Richard Crenian Blogs
February 20, 2009
“How Credit Worked with the US Auto Makers!” by Richard Crenian
So Saab just filed for bankruptcy protection and GM and Chrysler are thinking of doing the same. (GM owns Saab). Saab asked the Swedish Government for the same type of support, and US auto makers and in its wisdom, the Swedish Government said NO!
So how did things get so bad for the automakers?
In a paint by number way I will answer with my views.
1. GM (Put any Auto Maker in here if you like) builds a car, and thinks the market will be great, and builds on an assumption that the market is endless.
2. Auto Maker sells car to its own leasing company to lease guys. When you sell to your leasing company it’s a sale! Wow…magic, just like that! (So if I build a cabinet and sell it to my wife does that make me successful?)
3. Automaker reports sales are up, and profits are up. Stocks go up and everyone is happy. Meanwhile GMAC the buyer needs to lease the cars. If they don’t they are stuck.
4. GMAC runs out of money. It cannot afford to buy cars for lease.
5. GM sales drop naturally and now needs bankruptcy protection.
6. Government steps in to save their business model.
How great is that, when you as an individual screw up does the government bail you out?
Ok so stick with safe and sound investments. The stock market is a legal gambling den for sharks to bury you.
So Howard (my business partner and Mentor) does what? He buys cash producing properties, and makes sure they are in well located and well tenanted areas. Then he retires and golfs. Sounds good to me.
What are the GM auto executives doing? Not golfing for sure, and definitely selling their jets……..
Phone Howard and bug him. He is enjoying the beautiful weather in Tucson and here we are in the frozen north!! Good for him! 403-630-4544.