Auto Bailout Collapses, So What?

For a whole lot of obvious reasons, this is pretty much all anybody seems to be talking about today:

CNN: Auto bailout collapses in Senate

Deal to move forward on $14 billion stopgap measure falls short, possibly dooming GM and Chrysler to bankruptcy.
The future of the U.S. auto industry was in doubt Friday morning after a proposal for $14 billion in federal loans died in a late night Senate vote.
The Senate voted 52-35 to bring the measure for a vote -- short of the 60 votes needed to advance the legislation. The failure followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that both parties, as well as the companies and the United Auto Workers union, could accept.

*sigh*

It's disappointing, but hardly surprising that so many people insist that a bailout of the Detroit Three is the key to saving their bacon.

Save them, so they can do what, exactly? So they can continue to piss away money and shareholder value?

Save them so they can keep making uncompetitive automobiles?

Honestly, restructuring under Chapter 11 is probably the best thing for the automakers in the long run.

Way back in in the depths of history, there was just as much doom, gloom, and boo-hooing about permitting airlines to go bankrupt.

Today, airlines seem to go in and out of court-ordered restructuring on a revolving schedule. Somehow, amazingly, air travel hasn't ground to a halt.

The fact is, the Detroit Three need to be destroyed in order to be saved.

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Ford, GM, Chrysler All Pulling Together

Best commentary yet on the baillout of the Big Three.

Hat tip to WC Varones.

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Ford Posts Q1 Profit: No Word On The Other Six Signs Of The Apocalypse

Yahoo!: - Ford Motor Co. produced a profit of 100 million dollars in the first quarter

Ford Motor Co. produced a profit of 100 million dollars in the first quarter in a surprise turnaround for the struggling auto giant that has been mired in deep losses.
...
Despite the surprise profit, Ford said it expected to show a loss for the full year 2008 "equal to or better" than its 2007 deficit, dragged down by continued problems in North American automotive operations.

Yes, yes, bully for them them. But one data point doesn't make for a trend. The way the business media has been handing out reacharounds today, you'd think Ford had pulled this rabbit out of their hat eight or more quarters in a row.

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Ford Mustang pulls up lame

Canadian Business: Ford tries to stem 19 per cent slide in iconic Mustang sales
The latest version of Ford's iconic Mustang is growing old, and back-to-back monthly sales declines to start 2007 have the struggling company a little worried.
The new Mustang, which made its debut in the fall of 2004, has been a bright spot for Ford at a time when bright spots have been few.
So when Mustang sales dropped by 19 per cent in January and February compared with the same months in 2006, company officials became a little concerned.
"It's gotten our attention because when a high volume product like that declines as much as that, we want to see what we might want to do about that," said George Pipas, Ford Motor Co.'s top sales analyst.
A drop in Mustang sales should be a worry for Ford, which saw its overall U.S. sales slip eight per cent last year. The company sold 160,975 Mustangs in 2005 and 166,530 in 2006, big numbers in the midsize sports coupe market, a segment considered to be a niche.

To say that things aren't going well for Ford is an understatement. Right now, they seem eager to try almost anything.

Here's a radical idea: has anyone thought of taking a long, hard look at their sales culture?

I can't claim to be an expert on the auto business. Nor can I claim to have undertaken a comprehensive review of the salesforce at a large number of dealerships.

However, I have visited a few Ford dealerships over the years when shopping for a new car. The first salesman to approach me always seems to fall into two categories: the young would-be hotshot who thinks he's a closer, or an older broken down Willy Loman-like sad sack. The pressure sale, or the pity sale, what a choice. Neither personality type is effective with me, and since I'm not inclined to buy a car from people who annoy me, nor am I being paid to take the time to coach them on sales skills, these encounters see me leaving empty handed.

Inevitably, I buy cars from people who take the time to build rapport, and add value into the sale. I don't don't know if I've ever mentioned this before on my blog (okay, that was sarcasm), but those are critical skills.

So, from the perspective of a long time sales manager, my first response to the automaker's declining numbers is to ask, what are the salesmen doing wrong?

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Ford bets the farm on their future

Canadian Business: Ford restructuring to cost US$11 billion

WASHINGTON (AP) - Ford Motor Co. said Wednesday its restructuring plan would likely cost $11.18 billion, with more than half of the expenses devoted to programs for laid-off workers.
In a filing with the Securities and Exchange Commission, the No. 2 U.S. automaker estimated spending $5.96 billion on a jobs bank and other "personnel-reduction programs," along with $2.74 billion to scale back pensions, $2.2 billion for fixed asset writedowns and $281 million to shut plants.
The company also confirmed it has pledged all its buildings, trademarks, intellectual property, shares in the main company, and shares in Volvo, Jaguar, Aston Martin, Ford Motor Credit Co. and other operations as collateral for a $23.4-billion line of credit to fund its restructuring plan and cover losses expected until 2009.

In this instance, the aphorism "rearranging deck chairs on the Titanic" is not entirely apt. With this level of debt being leveraged to try to save the company, I think a better aphorism would be "Trying to re-lay the keel, overhaul the engines, and replace the driveshafts on the Titanic while already underway at cruising speed on choppy North Atlantic seas."

Unlike Chrysler, for whom Daimler can't seem to find a buyer, I get the sneaking suspicion that Ford will end up with a new owner in the near future: they will end up in the hands of the banks who have extended them credit, whether the banks want them, or not.

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