Ford, GM Bond Rating Lowered to 'Junk' Status
ALEX CHADWICK, host:
This is DAY TO DAY. I'm Alex Chadwick.
I used to drive junkers. Now General Motors and Ford are junk. That's the bond rating firm Standard & Poor's judgment about the automakers' bonds yesterday, downgrading them to junk status. GM did report its biggest quarterly loss in 13 years last month. Ford says it's not going to do so well this year. There are reasons for this financial slump that have to do with the general overall manufacturing climate and the history of these companies, but there's also the question of: Can they still make cars that Americans want? Joining us is Dan Neil, the Pulitzer Prize-winning automotive writer for the Los Angeles Times.
Dan, Ford and GM--what's gone wrong here?
Mr. DAN NEIL (Automotive Columnist, Los Angeles Times): Well, the short answer is that in North America--their biggest market--the world's biggest car market--their profitability has relied for almost a decade on big and midsized SUVs. Suddenly, with the face of gas prices, consumers are walking away from SUVs. Sales of big SUVs are down double digits across the board. And so this market turned out to be pretty fragile, and it's not clear that General Motors and Ford were well-positioned to respond.
CHADWICK: You look at the overall automotive market. You see that Japanese automakers like Toyota are doing well, selling a variety of range of vehicles. You see someone like the Koreans, like Hyundai, making cars now that get better satisfaction ratings than even German cars, so somebody's doing all right.
Mr. NEIL: Yeah, this is a very dynamic industry, and the people that are down today are going to be up tomorrow. That's one reason that I think people should be cautious about writing General Motors' obituary. There's--this is a company that has tremendous capital--intellectual and financial. But that doesn't mean that, you know, it's immortal. It can be run into the ground. But, sure, the Koreans have done quite well in the past two or three years by focusing on quality and product--and, by the way, the Chinese are coming over the hill 38th-parallel style, so look for that in the next five years as well.
CHADWICK: What should American carmakers be doing? I mean, what is the answer for them? Build better cars?
Mr. NEIL: That's a huge part of it. They've got to build better cars. They've got to build cars that people want. You know, a lot of this business is expressive and emotional, so there's a phrase, `gotta-have product.' They need to build gotta-have product.
CHADWICK: Well, that's it. I mean, what is coming that people are going to open up their newspapers and the car magazines, say, `I gotta have that one!'?
Mr. NEIL: Well, next week Chrysler is introducing the Dodge Charger, which is a four-door riff on its 300C sedan platform, and it looks very, very cool. This summer, General Motors will be introducing something called the HHR, the Heritage High Roof. This will really tell the tale, I think. This is a kind of a nostalgia-themed, crossover family wagon--small. If this is a hit--they have to sell about 60,000 of these. If it comes anywhere near that, that will be a very good sign. But I don't know if it'll sell.
CHADWICK: All right. Well, we're going on to a story about one person who is buying GM these days. Dan Neil writes the Rumble Seat column for the LA Times.
Dan, thank you.
Mr. NEIL: Thank you.
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