Big 3 Bailout
You read about it all over the news. We need to bail out the big three. GM, Ford, and Chrysler. Ford and Chrysler were asking for the least amounts, in the single digits. GM, however, says they need some double digit giveaways to bail them out of their current predicament.
Do you know how many car companies we have here today? I knew it was many, just not as much as 30. 30! And that’s really not all either, I took out a few for my purpose here. I don’t include companies like Mercedes-Benz USA. I’m talking regular drive-your-car-to-Walmart type cars. With GM companies accounting for 25% of the total number of these companies, it’s no wonder GM has been hit the hardest.
What does this mean for GM? They’ve recently started to do something about it by cutting the competition. Notice any more Oldsmobiles on the road lately? No. Notice when Geo was reabsorbed back into Chevrolet? There is too much competition among the same company. Buick. Cadillac. Chevrolet. GMC. Hummer. Pontiac. Saturn. All vying for our hard-earned cash. All in direct competition with each other. All willing to cut to the lowest price they possibly can to get my sale. That’s fine and dandy at the dealer level. But what does that mean when you rise up the food chain? That’s when you find out they are all attached to the same head. Fighting amongst themselves is killing the entire organism.
GM is not the only one with in-house competition, but by far the largest. Infiniti and Nissan, for example, also have some in-house competition, but a proverbial drop in the bucket when compared to the monster that is GM. Honda and Acura. Toyota and Lexus. These guys all share a sibling company, but only one.
Ford has a trifecta of in-house competition: Ford, Mercury, and Lincoln. Chrysler used to. Chrysler and Dodge. Remember Plymouth? Recently deceased. That’s why Chrysler “only” needs $7 billion in comparison to Ford’s (still using 3 branches) $9 billion and GM’s $12+ billion.
So how do the numbers play out? When someone buys a Toyota, there’s only a 3.4% chance that buyer could have bought another car that was price-cut to match another car ultimately owned by the same company. General Motors, on the other hand, garners a whopping 20.6% chance that the undercutting seller will ultimately belong to the same seller.
These are just the problems stemming from in-house competition. There are many other problems that have lead to the current crises; not properly reading consumer demand and outlandish salaries/benefit packages to name a couple more.