B&E’s Karan Mehrishi dives deep into the auto quagmire and gasps for breath...
The americans are insane[still]!
This August 2008 couldn’t have been more ironic. Here I was supposed
to file in the most devastating report I have ever made on the global auto industry, and there I had Audi’s offices requesting me to help them understand how Audi compares with other international auto players and the challenges Audi faces. Ironic because my research on America’s ‘greatest’ companies was complete, and the list of American idols – that is, the biggest five loss making companies America had created in the last year – was staring me on the face! These five stalwarts had a combined loss above $80 billion in the year 2007. What stunned me was that the leader of this bunch was clearly General Motors, with an individual loss touching close to a sickening $39 billion!!! Well, when I’d met Rick Wagoner, Chairman, GM, last year to get his exclusive quotes with respect to his $750 investment in India, I had had no inkling of the times to come, and he’d also been quite confident that “GM wanted to leverage its global resources” to succeed in “such a high growth market.” Strangely, nobody’s been picking up my phones in GM’s Detroit office since then. But Fritz Henderson, GM President and COO, Detroit, on August 20, 2008, writes in a rare letter to the editor in Wall Street Journal, “In the editorial ‘Can America’s Auto Makers Survive?’, Paul Ingrassia asks whether Detroit’s auto makers can survive. In the case of General Motors, the answer is, emphatically, yes. And not only survive, but thrive. There is no question the industry is facing significant pressures driven by a weak US economy and rising fuel costs. At GM, we’re taking the difficult and necessary steps to reduce our cost structure to be more competitive in the global marketplace and build a stronger foundation for our future.” I was stumped. It wasn’t that I was going to analyse the close to $2 billion loss GM suffered in 2005. The fact is that the last six months of GM (January to June 2008) has seen it rake up losses close to another $19 billion. I checked out the last three months (April to June 2008) and GM had losses of $15.5 billion! I really couldn’t see where the improvement, that GM President Henderson was referring to, was.
But it’s not as if GM’s alone in the bloodbath. Ford is not too far behind when it comes to sharing in the scathing hits. When William Clay Ford Junior gave an interview to Planman Media a couple of years back, he had just entered India and was typically gung-ho about cutting it clean very soon. In the first week of August 2008, Ford reported the biggest and worst one quarter loss (April to June 2008) in the history of the corporation! $8.7 billion! Year 2007 loss: $2.7 billion! Year 2006 loss: $12.6 billion!
Not surprisingly, while annual sales have regularly fallen or remained stagnant at GM (2006: $205 billion sales; 2007: $181 billion; 2008 six months: $80.6 billion) and Ford (2006: $160 billion; 2007: $172 billion; 2008 six months: $85 billion), the sales at Toyota (2006: $179 billion; 2007: $202 billion; 2008 six months: $118 billion) and Honda (2006: $84 billion; 2007: $94 billion; 2008 six months: $54 billion) have been constantly rising. But more importantly, companies like Toyota and Honda have raked up humungous profits year after year! Toyota had profits of $11.6 billion, $14 billion and $6.18 billion in 2006, 2007 and the first six months of 2008. While Honda, during the same periods, had profits of $5 billion, $5 billion and close to $2 billion!
Compared to the accumulated profits of $44 billion in the last three years of the fuel-efficient focused Japanese Big 2, the Detroit Big 2 had accumulated losses of a mind numbing $82 billion in the same period!!! What gives?!?! That’s when I came across four extremely critical issues that could surely define the reasons why the global auto industry dies sooner than later...
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
The americans are insane[still]!
This August 2008 couldn’t have been more ironic. Here I was supposed
to file in the most devastating report I have ever made on the global auto industry, and there I had Audi’s offices requesting me to help them understand how Audi compares with other international auto players and the challenges Audi faces. Ironic because my research on America’s ‘greatest’ companies was complete, and the list of American idols – that is, the biggest five loss making companies America had created in the last year – was staring me on the face! These five stalwarts had a combined loss above $80 billion in the year 2007. What stunned me was that the leader of this bunch was clearly General Motors, with an individual loss touching close to a sickening $39 billion!!! Well, when I’d met Rick Wagoner, Chairman, GM, last year to get his exclusive quotes with respect to his $750 investment in India, I had had no inkling of the times to come, and he’d also been quite confident that “GM wanted to leverage its global resources” to succeed in “such a high growth market.” Strangely, nobody’s been picking up my phones in GM’s Detroit office since then. But Fritz Henderson, GM President and COO, Detroit, on August 20, 2008, writes in a rare letter to the editor in Wall Street Journal, “In the editorial ‘Can America’s Auto Makers Survive?’, Paul Ingrassia asks whether Detroit’s auto makers can survive. In the case of General Motors, the answer is, emphatically, yes. And not only survive, but thrive. There is no question the industry is facing significant pressures driven by a weak US economy and rising fuel costs. At GM, we’re taking the difficult and necessary steps to reduce our cost structure to be more competitive in the global marketplace and build a stronger foundation for our future.” I was stumped. It wasn’t that I was going to analyse the close to $2 billion loss GM suffered in 2005. The fact is that the last six months of GM (January to June 2008) has seen it rake up losses close to another $19 billion. I checked out the last three months (April to June 2008) and GM had losses of $15.5 billion! I really couldn’t see where the improvement, that GM President Henderson was referring to, was.But it’s not as if GM’s alone in the bloodbath. Ford is not too far behind when it comes to sharing in the scathing hits. When William Clay Ford Junior gave an interview to Planman Media a couple of years back, he had just entered India and was typically gung-ho about cutting it clean very soon. In the first week of August 2008, Ford reported the biggest and worst one quarter loss (April to June 2008) in the history of the corporation! $8.7 billion! Year 2007 loss: $2.7 billion! Year 2006 loss: $12.6 billion!
Not surprisingly, while annual sales have regularly fallen or remained stagnant at GM (2006: $205 billion sales; 2007: $181 billion; 2008 six months: $80.6 billion) and Ford (2006: $160 billion; 2007: $172 billion; 2008 six months: $85 billion), the sales at Toyota (2006: $179 billion; 2007: $202 billion; 2008 six months: $118 billion) and Honda (2006: $84 billion; 2007: $94 billion; 2008 six months: $54 billion) have been constantly rising. But more importantly, companies like Toyota and Honda have raked up humungous profits year after year! Toyota had profits of $11.6 billion, $14 billion and $6.18 billion in 2006, 2007 and the first six months of 2008. While Honda, during the same periods, had profits of $5 billion, $5 billion and close to $2 billion!
Compared to the accumulated profits of $44 billion in the last three years of the fuel-efficient focused Japanese Big 2, the Detroit Big 2 had accumulated losses of a mind numbing $82 billion in the same period!!! What gives?!?! That’s when I came across four extremely critical issues that could surely define the reasons why the global auto industry dies sooner than later...
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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