high-school equivalent of a second-string football player lying and cheating in an effort to get a cheerleader into the sack, then Chrysler’s latest action is no better than an upperclassman stealing lunch money from a couple of pre-schoolers.
I am taking you with me
After its Fiat deal failed to get much media momentum, Nardelli and his supply-chain gurus are trying to increase the company’s margins by strong-arming its suppliers. Just a month or so ago, the Big Three were preaching how a bailout for Detroit would be a bailout for its suppliers. Not any more.
I guess that theory is out the window now that Chrysler is threatening some of its suppliers to lower their price, or else. What purchasing power Chrysler still has, I do not know. But it must think it has at least a little intimidation left in its aging skeleton.
In a letter reportedly sent to suppliers on Monday, Chrysler demanded that all “production suppliers” cut their prices by April 1. It also said the company would not increase what it pays for raw materials, even if the cost to produce the materials rose.
It is the big kid picking on the little kids. Fortunately, Washington is not going to stand for it. Instead, it will probably offer to pay the difference between what suppliers want and what Chrysler is willing to pay.
Truly, I do not know whether to laugh, cry or run from this news. GM and Chrysler are just weeks away from asking Washington for more cash, yet they have not done anything to change their long-term viability.
Re-eliminating jobs won’t sell more cars. And freezing supplier prices will not help for more than a quarter or two. Yet Congress will fall for the charades and write another check. That is just how the game goes.
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January 29th, 2009 at 7:40 pm
The truck’s rolling along (GM) and nobody, management, the UAW and the bondholders wants to drive so they’ll just ride in the back and enjoy the view as they go off the cliff. They know they’re going down and they know there’s not a thing they can do about it. They’re just hangin’ for the ride. Sad