COMMENTARY Memo to Detroit Auto Bosses: Hold Your Tongue
By Michelle Krebs October 16, 2009Put up or shut up, albeit in more polite European terms, is basically financial columnist Antony Currie's advice to Detroit's auto bosses.
The Big Three bosses have returned to one of their favorite past times, writes Currie on the financial blog site, Breakingviews.com: "... each of the Big Three's bosses has been indulging in painting rosy scenarios for their firms. But like pronouncements of the past, they're a tad premature."
Ford CEO Alan Mulally "has the most to crow about," writes Currie, citing the automaker's achievements: slashing costs; hacking incentive spending; staying out of bankruptcy; reporting relatively decent sales; and convincing some analysts the company will turn a profit in 2010, a year ahead of schedule.
But that doesn't make Mulally "a soothsayer," says Currie. He notes, as Edmunds.com's AutoObserver has, that Mulally's forecast for the U.S. to sell 11 million vehicles this year is overly optimistic. That would mean selling at least 1 million cars each of the remaining three months this year - or "roughly a third more than any month this year aside from Cash-for-Clunkers-boosted August." Edmunds.com predicts sales of about 10.2 million this year.
Worse, notes Currie, is GM's happy talk about an Initial Public Offering (IPO) of its stock, to get the U.S. government out of its business.
GM still has "much of the mess that clogged its engine" before bankruptcy, including 10,000 more workers than it needs, the failed sale of Saturn that will cost GM $100 million plus to compensate dealers and "horrendous" sales.
"More sales and a few good quarters will probably be needed before IPO talk is warranted," he writes.
But it is at Chrysler "where expectations and reality diverge most." Chrysler-Fiat CEO Sergio Marchionne recently announced he expects a Chrysler profit within two years, possibly followed by an IPO. Chrysler, too, faces challenges: an empty product pipeline, plummeting sales and soaring incentives. "...with few new products and no information on either finances or a business plan, which is expected in November, his claim of profitability rings hollow," he writes.
Currie concluded that Detroit's car bosses should keep quiet for the moment. "It's that Motown's upbeat predictions invariably disappoint."
About the Author
Antony Currie has more than a decade of experience as a financial journalist, having worked with Euromoney since 1996, most recently as a US editor. His column appeared on Breakingviews.com, an online source of financial insight.
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Well... That's the CEO's job, regardless of the industry, isn't it? As far as GM is concerned, the sooner the better for the IPO. GM needs to demonstrate that the boat will float.
Here in the US, 10,000 too many employees, and the Saturn Franchisees. But in Europe, RHJ International dropped their Opel bid in order to buy a non-automotive interest; Germany is now telling GM that State aid is available without regard to the buyer or the plan. GM could conceivably keep Opel, re-badge the cars or the dealers.
Chrysler's got the most weeds in the prop; it'll be interesting to watch incoming marketing chief, Oliver Francois, keep the dealerships open while changing our perception of Chrysler, and probably Fiat, too.
So, the CEO's job is to deceive investors and employees into believing a company is doing well when it isn't necessarily true?
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