"Too_Many_Tools" wrote in message
...
On Feb 21, 12:07 pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Sat, 21 Feb 2009 07:06:47 -0800 (PST), "

wrote:
On Feb 21, 2:53 pm, Bruce in Bangkok decypher-

Has anyone calculated what the overall effect of the car companies
going bankrupt would be? Obviously it will effect the steel industry,
parts manufacturers, local and federal taxes,franchised dealers, and I
don't know what else. Even the rubber industry in Indonesia, Malaysia
and Thailand will be effected as, according to the Rubber Institute,
wholesale rubber prices are tied very closely to Detroit (US Car
Industry).

From an outside prospective it world appear that it would have a
massive effect but I've seen no numbers to date.
Cheers,

===========
From a practical standpoint, GM and Chrysler *ARE* bankrupt.

The Detroit analysis submitted on 17 Feb to Congress claims in
excess of 100 billion $US in potential/consiquential losses in
the event of bankruptcy. While this seems high, it is possible,
but the claimed cost to "rescue/restructure" GM/Chrysler is also
low balled in their restructuring plans, and any such "rescue" is
likely to lead to the demise of Ford also under the present
conditions.

The political debate in the US now the determination if it cost
less to "bail out" GM/Chrysler with an unending stream of
"investments," or just let them go broke and deal with the
resulting mess, albeit at a very high cost, but some end point.

What seems likely is that if GM/Chrysler are forced into
bankruptcy, it will not stop at chapter 11 [reorganization], but
after the books are forced open and the total situation becomes
clear, the bankruptcy court will be forced to apply the "going
concern" rule and precede to chapter 7 [liquidation].

However the Rubber Institute analysis seems to make the
assumption that GM and Chrysler are essential for car production
world wide.

This is not the case.

The problem is that in the United States approximately 2 vehicles
[cars/light trucks] can be manufactured for every one that can be
sold in normal times, even with rebates, zero financing, etc.
[which results in good volume but little to no profit].

With the current downturn, the production capacity:sale potential
ratio is closer to 3:1, with more production capacity being
added, i.e. VW. Worldwide the production capacity to potential
sales ratio is even higher, particularly if the sales include a
reasonable profit.

This kills factory utilization and *GREATLY* increase unit costs.

Domestic and international vehicle production capacity has been
grossly over built with too many companies producing too many
models. Additionally, GM/Chrysler products in many cases have
essential inherent design flaws in that they require *MORE* labor
to assemble, in addition to the fact that this labor is paid
more.

The problem is that the market is glutted with new cars, everyone
is losing money, and the older, less efficient, and the top heavy
producers are going bankrupt. FWIW -- it is estimated that the
Detroit three have about 150-180 days of unsold new inventory on
the car lots and in the pipe line, even as they continue to build
more. In the US, most car lots are crammed to capacity with not
only new but used vehicles, such as SUVs, Hummers, etc.

Commodity producers such as steel, rubber, etc. should be little
affected, other than losing any money they have as accounts
receivable with the bankrupt companies, although their customers
will change. There may be *SOME* reduction as smaller, lighter,
and more efficient vehicles become the norm, when sale rebound.

On the other hand, vendors and dealers closely tied to Detroit,
particularly GM/Chrysler are about to take it in the shorts big
time, when they are stiffed on the huge amounts of money they are
owed, the model specific machines and tooling have scrap value
only, and the dealer franchises become worthless as the value of
franchise and their new car inventory largely disappears.

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Agreed.

Oversupply is definitely a problem.

I also suspect in the future the successful car manufacturers will not
be American.

I expect to be buying my next new car from China.

TMT

Chances are you will. I heard this a number of years ago, that the American
car manufacturers would eventually move over to China and close down
production here. In effect, they would be replacing American auto workers
with Chinese ones that they could pay jack ****. Of course, there are a
number of countries that you won't see this happening. You probably won't
see Chinese cars taking over the car markets in France, Germany, or Japan,
to name a few. Because while these countries all claim to be free market
advocates the truth is a little different. Those countries will not allow
China to destroy their domestic manufacturing base. We, on the other hand,
will. Proving once again that the free market idea is all about how much
each country wants to allow it to function in their land. Since workers have
no value to American businessmen they will no longer have quality jobs. The
end result of this is that they won't buy cars anymore. At least not very
many, which will cost the businessmen their jobs too. Unfortunately, their
short term greed prevents them from seeing what their decisions will do to
them in the future. The question is why is it that businessmen in other
countries can see that if they allow their country's workers to become poor
they will too but ours can't?

Hawke