The Detroit Big Three's own version of holding mortgages to (SUV)
McMansions of imploding resale value.
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Maybe worse than that, though, is it makes it tougher for the
people who might actually want to drive home a new Chrysler to do
so. Without the option of leasing, it's either cash -- or finance
the whole enchilada. In precarious economic times, fewer and
fewer people are willing to step up and assume a $60k debt load
-- especially when it is they (and not a lease company)
who will be left holding the bag three years down the road, when
that $60k SUV is worth a third of that.
Or less.
GM AND FORD are looking green around the gills, too. While
they're not as terminal as Chrysler (yet) neither can they afford
to absorb another multi-multi-million (and very possibly, billion
dollar) loss. Nor, probably, can they sustain a 20-30 percent
sales downturn caused by people reluctant (or simply unable) to
buy a new vehicle.
Just like the housing debacle, it's going to take years to clear
the bad paper from the system.
The question is, will America's Big Three -- who are uniquely
vulnerable because they placed virtually all their eggs in the
Gigantosaurus SUV/pick-up basket -- be able to weather the coming
body blows?
My bet is Chrysler's a goner. Cerberus -- the private equity
company that owns the almost-corpse -- is not likely to bleed
itself white over a lost cause when it can just cut the whole
mess loose and move on.
GM and Ford are publicly traded companies so different rules
apply. But if you own stock, the future does not look bright
ahead. Both of them realized -- probably too late -- that it was
time to stop selling Expeditions and Escalades. Neither has a 40
mpg small car available for sale, even now. This is disastrous.
GM's much anticipated Volt hybrid-electric car doesn't get here
for another year. Ford's best small cars are European-only.
Things are ugly. But they may be about to get much uglier.
Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.