Full Speed Ahead

It’s not looking good for Detroit. Both GM and Ford have been going through a rough patch, and they are both announcing significant losses. But there are some key differences in the kinds of financial troubles these two automobile giants have gotten themselves into.

GM reported a 2005 annual loss of around $8.6 billion on total revenue that remains relatively flat. While they have not taken on any more significant debt during this time, they are starting to find themselves with a significant financial obligation to Delphi. In fact, Delphi was a $3.6 billion expense for GM during Q4 of 2005 and is therefore a significant contributor to the total losses for the year. In addition to these issues, there are contractual obligations to a unionized workforce that is going to continue to keep things very expensive for GM.

There are other factors affecting the GM bottom line, which means it should be possible to restructure and fix these financial difficulties in the process. Meanwhile, Ford has attempted to grow through acquisition and has been attempting to gain relevance with established brands like Jaguar, Land Rover and Aston Martin. Unfortunately, these acquisitions have had an affect on the stock price and has forced the automaker to assume more debt.

How does this affect the consumer? It’s time for a new model, shoppers should be able to visit a single automobile superstore where all of the top brands are on display. We could roam the isles and look at BMW, Chervrolet and even Aston Martin. It is possible to comparison shop for virtually everything else, why should an automobile be different?

With this kind of sales strategy, companies like Ford and GM could dismantel their retail chain and focus on selling vehicles to the superstore owners. The burdon would be on the automobile manufacturers to build cars that auto superstores will want to carry, which would help weed out the Pontiac Aztecs of the world and at the same time give the consumer a greater bredth of choice.