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Blame Apple, Google, or Tesla?
CNNMoney (New York) First published May 16, 2017: 3:41 PM ET
The U.S. auto boom that fueled record sales and profits is winding down. Next up: A radical transformation that could threaten the survival of some automakers.
"The auto industry is changing more today than it has in the past 50 years," General Motors CEO Mary Barra has said publicly -- more than once.
"I don't make this claim lightly," she said. "I believe we are on the verge of a revolution in personal transportation."
It's true that the U.S. auto sector had a close call during the 2008 financial crisis, when both GM (GM) and Chrysler needed federal bailouts to survive bankruptcy. But that was a pretty straightforward crisis, caused by excess labor costs and a plunge in auto sales due to a wrecked economy.
The challenge today is posed by electric and self-driving cars, and it is far more fundamental.
Automakers are investing billions to develop these new vehicles. At the same time, they're facing a tremendous competitive threat from upstarts like Tesla (TSLA) and Uber, as well as from tech giants with deep pockets such as Google (GOOGL, Tech30) and Apple (AAPL, Tech30).
"We're at a major crossroads in the industry," said Michelle Krebs, analyst with AutoTrader. "The nature of the vehicles will be different. The models by which we acquire transportation could be completely different."
She compares the environment to the 1960s, when Japanese imports like Toyota (TM) and Honda (HMC) disrupted the industry.
And with all of these changes comes belt-tightening.
Late last month, Ford (F) disclosed that it may have to slash $3 billion in costs in order to free up money to invest in new technology. There were reports this week that in order to do so, the automaker may trim its global work force by about 10%, or as many as 20,000 jobs.
"If automakers are going to stay around, they have to be investing in these new technologies," said Krebs. "And it's difficult because there's no payback yet, and no time frame for when there will be."
Manufacturers are also cost-cutting thanks to a slowdown in U.S. auto sales after seven straight years of sales growth that reached record levels.
GM has cut production at four of its U.S. assembly lines and laid off about 4,400 factory workers. Fiat Chrysler (FCAU) also laid off 1,300 workers at a Detroit-area assembly line. And Toyota and Nissan have signaled they may cut production as well.
Related: Apple gets permit to test self-driving cars in California
Another sign of the times: Tesla's market value is now greater than that of than either Ford or General Motors.
But not even Tesla's long-term prospects are guaranteed, as Google's Waymo unit continues to test self-driving cars and Apple moves into the space as well.
"We believe Tesla's most important competition will ultimately come [not from automakers, but] from the world's largest, best capitalized tech firms," said Adam Jonas, an auto analyst with Morgan Stanley who has been bullish on the stock until recently. "We have an increasingly difficult time imagining Tesla as the dominant player and as a stand-alone company longer term."
CNNMoney (New York) First published May 16, 2017: 3:41 PM ET
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Topic - Auto sales are slowing, and upheaval is next - CNN - AbeCollins 18:15:34 05/16/17 (28)
- RE: Auto sales are slowing, and upheaval is next - CNN - pictureguy 11:06:54 05/17/17 (0)
- I'm waiting for Rail to make a comeback - jedrider 07:18:49 05/17/17 (4)
- Dream on - jec01 11:56:50 05/17/17 (0)
- RE: I'm waiting for Rail to make a comeback - grantv 09:52:35 05/17/17 (0)
- Rail needs the same Government continental system that made the freeway system, for rail. - 3+4=5 09:30:52 05/17/17 (0)
- RE: I'm waiting for Rail to make a comeback - AbeCollins 07:49:19 05/17/17 (0)
- RE: Auto sales are slowing, and upheaval is next - CNN - E-Stat 06:13:35 05/17/17 (3)
- RE: Auto sales are slowing, and upheaval is next - CNN - AbeCollins 12:16:33 05/17/17 (2)
- There's some overlap with the second - E-Stat 13:13:36 05/17/17 (1)
- RE: There's some overlap with the second - AbeCollins 20:40:56 05/17/17 (0)
- Legacy companies - bullethead 06:08:12 05/17/17 (11)
- LOL...your understanding of the auto industry is...ah...incomplete... - Steve O 08:59:53 05/17/17 (10)
- keep in mind - bullethead 12:56:44 05/17/17 (2)
- P/E Ratio - Inmate51 13:26:24 05/17/17 (1)
- "This ain't your dad's stock market".....Too true (nt) - Steve O 15:03:44 05/17/17 (0)
- RE: LOL...your understanding of the auto industry is...ah...incomplete... - AbeCollins 09:41:41 05/17/17 (6)
- You missed entirely... - Steve O 11:20:11 05/17/17 (5)
- From my perspective, you missed entirely... - AbeCollins 11:58:09 05/17/17 (4)
- You missed it again... - Steve O 12:32:23 05/17/17 (3)
- You weren't clear to begin with - AbeCollins 14:07:19 05/17/17 (2)
- That's why I said you didn't get my initial sarcasm... - Steve O 15:00:41 05/17/17 (1)
- No, I didn't. Sarcasim is hard to "see" ;-) - AbeCollins 20:34:42 05/17/17 (0)
- RE: Auto sales are slowing, and upheaval is next - CNN - Inmate51 20:10:43 05/16/17 (4)
- GM's stock hasn't participated in the market increase of last 8 yrs.... - Steve O 05:51:52 05/17/17 (3)
- Fiat Chrysler - Inmate51 07:46:32 05/17/17 (1)
- As the devil notes below... - Steve O 08:39:59 05/17/17 (0)
- RE: "And, FYI, FCA (Chrysler/Fiat) is a Dutch co." - b.l.zeebub 07:30:36 05/17/17 (0)
- So what. The last few years were a boom. Obvious those folks JUST BOUGHT CARS.. - 3+4=5 19:23:53 05/16/17 (0)