Episode 28 – Ghosn Predicts Consolidation, Bailout Is Kaput: For Now, LA Auto Show Unveils

November 20th, 2008 at 12:18pm

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The Big Three bailout in Washington goes down the drain due to lack of support. Carlos Ghosn says we’re going to see more consolidation soon due to the weakening global market. All that and more plus, a look at the latest cars unveiled by BMW, Nissan and Ford at the LA Auto Show.

Autoline Daily Poll: Should the Big Three get a bailout?

Transcript and Story Links after the jump . . .

Here are today’s top headlines. The Big Three bailout in Washington goes down the drain. Carlos Ghosn says we’re going to see more consolidation soon. And a look at the latest cars unveiled at the LA Auto Show.

Up next, we’ll be back with the news behind the headlines.

This is Autoline Daily for Thursday, November 20, 2008. And now, the news.

Well, like we’ve been reporting here all along, the bailout effort for the Big Three in DC is kaput…..for the time being. Democratic Senator Harry Reid, the majority leader, said he didn’t have the votes to provide the automakers with any money and he’s calling the whole thing off.

So what’s next? Like I’ve been saying, now Detroit will have to wait for Barack Obama to be sworn in as president in January. He has stated strongly, on the record, that he is in favor of saving the Big Three and the UAW. But the automakers and the union are going to have to regroup and figure out how they are going to communicate their message, because their testimony in Washington this week was a disaster—-all this mumbling, and stammering and avoiding the questions. That’s not how you sell the Senate on throwing you a lifeline.

What do you think? Should they get the bailout, should there be strings attached? We’re running a poll at AutolineDaily.com, so let us know what you think.

In a related item, Carlos Ghosn, the CEO of Nissan/Renault, says the current crisis in the auto industry will likely lead to consolidation soon. According to WWJ Newsradio 950, Ghosn says the weakening global market that the industry is facing will knock out some competitors. Is he hinting at a collapse of GM or Chrysler, and then consolidating them together? Ghosn isn’t saying, but the timing of the remark is probably not a coincidence.

Hyundai announced it plans to meet the Corporate Average Fuel Economy regulations of 35 MPG by 2015 (subscription required). That’s five years ahead of the deadline. Hyundai will introduce a hybrid version of the Sonata in 2010, offer more fuel-efficient versions of the Accent and Elantra next year; and introduce a new CUV powered by a turbocharged gasoline direct-injection, 4-cylinder engine. By the way, Ford also said it will come in ahead of schedule on CAFE.

Pakistan’s auto industry is suffering (subscription required) along with all other automakers. Yes, Pakistan does have an auto industry. WardsAuto.com reports that there are 8 car companies in Pakistan and 1,600 suppliers. The country makes 160,000 vehicles a year and the major players include Suzuki, Toyota and Honda. Jeez, they’ve got to deal with the Taliban, Al-Qaeda, missile strikes and a 42% drop in car sales. Boy, and we think we’ve got it bad.

Coming up next, a look at a number of the new cars that were unveiled this week at the LA Auto Show. We’ll be back, right after this.

The LA Auto Show opened its doors to the press yesterday. Here are a few of the show’s highlights so far.

BMW unveiled its all-electric, plug-in Mini E. The company is releasing 500 of these cars to the public for testing. It includes a 204 horsepower electric motor and a lithium-ion battery with range of about 150 miles. The company also showed-off its new 7 Series flagship sedan.

Nissan showed off the redesigned Z car and the funky little Cube. The updated 370Z features a larger 3.7-liter V6 with 332 horsepower and an optional seven-speed automatic transmission. The all-new Cube will be coming to the U.S. next spring and promises to offer a flexible interior and terrific gas mileage.

Ford made a splash with its redesigned 2010 Fusion. For the first time the company is offering a sport model with a 3.5-liter V6, there’s also a more powerful and efficient four cylinder engine. Six-speed automatic transmissions are standard across-the-board. But the biggest Fusion news is the availability of a hybrid model. Ford is claiming the Fusion hybrid will beat the Camry hybrid by six miles per gallon in the city.

The redesigned 2010 Mazda3 was also revealed. The new car features a restyled exterior and better performance. A new 2.5-liter, 167 horsepower four cylinder engine replaces last year’s 2.3.

Those are just some of the highlights from the LA show, but we’ll be bringing you more details in the coming days.

And don’t forget, sign up to win a special-edition 10th anniversary Autoline DVD and Autoline coffee mug. All you have to do is sign-up for our free e-mail newsletter. I’ll be picking the winner tomorrow on “Autoline Daily” so sign-up now!

Anyway, that’s it for today’s show, we’ll see you tomorrow.

23 Comments to “Episode 28 – Ghosn Predicts Consolidation, Bailout Is Kaput: For Now, LA Auto Show Unveils”

  1. Truman Lewis Says:

    It is time that we take care of our own and stop throwing our money overseas, with no REAL return.

  2. Chris Terry Says:

    Nice work John . . . you guys might want to embed the video somehow right into your email, so instead of clicking the link, then the video, just click the video.

    Suggestion for tomorrow/next day, what SHOULD have the three blind mice done to win over congress? More editorial, that’s your strong suit baby. Rock on man.

  3. Dee Allen Says:

    I don’t care if you call it a bailout or a loan, but it is a bridge loan the automakers are looking for — and not just US automakers. The Korean, German, Italian, Chinese, and my guess is soon the Japanese are doing the same thing. Why? Not because any of them are stupid, slow to react, mired in the past, in possession of corporate aircraft, pay too much, have bad supplier agreements, build products that are shoddy, poorly styled, lack in fuel efficiency or aren’t what buyers want. Everyone is in more or less trouble depending on where their balance sheet was when fuel spiked to $140USD a barrel, real estate hit a wall, the mismanagement of governments and financial institutions around the world caused a financial/credit meltdown, and consumers — battered by all these factors put what money they had left in their mattresses. The auto industry lives on credit, whether we are talking OEMs, suppliers, dealers, or customers. There isn’t any and none of the above are going to survive in a market that drops 30%-50% virtually over night. If you think some are immune, take a look at the reports of vehicles piling up on the docks from Toyota, Honda, Mercedes, Nissan, Hyundai and everyone else.

    Hopefully everyone has heard the predictions about the monumental chain reaction that will be set off in this country if we allow even one of the three companies here to go under. Now I have something else for everyone to contemplate: Does any cognitive person who looks at this and has the scope to look outside our national borders think it will stop here. Think about the interdependence of this industry and its suppliers as global enterprises. Was the banking crisis limited to Wall Street? Was it even limited to Main Street USA? No. It rippled quickly to banks and nations around the world — and so will the collapse of any large, global auto company.

  4. Doug Says:

    The government should receive an interest in the companies. The companies should present a plan toward sustainable profitability with milestones. The companies should be required to reach MPG and CO2 levels that will take us in the direction of energy independence. The government should offer substantive incentives for consumers to purchase those new products. The government should offer more incentives to companies which produce/hire in the US. It all boils down to, “Pay me now or pay me later!”

  5. Fernando B menendez Says:

    To ask for help and behave like do nothing
    executives ,is what got them where they are.
    How about CEO’s pays 4 times what a line worker makes
    that is what their value is in my view.
    Bonuses if the workers get a bonus,they get a bonus, again no more tham 4 times the line worker. make them fly commercial,if they Are
    kipnaped we wont miss them. they can be replace like everyone else.

  6. Senator Richard Shelby Says:

    What we have here is failure to make any money. Sqweeeel!

  7. Alex Kajdi Says:

    John,

    The public is suffering through hard economic times due to the collapse of the Finanical and Banking sectors. Treasury Secretary Henry Paulson should resign immediately! His planned bailout of the Financial & Banking Sectors was idiotic to say the least! It put our hard earned tax money right into the pockets of the greedies SOB’s on the face of the planet with no strings attached.

    Rick Wagoner, Alan Mulally abd Robert Nardelli should all be ashamed of themselves! To show up on Capital Hill asking for a bailout after arriving in three separate private corporate jets! These guys should have flown together in one corporate jet and showed Washington a Unified American Auto Industry! What a Public Relations Disaster They should also do like Gov. Sarah Palin and sale their corporate fleets of jets to raise cash to survive as you say until Obama is inaugurated on January 20th of 2009.

    Obama and the Congress need to secure any bailout/loans with a “first in line” equity position. This plan also needs to make these CEO’s and Board Members personally responsible for any debt to the US Government.

    The Big Three need to be reorganized and stop lashish corporate spending, perks and waste.
    You do not see the leaders of Toyota, Honda or Nissan begging on the steps of Capital Hill.
    They listen to consumers needs and wants, and do not do like GM and build 86+ different cloned (rebadged) models which are not as highly rated or reliable as the Japanese manufacturers. The Chevy Volt is the future for GM. GM blow it a decade age when they killed the EV1. GM and Ford, forget about Chrysler (while it is still controlled by Cerberus)needs to work with Washington and help rebuild our great country which these guys have made plenty of money off for many decades.

    Washington needs to give tax credits for job creation and tax penalities for US jobs shipped overseas! Our vocational trade and manufacturing high schools and community colleges schools need our support. The “Unions” are the result of corporate greed and excesses, not the other way around!

    I hope our New President – Elect and elected government officals listen to the general public and not corporate special interest groups.

    Sincerely,

    Alex Kajdi
    Rye Brook, NY

  8. John W Pick Says:

    Your “AutoLine Daily” is a big hit in my book. Keep up the good work Mr. John.

    Regards
    JWP in Ohio …

  9. Jeff Smith Says:

    I would suggest that BIG OIL step forward to rescue Detroit. The Big Three auto companies are directly responsible for the HUGE profits
    earned by the oil industry.I think it is time to give something back.

  10. Gary Witzenburg Says:

    John,
    You know and should make these points every day:

    1)The U.S. auto industry, while guilty of past bad management and products, have been very effectively led on a steady turnaround path most of this decade despite substantially higher costs than their off-shore competitors.

    2) With few exceptions, GM and Ford products by any measure are fully competitive, good as any and better than most today (check any objective data), and Chrysler’s are soon to catch up.

    3) All three were well on their ways to full financial recovery, with highly fuel efficient new cars and a cost-saving new labor contract in place by 2010 — until they were hit by sudden $4.00-plus gas, which destroyed sales of profitable products and shifted consumer demand literally overnight, then a government-caused mortgage crisis and financial meltdown and frozen-solid credit, NONE OF WHICH IS REMOTELY THEIR FAULT.

    4) If GM should fail, or declare Chapter 11, most of its 3,690 suppliers around the world, 2,000 of them in 46 of the 50 U.S. states, will go down with it. Then, because nearly all these suppliers also supply Ford, Chrysler and most foreign-owned U.S. “transplants” with critically important parts and systems, no one building vehicles here will be able to continue. Toyota, among others, has said so.

    5) All U.S. and most transplant vehicle assembly and component plants and virtually all U.S. supplier plants will shutter, turning every community around them into jobless ghost towns.

    6) Unable to survive for long with no new cars and few employed, credit-worthy customers, most domestic and many import-brand dealerships will shut down. The 3 million jobs lost almost immediately will be just the beginning.

    Unlike any other business, our auto industry is a fragile interdependent house of cards that will bring the entire U.S. economy crashing down with it should it be allowed to fail. Whatever people may think about GM and the U.S. industry in general, any who believe its demise won’t affect every American and every country’s economy around the world should think again.

  11. Charles d Says:

    the Auto companies should receive a loan from the government. the government should receive interest FROM the companies, not IN the companies. They’ve got the only source of credit/money today available at any interest rate. The incompetence of the banking committee (to be charitable) precipitated this issue.

  12. Scott Says:

    where to start, “in the beginning when God created the Universe…”, oops, that’s a little too early. as best i can remember, when China and India’s economy took off about 2 years ago, they started using up the worlds resources, especially oil, which as we all know from Economics 101 The Law of Supply and Demand means that the more items are in demand the more the supplier can (and will!) charge for them. So the price of oil, especially from the Middle East goes up substantially in the past year. So the domino effect began. Now the cost of most products and by-products began to rise, leading to employers to cut back expenses to save money, and one way to do this was by letting employees go. Now the perfect storm awaits – when the President authorized in 2003 i believe the Treasury to authorize more liberal lending practices to garner more home sales, i.e. mortgages and especially those wonderfully pesky Adjustable Rate Mortgages (ARMs). blame it on lack of knowledge of the mortgage lender, the real estate salesperson, the consumer, or all of the above, but when these ARMs low interest rate expired and the baloon rate was implemented, folks who ‘thought’ they could afford homes soon realized they couldn’t, which is leading to the most cataclysmic bankruptcy rates in our young country’s history. More perfect storm – with less folks paying taxes on homes, cities and towns now had less revenue to keep the status quo operating conditions in a continuing on-going manner. So cities and towns started cutting back and slowing down maintenance, upkeep, and othe vital services (let alone luxury optional services in cities such as pools and youth/senior complexes). so with less money being spent, the economy slows down, and with less money being invested, loaned, and saved, the unthinkable collision of social, economic, political and business came together to form the most devastating tsunami ever to wreck our country’s infrastructure, which is now effecting the world’s economy…and don’t even get me started on this ‘global economy’ that folks bandy about like it’s candy and easily understood AND APPLIED. the only country i think that practices free trade is ours, as most of our competitors DO NOT practice free trade and will manipulate their currency to help their exports remain under-priced to ours, and remain cost-competitive even to the detriment of our own manufacturers (that are left).

    I’m mad as hell and i’m not gonna take it anymore.

    what i’d like to see is our President and congress together as a unifed front, get together and come up with new legislation that will protect american jobs (isolationism anyone in the short-term?) and send a clear and mistakable message to the world community that WE need to start taking of NUMBER ONE and the hell with the rest of you. WE are not here to fix YOUR problems, whether militarily, socially, economically, whatever…time to get OUR HOUSE back in order dammit.

    after watching our congressmen and senators grill the big 3 CEOs the past few days really makes me wonder who is running our country. some of these folks should be employed by Barnum & Bailey of circus fame. of course the CEOs didn’t help themselves by providing lots of gibbledegook talk that didn’t answer a lot of questions quickly, directly and w/o question. one thing that doesn’t help is Americans resentment on what’s happening to the $700 Billion authorized by congress to the Wall Street Whiz-Kids and financial institutions that were allowed to run amok w/very little if any oversight. and now the Treasury Dept Secretary Paulson is wanting or has diverted some of those monies to other avenues of assistance. unbelievable – who’s on first? So now the big 3 CEOs come to the plate asking for assistance and they’re grilled over and over until well done. i don’t think the FannieMae/FreddieMac/AIG folks were barely given more than a passing glance for their $700 Billion…the domestic automanufacturers have to literally give blood to get in the chambers to provide their address, let alone face the onslaught and barrage of theatrics that awaited them. we americans should be ashamed on how some of our elected officials have behaved in the past few months, we have no one to blame but ourselves for not taking the PERSONAL RESPONSIBILITY to manage our own affairs, our own finances, our own homes/dwellings, and most importantly, LIVE WITHIN OUR MEANS.

    I’m mad as hell and i’m not gonna take it anymore.

    Down here in sunny Florida the sky has been overcast and gray of late, and it’s not due to mother nature. the country and world seem to be in a major funk, our finances and savings and investments are going down the drain, and maybe it’s just me, but i don’t see a whole heck of a lot of folks changing their behavior…and just continuing with their heads in the sand and acting as if things will be alright, things will work themselves out. This is exactly the attitude that congress knows their constituents will display, which gives them the unmitigated gall to act and craft legislation that is to the detriment of our nation.

    i’m mad as hell and not gonna take it anymore.

  13. Charlie Fullerton Says:

    If anyone ever deserved to go belly up, it’s the UAW, and the Detroit Three who gave the membership every fool demand they could think of. I, for one, am delighted that my next car will not involve $87./hr wages, a benefit package that no one except the armed forces personnel can ever dream of; and pensions that make even a Canadian politian blush. No wonder my $5000.00 car cost $22,000.+. And no wonder people are getting tired of pay the UAW rates!

  14. GM Dave Says:

    For twenty years GM has been restructuring the shop floor to be more like the Japanese. I think that before they get government money they need to restructure the management side. USA Today last year reported that the top 5 at GM earned more than the top 22 at Toyota and the top 36 at Honda. Want to send a message to congress and the UAW? Here is where you start.

  15. Howard Remeta Says:

    A lot has been made about the corporate jets. A lot of companies have corporate jets. Live with it. A lot of CEO’s have absorbitant salaries. Live with it. However, if your corporation is going down the tube and you want billions for a bailout, you should have a plan to recover. If you have no plan, it is business as usual. Business as usual is no change. $25 billion with no change means 10 months later you have used up your money and need more money. You have to have a plan to get out of the downward spiral. GM has already failed. Time to restructure and get a plan for the future.

  16. thom leshinsky Says:

    John;

    Having watched the testimonies by the big three I have to say it is a bit disconcerting that they continue to blame everything on the economic crisis when in reality they have been chasing away customers such as myself for the last decade . ( educated
    financially comfortable and aware of global issues )
    Now if they were to admit to a decade or more of bad choices and then say the current economic crisis is the last nail in the coffin their case would be a little easier to swallow . So though something needs to be done shifting the blame by the big three just isn’t going to get the job done.

  17. Pedro Fernandez Says:

    That’s right give money to poorly run and managed corporations that have not kept up with the times. i recently went to the S. Fla car show in Miami and for a few exceptions, the big 3 offerings were pathetic, for example the Cobalt Had a pretty modern looking center dash, but the steering wheel/speedo area, Yikes! it seemed to come out of a 1990′s car. Too many models, they need to cut back a lot. A Pontiac minivan, Pleeeease are you kidding. GM should keep Chevy Caddy and Saturn that’s it the rest is waste. Ford get rid of Mercury. And Chrysler’s got way too many crossover like vehicles.

  18. Martin Says:

    I hate to think what not giving them a bailout will mean. However they caused their problems. They have not made a product that interested me yet. I purchased my 1st new car in 1992 and bought a Toyota and they won me over because of their quality. When I hear people talk about the problems they have with their Chevy’s, Dodge’s & Ford’s, I cannot believe it. All I can say is you should have bought a Toyota. And I don’t like to say that. I cannot believe car interiors fall apart so easy. Or you need to replace front suspension parts as normal wear and tear on a car with less than 30,000 miles. They say their quality is getting better or equal to the Japanese however they need to prove it to me. I almost purchased the new Chrysler minivan before I purchased a Toyota Sienna and people who owned the Dodge and Chrysler minivans in the past said don’t even think about it stay with Toyota. That is a shame to me. When I needed to purchase new trucks for my company and went out for bids the big 3 dealers could not get close to what Nissan could do. I was purchasing 5 trucks this was back in June and the big 3 dealers would not deal. What I had to pay for a stripped down Ford F250 was apalling for what I got in it. And I had to buy that because of need. So Ford got that sale. Like I said I don’t want to see 3 million people out of work but I think the CEO’s have to come up with a plan. And selling cars people don’t want is not a good plan. And a $60,000 hybrid SUV is not a good plan.

  19. Winger Says:

    I think the bailout is necessary in order to save jobs. The auto industry is vital to North America. It generates many jobs and huge tax money. I think people are short sighted if they think loosing 1 or more of the Detroit 3 will help. Millions of middle class job losses will cripple the economy for years. You think your taxes are high now, wait till unemployment gets into double digits.

    I think people have been misinformed by the media.

    1. Line workers take home wages are not $70 an hour.
    2. Auto workers don’t bring home $150,000 a year.
    3. Unions are not to blame for high car prices.
    4. The labor costs per vehicle are very small overall. Advertising costs are on the average $2000 per vehicle(way more than labor).
    5. GM, Ford, Chrysler, in the past, lost market share because of NAFTA and unfair/restrictive trade policies.
    6. 5 years ago when products were being developed these companies couldn’t predict gas would get to $4.
    7. GM, Ford, Chrysler can’t sell cars if the bank won’t give customers a loan. The auto companies and suppliers rely on credit to operate.
    8. There are 3,000,000 people directly or indirectly employed by the auto industry. The loss to the economy would be $150 billion a year. Far less than the estimated $75 billion bridge “loan” they asked for.

  20. Bob Nogueira Says:

    For the past week I have been preaching how the Big 3 deserve the requested loan. I even stated how the top management were really bringing the companies into the 21 century. Then those three fools show up in Washington in private jets to ask for a loan. Now I feel like the fool for having supported them. They proved to everyone that they are so out of touch with the real world they could never build a car people would want.
    What is needed now is a Stock holders revolt. Throw out the board of directors and the top management.

    On another note John should start making the rounds of the cable news shows and talk shows. I am sick and tired of hearing people who know nothing of the auto industry telling the country what is wrong. I actually heard one guy say that Ford made lousy cars. When he was asked ‘what about the Fusion?” his response was “What’s a Fusion?”

  21. Brendan Says:

    The domestics have completely ignored the small car sector for the last two decades complaining that they can’t make money on small cars! Well, there’s a reason why the Civic is more expensive than the (Focus, Cobalt…), it is a better car. Maybe Ford and GM wouldn’t be in the place they are today if they had brought over the much better European Focus (starting in the late 90′s) and GM had imported their small and mid-size Opels to the States. While raking in the dough from big truck sales, the domestics should have been spending those profits, in part, on developing quality smaller and efficient cars and on thinking of innovative ways to raise quality and lower production costs. The massive big-truck profits could have offset the short term losses involved in importing and developing good small and mid-size cars. They didn’t do this, and they must suffer for it now.

    I am 27 and have followed the industry the majority of those years. The story has always been the same. A bailout will do nothing in the long term and we’ll be faced with this same situation sooner than later.

  22. Salvador G. Says:

    Well all I have to say is that, if the big three are not getting a bail ( which I believe they will anyway ) their going have to sell something to foreign companies (from China or Dubai) and my question is what and for how much??

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