Can U.S. carmakers ride out a recession?
Weaker-than-expected sales could incite suicidal price cutting and badly damage GM, Chrysler and Ford.
As most economic indicators continue to flash yellow - and occasionally red - a vigorous debate is unfolding about how far auto sales will fall this year. With all three of Detroit's automakers under significant financial pressure, the debate is more than academic. None of the three is expected to make a profit in the U.S. in 2008. Should sales turn out to be considerably weaker than expected, it would not only create larger losses but could also incite another round of suicidal price cutting that would seriously damage all of the companies.
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Hi, Guys, as we know, there is a business life cycle, and recently, it seems that there is some problem with major car companies to maintain their business in the United States. According to the article, each company has different perspective on the same situation; recession.
Fritz Handerson, who is a newly appointed president of GM (General Motors), seems to evaluate that this recession does not affect to the individuals yet. He sounds like an optimist.
On the contrary, Bob Nardelli, Chrysler CEO, has different opinion. He takes a view that there would be no economic improvement this year. He describes that now the economic situation would be like ‘bathtub-shaped’, which means the recession will be longer duration. So now, Chrysler has a plan to close the West Coast design studio and to change the summer production shutdown into a company-wide vacation.
In the mean time, Ford CEO, Allan Mullay seems to be confused to look over this situation. However, CFO Don LeClair says the number of sales is not important, the company needs to consider of discounting required to achieve the goal.
We learned that there are three levels of strategy. What level of strategy do you think appropriate? It does not seem to be a business level or a functional level strategy. As you also know our economy is so complicated, so it must be hard to predict future just one from many industries. In my opinion, GM has a narrow viewpoint, the company seems to just focus on their industry even thought he knows that it is a recession. Also, Ford CEO seems to be needed a business level of strategy before getting new corporate level strategy. His interview from the article sounded like he does not have a confidence to overcome this hardship. The other side, I expect that Chrysler would overcome this recession properly. The company already has a plan to fight this distress.
They have a common that all of them think that A steeper downturn now could mean a steeper upturn later. Also some objective indexes make them have a silver lining. Before going optimistic road, however, there is a big wall blocking up them; can they survive until then?
We will know that which company did the right thing.
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