Presidential Advisor - "the optimum number of U.S. auto companies is one"

[alienjimmy]

From an interview in the Yale Alumni Magazine...

Yale president Richard C. Levin '74PhD is the only economist on the President's Council of Advisers on Science and Technology. His research centers on productivity in manufacturing and on industrial research and development. In this interview, he talks about the state of the economy and offers his personal forecast.

Y: On a different bailout front, what do you think about the auto companies?

L: I think the optimum number of U.S. auto companies is one. Maybe two, but certainly not three. The worldwide auto industry is going to shrink, to a Chinese firm, a Japanese firm, an Indian firm, a Korean firm, a European firm -- and an American firm, I hope, but there's a chance there will be zero U.S. auto companies if we don't do this right. There are a lot of assets in America -- technological assets, know-how, skills, and labor. But I think a managed reorganization is the right approach. The companies need to shed their legacy costs. The government can offer protection to current workers and retirees.

(complete interview at) http://www.yalealumnimagazine.com/is..._05/levin.html

[Captain Awesome]

What a maroon!

[Georgie]

hope and change... and dreams

[Steve]

At first I was offended with the remark but he tempers it with "one or two" Hay - It's a free market. What's wrong with all of them being American (I realize this is not realistic). I for one am for the demize of Chrisler.

[PQ]

Originally Posted by Steve

At first I was offended with the remark but he tempers it with "one or two" Hay - It's a free market. What's wrong with all of them being American (I realize this is not realistic). I for one am for the demize of Chrisler.

[TAG UR IT]

WOW.

[Zabo]

THERE CAN ONLY BE ONE!



We need one for Ford and GM..

[ZZcamaro]

I have a hard time with feeling there can be only one. I personally operate two companies, both of which have proven successful.

When running a company there is always a certain niche market which you will fit into best. if you tailor your firm to fit that market, advertise properly, and treat customers right, you will succeed. I am proof that it works.

I operate a small web-based performance parts supplier...I do it for fun and to pay for my hobbies!! Not to make a million, but to serve a certain community, and my response has been excellent.

I also am the CEO of an investment advisory company which I formed when I became tired of my old company screwing my clients. I now operate putting the client first, and on a dicsounted basis compared to other brokers. This business has EXPLODED!! and it is how I survive.

I treat my people right, and I focus on my specific markets. That is how a company can and will survive, no matter how many competitors are out there.

Sorry for my rant!

[JaysonAych]

I think that estimate of "one maybe two" isn't far off if you're simply taking into account the current market conditions and the way automakers are set up to make money right now, and not how considering how they would fare if they were more efficient. With all of the bigger automakers doing business in the US--both foreign and domestic--seeing their sales drop around 40%, that's a serious cut if your company is dependent on getting a small amount of profit per unit, but selling a huge amount of units. If you're suddenly selling 60% of what you sold a year ago, but still have the same large amount of overhead and infrastructure, it's nigh-impossible to get bills paid. And considering a year ago that each member of the Big 3 were operating with a dealer and factory network that assumed each company had another 7-10% market share than what they really had, as cutthroat as the competition in the US market is right now, 3 mainstream US automakers are going to find it difficult to survive.

Now, if companies go through massive restructuring, like the big 3 have been doing recently to find a way slash their infrastructure to better represent and support the number of products they actually sell, and make a larger profit per unit to sustain them when they're not selling as many, then yes all 3 can find ways to thrive. But not at the current level at which they're operating their respective empires. With the comparatively small amount of profit American automakers get per unit, there are not enough sales right now to split between them to where they could make more than what it costs to run their businesses.