Thursday, October 9, 2008

Will U.S. automakers learn from this?

U.S. automakers have no one but themselves to blame for the precipitous drop in the value of their stocks. General Motors shares fell as much as 33 percent to $4.65 on Thursday before rebounding slightly on the New York Stock Exchange, according to the Reuters international news service, and Ford shares closed down 21.8 percent at $2.08. Sure, the automakers will blame the results on the global downturn in the financial markets, but we know better. U.S. automakers have been losing money for years because they refuse to make high-quality fuel-efficient cars. Complaining loudly and demanding a government bailout may keep them afloat for awhile, but there will be no long-term relief until they address their fundamental disconnect with the auto-buying public. We feel for the auto industry employees who will be laid off and for the auto-related industries that will suffer as a result of these developments, but the responsibility falls on management. There hasn't been any word from Detroit on company managers forced to resign, although there should be. The auto industry should have stopped relying on tax breaks and accounting tricks years ago, but instead went for short-term gains at the expense of long-term planning. Now we're all paying for it. Instead of building quality small cars like they should have starting doing 30 years ago, U.S. automakers conceded the market to foreign automakers as if there was no consequence. General Motors, Ford and Chrysler took advantage of tax breaks afforded by overly generous government officials to build inefficient and environmentally damaging SUVs instead. Now, analysts are warning of even further declines in automobile sales, particularly if the economy contracts, Reuters said. J.D. Power predicted General Motors sales in the United States will drop by nearly 3 million vehicles next year.

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