Billionaires turn their backs at Detroit while Chinese women buy new cars with 3 months of breastfeeding. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.
This is low. So low, it must be the bottom: Turn-around artists are turning their backs on Detroit's auto makers. Billionaire Kirk Kerkorian sells his holdings in Ford Motor Co. , after his nearly one billion dollar investment (made when he thought Ford was way underpriced) lost two thirds of its value. Kerkorian had to put up 50 million shares of his MGM Mirage Casino to secure the credit line he used to buy into Ford. It must be real, real bad when supposedly recession-proof investments in CASINOS are pledged to prop up auto makers. (However, even casinos aren't as recession-proof as they used to be. )
Cerberus, motivated (coaxed? threatened?) by JPMorgan Chase & Co. and Citigroup Inc., which hold a lot of the debt from Cerberus's purchase of Chrysler from Germany's DaimlerChrysler, is desperately seeking a suitor for Chrysler. The preferred partner in that arranged marriage is GM. Cerberus is said to be in talks with Nissan Motor Co., Renault SA, and anybody else who reads the prospectus. People in the know discount these as diversionary tactics to lend more urgency to the wedding with GM. The Chrysler/GM marriage has been praised in the mainstream media as the savior of the U.S. auto industry, as a "win-win" situation full of "synergy" potential. These words rank big in the Dictionary of Corporate Bullshit - people in the know for the exit when these words appear in a Powerpoint deck. Our friends over at compare the Chrysler/GM shotgun wedding to the "Titanic rescuing the Lusitania."
"Typical investors, and Cerberus is anything but typical, are running from the automotive industry," said Warren Feder , partner at Carl Marks Advisory Group LLC in New York. "It's hard to see any upside with a degree of comfort, and you need that to make an equity investment."
Next year, China could buy more cars than Americans
JPMorgan Chase & Co, who should have a vested (see above) interest in painting a rosy of the auto industry, just did otherwise. U.S. auto deliveries may fall to an annual rate as low as 10 million vehicles this quarter and as low as 11 million next year, Himanshu Patel, an analyst at JPMorgan Chase & Co. in New York, wrote in a report on October 21, 2008 . A few days before, J.D. Power and Associates still had estimated 13.2 units sold in the U.S. for 2009. Patel's 2009 estimate would be the lowest rate since 1982. The predictions get worse by the day.
Next year, China could buy more cars than Americans
If Patel is right (and, see above, his firm paid dearly for insider knowledge about the auto business,) and if China maintains a - by Chinese standards - rather sedate growth rate, come 2009, the Chinese auto market might be the same size or even larger than the U.S. The China Association of Automobile Manufacturers, had already predicted 10 million units for 2008, but with growth slowing in China, the Eastern Empire may not reach that target this year. Next year, unless the sky will fall, 11 million cars sold in Chinas are entirely in the cards.
Babies are starving - not in China.
Anyway, Bloomberg says that the exit of Kerkorian, Cerberus & Co. "may leave the U.S. auto industry without new funding just as sales head to a 26-year low."
Here comes a really disturbing bit of data: "Most consumers are worried about: 'Will I have enough to put food on the table so my family can eat?' Eduardo Castro-Wright, President and CEO of Wal-Mart's U.S. operations told attendees of a luncheon sponsored by Town Hall Los Angeles. His stores see spikes of sales of baby formula when paychecks come in, "suggesting consumers are rushing to buy such necessities as soon as they have the cash," Reuters reported. "As the economy worsens, Wal-Mart's customers have increasingly shown signs of living paycheck to paycheck. Wal-Mart's sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers' budgets become more stressed."
3 months of breastfeeding buys a new car
Contrast this to China. In the wake of the milk worries, affluent Chinese parents of babies more and more turn to "milk mothers" or "Nai Ma" who breast feed their new-born if the real mother doesn't want or can. Baby formula? No, thank you. Or "bu, xie, xie," as they say. They want the real thing for their one child only. In Beijing, a milk mother from the provinces can make between $300 and $1600 a month, with free room and board. A secretary in Beijing starts at around $300 a month, and must use the money to pay for food and shelter.
Back to topic #1: If an American family can barely feed their babies, the likelihood of buying a new car is nil or worse. The Chinese milk mother can buy a new car for cash with three or 5 months earnings (if she opts for e better model.). The International Breastfeeding Committee of WHO/Unicef recommends breastfeeding for six months. Chinese hospitals do recommend a year or more. After a year of watching DVDs and feeding someone's baby, the milk mother will have two or three cars to take home. Meanwhile, back in the U.S.A., parents need parts to keep their cars running, at least twice a month, for a trip to Wal-Mart.
This is low. So low, it must be the bottom: Turn-around artists are turning their backs on Detroit's auto makers. Billionaire Kirk Kerkorian sells his holdings in Ford Motor Co. , after his nearly one billion dollar investment (made when he thought Ford was way underpriced) lost two thirds of its value. Kerkorian had to put up 50 million shares of his MGM Mirage Casino to secure the credit line he used to buy into Ford. It must be real, real bad when supposedly recession-proof investments in CASINOS are pledged to prop up auto makers. (However, even casinos aren't as recession-proof as they used to be. )
Cerberus, motivated (coaxed? threatened?) by JPMorgan Chase & Co. and Citigroup Inc., which hold a lot of the debt from Cerberus's purchase of Chrysler from Germany's DaimlerChrysler, is desperately seeking a suitor for Chrysler. The preferred partner in that arranged marriage is GM. Cerberus is said to be in talks with Nissan Motor Co., Renault SA, and anybody else who reads the prospectus. People in the know discount these as diversionary tactics to lend more urgency to the wedding with GM. The Chrysler/GM marriage has been praised in the mainstream media as the savior of the U.S. auto industry, as a "win-win" situation full of "synergy" potential. These words rank big in the Dictionary of Corporate Bullshit - people in the know for the exit when these words appear in a Powerpoint deck. Our friends over at compare the Chrysler/GM shotgun wedding to the "Titanic rescuing the Lusitania."
"Typical investors, and Cerberus is anything but typical, are running from the automotive industry," said Warren Feder , partner at Carl Marks Advisory Group LLC in New York. "It's hard to see any upside with a degree of comfort, and you need that to make an equity investment."
Next year, China could buy more cars than Americans
JPMorgan Chase & Co, who should have a vested (see above) interest in painting a rosy of the auto industry, just did otherwise. U.S. auto deliveries may fall to an annual rate as low as 10 million vehicles this quarter and as low as 11 million next year, Himanshu Patel, an analyst at JPMorgan Chase & Co. in New York, wrote in a report on October 21, 2008 . A few days before, J.D. Power and Associates still had estimated 13.2 units sold in the U.S. for 2009. Patel's 2009 estimate would be the lowest rate since 1982. The predictions get worse by the day.
Next year, China could buy more cars than Americans
If Patel is right (and, see above, his firm paid dearly for insider knowledge about the auto business,) and if China maintains a - by Chinese standards - rather sedate growth rate, come 2009, the Chinese auto market might be the same size or even larger than the U.S. The China Association of Automobile Manufacturers, had already predicted 10 million units for 2008, but with growth slowing in China, the Eastern Empire may not reach that target this year. Next year, unless the sky will fall, 11 million cars sold in Chinas are entirely in the cards.
Babies are starving - not in China.
Anyway, Bloomberg says that the exit of Kerkorian, Cerberus & Co. "may leave the U.S. auto industry without new funding just as sales head to a 26-year low."
Here comes a really disturbing bit of data: "Most consumers are worried about: 'Will I have enough to put food on the table so my family can eat?' Eduardo Castro-Wright, President and CEO of Wal-Mart's U.S. operations told attendees of a luncheon sponsored by Town Hall Los Angeles. His stores see spikes of sales of baby formula when paychecks come in, "suggesting consumers are rushing to buy such necessities as soon as they have the cash," Reuters reported. "As the economy worsens, Wal-Mart's customers have increasingly shown signs of living paycheck to paycheck. Wal-Mart's sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers' budgets become more stressed."
3 months of breastfeeding buys a new car
Contrast this to China. In the wake of the milk worries, affluent Chinese parents of babies more and more turn to "milk mothers" or "Nai Ma" who breast feed their new-born if the real mother doesn't want or can. Baby formula? No, thank you. Or "bu, xie, xie," as they say. They want the real thing for their one child only. In Beijing, a milk mother from the provinces can make between $300 and $1600 a month, with free room and board. A secretary in Beijing starts at around $300 a month, and must use the money to pay for food and shelter.
Back to topic #1: If an American family can barely feed their babies, the likelihood of buying a new car is nil or worse. The Chinese milk mother can buy a new car for cash with three or 5 months earnings (if she opts for e better model.). The International Breastfeeding Committee of WHO/Unicef recommends breastfeeding for six months. Chinese hospitals do recommend a year or more. After a year of watching DVDs and feeding someone's baby, the milk mother will have two or three cars to take home. Meanwhile, back in the U.S.A., parents need parts to keep their cars running, at least twice a month, for a trip to Wal-Mart.
About the Author:
Author Bertel Schmitt is looking back at a 30 year career as a marketing consultant to Volkswagen AG. He is now CEO of Hongkong, Beijing, and Hamburg based Sinamotive, a company specialized in sourcing low cost high quality auto parts in China. The company is backed by U.S. venture capital. Schmitt also is author of a blog about the Chinese auto industry.
No comments:
Post a Comment