Thursday, November 13, 2008
If GM is neutered, U.S. won't be a player in meeting surging global demand for autos
In the debate over whether GM should be bailed out or pushed into bankruptcy, I see almost no discussion of the big global demand for new vehicles that will come over the next decade, pushed particularly by fast growth in developing countries (like India and members of the Russian Federation). If GM goes under or into bankruptcy, the U.S. will not be a major player in producing the demand for 180 million vehicles from new owners -- on top of replacement demand. Most of that production will be ceded to international makers. Just think about that 180-million number. Say the average global retail price for those cars is $15,000, which is on the low-low end of current average prices. That comes to $2.7 trillion.
GM's share of that growth, based on its current 20% of the international market (including the U.S.), would be $540 billion -- or $54 billion a year over two decades. Its fuel-efficient, mid-size Chevrolet Cruze sedan (photo above) will be its major entrant in the global market starting in 2011. It will offer 40 MPG. Figure on a price tag north of the current global Chevy Cobalt, which goes for $15,0000-$17,000.
Keep in mind, too, that if GM were able to keep its market share as that growth gains steam, and production transitions to the all-electric auto (which GM finally is totally committed to), it would provide a big chunk of the 5 million "green collar" jobs that President-elect Obama wants to create over the next decade.
Could GM do that with a bailout? It has a shot -- a far better shot than if it is forced into bankruptcy that will prevent it from taking the expansionary steps it would need to take to be a player in meeting the coming global auto demand.
Politico.com asked a variety of quotable people whether they thought federal bailout money should be available to the Detroit Big Three. The only big foot who raised the issue of future global auto demand was Peter Fenn, a Democratic media consultant. Too many of the other quotables were talking off the top of their heads.