Released October 11, 2006 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas). Could things get any worse for the General Motors Corporation (NYSE:GM)(Detroit, Michigan) and Ford Motor Company (NYSE:F)(Dearborn, Michigan)? The much publicized Renault-Nissan (France) and GM merger talks are dead in the water and now Ford and GM are making noise about merger/alliance talks, which would be laughable if we did not know they were at least somewhat serious. Over 47,600 GM and Delphi Corporation (Troy, Michigan), a GM spin-off in Chapter 11 bankruptcy, workers have accepted buyouts and early retirement packages as part of GMs attempt to right the ship. Ford has offered buyouts and early retirement packages to its entire 75,000 person hourly workforce. Yet, these two companies are still allocating more then $2.5 billion to future capital investment in North America.
To give these two companies some credit, this type of investment is absolutely necessary, if they are going to have any hope of remaining at least partially competitive with Toyota Motor Corporation (NYSE:TM ) (Japan) and the other foreign automakers who are gobbling up more and more market share annually. However, this is probably only a drop in the bucket of what is truly necessary for them to spend if they really want to get back on top.
Plant closures are also the name of the game for both companies currently. GM will close twelve assembly plants by 2012 and Ford an additional fourteen by 2010, having recently moved up the closing dates on several plants to 2007. This will mean thousands of layoffs if the hourly employees do not accept the buyout and early retirement offers.
As if this situation was not bad enough, in June of 2006 an internal Ford memo was leaked stating the company was considering investing $9 billion in its plants in Mexico, which needless to say, caused uproar. This was of course immediately denied by Ford executives. Soon thereafter, however, Ford announced plans to invest $1 billion in the state of Michigan as part of a 20-year deal with the state, which would save 14,000 jobs. The real question insiders are asking is where these billion dollars will come from given the current state of the company.
The lone bright spot for both automobile manufacturers has been their continued dominance in the truck market. Toyotas new truck assembly plant in San Antonio, Texas, will be its first foray into the truck market and it will take some time to see the results of its efforts. It should be interesting to watch Toyotas marketing campaign, as they attempt to break the rural dominance Ford and GM trucks currently have. If Toyota can increase sales in rural markets, which will eventually translate into urban sales as well, Ford and GM will lose even more market share quite rapidly.
Ford and General Motors are treading in deep water and the coming eighteen months will be very telling. Will they sink or swim? Odds are they will continue to recover from the hole they themselves have placed their companies in, but at what expense? The unions future is not looking bright simply based on the severe actions both companies will be forced to continue to take to get back on track. The tier suppliers have been feeling the cost cutting pinch for several years now and are to the point where they cannot get any leaner. Ford and GMs upper management will have to continue to make the tough decisions and go all out to save their companies and the capital investment scheduled for 2007 is one step in the right direction.
Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.
To give these two companies some credit, this type of investment is absolutely necessary, if they are going to have any hope of remaining at least partially competitive with Toyota Motor Corporation (NYSE:TM ) (Japan) and the other foreign automakers who are gobbling up more and more market share annually. However, this is probably only a drop in the bucket of what is truly necessary for them to spend if they really want to get back on top.
Plant closures are also the name of the game for both companies currently. GM will close twelve assembly plants by 2012 and Ford an additional fourteen by 2010, having recently moved up the closing dates on several plants to 2007. This will mean thousands of layoffs if the hourly employees do not accept the buyout and early retirement offers.
As if this situation was not bad enough, in June of 2006 an internal Ford memo was leaked stating the company was considering investing $9 billion in its plants in Mexico, which needless to say, caused uproar. This was of course immediately denied by Ford executives. Soon thereafter, however, Ford announced plans to invest $1 billion in the state of Michigan as part of a 20-year deal with the state, which would save 14,000 jobs. The real question insiders are asking is where these billion dollars will come from given the current state of the company.
The lone bright spot for both automobile manufacturers has been their continued dominance in the truck market. Toyotas new truck assembly plant in San Antonio, Texas, will be its first foray into the truck market and it will take some time to see the results of its efforts. It should be interesting to watch Toyotas marketing campaign, as they attempt to break the rural dominance Ford and GM trucks currently have. If Toyota can increase sales in rural markets, which will eventually translate into urban sales as well, Ford and GM will lose even more market share quite rapidly.
Ford and General Motors are treading in deep water and the coming eighteen months will be very telling. Will they sink or swim? Odds are they will continue to recover from the hole they themselves have placed their companies in, but at what expense? The unions future is not looking bright simply based on the severe actions both companies will be forced to continue to take to get back on track. The tier suppliers have been feeling the cost cutting pinch for several years now and are to the point where they cannot get any leaner. Ford and GMs upper management will have to continue to make the tough decisions and go all out to save their companies and the capital investment scheduled for 2007 is one step in the right direction.
Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.
