And now, rumors of GM buying Ford...
05-29-19, 06:02 AM
#1
Lexus Fanatic
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And now, rumors of GM buying Ford...
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GM Merger With Ford Looks More Likely
- Douglas A. McIntyre
1 day ago
Fiat Chrysler Automobiles N.V. (NYSE: FCAU) proposed a merger with Renault that would create the world’s third largest carmaker. The eroding economics of the industry make such deal more likely by the day. Deep trouble at Ford Motor Co. (NYSE: F) and General Motors Co.’s (NYSE: GM) need for more heft to compete with rivals Toyota and Volkswagen make a marriage between the two largest car companies increasingly probable.
Fiat Chrysler argues that a tie-up with Renault will lead to $5.5 billion in savings. As car sales have flattened in the United States and started to drop in China, the two largest markets in the world offer less hope for revenue improvement. Neither company has much of a sales footprint in China. Renault has none at all. Both have a strong market share in Europe, but it is one of the most competitive markets in the world. At the low end of the market, VW is the dominant force. At the high end, it is BMW and Mercedes.
While GM and Ford both have a strong market share in the United States, Ford has stumbled. It has withdrawn most of its sedans in the American market because sales have shifted from cars to sport utility vehicles, crossovers and pickups. Ford’s only bright spot in the United States is its F-Series full-sized pickup, which is the top-selling vehicle in the nation. Ford’s sales in China are abysmal and falling. GM’s are strong, but it is up against other car companies, both local and global, that need the largest car market to be successful.
Ford’s management, under CEO Jim Hackett and Executive Chair William Ford, has shown it can cut costs. It recently cut 7,000 white-collar workers. That will save $600 million. Hackett has set total savings of $14 billion for the five-year period that began last year. He also said the company will invest $11 billion to have 40 electric and hybrid cars by 2022. Not many outsiders believe he can make his goal. Ford may build more electric cars and hybrids, but selling them is another matter. The competition in this market runs from tech companies like Alphabet’s Waymo to Tesla, startups and every major manufacturer in the world. There is no evidence Ford is ahead of this wave, and so far, it appears the company is behind it. Confidence in Hackett, in particular, is low.
GM is better regarded than Ford, primarily because of the work of CEO Mary Barra. She has been CEO of GM since 2014. It also has cut costs. However, many outsiders believe it is ahead of most of its rivals in both the electric and self-driving car businesses. GM owns 75% of Cruise Automation, a leader in artificial intelligence of future cars.
GM has two other advantages over most global manufacturers. It is among the leaders in car sales in China. With its joint venture partners, it sold 813,973 vehicles in the first quarter. GM is also the leader in U.S. car sales, with about 17% of the market.
One of the primary hurdles GM would have if it took over Ford is that the market share of the two in the United States would be close to 30%. Either U.S. regulators would need to accept that, or the combined company would need to sell or spin out some of its brands. The most likely of these are GM’s Buick or GMC truck business.
While GM may have a future as a standalone car company over the next decade, Ford does not. Its market cap is down 42% over the past five years, while GM’s is close to flat. The savings in a combination would be well into the billions of dollars. A marriage of the two also could compete effectively with Toyota, VW and perhaps the new Fiat Chrysler and Renault combo. GM also has the advantage that it is considered to make among the most dependable American cars.
Fiat Chrysler argues that a tie-up with Renault will lead to $5.5 billion in savings. As car sales have flattened in the United States and started to drop in China, the two largest markets in the world offer less hope for revenue improvement. Neither company has much of a sales footprint in China. Renault has none at all. Both have a strong market share in Europe, but it is one of the most competitive markets in the world. At the low end of the market, VW is the dominant force. At the high end, it is BMW and Mercedes.
While GM and Ford both have a strong market share in the United States, Ford has stumbled. It has withdrawn most of its sedans in the American market because sales have shifted from cars to sport utility vehicles, crossovers and pickups. Ford’s only bright spot in the United States is its F-Series full-sized pickup, which is the top-selling vehicle in the nation. Ford’s sales in China are abysmal and falling. GM’s are strong, but it is up against other car companies, both local and global, that need the largest car market to be successful.
Ford’s management, under CEO Jim Hackett and Executive Chair William Ford, has shown it can cut costs. It recently cut 7,000 white-collar workers. That will save $600 million. Hackett has set total savings of $14 billion for the five-year period that began last year. He also said the company will invest $11 billion to have 40 electric and hybrid cars by 2022. Not many outsiders believe he can make his goal. Ford may build more electric cars and hybrids, but selling them is another matter. The competition in this market runs from tech companies like Alphabet’s Waymo to Tesla, startups and every major manufacturer in the world. There is no evidence Ford is ahead of this wave, and so far, it appears the company is behind it. Confidence in Hackett, in particular, is low.
GM is better regarded than Ford, primarily because of the work of CEO Mary Barra. She has been CEO of GM since 2014. It also has cut costs. However, many outsiders believe it is ahead of most of its rivals in both the electric and self-driving car businesses. GM owns 75% of Cruise Automation, a leader in artificial intelligence of future cars.
GM has two other advantages over most global manufacturers. It is among the leaders in car sales in China. With its joint venture partners, it sold 813,973 vehicles in the first quarter. GM is also the leader in U.S. car sales, with about 17% of the market.
One of the primary hurdles GM would have if it took over Ford is that the market share of the two in the United States would be close to 30%. Either U.S. regulators would need to accept that, or the combined company would need to sell or spin out some of its brands. The most likely of these are GM’s Buick or GMC truck business.
While GM may have a future as a standalone car company over the next decade, Ford does not. Its market cap is down 42% over the past five years, while GM’s is close to flat. The savings in a combination would be well into the billions of dollars. A marriage of the two also could compete effectively with Toyota, VW and perhaps the new Fiat Chrysler and Renault combo. GM also has the advantage that it is considered to make among the most dependable American cars.
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Last edited by bitkahuna; 05-29-19 at 08:34 AM.
05-29-19, 06:10 AM
#2
Lexus Fanatic
Before the recession. Book called “End of Detroit” predicted one of the big three will no longer exist in its traditional form. Looks like it coming true. I wont miss Ford, maybe miss GM a little bit as their cars are somewhat appealing. But I would never buy a Ford or GM. So what difference does it really make.
05-29-19, 06:10 AM
#3
Lexus Champion
This does not sound like a rumour to me. It seems more like a "I wish it could happen at some time in the near or far future" dream by some blogger.
We all have these dreams. That does not make them rumours.
We all have these dreams. That does not make them rumours.
05-29-19, 06:49 AM
#4
Lexus Fanatic
Bitkahuna, I'll just give you a little heads-up. Not a terribly big deal (and please don't be offended when I point this out), but, sometimes, when you post newspaper or internet-articles with photos/images, you sometimes have to go back and re-space, with the cursor, words and phrases that are adjacent to the images. It's just a quirk with some types of the software involved with copying and posting/pasting. I try to do that with my own posts, but sometimes I miss one.
I know, from numerous posts/discussions in other threads, that some people think I am just stubborn and blind on this issue, but I simply don't buy that line from GM and Ford about the so-called "need" to drop sedans from low sales. If you look at what both manufacturers actually make (per unit) on each vehicle-sale, it's clearly more on each truck and SUV than on a typical car, particularly a smaller car like a Cruze, Spark, Focus, or Fiesta, which has little mark-up. The amount per vehicle generally applies whether the manufacturer sells one of them or a million. So, it's not hard to figure out (even for blind people like me LOL) that this whole drop-sedan nonsense is merely an attempt to, if possible, stop people from buying new cars and get them into more profitable SUVs and CUVs. It's chasing after more $$$$$ per unit, at the cost of customer-choice. That won't work with people like me, but it probably will with the hordes of GM and Ford fans who, along with baseball, hot dogs, and apple pie, are die-hard repeat buyers. They'll let themselves be forced into an SUV just so they can stay with the nameplate....and just hand the manufacturer more profits.
On the issue of GM and the "most dependable" American cars, yes and no. Most of the smaller, Opel-sourced Buicks are solidly better than average, but GM also makes some very unreliable products, including the GMC Acadia (ironically, one of my favorite SUVs), Chevy Traverse, and some of the full-size, truck-based SUVs. Those large truck-based SUVs used to be reliable, not so much the case recently.
Originally Posted by article
While GM and Ford both have a strong market share in the United States, Ford has stumbled. It has withdrawn most of its sedans in the American market because sales have shifted from cars to sport utility vehicles, crossovers and pickups.
I know, from numerous posts/discussions in other threads, that some people think I am just stubborn and blind on this issue, but I simply don't buy that line from GM and Ford about the so-called "need" to drop sedans from low sales. If you look at what both manufacturers actually make (per unit) on each vehicle-sale, it's clearly more on each truck and SUV than on a typical car, particularly a smaller car like a Cruze, Spark, Focus, or Fiesta, which has little mark-up. The amount per vehicle generally applies whether the manufacturer sells one of them or a million. So, it's not hard to figure out (even for blind people like me LOL) that this whole drop-sedan nonsense is merely an attempt to, if possible, stop people from buying new cars and get them into more profitable SUVs and CUVs. It's chasing after more $$$$$ per unit, at the cost of customer-choice. That won't work with people like me, but it probably will with the hordes of GM and Ford fans who, along with baseball, hot dogs, and apple pie, are die-hard repeat buyers. They'll let themselves be forced into an SUV just so they can stay with the nameplate....and just hand the manufacturer more profits.
GM also has the advantage that it is considered to make among the most dependable American cars
On the issue of GM and the "most dependable" American cars, yes and no. Most of the smaller, Opel-sourced Buicks are solidly better than average, but GM also makes some very unreliable products, including the GMC Acadia (ironically, one of my favorite SUVs), Chevy Traverse, and some of the full-size, truck-based SUVs. Those large truck-based SUVs used to be reliable, not so much the case recently.
Last edited by mmarshall; 05-29-19 at 06:58 AM.
05-29-19, 07:23 AM
#5
Super Moderator
Spinning off GMC to appease the FTC would make no sense. The only vehicle in their entire lineup that isn't a straight-up badge-engineered version of a Chevrolet vehicle is the Acadia, which diverged somewhat from its previous Enclave/Traverse brethren this generation. The resultant company would either need to spend an extraordinary amount of money developing platforms for these vehicles, or continue to buy them from GM.
05-29-19, 08:51 AM
#7
Lexus Champion
Spinning off GMC to appease the FTC would make no sense. The only vehicle in their entire lineup that isn't a straight-up badge-engineered version of a Chevrolet vehicle is the Acadia, which diverged somewhat from its previous Enclave/Traverse brethren this generation. The resultant company would either need to spend an extraordinary amount of money developing platforms for these vehicles, or continue to buy them from GM.
This whole "rumor" seems ridiculous. GM and Ford shed excess brands because of overlap/cost; but now there's going to be Ford/Chevy; Ford Trucks/Chevy Trucks; and Lincoln/Caddy all under the same umbrella, directly competing against each other?
Makes for a great internet discussion; I don't see how it makes ANY business sense.
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05-29-19, 08:55 AM
#8
Intermediate
05-29-19, 11:22 AM
#9
Lexus Fanatic
Agreed....I'm in favor of consolidating all of the GM pickups into one division. Although GMC, unlike Chevy, currently exists as a truck/SUV-only division, it would probably make more economic sense for GM to consolidate all the truck sales into Chevy, and simply ax the GMC division. Ford and FCA, for example, get along just fine with only one truck division each.....so does Nissan and Toyota.
05-29-19, 12:10 PM
#10
Lexus Fanatic
You really are hung up on the sedan cancellations by GM or Ford. It is clear that people are buying lesser and lesser LaCrosse models, Cruze models, Cadillac XTS models and the Ford models. So many people have said it, GM has an overcapacity problem in the US and Canada. Ford has issues in the US. Anyways, the bigger picture is the issue with declining market share for these companies. They are not in very good shape for the long term.
05-29-19, 12:26 PM
#11
Lexus Champion
And there are also those that steadfastly believe that the moon landing was faked; and they are extremely strong in their convictions.
05-29-19, 02:13 PM
#12
Lexus Fanatic
No comparison. There are actually numbers to support what I said. The average profit, on SUVs, is higher than on the average sedan....and there is incentive for the manufacturers to push those sales. There is no practical incentive for people to claim that the moon landings were faked.
05-29-19, 02:18 PM
#13
Lexus Fanatic
Irrelevant. It's not a question of me (or just one human being) being hung up, but of decisions by the automakers that remove customer choice....and toss people out of jobs. This is going to affect a LOT more people than just me.
05-29-19, 02:21 PM
#14
Lexus Fanatic
As far as the original topic (GM buying, or merging with Ford), I don't think Federal regulators would accept that. The resulting corporation would be too big, and control too much of the market share in the U.S. This is not the 1960s, when GM was allowed to control over 50% of the American market.
05-29-19, 03:33 PM
#15
Lexus Champion
Corporations remove customer choices every day. This is just an instance where you don't like the choice being removed.