"Ford Motors In The Unfree Market"

General Motors has some genuine good news. The automaker's June 1 bankruptcy filing hasn't been nearly as ruinous as GM executives once feared. New vehicles like the Chevrolet Camaro, Cadillac SRX, and Buick LaCrosse are wowing reviewers and drawing buyers. The Chevy Volt, an electric plug-in that could help move the car industry away from gas-powered engines, remains on track for launch late in 2010. Fewer dealers and a streamlined workforce are finally bringing GM's size in line with its customer base.

 While GM and Chrysler have been busy restructuring, competitors have taken advantage of the turmoil to woo their customers and increase market share. Ford and Hyundai appear to have benefited the most from their rivals' woes. GM's U.S. market share so far in 2009 is 19.7 percent, according to J.D. Power & Associates. That's nearly 3 percentage points lower than at the same point in 2008. Ford's market share, meanwhile, has risen by 1 point, and Hyundai's is up by more than 2 points. Both companies are aggressively rolling out new vehicles, and they're not about to give back hard-won market share just because GM gets all four wheels back on the pavement. Toyota, meanwhile, has had a terrible year—but still held its U.S. market share steady. And like GM, Toyota is revamping itself for leaner times.

Company execs are right when they point out the quality improvements in new GM models, but there are still a few dogs weighing down the whole lineup. You won't hear anybody at GM bragging about the Chevy Aveo, Cobalt, HHR, or Impala, largely relegated to rental fleets. The Buick LaCrosse might be a fresh hit, but the aging Buick Lucerne, not so much. (Good luck remembering which is hot and which is not.) And the Cadillac STS barely rates a mention where it competes, against the middle range of the BMW, Mercedes, and Lexus lineups. GM has plans to replace most of these middling legacy vehicles, but the replacements will have to prove themselves, and that takes time. Reliability is still a GM weakness and nobody's going to automatically assume that new models are better than the weak ones they're replacing. (Read Full Article)

Based on figures so far for the year, Chrysler will most likely sell fewer than one million vehicles in all of 2009. Two years ago, it sold more than two million. Its market share fell to 7.9 percent last month — less than half of Ford’s share and a little more than one-third of G.M.’s. Chrysler’s market share was 11.3 percent a year ago.

“They have nothing really in their arsenal to compete right now,” said Jessica Caldwell, director of industry analysis at the car-buying Web site Edmunds.com. “At least G.M. is making some overtures, talking about what they have and what they plan to do.”

Chrysler hopes to start changing that perception, with a daylong series of presentations on Wednesday for hundreds of reporters, analysts, local officials and other guests.

The company has given few indications of its plans since emerging from bankruptcy in June and joining forces with the Italian carmaker Fiat, whose chief executive, Sergio Marchionne, now holds that title at Chrysler as well. (Read Full Article)

Ford Motor Co.'s latest earnings report doesn't mention General Motors or Chrysler, its crosstown rivals. But those competitors have a lot to do with Ford's surprising $1 billion profit in the third quarter.

Ford attributes its better-than-expected performance--its first quarterly profit since 2005--to aggressive cost-cutting, popular new products like the Taurus sedan and Fusion hybrid, a cash-for-clunkers bump, and improvements at its financing arm. But Ford also is a clear beneficiary of the woes at GM and Chrysler, both trying to recover after bankruptcy filings earlier this year. Ford cited a market share gain of 2.2 percentage points compared with 2008, which helped offset a shrinking market. For a mature industry like the car business, that's a huge gain in a short period of time. And there's little doubt that many of Ford's new customers bailed on the other two domestic automakers as they shambled toward bankruptcy and wolfed down billions in taxpayers bailouts.

But the GM and Chrysler bailouts also are holding Ford back, which prompts some capitalistic what-if questions. For years, there was too much capacity in the U.S. auto industry, with a reckoning on the horizon: Too many manufacturers built more cars than Americans really wanted, forcing deep price cuts to move the metal. That caused the most pain for the weakest automakers, which turned out to be GM and Chrysler. As the recession hit in 2008, free-market forces intensified, forcing the two domestics to hemorrhage cash. Ford wasn't far behind, and some analysts expected Ford to line up for a bailout too. But by either luck or foresight, Ford had done some financial maneuvering in prior years that allowed it to survive the bloodletting without government aid.

So the one domestic automaker that has paid its own freight could end up penalized for its success, while the government indefinitely subsidizes competitors that would have died without government aid. Without the GM and Chrysler bailouts, there would be a vast surplus of unemployed autoworkers. But since the government saved thousands of jobs, the unions have more bargaining power, which they seem poised to use against a company that has stayed off the federal dole. (Read Full Article)

   Just as it is not nice to "mess with Mother nature", it is not nice to mess with the free market. As I see it, government intervention in the US auto industry bailouts of Chrysler and GM has only prolonged the inevitable failure of Chrysler (they are not making any cars Americans want) and prolonged the recovery of Ford Motors (who didn't need bailing out) and General Motors (who at least are making some cars Americans want). In a genuinely free market, good businesses succeed and bad businesses fail, replaced by good businesses. Jobs are lost and new jobs are created, all within the free market flow. Government intervention, except for necessary consumer or investor protection regulations, only exacerbates economic problems. Hopefully future generations will learn from the current recession that it is not nice to mess with the free market.

tags: business  politics  ford motors  gm  chrysler  free market  

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