Vehicle Manufacturers – Pulling it Together

It wasn’t too long ago that we were all wondering if we were seeing the end of the American vehicle manufacturer.  All three of our biggest domestic identities, General Motors, Ford Motor Company, and Chrysler Corporation, had fallen to lows that they would have never dreamed of.  Throughout the last eighty years, we’ve seen depressions, economic downturns, oil and gas crises, wars, general unrest, or just lack of confidence, affect the automotive industry.

 

Just reflecting on how an economic crises that brought our country to the brink of economic disaster, made everyone just freeze spending within a matter of a month, causing a chain reaction, that years later, we still haven’t pulled ourselves out of, is scary stuff.

  

Not only did the sales of vehicles stop, the federal government realized reaction was required to restart the economy, or a massive default could take place, throwing us into an economic meltdown.  First, massive loans were available to those that the government decided were necessary to prop up the overall economy.  Both GM and Chrysler took the money as a desperate way to survive.

 

Many a President has implied, how goes GM, goes our economy.  Names like Buick, Cadillac, Chevrolet, Daewoo, Geo, GMC, Hummer, Oldsmobile, Pontiac, Saturn, made you feel a part of something bigger, and represented the success of an American institution.  After all, isn’t bigger better?

 

Not this time.  With the loaned government money only buying time, drastic action was required.  The GM filing for bankruptcy protection, hit our confidence as a country like never before.  We felt exposed.  After all, if GM could go down, no one was safe.

 We watched as analysts predicted the end of the big three.  We heard some say, don’t loan anyone anything.  Thank goodness that cooler heads prevailed.  While the jury may be out on whether this was done the best way or not, at least we dodged the bullet.

Out of this automotive mess, one company played it differently than the rest.

 

Ford Motor Company took a different path.  Some may say, they gambled it all, by going it alone.  Others may say, they were brilliant for playing the waiting game, to see who could outlast who.  Any way you look at it, it took guts and determination, both attributes of a strongly run privately held company.

So, who wins in this real life scenario?

 Not only did Ford Motor Company fill the void while their competitors were crippled, they took control of the situation, instead of letting the situation take control of them.  In a way, it may be viewed as a turning point for Ford, who was considered a prime candidate to not survive due to slipping market share under the market conditions prior to the economic meltdown.

So how did the others survive?  By taking two completely different paths.

 

First, after the US Government believing there is no way they were going to let an American institution and symbol of our economic strength and size, go away, while dealers were given notice of closure throughout the country, and bad news after bad news continued to emerge from General Motors, it was realized drastic action was required to save a domino effect situation.

That drastic measure turned out to be letting General Motors go through a government financed bankruptcy, and emerge as a government owned company.  Once this was accomplished General Motors proceeded to go public, with US Government support, to raise capital, by having an IPO – Initial Public Offering.

Even though the US Government is still the main shareholder in the new public company, General Motors now had the funds, and the release of liabilities, to move forward again.  With having the security of being in effect, a nationalized company, General Motors has wasted no time in trying to go back and reclaim their position as the number one automotive company.

With both General Motors and Ford Motor taking two completely different paths, Chrysler had the hardest way to go.

 

While not viewed as a game changer, whether Chrysler survived or not, it still represented the health of our economy, and remained a symbol of American resilience.  Again the US Government stepped in through financing, and helped Chrysler through its own reorganization.

 

Instead of standing on its own, Chrysler ended up taking Fiat in as a partner, while it repositioned itself through remarketing, as a symbol of resilience by using the city of Detroit as its back drop.

 With Ford Motor Company taking the private survival round, General Motors taking the government owned route, and Chrysler taking the reorganization route, it is yet unclear if all three will survive in the long run, but it is clear that these companies will continue to represent the determination of the government, and the public in general, to support the existence of American born companies in the automotive industry.