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Saturn, Saab, Volvo & Hummer Face Uncertain Futures

With the crisis in the American auto industry, General Motors is expected to attempt to either try to sell Saturn as a separate company or else shut down this brand which has not been very successful, and a failed attempt by GM to build up a modern new higher tech brand of high quality smaller automobiles. GM will also attempt to sell off the Saab brand of automobiles to raise capital. And Ford is looking to sell Volvo. However, if no buyers for these high quality brands of legendary Swedish workmanship come forth, then both brands might face an uncertain future. It is just another sign of what a difficult economic crisis that the entire automobile is in currently.

Even the Hummer nameplate which is owned by GM has been up for sale for a little while, and with such difficult times faces an uncertain future as well if no new buyer with enough capital steps forth. Sadly, the great Pontiac nameplate could become down to just a few models as well, as GM is likely to refocus the company on a core of just four nameplates; Chevrolet, Buick, GMC trucks and the luxury Cadillac division. The serious situation with Pontiac could even become like the story of the Oldsmobile brand, where it was reduced down to just a few models and then eventually discontinued.

Strangely, while GMC trucks and the trucks sold under the Chevrolet name are often very similar, they still appeal to different buyers, where the GMC brand still sells in profitable numbers to business buyers while the Chevrolet trucks appeal much more to regular consumers.

GM is also attempting to negotiate a difficult offer with creditors to accept just $35billion for $65billion worth of merchandise, supplies and other credit offered to GM for which they owe. But such a huge loss to creditors could almost financially break some smaller companies not used to absorbing such huge losses of material and supplies, and certainly make many suppliers wary of future business dealings with GM. Who wants to do business with a terrible credit risk like this and risk such losses in the future? GM views this bargaining over credit terms as an alternative to declaring Chapter 11 bankruptcy. However, for creditors to have to absorb such credit losses is a difficult pill to swallow.

And both GM and Ford are expected to cut their dealer networks by dramatic numbers whether or not government loans or bailouts are forthcoming as well. GM is expected to ax a good third of their car dealerships from 6,450 today down to just 4,700 by 2,012. Ford is looking to close 606 dealerships by the end of this year alone, which would leave 3,790 still open.

And while both GM and Ford are public companies, stockholders are currently suffering with sharply declined stock values as well as GM probably withholding any stock dividends until after any loans are repaid if a government bailout is coming. This is gloomy for any investors in these companies, and unlikely to attract many to buy stock in either company right now, although of the three companies, GM, Ford and Chrysler, Ford just might have the best chance of survival of the three companies. Chrysler is an independently owned company and does not offer public stock. But to change that nature might be a survival option for this company.

In fact, while Chrysler and GM could use immediate cash to survive this crisis, Ford really only needs a $9billion dollar credit line which it would like to have handy since it is widely expected that the current economic downturn in sales could lag on to 2010 or 2011. The CEO of Chrysler warned today that the current recession could well turn into a full scale 1930's type economic depression if any one of the Big Three American auto brands should collapse.

Chrysler will likely be forced into seeking partnerships with other brands. Currently Chrysler has some dealings with both Nissan and Volkswagen, but could go beyond these arrangements looking to build or sell more products to other makers as well. Volkswagen purchases some vans from Chrysler, and Chrysler has worked with Nissan to develop a hybrid power plant for some trucks as well as plans to build a new pickup truck-line for sale as a Nissan product. Chrysler benefits from using their unused production capacity to build products for other brands who can put off the tooling costs to build new production sites by being forced to spend massive capital on new plants at this time when corporate credit is tightening as well in the troubled worldwide economy.

During the 1930's, the luxury car-maker, Auburn-Cord-Duesenberg, survived the Great Depression for a little while by converting their luxury automobile production largely from automobiles to building kitchen cabinets which were sold to a Roosevelt-era economic recovery program to be installed in new homes that the government was building. Ultimately, this luxury car-maker did not survive. And the Big Three in Detroit are getting very close to this same level of complete desperation, especially in the cases of both GM and Chrysler. Smaller Chrysler has proven some ability to survive several crisis situations since the late 70's with a government bailout and some buyers as the German company Daimler, and then finally private investors for a while. But whether Chrysler can bounce out of the fire one more time is a very good question. And the huge size of GM makes any efforts to rescue this automotive giant even more daunting.

It used to be said that, "So goes GM, so goes the nation", which now has frightening meaning, especially when any collapse of this automobile giant could cause a ripple effect so large that it may become like a tidal wave sweeping away millions of American jobs and push this nation into a full-blown 1930's type economic depression or even worse. That's a frightening prospect for congress to face, although the voter mail to these members of congress still runs at least 2 to 1 against support for any American auto industry bailout. Congress will likely be forced to act very soon to rescue Detroit and hope for the best to explain to the voters at some later point how a deeper recession or even depression was avoided by their actions.


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Comments (1)

Doubting Thomas:

I'd be sorry to see the Saturn label go - I had a 1992 SL1, and it was a great car - sharp styling, plenty of interior space, and reliable - had no trouble with it for 160k miles. The later models, however, looked like someone carved a rough shape of a car out of a bar of soap, then used the soap until all the corners and edges were nice and round. They weren't ugly so much as they were just plain boring. I looked at the VUE when buying a car in '02 - much as I wanted to, I couldn't get excited about it and thought it was too expensive. Ended up getting a Honda CRV - somehow, it felt more like the Saturn I had at the time than the VUE did, if that makes any sense.

Could be it's time for GM to simply contract - not so many labels, not so many models, and for heaven's sake get some interesting STYLING - because what they've got now isn't doing the job!


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Publisher: Kevin Aylward

Editors: Lee Ward, Larkin, Paul S Hooson, and Steve Crickmore

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