All that is wrong with the (disposable) Auto Industry 22nd September, 07

I’m sick and tired of the North American Auto Industry. Supply and demand seems to mean nothing to General Motors, Ford or Chrysler. Each year is the same old same old, pushing cars off the lot with massive marketing campaigns, huge deals and incredible incentives; rather than having them pulled off the lot.

Short and simple, they work in an industry of slim margins and high capital investment (the R&D to keep efficiencies high) which is a vicious cycle. Which combined with commodity expectations, the domestic auto makers are doomed and just don’t see it.

Don’t buy it? Check out the long term debt for any of those three companies. GM for instance is sitting at a long term debt of $190Billion [and growing]. Each year they invest incredibly in R&D and in highly depreciating and dating capital. The kicker is they operate with a net loss in revenue of billions (just under $2billion this year). So, that $190 billion just keesps growing. How depressing, and these guys just keep digging a deeper hole each year. Brilliant!

Now really, the technology and reliability of our vehicles has been improving over the years. Sure there is the age-old saying “they don’t make them like they used to’; while true, it’s not something you can consistently generalize with quality and reliability. Ultimately, most of us don’t have to give our vehicles anything more than a regular oil change and car wash every 3-6 months. Besides that, vehicles generally run very well, and for a long time.

So why is it then, automakers flood the market with more than enough new (but the same) product each year? Sure, North America is disposing of perfectly good automobiles on a regular basis (thanks to a disposable society), but not nearly at the pace the big automakers can produce them.

Is it really any surprise that Detroit city is in such financial ruins lately? Talk about mismanagement and lack of forsight!

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