Forbes declares, "Detroit is DEAD!!!"

http://www.forbes.com/2007/05/23/detroit-gm-ford-pf-ii-in_jb_0523soapbox_inl.html?partner=yahootix

Wow, what a depressing read!!! :confused:

Nice, death watch for the ......... United States of America!

Are things as doom and gloom as the article states?

Detroit isnt dead. The auto market has changed and the domestic brands are having some issues keeping up but they are not dead by any means.

Are things as doom and gloom as the article states?

The city of Detroit itself is pretty bad. No money, crumbling infrastructure, high crime, high taxes. Potential solutions are outside the scope of this forum, I think.

In many parts of the U.S. (especially here in California), imported cars, such as Volkswagen, Mini, BMW, Toyota, Honda, are assumed to be higher quality than Ford, GM, and Chrysler products. The European products actually aren't higher quality, and they have a cost disadvantage, so they really aren't a threat. Toyota and Honda generally are high quality, and they also have a cost advantage, due to defined-contribution retirement systems, more flexible work rules, somewhat lower salaries, etc. Now, combine a cost advantage with a product for which people will pay a price premium.

I.e. it costs GM and Ford more to make a car that people will pay less for.

Now, add in the CO2/gas mileage standards that are being promulgated, while realizing that the Big 3 have traditionally made the most money on large vehicles and lost money on small vehicles.

There is a rough patch ahead. :(

This is why Detroit needs to hit the competition where they aren't, while also continuing to fight head to head, and will need all the help it can get from its Australian, European, and Asian groups.

The city of Detroit itself is pretty bad. No money, crumbling infrastructure, high crime, high taxes. Potential solutions are outside the scope of this forum, I think.

That's not entirely false, but I'm wondering how a guy from Santa Clara is getting his information. :)

I don't think Detroit is much different than any large city with significant suburban sprawl. I'm sure there are exceptions, and there's no need to point them out -- but almost every city like that is going to have an old/abandoned/run-down area somewhere with higher crime. Go ahead, try to tell me none of your big cities have that problem. NYC? Chicago? Atlanta? Phoenix?

I looked at the date of this article expecting it to be 5/23/2006, not 2007.

He's saying the same things people said a year ago about GM going bankrupt then he makes a daring prediction that GM will try to renegotiate contracts, close plants and change benefits. I guess he doesn't realize these are already happening?

Maybe his next article will be predicting the Power Ball results from 2005.

Reads like your typical negative Detroit/US automaker article. This is standard fare. As for the city itself, we the citizens of Detroit and its outlying areas have been hearing the same stuff for decades. Unfortunately I can't see our fortunes turning anytime soon thanks to the re-election of an all but proven crook. "Hip-Hop Mayor" indeed. :o

Back to cars, we all know the reasons why the Domestics are hurting. They've been well documented in a thousand different places. This article doesn't state anything we didn't know, it's just a little more blunt.

GM will be fine if they can continue to get their costs under control (this includes getting concessions from the UAW) and if they keep improving on their product. Every release needs to be a quality and marketing home run. Cars like the '08 CTS and Malibu, Camaro and G8 are prime examples. There is no room for clunkers anymore. This is the only way to improve public perception.

Dramatic articles sell magazines.

Maybe his next article will be predicting the Power Ball results from 2005.

:lol:

That's not entirely false, but I'm wondering how a guy from Santa Clara is getting his information. :)

I don't think Detroit is much different than any large city with significant suburban sprawl. I'm sure there are exceptions, and there's no need to point them out -- but almost every city like that is going to have an old/abandoned/run-down area somewhere with higher crime. Go ahead, try to tell me none of your big cities have that problem. NYC? Chicago? Atlanta? Phoenix?

I was born and raised in Detroit, so my instinct is to defend it, but I really can't. I'm in living in Atlanta at school and the difference is night and day. Where I go to school is by most people's definitions pretty run down, but you can still find 24 hour gas stations, national brand supermarkets and thriving small businesses like take out places or mom and pop video stores. I'm from a nice area with very expensive houses, thats a mile from woodward and five minutes from downtown and the new center, but you will find nary a branded store for miles...The only area in Atlanta thats completely desolate and actually reminds me of Detroit is Bankhead, and even thats nowhere near on the scale as detroit.

The city of Detroit itself is pretty bad. No money, crumbling infrastructure, high crime, high taxes. Potential solutions are outside the scope of this forum, I think.

Safest thing to do would be to evacuate the city and nuke it from orbit.

That's the only way to be sure.

That's not entirely false, but I'm wondering how a guy from Santa Clara is getting his information. :)

I've visited a number of times. I've been around various parts of the city. I've read articles on the Detroit News website.


I don't think Detroit is much different than any large city with significant suburban sprawl. I'm sure there are exceptions, and there's no need to point them out -- but almost every city like that is going to have an old/abandoned/run-down area somewhere with higher crime. Go ahead, try to tell me none of your big cities have that problem. NYC? Chicago? Atlanta? Phoenix?

I've been to all four of those; they are different from Detroit, and I'll leave it at that.

I like visiting Detroit. The Rencen has some neat exhibits. The Automotive History collection at the downtown library has some great info on cars of the past and present. It's a great place for a carnut to visit.

Here's another spin from Forbes although not quite as battering as the first article...

http://www.gminsidenews.com/forums/showthread.php?t=49876

Good PhD, do you go to Tech by any chance? M.E. '05 here. :)

Anyway, I agree with the sentiment about Detroit. The city is one of the worst I have ever seen and doesn't have much of a shot of getting any better due to the population's general lack of forethought, motivation to improve, or intelligence to elect responsible city officials. The inmates run the asylum over there. There are a few bright spots, but they're all owned by GM.

As far as the article's opinion about the General's fate.....just another doom and gloom/disparage anything American statement from a bunch of elitists in ivory towers.

Long live Detroit -- be it dead or alive!

Good PhD, do you go to Tech by any chance? M.E. '05 here. :)



Michigan Tech?
Cass Tech?
Wayne Tech?

At least Detroit's NBA championship hopes are still alive. Go Chauncey!

That's not entirely false, but I'm wondering how a guy from Santa Clara is getting his information. :)

I don't think Detroit is much different than any large city with significant suburban sprawl. I'm sure there are exceptions, and there's no need to point them out -- but almost every city like that is going to have an old/abandoned/run-down area somewhere with higher crime. Go ahead, try to tell me none of your big cities have that problem. NYC? Chicago? Atlanta? Phoenix?

None of the big cities have that problem. At least no where near the extent that Detroit does. Literally the only decent area is that downtown section by the GM building and the Windsor tunnel.

The author is certainly entitled to his opinion. One thing to consider, however, is that Cerberus is now tied to the hip with GM through GMAC. Since most of GMAC's business comes from car loans, if GM goes down then so does GMAC and possibly Cerberus. Personally, I'd bet that Cerberus has a better financial handle on things than the author of this article.

The author is certainly entitled to his opinion. One thing to consider, however, is that Cerberus is now tied to the hip with GM through GMAC. Since most of GMAC's business comes from car loans, if GM goes down then so does GMAC and possibly Cerberus. Personally, I'd bet that Cerberus has a better financial handle on things than the author of this article.

I doubt that GM will go down. I'd see Canada and/or the U.S. stepping in to do something before that happened.

Over the past decade, GM's gross profits have declined from $40 billion to $22 billion, while its debt has increased from $199 billion to over $450 billion, all during a period of historically low interest rates.

The low rates won't last forever, though. Just over the past three years, GM's interest expenses have risen 77% from $9 billion to $16 billion and are projected to rise to $18 billion this year.

So, how is the above the author's "opinion"? I see a lot of numbers above.

The fact is, GM's financials remain in terrible shape, and Ford is even worse off. Talk all you want about the GMT900, the Kappa, the '08 Malibu, the whatever, but none of this excellent product changes the fact that GM is in debt up to its collective corporate eyeballs, and that the cash burn continues on.

In my case it's not that I don't believe the numbers, but the fact that I've already seen them and this is nothing new.

It upsets me when people get paid to do this and they're just regurgitating what we've seen for a year.

So, how is the above the author's "opinion"? I see a lot of numbers above.

The fact is, GM's financials remain in terrible shape, and Ford is even worse off. Talk all you want about the GMT900, the Kappa, the '08 Malibu, the whatever, but none of this excellent product changes the fact that GM is in debt up to its collective corporate eyeballs, and that the cash burn continues on.

Maybe it's just the accounting lingo that tends to confuse (one can manipulate any figure to support their argument). For instance, (not being a financial guy) I can't distinguish between the $450 billion debt quoted in the article with the second article I quoted, which states....

General Motors has about $41.4 billion of long-term debt, while it is only worth around $17.2 billion on the stock market.


One figure seems more manageable than the other. Conversely, $450 billion in debt seems insurmountable.

Maybe it's just the accounting lingo that tends to confuse (one can manipulate any figure to support their argument). For instance, (not being a financial guy) I can't distinguish between the $450 billion debt quoted in the article with the second article I quoted, which states....

One figure seems more manageable than the other. Conversely, $450 billion in debt seems insurmountable.

The difference is that once includes GMAC's debt, and the other is GM's debt from continuing operations. GMAC's debt is quite understandable given that it's in the asset and lending business, and besides, half of it belongs to Cerberus now. But the author doesn't fully explain these things in an attempt to bolster his opinion that GM's situation is irreversible. Like you say, a person can (mis)use numbers to support almost anything.

All I know is I was there 2 years in a row for NAIAS, and the Hotels around the Center I stayed at were doing restoration work, and the areas finished looked great!..
Downtown looked pretty similar to Columbus, as far as up-keep. It looked like the whole area I was in was doing some kind of remodeling...but i don't know about the less popular areas.

The difference is that once includes GMAC's debt, and the other is GM's debt from continuing operations. GMAC's debt is quite understandable given that it's in the asset and lending business, and besides, half of it belongs to Cerberus now. But the author doesn't fully explain these things in an attempt to bolster his opinion that GM's situation is irreversible. Like you say, a person can (mis)use numbers to support almost anything.

This is totally correct. I would add to it the re-tooling of machines, new machines, new buildings, new add-on's to building, infrastructure support and remodeling, etc. This all gets amortized over periods of time. This is a debit on the books and you do owe for that debit. These debts are rotating for every business and one could say all business's are in debt if you took all negative purchases and do not add any value they provide.