The American auto industry, GM and Chrysler in particular, have been tumbling since the last real financial collapse in this country in the 1970’s. They were in trouble then for the same reason they are in trouble now; bad business decisions, bad taste and an inferior product.
Ford is the exception and a buy, but first a great story.
Why all the whining and nostalgia about the demise of GM that’s being pumped through the airwaves? The unemployment situation for the UAW is a serious problem, but this three month wake for the great American icon is ridiculous.
GM did everything wrong, for 35 years. They built junk. Bankruptcy happens to companies that sell junk.
My first new car was a GM. I was a brand new Naval Officer and I needed a dependable way to get from Newport, Rhode Island to my girlfriend’s home in Pennsylvania. At least at that time I thought I needed to do that. I’m sure it would look very different now.
This was prior to the pay raises for the military Reagan put in place in the 80’s, so I was stretching it to buy any car. And since it was a time of “Buy American” fervor, and I bleed red, white and blue, I bought American. The disaster started.
In the first month the brake rotors went out of round, which meant when I braked the car shook violently. The clutch cable stretched and made a groaning sound every time I stepped on it. The driver’s door wouldn’t close properly and the valves sounded like there were marbles inside the valve covers.
All the stories I had heard were true. They did build junk.
Not to worry said the young kid, which I was in 1979, it’s under warranty. I’m so glad I’m not young anymore.
After at least ten trips to the dealer, nothing, and I mean nothing was done to fix anything. It seemed it wasn’t the car that had problems, according to the service manager it was my head. That would have been true if my head had been between the driver’s door and the doorframe. I finally gave up.
One year later I traded the car for a Volkswagen Rabbit and never looked at another American car again. It’s one thing to have problems with a car; it’s another not to fix the problems.
Since 1979 I have purchased seven new cars, all foreign, and have never had a problem even close to what the GM gave me. In fact, since 1987 I have driven Volvos and have had two, count ‘em two times when the cars have needed anything other than regular maintenance.
GM not only made junk cars people didn’t want, they wouldn’t fix them either. I’m sure you can imagine how much nostalgia I feel for GM.
The bright star on the auto horizon is Ford.
Between 2002 and 2008 I travelled to Detroit for meetings and saw something that struck one of those, this means something cords.
Everywhere in the airport were signs talking about Ford and the new green wave that was coming. This was in 2002! Nobody was talking green cars in 2002. This green focus wasn’t advertised anywhere else.
After 25 years in the markets I have developed something of a sixth sense, and these signs triggered it. I didn’t know what was to unfold, but I knew something was afoot.
In the next few years Ford had major shakeups in the board room, got the union concessions they needed to operate profitably and started planning to build a hybrid car that would compete with the Japanese, without being threatened by congress or funded by the taxpayer.
In fact the Ford CEO sat in front of the congressional hearings last fall and stated they didn’t want or need a bailout, they were fine.
Since the announcement of the conversion of one of their trunk plants to a hybrid plant Ford stock has moved from the post crash low of $1.01 to a high of $6.51 in mid May. This is while GM and Chrysler were still feeding on the taxpayers and we have been force fed this three month wake.
In just a week Ford ran from $5.15 to $6.14 on news of its increasing sales, up 20% just in April. Ford will be the only winner at the end of this mess. It is well worth a position in your portfolio.
We may see a pullback to the fives, but whether you wait for a lower price or not, buy it in one quarter positions. Buy about one fourth your usual amount and wait for the dips. I can easily see a 30% to 50% short term run in a strong market. Long term, three to five years, we may have an even bigger story.
The auto industry is fine, the weak links have fallen away, as they should, and the new leaders are emerging.
Ford is giving off all the signs of a company that’s moving to the lead. Always follow the leader.
Good Luck!
Steve
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Steve,
Enjoyed meeting you in Miami. And I enjoy The Bond Trader. In terms of delivery my wife and I agree you were the best. But I strongly disagree with you about GM. I have owned several chevys and buicks and have been pleased with each one. Right now we have a 2003 Buick Century and 2008 Buick Lacrosse and couldn’t be happier. The LaCrosse is a dream. Just sold our 2001 Chevy prizm and wish I had it back(love it so). Our first Buick was a 1969 Buick station wagon and it did very well for us. Sure there have been a few problems along the way-but very few.
Hi Steve
My opinon is that you are correct in your assesessment of the Ford
Motor stock. The New fellow, Mr. Alan Mulanlly, from the article in the May 25th issue of Fortune from Boeing performed the correct surgery for Ford. He initiated regular meetings for across lines major and minor Management with Authority and in the end
required Acountability discipline when necessary, also across the board. It is very important to note here that Mr. Mulanlly is a very well organized individual and is not satisfied until common ground within management is attained. Then expects the desired and agreed upon final result.
In conclusion, I believe Ford Motors will be a great promissing company and investement while Alan M. CEO remains at the helm. I trust he will plan to leave a very good replacement who may be in training as we speak. Thank you for your article.
Note my name is correctly spelled as “Burgess” (see bove).
Ford will be in the same position as Gm next year after they run out of money, and they will., because all those problems you had with your gm car, I have had with every ford I ever owned. They build nothing but junk. I have had some problems with chevy’s but nowhere near what I had with ford, they deserve to be gone.
Anyone who thinks that GM makes crap and Ford makes a quality product hasn’t owned many Fords. I have owned Ford products twice in my life, and if you gave me another one, I would sell it the day I got it. My experience with GM was much better, although I drive a Honda and a Toyota today. As I emailed Larry King a few weeks ago when the Ford CEO was on the show, the only thing Ford could do to get my business back is to offer the same benefits as their competitors. When Kia and Hyundai can offer 100,000 or 10 year warranties on their cars and Ford offers 1 year or 10,000 miles, who do you think builds a better quality vehicle?
Steve I find your comments about GM shallow and uninformed. This is a sad state of affairs from one who makes his living on long term study. I noticed that you didn’t mention the model of car you bought from GM probably to hide the fact that it was the most bottom end vehicle they sold and probably not built in America. They like all car companies in this country suffered through the 70’s with priorities going to a war in Asia, an Oil Embargo, Wage and price freezes, and unrelenting inflation. Most foreign car companies only ship there best products to our markets, while selling low end one in there home markets. You being in America had access to the low end GM products and bought one and now want to compare, road kill with Caviar. Shame on you for using your platform for unfairly assessing this company. If you go back to the 70’s Ford had a terrible time with the new smog controls and vacuum line issues that burnt valves and ruined engines. A closer inspection would reveal that GM has made many great car and truck models with great service records. You have shown your stripes with this article and your over all short sightedness. You will now have to redeem your reputation as I will use your standard, though you have written a great volumne of good articles, I shall judge you on the one that I didn’t like and shout to the world what a fool you are……. Now how fair is that. I hope to take this to heart as you have wonderful insight on the financials stick to what you know and leave the experts in cars to rate and judge them. Respectfully Jon Volz
Well Steve, with approx 42% of GM stock owned by the four biggest oil companies, (enough to control the board), I wouldn’t expect to much in the way of “green” vehicles to come from them until they were forced to compete with the rest of the industry, or die on the vine. There’d be a huge bias toward gas guzzlers (as we’ve seen already), because hybrids and electrics are will slowly wean us off big oil, and especially foreign oil. ( see ev1.org - recommended reading by your colleauge Christian Hill awhile back).
By now we could have had millions of electrics running around the world, requiring no oil whatsoever, plus minimal maintenace, the environment would win big time, we wouldn’t be supporting foreign governments who hate us and our way of life nearly so much, and GM would be humming along making those millions of electrics, (which will probably be made by someone else now).
I agree with the revenge of the EV1 article big time. GM shot their own foot off on this one IMO.
Steve, your article about your experience with a GM vehicle interests me. I too had an experience similar but it was with an ‘85 Ford T-Bird…not their “low-end” unit. I too switched at the time to an import…five of them to be exact. I, however, did not abandon American made products and conducted (although not planned) a “cost per mile” comparison over the last several years and remarkably found the best products to be American made…a 1987 Pontiac Grand Am and a 1992 Chevrolet Lumina. We put well over 100,000 miles on both and endured minimal issues with either. On the other hand the Toyota Celica, Corolla, and Camrys we purchased were outrageously expensive when repairs had to be performed (at less than 100,000 miles I might add). I have learned more about GM’s products and may never buy another foreign made vehicle due to the outstanding service my GM vehicles have provided. Furthermore, the foreign makers can’t compete with the full-size trucks on the market today…not even the Tundra. My full-size Tahoe (2003 with over 80,000 miles) still gets over 17 mpg and the safety, functionality and utility has been great and definitely a source of peace of mind while my wife and children commuted to and fro… We enjoyed 30+ miles per gallon from our 2001 Buick Lesabre that I just recently traded with over 126,000 miles and never felt cramped, too enclosed, nor vulnerable on trips and everyday driving. I am a bit discouraged by your “junk” comment and seriously question anyone with such a short-sided outlook. I sure hope your investment advice is more competent. Even through GM’s “failures” they have consistently sold more vehicles than any other automaker in the world (until just recently) and hopefully will again. I challenge you to look into GM’s products and do an open-minded comparison. One quick example…my 2003 Chevy Silverado full-size 4-door extended cab (5.3L V8, automatic, with comfortable features) at 18.3 mpg with over 70k miles on it is almost as good as I could squeeze out of my Toyota Tacoma (4 cyl, 5-speed manual transmission, few creature comforts and nowhere near as safe in the event of an accident) at 20 mpg. I will gladly give up 1 to 2 mpg for comfort and safety and utility. Maybe it is time for you to look again. It may also be time to limit the interference offered by our “leaders” (who for the most part have little to no experience building and manufacturing anything short of chaos) on manufacturers and simply encourage the market to decide.
You don’t know much about cars. I have owned over 10 cars in my 60 years of driving. All GM and Ford. I have never had a serious problem with any of them. Any problems were addressed promptly and courteously. I am glad I live in the West where people treat you with respect. Bad mouthing GM will not solve your problem.
Sound like you hit a sensitive nerve.
Since 1955 I have purchased 14 auto’s 1 American Motors, 6 Chrysler products, including 3 Imperials, 1 Jaguar, 1 Mazda RX7 and 5 Cadillac’s. I have never experienced the problems you refer to with the products or the dealers.
The auto that gave me no mechanical problems was the Mazda RX7.
I recently took a subscription to your “Sound Profits”. I hope that your recommendations for investing is better than your feelings about American built auto’s.
I hope I don’t regret taking you up on your Ford suggestion.
Steve,
From 1960 to 1990,I was in large fleet management-2500+vehiles.AMC and Chev. cars provided very good service,Ford did not;Chrysler was very weak in their performance.Chevy and Ford light trucks were about on par in operating costs,while Chrysler,[Dodge]were poor.Ford and IH Heavy trucks exceded the performance of Chevy/GMC.
Re warranty coverage: Most fleet warranty was negotiated.Ford and GMC were natorious for dragging their feet,BUT,certain dealers were helpful even when Ford and GMC Fleet service reps were not. AMC,Chev.and IH were generally very fair in their warranty administration.For the public,warranty service was adequate at well managed dealerships.
Management at GMC was in general egotisticly “full of it self”,Ford less so.
Of all the mfg. that I dealt with,AMC and IH were the best,but alas AMC failed to continue their Folkswagen approach/philosophy.
To condemn or praise a vehicle from any of the vehicle companies requires one to be more specific as to models and time frame..you bought a GMC product in c. 1979 that was junk;fine,but I bought a Chevy C-10 pick-up in 1981 and sold it last year [2008],not restored,but still run’n,dependable,getting > 18mpg…that ain’t “junk” Steve…but then again, I didn’t replace it w/ a Chevy either.
Steve If everyone had the same opionion as you, every company in the US would be out of business. Buy American to keep Americans working. Spending just 20 cents of every dollar on an American made product would creat 5 million jobs a year. Would invite you to our house but you would have to park your car at the bottom and walk up.Long drive too. Not American made don’t drive up.
Steve,
I’ll never buy another Chrysler is my motto. As a matter of fact I dont even like driving in a Chrysler. I was treated so badly by Chrysler that I won”t walk in a (Dodge) show room floor. I, too, bought in the 70,s and I still have a soar taste about that product. Let them go and let that name go too.
David
Thanks, Steve, for confirming my memory still works. For one, Opel had a bad reputation for the need to be fixed. Asking mechanics in independent repair places would give you an unbiased opinion and the prices for used cars would confirm that. Secondly, already a long time ago (may be 30 years) it was published in Germany that investing in GM was like playing the lottery as GM did not fund their obligations for retirement and health benefits as much as needed. Instead, they used the money for window dressing or plain stupidly lost in through bad business decisions.
In recent years I frequently rented small cars in Germany. Most of the time I would get an Opel but sometimes it was a Fiat or a Peugeot. These vehicles performed well in cities and on the Autobahn where I like speeds above 100 miles/h. The fuel efficiency of those little turbo diesels or gasoline engines was marvelous.
When I asked GM to sell these little Opel cars in the US I got a polite “NO”. I might have bought one instead of keeping my Ford minivan. Now I will switch to the VW minivan as Mercedes is not affordable to me any more.
What I do not understand is why the authorities make it so difficult to sell a car in the US that is street legal in Europe. They have standards as good as the US or even better. And don’t tell me “buy US” makes any sense, at least not until the fuel is purely US.
Well, whoop-de-do, Steve. GM did not build the greatest vehicles in the world, but, contrary to your belief, and a lot of others, by the way, they mainly built what a lot of Americans wanted, and still do. I will take my larger American nameplate over these little pint-sized pea shooters any day, and so will a lot of others. I can see why you soured on GM right out of the gate, but recent years have proven that they can and do make some nice vehicles. I still don’t get your comment about Ford advertising electric, or green, back in 2002. To my knowledge they still don’t have anything on the market besides a couple of hybrids, which any one will tell you are grossly overpriced compared to a standard vehicle. I understand your comments being about Ford (F) stock for this article, but if you are so enamored with Ford, why didn’t you tell us you just purchased/leased one instead of sticking with your beloved imports. Sorry to all you import lovers, but if you think moving all of our manufacturing, of everything important, out of this country somehow will make this country maintain our standards we have come to enjoy, you need to “enlighten” me, because I just don’t see it happening. Do I try to help my neighbor by buying a product he helps make? You’re doggone right, if I can. Middle-class Americans are not likely to get rich in the stock market; somebody has to be willing to manufacture and purchase American made/nameplate items or the next generation is going to be in a world of hurts.
Steve: I agree with you about GM cars and Ford cars (I personally have been driving Fords for over 20 years, and made up my mind long ago never to give GM a sucker’s chance again). From an investment perspective, I just wonder what you would think about the fact that the imperial Federal USofA government is now subsidizing GM: Do you think this will affect Ford’s competitive position vis-a-vis GM? Do you think there is a possibility they would dream up a program along the lines of, “Buy a GM car and get a $2000 tax credit; Buy a Ford and you get none”?
I personally think that even if they were to try something so stupid as this, it would backfire, but one can never underestimate the stupidity of the political class.