Detroit: What Good News? (F)(GM)

Ford’s stock has gone through a series of spasms the last few days. First the company said it has made $100 million. Almost no one expected that and the stock rose sharply. The next day an auto analyst said the stock was overvalued. The shares gave most of their gains back.

The following day, billionaire and octogenarian extraordinaire, Kirk Kerkorian made a tender offer at above the market price to pick up 20 million shares of Ford. Up went the stock again.

Those not watching the main event might have noticed the side-show where GM was cutting a huge portion of its capacity to build pick-ups and SUVs. Over 3,500 people were laid off in the process. According to The Wall Street Journal "The move will reduce by 88,000 the number of pickup trucks GM had planned to produce this year, and lower by 50,000 the number of SUVs it had planned to build."

Pick-ups and SUVs are where American car companies make their money. The margins on little sedans and coupes are peanuts. The Japanese are also very competitive in that end of the market. The GM news almost certainly means another several quarter of losses for itself and Ford as the North American vehicle market falls apart.

The Ford news didn’t mean much. Too bad so many people were watching.

Douglas A. McIntyre