GM To Cut New Pickup Truck Production?
Yesterday the Detroit News reported that GM may cut production of its new pickup truck. That is extremely bad economic news. GM recently launched a newly designed pickup for the first time in years. Even though the reviews have been generally stellar, weak sales and brutal pricing strategies from Dodge, Ford and Toyota paint a potentially dour sign of economic activity in the U.S.
I've talked about the pickup truck economy on here. With so many craftsmen and women, construction workers, entrepreneurs, farmers, etc, relying on pickup trucks for their livelihood, this speaks loads about the state of their businesses or their concern re making a large investment in their business. As an aside, as I wrote about in South America, don't assume American farmers are raking in the cash with grain prices soaring. So too are input costs such as agri-chemicals, fertilizer, fuel and equipment. Those printing money with inflated agriculture prices are the major global agri-firms that make and generally control markets in said products and very large farmers who use sophisticated futures strategies.
At the same time we find GM's bonds cratering on concerns about the economy. Already "junk", GM's bonds dove as much as 3% in a single day this past week. Finally, GM's attempted sale of its transmission unit is running into trouble as underwriters scrap plans to offer $3.5 billion in debt for the deal.
It hasn't been a good week for U.S. auto makers. While all three are making significant operational progress in their turnarounds, the economy is not assisting and likely won't assist any time in the near future. Nor is their generally unfavorable product mix that takes years to rectify. It might be time to put GM and Ford back on "bankruptcy" watch if fundamentals don't improve over the coming months. I have no doubt about the viability of either company long term but the road to long term prosperity will have many potential pitfalls without a strong domestic economy.
I've talked about the pickup truck economy on here. With so many craftsmen and women, construction workers, entrepreneurs, farmers, etc, relying on pickup trucks for their livelihood, this speaks loads about the state of their businesses or their concern re making a large investment in their business. As an aside, as I wrote about in South America, don't assume American farmers are raking in the cash with grain prices soaring. So too are input costs such as agri-chemicals, fertilizer, fuel and equipment. Those printing money with inflated agriculture prices are the major global agri-firms that make and generally control markets in said products and very large farmers who use sophisticated futures strategies.
At the same time we find GM's bonds cratering on concerns about the economy. Already "junk", GM's bonds dove as much as 3% in a single day this past week. Finally, GM's attempted sale of its transmission unit is running into trouble as underwriters scrap plans to offer $3.5 billion in debt for the deal.
It hasn't been a good week for U.S. auto makers. While all three are making significant operational progress in their turnarounds, the economy is not assisting and likely won't assist any time in the near future. Nor is their generally unfavorable product mix that takes years to rectify. It might be time to put GM and Ford back on "bankruptcy" watch if fundamentals don't improve over the coming months. I have no doubt about the viability of either company long term but the road to long term prosperity will have many potential pitfalls without a strong domestic economy.
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