If They Can’t Sell The Cars, How Do They Expect To Sell The Car Companies?

The Big Three CEOs are back in front of Congress to again ask for money. This time, the boys left their jets at home and drove in cars. They also brought the plans for returning to profitability that Members asked them to supply.

Pluck me bald and call me Telly, but what the executives are shoveling doesn’t seem to be nearly enough fertilizer to make this garden grow again.

Central in plans from each company is the sale of at least one brand. Ford wants to sell Volvo, GM admits Saturn, Saab and Hummer are on the block, and Chrysler is waving Jeep in the wind. Now I’m not an automotive executive…and I didn’t even stay at a Holiday Inn Express last night, but I’d like someone to explain to me how if none of these brands are successfully selling individual cars to consumers, then how do the Big Three execs expect to sell the freaking brands themselves?

Let’s break it down: Volvo is on track to sell roughly 72,000 cars. Ford sold-off Volvo trucks many years ago, so the value of the brand is based only on consumer vehicles. Over at the General’s place, Hummer is on pace for just under 45,000 vehicles, Saab at 90,000 and Saturn at 230,000 cars. Jeep is the largest contributor of any of the brands, looking to deliver in 2008 for Chrysler just under a half-million vehicles.

Nobody in their right mind will buy Hummer. Its place in a 2015 35 mpg CAFE America is non-existent. Some Arab prince might buy it on a whim, but no automaker wants that brand hanging on its CAFE results like an anchor.

Saturn is like Mazda, just not as sporty. It is possible that a BMW or Porsche could buy them for their mpg and stand-alone dealership network. Don’t expect them to pay too much.

Saab and Volvo might as well look to the Korea, Malaysia or India for a buyer. No German, French or Italian company will touch these quirky Swedes.

Jeep is a more interesting play, because it’s a respected niche brand without the horrible CAFE strain of Hummer. Some company will make a play for Jeep.

In the near term, though, selling these companies creates costs for the Big Three. GM, Ford and Chrysler have traditionally spent way too much money in concessions to dealers after selling or closing brands. Also, don’t expect any companies to pay much for these brands when it is well known that a) the brands are for sale and b) nobody else is bidding on them. Despite skipping all those economics lectures in college, I do remember the whole supply and demand concept.

Obviously there is much, much, much more the Big Three’s plans for profitability than just selling these brands. Labor union concessions, plant closings, pay reductions, job cuts, supplier contract renegotiations, and dealer closings (why is it when you ask about dealer quality, Big Three executives always are quick to point out that dealers are independent, and it’s impossible to better control service and sales capabilities, but when dealers are a part of larger plan for money, they are no longer seen as rogue entities?) are all part of the deal.

Maybe the Big Three will offer “Zero Down, Zero Percent Financing”, “Factory-to-Dealer Rebates” and “Employee Pricing” for any company interested in buying Saturn, Saab, Hummer, Jeep, or Volvo?

With now $34 billion in bailout (call it loans, investment, or whatever – it’s a bailout) requested, and now talks about “government managed restructuring” which sounds way too much like British Leyland version 2008, Americans should be screaming to let the companies sink or swim on their own. If it really is as easy to sell brands, lower labor and supplier costs, and most importantly – create new cars that people will actually buy over the competition as the Big Three claim it will be with the funds Congress provides, then certainly these companies should be able to do it without getting involved with inefficient government red tape that will come with any bailout money.

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One Response to If They Can’t Sell The Cars, How Do They Expect To Sell The Car Companies?

  1. Artur says:

    This is an interesting analysis and I think you’re right about the bailout. It’s bad enough for the government to give money to businesses that can’t compete, but now they want to help manage them? There’s a recipe for a success…

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