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Weve already stated our belief that that 2007 will see Americans buying several hundred thousand less cars than they will purchase in 2006. We are looking for 16.8 million vehicle sales this year. Lets get into the numbers, and see what the implications are. When you, or I buy a car for our personal use, we pay on average about $25,000 per car. The car rental companies in the United States purchase more cars than any other group. They buy American cars, and pay an average of $15,000 per car. We dont see any big profits from this market segment.

Lets look at the dealerships, and sort out how the Japanese do against the Americans. A Chrysler dealer last year on average sold about 225 cars. If you were a Ford dealer, you averaged almost 700 cars per dealer. GMs Chevrolet dealerships came in under 650 cars per dealer. Would you be surprised to learn that Toyota sold more than 1600 cars per dealership last year?

Now you know why American car dealers are complaining and going out of business. In the last year GM lost 200 plus dealers while Ford lost 40, and Chrysler lost more than 110. This is happening on our home turf, folks. This is not the Japanese and the Americans slugging it out on European soil for control of European markets. This is the American consumer choosing to buy Japanese over American made products on American soil. People are voting with their feet.

Heres the next big question. If American car dealers are closing their doors at this rate, what kind of shape can the rest of them be in? Can the owners be putting big bucks into their dealerships while their friends dealerships are folding up? We think not. Will the friendly banker be willing to finance their car inventories when the bank sees other domestic dealers closing their doors? We dont see it. This means that American car dealers can only finance through the car manufacturers financing arm, and thats not good when the dealer has only one choice. We estimate that half of Fords dealers are not making a penny. We think for General Motors, it could be as high as 25% are unprofitable. Whats the customer experience going to be like in a dealer thats losing money on every car he sells? Is anybody listening in Detroit?

Every time GM loses a point of market share, they have to implement plans to dismiss 20,000 people from their jobs. We see the necessity for GM to cut another 60,000 jobs that they havent announced to establish break-even 12 to 18 months from today. With all the talk about GM in the news in the last 60 days, has anybody at GM or Ford uttered a word about their real problem, QUALITY? The American consumer does not want to buy American made cars in any quantity that would allow Detroit to make money.

We believe that GM will be unprofitable until 2008 at a minimum, and 08 can only be profitable if they maintain market share, and we see continued declining market share. The Chairman has verbalized nothing that deals with the issue of quality, and upgrading the consumers consciousness to consider GM cars when it comes to quality. Even Mercedes marvels at Japans ability to produce the quality they do for the dollar it costs. Mercedes doesnt understand how Japan does it at their price points.

We took a close look at Ford (where Quality is number 1, and Ford has a better idea), and found their restructuring plan isnt substantial enough to get the job done. They call it the Way Forward Plan. We call it the Lost in the Wind plan. They are taking total charges of $3.4 billion in 06. They expect to be profitable in 08, why, we ask? Whats going to change between now and 08? They believe they can save almost $6 billion in costs. We dont see it, and if they were able to do it, dont you think Japan would jump on the bandwagon and do whatever they have to do to drag their already low costs lower.

Did you know that when GM, or Ford produce an interesting car, Japan buys the car immediately, rips it apart, part by part in Japan, and than takes any interesting technology and applies it to their cars almost immediately. Japan can put out a car in one-third the time it takes GM, or Ford to design a car by committee. South Korea can go from design to showroom in even a shorter time span.

Fords restructuring efforts in our opinion are clearly overstating the bottom-line results. We see a headwind coming, where Ford thinks its got a tailwind at its back. Its going to get tougher for Ford, and this is being overlooked because GM and its troubles are getting the headlines. With the employees departing from both companies how do you think the guy down on the assembly line is feeling? Do you think hes a loyal, lets get it done type of individual? Do you think hes wondering if hes going to be there 2 or 3 years down the road? Will his pension benefits be safe? Will he ever get a pension? Will he even have a future at either of these two companies that were once the unquestioned leaders of American managerial know how?

Henry Ford wrote the book on manufacturing, and GMs Alfred P. Sloan wrote the book on building a company that is still studied at Harvard Business School, and MIT today. Somehow in the last 3 decades, the bean counters in Detroit forgot how to make cars. They literally forgot what business they were in. They instead thought only about the money. Labor became a cog in the wheel, not an integral meaningful partner in the process. To turn this American industry around will involve a different level of intelligence than the intelligence (used advisedly) that got them into trouble in the first place. Einstein was right.

Goodbye and good luck

Richard C. Stoyeck
http://www.stocksatbottom.com

Richard Stoyecks background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and StocksAtBottom.com

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Hybrid Cars Save Money

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Hybrid Cars Save Money If you have been sitting on the fence about deciding to purchase a Hybrid car, you no longer have any excuse to be squeamish. Consumer Reports just released a study this August that confirms that Hybrid cars will in fact save you money over the long run.

The combination of generous tax credits along with the fuel saving nature of these vehicles is what makes them a good long term value. The difference in up front cost between a hybrid and its traditional counterpart is often between $1200 and $7000. Thats a wide gap, and can be enough to leave you wondering if its worth it.

The good news is that if you act fast and purchase your new Hybrid car before the tax credits phase out in 2007, alot of that upfront additional cost will come back to you in the form of a tax credit. Meanwhile, you will enjoy long term savings on fuel costs.

Did you know that as of 2006, Hybrids account for only 1% of new car sales in the US? As gas prices rise, the ratio will likely change as people seek to cut costs out of rising fuel prices. Unfortunately, if you wait too long you will no longer be able to take advantage of the tax credits that are being phased out. If you are considering purchasing a Hybrid car, you are better to do it now.

The study, conducted by Consumer Reports assumes that you keep your Hybrid car for several years, long enough to notice the difference in cost of filling up. Of course, the more you drive to work, school, or on vacation, the faster and greater your savings will add up.

If you are researching Hybrid cars, be sure to check out http://www.hybridrevolution.org This site lists updated information on all makes and models of Hybrids available and soon to be available.

Amber Lowery is an author and webmaster. You can read more about Hybrid cars by visiting her site: http://www.netcarshopping.info/hybrid.html or by visiting: http://hybrid.autobuyerworld.info

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