The Cliff is in the Rear View Mirror?

The Cliff is in the Rear View Mirror?

The Cliff is in the Rear View Mirror?

A mostly political weblog.
March 3 2009 5:19 PM

The Cliff is in the Rear View Mirror?

GM's best argument against bankruptcy has been that once consumers thought the company was bankrupt, they'd abandon the brand and its sales would fall " off a cliff." Well, GM sales have now fallen 53%   while it dickers with the Obama administration. How much worse could bankruptcy be? ...

Yes, other carmakers' sales fell too, even Honda's and Toyota's, which--according to one investment analyst quoted by the Times-- shows that there's not a GM problem but an industry-wide problem. This supposedly"reinforces the industry’s case in Washington that the unprecedented industry conditions should justify a continued federal bailout." I'm not so sure.

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1) The other companies didn't fall as precipitously as GM. Honda fell 38%, for example, Toyota, 40%. There is also the question of price: Hapless Chrysler fell only 44%, but that's after giving unprecedented incentives, amounting to a 20% price cut, according to the NYT .  Sales don't mean that much if you're giving the cars away.

2) What does the (milder) slowdown at GM's competitors have to do with GM's bailout, exactly? The company is broke. It would ordinarily go bankrupt, giving a judge power to rescind union contracts, screw creditors etc. The argument against such a bankruptcy is that sales would fall. But it turns out sales can hardly fall that much more. QED, no? It seems like an absolute-number question not a relative-number question. Regardless of what's happening at non-bankrupt Toyota, GM's plummeting sales make it a relatively good time to go the bankruptcy route. It's not as if a banner month for industry-wide auto sales is looming on the horizon. ...

  P.S.: I'm not sure consumers wouldn't have more confidence in a car made by a GM-in-bankruptcy, in which the sharp decisions necessary for survival were being made, than in the current GM-in-political-limbo, in which all parties are trying to appeal for White House billions to postpone those decisions as long as possible (while sales crater anyway). Which company is more likely to be around in 10 years? ...  2:32 P.M.

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