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- Toyota - Down 37% year over year
- GM - Down 31% year over year
- Ford - Down 32% year over year
- Chrysler - Down 53% year over year
The reason that the big three are in so much worse shape than companies like Toyota is simply that they have a larger focus on US sales. Toyota sells more cars outside of the US market than any of the big three, so their exposure to this down turn is lessened. If there was a major down turn in Japan, you can expect that Toyota would take a bigger hit than GM, Ford, or Chrysler.
There are also a number of other factors that hurt the big three that have little to do with their current day to day operations. They have a legacy of retirement benefits to older workers that makes their production costs much higher. They also have to pay for medical coverage in the US that would be covered by the government in Japan. There's been an attempt to blame unions, but the difference in pay scale between union and non-union workers in the US isn't all that large. Certainly not large enough to suggest it has anything to do with the problems the big three are having now.
But it's worth considering what this deal would have actually done. They were talking about a $25 billion bailout. For perspective, here's what the financials of the big three look like right now:
GM - $16.2 billion cash on hand - burn rate: $6.9 billion/quarter
Ford - $18.9 billion cash on hand - burn rate: $7.7 billion/quarter
Chrysler - $6 billion cash on hand - burn rate: $3 billion/quarter
GM - Insolvent by 2nd Quarter 2009
Ford - Insolvent by 2nd Quarter 2009
Chrysler - Insolvent by 1st Quarter 2009
Ford - Insolvent by 2nd Quarter 2009
Chrysler - Insolvent by 1st Quarter 2009
Now, if they all get $25 billion, it's worth considering that their collective burn rate is $17.6 billion/quarter. So $25 billion probably gets them through til the 4th Quarter of 2009 depending on how you divide it up. So if that money is going to be anything other than flushing money down the toilet, they definitely need a game plan for restructuring to reduce their burn rates. Ultimately much of this depends on what the economy does, and if it turns around in the mean time, that might help them.
Also, in terms of bankruptcy, one of the big problems is that the assets they have aren't really going to be worth much. They can't sell off manufacturing capacity because, with the market the way it is, nobody else needs that capacity. The credit markets are for crap, so they won't be able to restructure their debt much either.
My take at this point is that there needs to be a bailout, but that Congress does need to take a somewhat hard line with these companies. We need them to survive in some form, but we need to get them to restructure in a serious way. There is a lot of value in these companies if they are trimmed down, reorganized a bit, and brought under more competent long term thinking management. I have little doubt that US manufacturers can compete against Japan and Germany, but not in their current form.
In the long run, even if they do fail, demand for cars will continue, and you can expect foreign manufacturers to fill the gap and, largely due to cost savings, they'll make a good portion of those vehicles here. But in the short run, the last thing our economy needs is another large group of people out of a job. So better to keep them around in some form.
