At the precipice of doom, are there signs of better days?
11-26-08:
October and November have been the gloomiest months on record for the auto industry and Wall Street alike. The “October Surprise” in this year’s election was the economy and it arguably had its effect on the elections, scaring people into voting for a change for change sake.
The Detroit 3 already weakened by a couple of bad years, record gas prices in 2008, and in critical stages of a tenuous turnaround effort got socked hard. Car sales off, stock prices hitting record bottoms were only the headlines that everyone heard on the news. Behind those were evaporating cash reserves in a time when they are spending more to keep the lights on than is coming in from car sales.
In November we learned that the Detroit 3 are in a grave state that may only be staved off by emergency intervention loans from the federal government. General Motors has stated they only have enough cash in the bank to get through December. Chrysler is looking pretty dim like an old headlight about to blink out for good.
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These two companies cancelled their public debuts and press conference showings at the Los Angeles Auto Show, leaving vast dark expanses of aging models on display with nobody on hand to extol their virtues. No new models to promise, no concept cars to point to their futures. GM had the Volt electric car that might come someday. Chrysler’s showing of tired old models was in and of its self a dooming sign that they may be on the end of their road.
Things at the Ford booth were different. Despite trying times, Ford showed off a number of critical new models that the company says is putting their best foot forward. The new 2010 Mustang that is an iconic figurehead of sorts for Ford was shown. More important was a redesigned Ford Fusion, Mercury Milan, and Lincoln MKZ. This is the bread and butter of the Ford lineup that they need to take them to the goal line of recovery. Initial reaction on the cars is positive as they present a fresh and handsome look across the board as well as feature many tactile improvements of features, quality, and finish.
The icing on the cake was a new hybrid version of the Ford Fusion and Mercury Milan. The new high mileage mid-size sedan will beat Camry and Accord in almost all aspects of performance and efficiency. Ford made sure everyone on hand was made aware of this. The messages were heard loud and clear in green conscious California. At the Ford booth there wasn’t an Explorer, Expedition or Super Duty truck to be seen. It was all about their new crop of efficient and fresh designed cars.
What Ford has made apparent to all who care to watch is that they are now in the lead of the Detroit 3, best positioned in the right product at the right time. They are also showing themselves to be the best positioned financially for recovery. They have stated in recent days that they have enough cash on hand to make it through the 2009 calendar year and that their plans to recover are not dependent on a government bail-out loan.
They are still lobbying congress for assistance as are GM and Chrysler, but they state they are only doing so as a back-up plan - a line of credit as a last resort. All of this fleshing out of sorts has been showing up in stock trading in the past week. Ford has been slowly climbing out of the morass of November, rising above $2.00 a share for the first time since election week. Having bottomed out at a record low of $1.01 per share, Ford (F) closed up today at $2.15.
