Fallout: The Financial Crisis

Last round of pleas from the Big 3

Marketplace Staff Dec 2, 2008
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Fallout: The Financial Crisis

Last round of pleas from the Big 3

Marketplace Staff Dec 2, 2008
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TEXT OF INTERVIEW

Kai Ryssdal:
I don’t know if he’s doing the actual driving himself, but Ford’s Allan Mulally clearly learned his lesson the last time he went to Washington.
He and his colleagues, Rick Wagoner of GM and Robert Nardelli at Chrysler, got a thumping when they showed up in corporate jets.
So Mulally’s taking to the road for hearings that start Thursday.

Wagoner and Nardelli are probably flying commercial. They’ll be bringing with them details of the bailout justifications Congress asked them for.

Broad outlines were released today. More green cars. Smaller and smarter business plans. And executive pay cuts are the highlights.

Eric Noble runs an auto industry consulting firm called The Car Lab. Eric, good to talk with you.

Eric Noble: Likewise, Kai.

Ryssdal: Stakes are very high for Detroit with these plans. Based on what we’ve seen so far, is this going to do it?

Noble: Well, I think what we’ve now seen from General Motors is alittle bit of an admission that they need gastric bypass to get rid of some brands. And that might be effective.

Ryssdal: They’re going to get rid of some brands. They’re going to go green. Rick Wagner, the CEO, is going to work for a dollar. Ford said essentially the same thing. Is that really the best they can come up with, green and cheap CEOs?

Noble: Well, objectively, both companies need to stay in business, and that’s about trimming some fat and that means getting rid of some brands. What we need to see from Ford is that probably Mercury needs to be put out to pasture on a permanent basis. General Motors admission now, or its tacit admission, that Saturn, Pontiac and Saab are all officially for sale along with Hummer, is welcome news.

Ryssdal: Were you surprised at all of the immediacy of General Motors need? They said they need $4 billion this month or it’s probably over.

Noble: You know, the burn rate at General Motors is vast. And that’s just a function of their size. And it has taken for years more revenue than they can generate. So, no, it’s not surprising.

Ryssdal: CEO Rick Wagner has been at General Motors for a long time, he has been reluctant to cut brands so far. Remind us of why that is, what happened?

Noble: Well, last time Rick cut a brand it was Oldsmobile and that cost the company, arguably, over a billion dollars to pay out some dealers and their lawyers. So, for years since then, Rick has been probably overly reluctant to make some further necessary cuts–namely Pontiac. And probably today, we see Saturn and Saab also joining those lists.

Ryssdal: Do you think this will be the last bailout then Eric?

Noble: You know the economy is going to be the determinant there. If consumers don’t get out their wallets and walk back on the dealer lots, this is probably not going to be the last bailout. We’re looking at an industry that today can’t make money. Whether Toyota, Honda, or General Motors are on the billboard.

Ryssdal: Well, that’s a good point, this bailout isn’t actually going to help them sell cars is it?

Noble: No. This bailout might restore alittle bit of consumer confidence that these brands are going to be around. But everybody’s got a problem, and that’s low traffic.

Ryssdal: Low traffic–not a lot of consumers.

Noble: Not a lot of shoppers.

Ryssdal: All in all then Eric, is this what Congress needed to hear?

Noble: Let’s hope it is. I think for the survival of General Motors it’s what the shareholders needed to hear. Whether or not they’re going to have the funds to implement all of this is the question that’s now going to be before Congress.

Ryssdal: Eric Noble runs runs a company called The Car Lab, it consults for the auto industry. Eric thanks alot.

Noble: My pleasure Kai.

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