America Losing Interest in Keeping Detroit Afloat
By Michelle Krebs February 27, 2009A survey conducted by the USA Today newspaper and Gallup poll this week found only 25 percent of Americans believe the government should continue lending money to Detroit automakers.
"That's a huge, and fast, change of heart," said USA Today's Jim Healey, who added that in December, before the government approved emergency auto loans, 61 percent favored federal help for the automakers.
"The more people understand what's wrong with General Motors, the less willing they are to support it," said Porter Stansberry, head of Stansberry & Associates Investment Research, in the USA Today story about the survey.
General Motors Corp. and Chrysler LLC on February 17 submitted to the U.S. Department of Treasury restructuring plans to demonstrate their ability to continue long-term operations. But both plans included asking for additional billions in government assistance.
GM said it may end up requiring as much as $30 billion in total federal funds; Chrysler asked for an additional $2 billion more than the $3 billion the company said it would need by March 31 to continue operations, bringing Chrysler's requested payout to $9 billion.
And these numbers come in the face of a U.S. auto market that has yet to find bottom. February car sales, when reported next Tuesday, are expected to equate to an annual selling rate of just 8.2 million units, according to data from Edmunds.com.
Chrysler's restructuring plan indicated that it would be difficult for the company to survive under any conditions if the U.S. Seasonally Adjusted Annual Rate of sales is not at least 10.1 million units.
GM, meanwhile, continues to be awash in red ink, reporting it lost $30.9 billion for all of 2008, the second-worst annual loss in the company's history -- in a year that saw 13,199,234 light vehicles sold in the U.S.
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I am upset about Congress loaning (giving..if they go out of business who will pay back the loans) the Detroit Automakers my tax dollars when they have been gouging the car buyers out of thousands of dollars for overpriced cars & trucks for years. When I walk into an auto dealership & a salesman qotes me a price as if thats the lowest he can offer I am offended. I am no longer a DUMB CONSUMER. I know I am paying for more than that shiney new car. The same thing holds true for the Detroit Automakers. There is nothing wrong with making a profit but can they continue to expect the buying public to accept & pay for overpriced vehicles in this aweful economy? When so many people are unemployed or ferful of losing their jobs can auto manufactures & dealerships continue to price their products as if everything is normal? Housing will not recover its glory days nor will the stock market & those who make millions investing & dreaming up ways to sell worthless assets return. This is a NEW DAY OF SANITY. I am willing to help Detroit Automakers & their dealers if they are willing to help me and the public at large afford their products. The only reason the cars & trucks cost so much is everyone involved in the final product wants to make a profit beyond what the product is worth. These are the days of if it is not really worth my hard earned money I will not buy it. Stop asking for handouts from the taxpayers American Auto makers & price your products to sell and you will tun around such dismal sales. Don't ask us (the American Consumers) to continue to bail you out of a hole you created by selling less than reliable vehicles that were overpriced, underperformed, & less efficient. STOP BEING STUPID & ARROGANT!!!
Supply, demand, value, price. These are the four elements of any commodity in a free market economy. Cost is a product of these
We place a high value on personal transportation in our culture so automakers built lots of manufacturing capacity and hired hundreds of thousands of folks to design and build vehicles to supply our ongoing demand.
Value is a slippery thing; dependent in large part on emotion. Harley Davidson understood this better than any vehicle builder, car or motorcycle. They had at one time a two year waiting list >with deposits< for its high demand models. Folks would pay well above MSRP to get in on the "lifestyle" they highly valued. Meanwhile, other brands offering bikes that weighed a third less, had in some cases three times the horsepower and an MSRP half as much, were offering all manner of incentives to enhance their value. So price isn't necessarily proportionate to value.
Price is the only one of the four that can be defined. If, however, demand collapses to a level below the break-even point of its manufacturing cost, we end up where we are today; pricing well below cost attempting to drive up value and thereby increase demand above supply and its cost. Fear is what we are placing high value in now. Its price is unbearably high. Its demand ceaseless. We "wait and see" if demand will ever come back.
GM and Chrysler LLC may be the first two dominos to fall. Other industries would fall worldwide, as cost continues to outstrip price, right past recession, right past depression, off the table into Dark Ages II, the Sequel.
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