The boys in Detroit are dreaming awfully big dreams
Saturday January 25, 2003 AL COATES RECORD STAFF
The Earth is warming (although you'd never know it). The polar ice cap is melting. The price of oil has spiked to the mid-$30s. War with Iraq is on the horizon. Venezuela, both the nation and its oil pipeline, is in turmoil.
And now, just when the consumers and investors of North America are most desperately in need of common sense and level heads, our good friends at General Motors have gone out, put on their thinking caps, and built . . . wait for it . . . three brand spankin' new models -- the Chevy SS, the Chevy Cheyenne and the Buick Centieme -- all of them great, walloping gas guzzlers and all of them with between 400 and 500 horses under the hood.
Do we stop with GM? Of course not, for at the same time the General was rolling out its new creations in Detroit, so was rival Ford, proudly showing off its new 427 concept sedan, a giant V-10 with 590 horsepower.
DaimlerChrysler? Well, let's see. How about the Dodge Magnum SRT-8 unveiled out in L.A. This one is the baby of the bunch, a piddling 430-horsie V-8 wagon on a rear-drive platform.
Oops! Almost forgot Cadillac. You'll love this one -- a concept car called Cadillac Sixteen. The Sixteen, as you might imagine, stands for 16 cylinders. Horsepower? A honkin' 1,000, just the ticket for getting a quart of milk down at the 7-11.
Ain't irony grand? Here's our good friend George W. cranking up the ol' Gutenberg, printing money to finance a war and an economic expansion, hoping like the devil to secure a steady gusher of oil, only to give us the opportunity to waste it again, gob-smacking the atmosphere with the emissions pouring from the exhaust of our new V-10, 590-horse Ford 427. Excellent.
And all of this at a time when the North American Big 3 car-makers are steadily and rapidly losing market share to the imports.
And when Ford has just decided to extend its 0-per-cent financing incentives to 60 months on many models, including the popular Windstar minivan. Even the Explorer SUV can now be had at 0-per-cent financing.
Can anyone in charge at the Big 3 spell cannibalization? Or charges against future earnings?
And, geez, not to be outright petty, but exactly how are the guys in Detroit going to deal with the pension under-funding issue? You know, the kind of thing big companies need to consider when their pension investments turn sour, as they have these past two years, and when they have to up the ante to avoid being in violation of Washington statute.
Yes, yes, I know. The stock prices of the Big 3 carmakers are way down from their highs. GM may even hit $5 US in earnings this year and with a stock price in the neighbourhood of $40, there might actually exist some value in a car company with a P/E ratio of 8:1. Especially given that GM is gaining market share in the U.S., even if it is only against Ford.
But consider the pressure the Big 3 are under from the imports, where the Hondas and Toyotas, the Nissans and the Mazdas, even the Bimmers and Beetles, have been able to undercut the domestics on price and value, all thanks to a U.S. dollar that, until recently, had been riding too high in the saddle.
Those imports, broadly speaking, also have better reliability numbers. And higher resale values, etc. These days, if you buy shares in the Big 3, you're taking a leap of faith that I, for one, would prefer not to contemplate.
But the boys in Detroit dream big dreams, firm in the belief that gas at $1.40 a gallon somehow makes a 500-horsepower, V-10 interstate hog a worthwhile, necessary creation.
Big dreams, for certain. And in technicolour, too.