Survivor Detroit: Will Anyone Make It?

October 10, 2008
Just when we thought the grim times in Detroit couldn't darken, Thursday happened.

GM and Ford stocks fell to dramatic, swooning lows right along with the Dow, freefalling into the 8,600 range for the first time in five years. GM shares are sitting at levels not seen since the Korean War. Ford is essentially a penny stock.

Inside the industry, it's turning into a bad season of "Survivor" (and who watches "Survivor" anymore, anyway?). It's about to get worse. The reports are dire this morning, with the possibility of another 500-point drop in the Dow. Geraldo Rivera's on morning TV, talking about how GM and Ford are trading at $4 and $2 a share, and the $25 billion in loans might be used just to "keep the lights on."

When Geraldo shows up in your back story, it's like Jim Cantore showing up at your oceanfront property. Not good.

But is it a game-ending scenario? Yesterday, I talked with CBS MarketWatch, which asked pointedly if GM was in danger of going bankrupt. With the cash on hand, GM says it will weather the rest of the year, and they know their wallet better than the press. I hesitate saying anything like the B-word because there are more levers yet to pull at both of the publicly owned domestics.

But like John McCain's campaign, the options are getting fewer and more esoteric. GM is trying to unload its headquarters to the notoriously well-funded city of Detroit. That's how extreme the solutions have become. Ford already mortgaged everything, including the blue-oval logo--and its best new vehicle, the 2009 Ford Flex, isn't selling well.

If there were any signs of recovery, the domestics might be able to muddle through this year and hedge their bets on the $25 billion federal loans, which come with plenty of strings. The problem is, analysts are predicting a bloodbath next year. Car sales in 2009 could hit a three-decade low of 13.2 million vehicles. Off recent highs of nearly 17 million car sales, that's like wiping GM, Toyota, and Ford off the sales charts entirely.

We're in freefall, and there's not even a glint of a recovery. The entire U.S. auto industry will be battling simply to survive. They'll have to do it for 18 to 24 months. And some of them won't make it, the headwinds are just too strong.

Think of the postwar implosion of car brands after World War II, when the market went from dozens of brands to a handful. Could we go from three U.S. makers to one--or none?

What's your take on the survivors? Who's going to make it through this Marianas trench?

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