What’s happened to the auto companies? And what should we do about it?
There’s no question that the credit crunch has exacerbated conditions for the Big Three. Back in August Chrysler announced that because of insurance issues they were eliminating leasing as a financing option. The other companies quickly followed suit. Auto sales have fallen 30% since then.
But it’s also true that for years the only profitable vehicles coming out of Detroit were gas-guzzling SUVs and pickup trucks. Building your business plan around perpetually cheap gas seems short-sighted, at best.
So do we bail them out, or let them fail? One thing for sure: both management and labor share the blame. When a sports team loses over and over, it’s time to fire the coach. But when the players refuse to change the game plan, it may be time to fire them, too.
Douglas R. Tengdin, CFA
Chief Investment Officer
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