US Car Companies Get Arrogant

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Barely a month after begging for money in Washington, the US auto companies are talking about what a fine job they are doing preparing for a profitable future.

Their predictions are flawed because they speak to the industry’s ability to control costs, and, in some cases, use government funds to tide them over. The forecasts neglect a full analysis of what happens if the recession gets much deeper.

According to Reuters, Ford (F) says it will not need any federal loans at all. The car firm thinks the Obama stimulus package will put the overall economy on a better track by the second half of the year. That forecast ignores that fact that the program may not even be voted into law before March.

At Chrysler, management says the firm will be "viable" by spring due to cost cuts and a better model line.

The comments about how well Detroit can do ignore the reality that US vehicles sales may drop below 10 million in 2009. Most of the plans presented to Congress by The Big Three assume total units sold for the year at a number closer to 12 million. A two million vehicle deficit could pull another $50 billion in revenue out of the American market leaving all of the auto companies doing business in the US facing worse sales short-falls than they had last year.

The government is still facing putting tens of billion of dollars into Detroit to keep it afloat in 2009 and perhaps 2010. But, at this point, no one in the Motor City wants to say that in public..

Douglas A. McIntyre