Ford and GM are both effectively bankrupt.

auto assembly

So say Forbes magazine

And if either or both do a bk, then Detroit will completely crater. Yikes.

Forbes makes it clear that GM has been living by borrowing money so as to make the books look good each quarter. But that’s been cheap money, they owe hundreds of billions now, and interest rates will be rising as the Fed works to stop inflation. Thus, GM will be paying much more for their money soon. And they can’t afford it.

Ford has been selling their other cars as a loss to subsidize their SUV line and now that’s looking like a short-sighted blunder.

Japanese auto companies don’t live and die by the quarterly reports. They look and plan way ahead, are innovative, and give the public what it wants.

Detroit lives and dies by the auto industry. When the dinosaurs that are GM and Ford topple and fall, a lot of innocent bystanders are going to get hurt.

One comment

  1. Yep, and some will probably blame capitalism itself, even though as you note the (equally capitalist) Japanese automakers are doing a much better job. The blame here goes to American shortsightedeness and ignorance. There was a time when our industry was the best in the world– and, like an aging champion, we refuse to believe it’s not still true. Denial is such a wonderful thing.

    Actually it can be argued that the Japanese are even more capitalist than we are, since their companies do a better job of serving the market. And that the fall of U.S. industry is not the failure of capitalism, but its triumph, as less efficient (American) companies fail and more efficient (Japanese) companies thrive. This trend could be reversed– if we had the discipline and vision. But more likely we’re seeing the decline of a once-great and now-decadent civilization.

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