Tuesday, November 18, 2008

When The Pen Is The Sword

No doubt the US auto industry is teetering on the brink of destruction. Ford has the cash to make it though until 2010 but the collapses of GM and Chrysler will destroy the supplier network that Ford and many other auto manufactures depend on. There has been so much talk about the bankruptcy of GM that the shock value has worn off. We're growing to accept that it is highly possible there will be no more General Motors. There is no longer PanAm, Woolworths, Bethlehem Steel, and the list goes on. Icons do pass.

There will be a huge impact to our economy and many companies without GM. But of interest today is Edmunds.com, my former employer. It's not about the website itself, but I guess more about Automotive Journalism here in the states. For years and years, Ford, GM and Chrysler were beat up and nit picked. Toyota's are boring, Nissan's not very reliable after all, Honda's bland, but these never were their main themes. Remember, Hillary Clinton on paper was probably the most qualified candidate for President. The pen is very mighty.

But in the case of Edmunds.com, the pen has come back to stab the hand that holds it. Today's Insideline.com featured an article called "Be American, Buy American". It was written by a "ghost writer" called "The Mechanic". Well that would have to be an Edmunds staffer as I doubt they've given the keys to the website to some nameless person. The picture for the piece was the new Chevrolet Camaro, a car that could conceivably never be produced.

It's a bit too late though. GM writes eight figure checks to Edmunds.com and it's a substantial portion of their total revenue. Out of respect, I wont' quote any figures from my time there, but it's quite a bit. You might say "wow". I found the timing of the article interesting as today the automakers went to the Senate for a beating while they were asking for life raft.

GM may have loved Edmunds.com, but I could never see the love returned. Bob Lutz even once paid a visit to the offices in Santa Monica. But recently they showed a picture of a Silverado attached to a tow truck as a main photo for a long term test. All cars can break down, but never in my nearly 30 years of car magazines can I recall such a slap. Despite the large chunk of cash bestowed on the company, during my time, no upper management drove a GM product. Acura, Lexus, Land Rover and Volvo, as I recall were the personal (not long term test) vehicles with reserved parking. If GM handed me an eight figure check, I might have a Cadillac or two parked in the reserved spaces.

But it may be too late Edmunds. It was not cool to be nice to GM either personally or in print. The company is run by a fine family with high caliber employees and despite the major bruising it may receive for the loss of GM, it will live on.

Just like the rest of us.

Saturday, November 01, 2008

Big Decisions

I've already voted. Thankfully Travis County does a great job of setting up polling places. One was by my office and I voted earlier in the week. Fast, efficient and convienent. Voting should always be this easy and acessable. I think the election is decided for President, the big show will be how big the Democrats lead in Congress will be.

What do we do about the American automobile industry?

Chrysler maybe a goner. Yes you can still buy one, in fact you can order one. But before we have another Congressional election, you won't be able to get a new one. Ford is doing ok, and will weather the storm with the surplus of cash on hand. But what do we do with GM?

GM has more then sales problems. It has cash problems. Two years ago Ford mortgaged everything. Credit markets were open, it was easy for them to get cash. GM sold half of GMAC (their finance arm) to raise cash. Now they can't lend you money to buy a car, but Ford still can. Ford held on to Ford Motor Credit.

GM is not an industrial icon to my generation. However to my parents generation it is. GM was everywhere on television, they owned half the new vehicle market in the United States and were at times eyed by the justice department to be broken up for anti-trust reasons. Today, GM has about 24 percent of the market and is on the verge of running out of cash. When you burn through a billion dollars a month from your bank account, well sometime in 2009 GM won't be able to pay their bills. They no longer pay them in 30 days as it stands today.

Do we save GM? Arguments are being made by governors across the country to lend money to help them out. We did help out Chrysler in the 80's and the treasury made $400 million in profit for doing so. Do we want to try the same for GM? You keep hearing GM is going to buy Chrysler, but don't be fooled. Chrysler is a goner, you're financing saving GM not Chrysler which will be closed. Period. There will be massive job losses regardless.

I work in the auto industry. The company I work for will be effected. Part of the problem with GM and Chrysler going under is that the suppliers who supply them will go under too. Those suppliers also supply the rest of our auto industry in the US and will face massive restructuring (layoffs). Oh, and the retirees who will be flooding the government funded pension guarantee system. Don't forget about them.

We've said good-bye to making textiles. We've said good-bye to making electronics. We've said good-bye to most of our manufacturing industry. But are we ready to say goodbye to General Motors?

Baseball, Apple Pie and Chevrolet. A fate that will be decided after Election Day.