It has been nearly a year since the CEOs of the Big Three flew their over-sized private jets to Washington begging for bailouts. Now that the bailouts have had time to set in and reconstruction of these flawed companies has been under way, how are they doing? Have these three big automakers done enough to create companies that will be sustainable in the future?

Take a look at what’s been going on at the Big Three:

Chrysler

U.S. Brands: Chrysler, Dodge, Jeep

Headquarters: Auburn Hills, Michigan

Bailout: $15.2 billion (repaid $1.5 billion)

Declared Bankruptcy: April 30, 2009

Post-Bailout Company:
In June 2009, Italian automaker Fiat took a 20% stake in Chrysler in exchange for partnering with them on new products. In this partnership, Chrysler LLC has become Chrysler Group. Chrysler’s former CEO and Chairman, Bob Nardelli, has been replaced by Fiat CEO Sergio Marchionne, with former Chrysler President Jim Press as his Deputy CEO. Fiat brings to Chrysler billions of dollars worth of advanced technology, while Chrysler offers the Italian automaker opportunities to market more of their brands in the U.S. The company plans to unveil a revised business plan this November, though has done little to cater to the demands for smaller, more fuel-efficient cars.

August 2009 Sales: Down 15% nationwide from August 2008.

The Outlook: Predictions for Chrysler seem to be the most dismal. Upon acquiring a stake in Chrysler, Fiat was said to be “surprised” by the lack of effort that had been put into a recovery. “Chrysler is over, basically,” says Industry Analyst Todd Turner of Car Concepts Automotive Research of the Chrysler brand. “Within five years, you’re going to see nothing.”

General Motors

U.S. Brands: Chevrolet, Cadillac, Buick, GMC

Headquarters: Detroit, Michigan

Bailout: $49.9 billion

Declared Bankruptcy: June 1, 2009 (came out of bankruptcy on July 10, 2009)

Post-Bailout Company:
Former CEO Rick Wagoner resigned as a part of the bailout agreement and was replaced by GM’s President and Chief Operating Officer, Fritz Henderson. This past July, NGMCO Inc. purchased GM, changing its name to General Motors Company. A new strategy is in the production of smaller, more fuel-efficient cars, and the new Chevrolet Cruz is due out next year, as well as a plug-in model of the Chevy Volt. Having the long-standing reputation of being primarily a pick-up and SUV maker, this change could sustain the company.

An additional note, The New York Times reported recently that GM will be calling back 2400 laid off factory workers to meet a surge in demand after the recent Cash for Clunkers stimulus.

August 2009 Sales: Down 20% nationwide from August 2008.

The Outlook: Stephen Spivey, Senior Auto Analyst for business consultant Frost & Sullivan, comments, “It’s way too early to say if they’ve done enough in bankruptcy.” We’ll just have to wait and see if GM has made enough progress to have a future.

Ford Motor Company

U.S. Brands: Ford, Lincoln, Mercury, Volvo

Headquarters: Dearborn, Michigan

Bailout: None.

Declared Bankruptcy: None.

Post-Bailout Company:
Ford remains the only automaker of the Big Three to have avoided bankruptcy. In July 2008, Ford has taken the initiative to embrace the production of more fuel-efficient cars and announced in July 2008 that it would bring six of its models to the U.S. Recently, the Department of Energy granted Ford a $5.9 billion loan to help them reequip many of their factories to produce more fuel-efficient cars.

August 2009 Sales: Up 17% nationwide from August 2008.

The Outlook: Moody’s Investor Service has upgraded Ford’s ratings from “negative” to “stable,” stating that, “the period of greatest risk in Ford’s restructuring has passed.” Ford seems to have the best odds out of the three for long-term survival.

Photo by: madaise // CC BY 2.0
Sources: CNN Money/ Assignment Detroit. money.cnn.com. Wikipedia. www.wikipedia.com

With all the talk in the marketplace of all these bailouts, you have to ask yourself is it really a good thing?  The financial bailout that happened less than a month ago is now pouring over into a bailout of the automotive industry.  Does this make sense for us?

A good friend of mine told me the other day that if he could, he would go ahead and buy millions of dollars of stock in GM.  A year ago I would have said the same thing, but then I learned how to read financial statements.  Just because something is cheap, doesn’t mean it’s undervalued.  Go to the grocery store and you’ll know what I mean.  You see that bread for 10 cents?  Well, you better hope you can eat it all within a few hours before it goes rotten.

The problem here is that the lawmakers aren’t looking at the automotive industry with unbiased eyes.  Instead they see GM as a pinnacle of US manufacturing and they don’t want to see that go away.  Last time I checked you’re not supposed to value a company based on emotions but instead on the value that it brings to its shareholders.  Here we have a company that has been dragged down by poor management and terrible inefficiencies.  Is this a company that I want to reflect as a cornerstone of American ingenuity?  Hell no, I prefer to put that title on companies like Google and Microsoft.

How is it that the US car makers have been able to continue on this downward spiral and just as they hit bottom they get a bailout?  It makes absolutely no sense!  Granted, people will say that we can’t let this happen because more jobs will be lost in Michigan.  Well, I have a feeling that if GM went under some other automotive company (that actually makes money) might step in and save some of those jobs.  Sure it won’t be all of them, but it’s time that the Michigan economy starts doing things right!  Why keep pouring money into a business model that is flawed, it’s a proven fact!

In either case, I firmly believe that companies should be held responsible for their own financial woes.  I’ve worked at GM before; I have seen the ridiculous inefficiencies that they allow to happen it’s quite frightening! If they get a bailout today, we will see this same thing happen again in 15 years, count on it!