911: Auto Sector

I just opened the list of Forbes 2000 companies of 2009 (www.forbes.com).

Actually after reading that GE is the rank1 company for the year 2009 (market value $89.87b), suddenly I got curious that what is the ranking of GM, once upon the undisputed No.1 for almost half a century. When I became tired of searching the name of GM in the list which was ranking wise I decided to search by the name wise(Actually I was hopeful that I will find the ranking in top20, Toyota is No.3). It took some effort to find the rank finally. In this economic turmoil period there are very few news which have enough potential to surprise you. But here it was. GM rank: 844
(www.forbes.com/lists/2009/18/global-09_The-Global-2000_Rank.html).

All other company you know, name it and they are far far ahead then GM. Even Eaton was under 500. I checked it again for verification, but it didn’t change. With the net market valuation of $1.37, it is just a billion dollar company now. It has already lost almost all the money in the market and showing the consistency in reporting losses quarter after quarter, year after year. Once the share value of GM which was touching $100, has seen as low as $1.27 in recent days. Who knows it is not the bottom yet.

After shaking the CEO Mr Rick Wagoner, things have hardly turned in a way which we can say better. I am surprised too by the Obama government stand on Auto sector. Putting hundreds of billions of dollars to City, AIG and like companies make sense to these guys, but providing few billions to these wounded Auto giants are taking numerous meetings and planning. After witnessing a significant part of the bailout money, which is nothing but the taxpayer share, is going in the bonus and maintaining the luxuries of so called executive, Mr Obama only showed his disappointment. House was unhappy with the Big3 top rankers by using their corporate jets and eventually they came via ground transport next time. But it was Citygroup who is buying corporate jets from the bailout money, why such discriminations? Why is such hesitation to provide the loan amount of around $30b to these guys, who was one year before the No1 Company in the world for continuous 77 years. Here is AIG getting bailout and supports even after making loss of $60b in a quarter and here is Auto guys who are still in search of supporting hands even after going through numerous meetings and deadlines for a more viable plan. It won’t be surprising if we see in coming months that just to approve the viable plan these so called intellectuals have taken so much time that company itself has vanished. Its like one is calling 911 in fire and at the place of getting immediate understanding and support, that one is being asked for the description and urgency of the situations, so that they will sit and decide whether to help and support that guy or not. If you know what is not a good viable plan then you must be knowing what it is. If so why don’t you provide the viable plan to these companies to act upon and ask their agreement on it and save some critical time.

I am not playing a critique here and won’t comment on Mr. Wagoner capability and working. But one thing for sure, whatever he had faced was the mistakes of previous management team mostly. And considering his stepping out seems more political than rational. May be Mr Obama wants to show his people that he is not only giving easy tax money to these guys but also acting tough and punishing them for their mistakes. Its not that guys at the bottom line are being axed but also guys at the top are facing the heat. If that is the case, then why not with big guys of City, why not of AIG?
Seems these wall street executives have enough influence on the government decision making capacity and process. Also, government need their support in many cases, so lets not burn hand. This only shows here that Mr. Wagoner has just been proven sacrificial lamb.

Lets not criticize this event as well, coz its critical to concentrate on critical issues. Mr Henderson, the current CEO of GM is just continuing the restructure plan which was started by the ex-CEO. He is also a bit more vocal about the possible Chapter11 bankruptcy for the company. Considering the sell of the vehicle is directly related to the sentiments of customers, filling for Chapter11 is not the most eligible candidate in this situation.
Another lifeline has been provided by government, within 60 days come up with a more viable plan to get the aid. Also, Mr. Nardelli, CEO Chrysler has been asked to finalize the deal with Fiat by the end of April to get the support from the government. Remaining brother of these two, Ford seems to be in a bit more healthy and secure condition right now and also recovering at the same time. Thanks to Mr. Mulally, who has shown some vision and acted aggressively to restructure the company. Result, now it has better ranking than GM and share price is leading too. Public is also more optimistic about Ford right now, which is showing in the vehicle sell data of recent months.

Now facing loss after more than 70years, Toyota is again towards another loss. This time estimated loss is approx $5-6b. Toyota, who got the No1 slot last year and current world’s 3rd biggest company could get this position only because GM has lost ground continuously for several years (more than $80b has been lost since 2004 by GM). Now tough time for this new No1 has come too.

In this tough and transition phase of auto sector any prediction or speculations are pretty uncertain. But what is expected and hoped from the government that Auto sector should not be treated as a step son, coz this sector itself has a potential to reform this recession phase. After all millions of people had worked day and night to create this sector and are still attached directly or indirectly to this sector and working positively in this negative atmosphere.
Let’s give them a positive hope.