I did a poor job of conveying my thoughts in that comment. Production capacity should be cut but not all the way down to 9M SAAR. That is an unsustainably low number and when it rebounds we would be caught short in production capacity, putting significant pressure on pricing. This is something we have to be very concerned about in this downturn, and not only with regards to automobile manufacturering. With all of the liquidity being pumped into the markets, I am very concerned about stagflation like the 1970’s and early 80’s. Commodity production is contracting at an alarming pace and we are ripening the markets for skyrocketing inflation when the economy starts to turn.

Yea, this always gets me to, and something all the networks (cable included) seem to ignore. A managed/structured bankruptcy and those employment contracts are out the door (including Rick himself), including all those stock option grants…. it’s no surprise….

I want to buy an EV (EREV or BEV) in 2011 and I don’t want to pay the market price in a 14M SAAR market with 9M production capacity. Each manufacturer’s capacity should be cut so that they can be lightly profitable at 12M SAAR but they should retain enough capacity to take profitable advantage of a 15M SAAR market. Beyond that the consumer’s would be best served by idling capacity no divesting from it. One positive side effect for any auto manufacturer that survives this downturn is that they should emerge much more nimble.

#79 statik

We agree on the need — as distasteful as it is — to prop up the banking sector. No issue there. In fact while it’s nice to act like Senator Shelby and just say things like “let them fail”, this misses the point that if the large financial institutions fail, then all the S&Ls and regional and local banks that hold a high percentage of their assets in preferred stock of these companies would also fail.

I also agree about the sturm and drang over the amount lent to the banks. Yes the banks will recover. Yes they will make money. I’m not completely sure that AIG will ever pay off, but the others most certainly will. So I’m with your there.

What I don’t understand is why you say the GM business model can’t work. How exactly is the GM business model any different than the Toyota or Ford business model? All the models are the same as far as I can see. Some have better product than others but the basic business model seems the same.
==============================

Don, that is a big question to map out GM’s business model in relation to Toyota, (I’m not that thrilled about Ford either, it is GM…just a year behind I think, lol). I don’t know if I can even answer that in under 5,000 words. I’ll vaguely bullet point GM, and leave out the ‘fringe’ reasons:

Basically, GM’s model differs from Toyota’s in the following ways:
–to expand/surivive through borrowing and kiting their financing and hoping for a unknown silver bullet to somehow cure their balance sheet before the debt servicing crushes them
–to be its own competition by opening rival brands and stocking them with rebadged/restickered vehicles that are exactly the same
–flooding small/mid-sized towns with multiple dealers like your local mall that has 3 bookstores all owned by the same company, trying to make the customer’s choice you, you or you
–to green light projects based on the margin of the vehicle and hope it sells, rather than the demand of the market because you have capitulated to workers and more importantly, communities that have given you big kick backs to move to their location (rather than the more optimal, long term cost efficient locations) and now find you can no longer compete on low cost items…so you don’t offer them

The bigger issue (besides the company specific ones) of course is:

Can ANY car company make money while building cars in the US, I am not sure the answer is yes…we’d all love to click our heels together, be really, REALLY patriotic and will the answer of ‘yes’ into existence, but it doesn’t work that way. The advent of the electric car only makes this question even more difficult, as it commoditizes the automobile.

It is worth a go I think, it is necessary to try and foster job retention in this climate anyway…and if you can turn around a dog of a company at the same time–bonus.

That should read:

“We are herehoping the dance continues long enough to get our electric cars of course, lol.”
–my edit functions seem to be down atm

#79 & #80 statik: Well if the game is essentially up, why are we wasting our time here?
———————–
We are here opening the dance continues long enough to get our electric cars of course, lol.