Saturday, December 6, 2008

Auto makers or the Entrepreneurs?

The U.S. budget deficit swells to record $455 billion in fiscal 2008 and made the country the largest budget deficit among the nations[1]. Regardless on how much they are liable to the nations, they have pledged to tackle the economy by over 700 billions of dollars to build up their economy which may scratch the other nations' back.

As it can be inducted, the policy of the States, governs such an investment strategy which tackles the nations' economy by alleviating the internal fiscal policy.

So don’t you think, building up the infrastructure and stimulate the financial institutions and entrepreneurs must be prioritized to the bail out of the car manufactures?

Who got the cash to buy the car? If they spend over 30 billions of dollars to bail out the 3 auto makers, who is going to buy the car regardless on how fuel efficient they are?



Reference:

[1][Reuters] U.S. budget deficit followed by URL: http://www.reuters.com/article/topNews/idUSTRE49D9GL20081015.

3 comments:

Ayesha said...

Well, I think it's better to change the infrastructure and stimulus the 3 Auto Makers rather than just giving $30 billions to solve their financial problem without making any improvement on their industry because the same problem may arise again. The government of United States should not only prioritize the 3 Auto Makers by bailout but also should solve the unemployment rate and the economic growth issues. Because if the government prioritize only on the 3 car manufacturer and not to people's income,there will be less people would afford to buy a new car.Moreover, the 3 Auto Makers and the other car manufacturer would have the same problem again.

Ceasar said...

While large American automakers like General Motors and Ford continue to struggle, much smaller manufacturers are tapping into a lucrative niche market with a high-end, low-volume approach to vehicle sales that harkens back to the industry's early days.

Fittingly, much of their success is being driven by the risk-taking energy of a few old-school entrepreneurs who are now producing some of the fastest -- and most expensive -- cars on the road.

Take Douglas Hasty, a serial entrepreneur who co-founded Unique Performance six years ago. Hasty previously launched a concrete company and an insurance business before getting into the auto market.

Based in Farmer's Branch, Texas, Unique Performance's Foose 69 is a retrofitted 1969 Chevrolet Camaro equipped with modern suspension and brakes, chrome wheels, a GPS navigator, leather seats, and a high-tech sound system. It sells for upwards of $124,000.

Hasty says the company's success comes from satisfying a mixed demand for vintage cars and dependability. It also helps that the company can lean on costly, safety-tested parts from a much larger car manufacturer in producing its own vehicle, says Keith Crain, the editor of Automotive News, a Detroit-based trade journal.

"It's the fun part of the auto industry," Crain says. "There have always been specialty manufacturers and there always will be. I love them, because they're basically entrepreneurs who design and build their own cars, and try to sell them."

However, Crain cautions that comparing a handful of specialty automakers with the Big Three is largely a game of apples and oranges.

"It's really a cottage industry, and if you add them all up you're probably looking at maybe 5,000 in sales," Crain says of the specialty automakers. That compares to well over 2 million for the General Motors, Ford, and Chrysler last year alone, and more than 16 million for the world's major automakers combined.

Still, behind those massive numbers hides a heavy reliance on gas-guzzling SUVs that has hurt big American automakers in recent years. Amid soaring gas prices and widespread layoffs in 2006, year-end sales figures show an 8.1 percent decline in combined auto sales at General Motors, Ford Motors, and Chrysler, according to Morgan & Company, an automotive market-research firm based in West Olive, Mich. The declines run across most vehicle segments, from midsize cars to luxury vehicles, SUVs, pickups, and vans, the report said.

In addition, Toyota is now threatening to displace GM as the world's biggest car company, while Ford expects to lose its second-place standing in the U.S. market to the Japanese automaker sometime this year, having already been overtaken twice in the past six months in monthly sales. GM, which lost $10.6 billion in 2005 and cut some 34,000 jobs, is expected to downsize even more in the year ahead.

To be sure, small-volume automakers have had their share of setbacks, too. In the early 1980s, the DeLorean Motor Company went bankrupt after rolling out less than 9,000 sports cars, despite a starring role in the Back to the Future film trilogy.

Across the industry, however, one bright spot remains smaller specialty car sales, which grew by 12.1 percent last year among all automakers. That's a segment many lower-volume car makers have crept into over the past decade by offering small high-end -- and high-cost -- vintage cars, luxury vehicles, and top-performing electrics.

With price tags well over $100,000, these niche automakers are more likely competing with vacation homes and luxury yachts, rather than other mass-produced car dealers. Crain calls it the "exotic collectors" market.

San Carlos, Calif.-based Tesla Motors is a good example. Its cutting-edge, two-seater electronic car, priced at $100,000, can hit 60 miles per hour in about four second -- as fast as a Ferrari, but with zero emissions. California Gov. Arnold Schwarzenegger recently took a test drive, calling the battery-powered roadster "hot."

Perhaps too hot to meet demand. Tesla has already pre-sold all 220 vehicles it's capable of producing this year, and won't be accepting orders for 2008 until November.

"Each of our customers has made the decision to invest in an attractive car that uses no oil and is responsible for far fewer greenhouse gasses than the alternatives," says Tesla co-founder and CEO Martin Eberhard, calling the company's first customers pioneers.

Eberhard says he expects future models to reach "price points that eventually work for every budget."

For most auto lovers, the bottom line is, and always will be, performance. That's where a company like Panoz Auto Development comes in. Launched in the late 1980s in a converted 2,000-square-foot salt storage barn on the outskirts of Atlanta, Panoz today sells hand-built Esperante sports cars that run from $121,326 and up, along with high-performance racecars.

The Esperante, launched in 2000 and now available in convertible and coupe models, comes with a hand-assembled 420-horsepower V-8 engine under a lightweight aluminum body and can go from 0 to 62 miles per hour in just over 4 seconds, hitting a top speed of 180.

In developing its commercial vehicles, the company relies on a mix of R&D, customer clinics, and the track performance of the Panoz GTLM racecar, says founder and president Dan Panoz.

Still, even at maximum capacity, the company is able to produce and sell only about 300 vehicles per year.

http://www.inc.com/articles/2007/01/cars.html

Anonymous said...

Although its against the laws of capitalism, saving the 'big three' automakers is vital for the US economy, because without this help from the government,these companies would fall, leaving more than 3million people unemployed, and that would be a big blow to the US economy, and my homie Obama.This debate isn’t about American car quality vs. foreign automakers, as some have made it. Detroit has made tremendous strides in quality,and when people say the big 3 are putting out poor quality,they are just showing their ignorance.Fuel inefficient, yes, but poor quality isn’t the issue here.

Secondly, U.S. manufacturing, despite huge job losses, is still a viable aspect of their economy, and to think that dumping over two million jobs, in the midst of one of the worst financial quarters in recent memory is asinine. How are those kind of job losses going to be positive for the economy, moving forward?

Manufacturing is a wealth-generating sector (unlike the financial services sector, which just pushes money around by keystrokes), one that economists know firsthand.

What I’d like to see happen is Congress extend some bridge loans to get the automakers through this tough patch, while at the same time, convening talks about where they need to go with R & D,pushing them particulary to have a more structured business organization and produce more fuel efficient cars, particularly as it relates to new technology.