I want what G.M. and Ford are smoking.
- Sep 25, 2006
- admin
- Investing
“ONLY THE STRONG SHALL SURVIVE.”
At least that’s the way Darwin always saw it.
From his perspective, long-term survival was secured only by the mating – and adaptation – of two healthy and strong organisms.
To do the opposite was like going against Mother Nature herself.
That’s why the mating dance that we’ve been hearing about recently in Detroit is so painful see: It’s like watching two deformed fools taking a s–t in a warm pool.
That’s the exact visual that came to mind when I first heard that Ford (SYM: F) and General Motors (SYM: GM) are staring into each others’ eyes with the look of love.
But instead of doing it for love, they’re doing it for money – your money.
As a consumer, you may or may not have a problem giving it to them.
I know I won’t. Why?
Because I like my cars like I like my women – sexy and codependent. Did I say codependent? I meant independent – able to take care of themselves.
But Ford lost me when I hit the mighty age of 16 and suddenly found myself needing a car for a very important job I happened to be interviewing for: Chauffeur to the in-crowd.
But circumstances being what they were for our family (dirt “lower middle class”), I had to work for mine. So I got my first job flipping burgers at Bakers Burgers.
Flo, my middle aged manager who with the liver-spotted face, told me I was fast. That I would amount to something at Bakers if I just wanted it bad enough.
But I just wanted to work enough to pay for the car …
… So I flipped these square little meat-like patties until I got my very own brand new Ford Escort, the one I needed for my real occupation – driving around the cool kids!
Well, soon after getting my new car, I got my first new assignment: My “friends” were going to let me drive them to the beach on Saturday at around noon.
After wiping off the grease from the morning shift, I agreed to give Flo a ride home before going home myself, taking a shower, and picking up my friends to head to the beach.
But thanks to the brilliant engineers at Ford, I never made it past Flo’s: The car wouldn’t start. It wasn’t as if the engine tried to start – when I turned the key, the engine just gave a clicking sound. Exactly the kind of sound you want to hear when you buy a brand new car.
So there I was, trapped. Unable to leave. My short-lived freedom to go wherever I please was snatched right out of my hands. I went from a free, cool-crowd prospect to washed up loser faster than you could say “Mel’s Diner.”
(If it wasn’t for Flo’s sexy beehive hairdo, the day would have been a total waste … but that’s another story.)
Anyway, Flo and I moved onto smaller and better things, such as Honda and Toyota. They’re inexpensive, they always turn on in the cold, and at least you feel like you’re getting your money’s worth.
What do the paranoid ravings of an ex-Detroit/American Pride junkie have to do with whether or not the rumored merger between GM and Ford is a good thing?
Plenty.
After getting tossed to the curb by Japanese cars for the past 20 years, Detroit is doing some real soul searching for maybe the first time since the 1980’s.
Here are the top 3 problems they’re thinking through right now:
- How they can dump the “legacy costs” (that have turned the car company into a healthcare provider) without going bankrupt;
- How to balance their product mix so they can sell fewer gas guzzlers and more efficient cars;
- How to sell cars without giving them away.
While all of these thoughts are indeed important, they hide one simple fact:
That Detroit, no matter how hard it tries, still sells ugly cars that don’t work as well as foreign ones.
Sure, their trucks are in high demand. And you can find plenty of Detroit-sponsored studies that claim their cars are made as well as foreign ones … but if you can’t make cars that people want, then you’ll have problems whenever higher energy costs shave value from the price of your trucks.
All the while, companies like Toyota (SYM: TM) – which have likely reached a cyclical peak – actually sell automobiles that people want to drive.
And while I almost hate to say this out loud, bankruptcy will likely be the only long-term solution that can right-size the cost structure of these two dying companies.
In that context, it appears to me that what Detroit is trying to do is simply put off taking the medicine that they need to take.
Sure, it might work for a little while.
Heck, they may even run the automotive tables again in the short-term.
But in the long-term, none of this will really matter …
To bad for Detroit, Darwin didn’t say “Only the weak shall survive.”
— Dylan Jovine