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Behind The Wheel

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Mar.02

9:46 AM ET

Monday, 2 Mar 2009

The Big 3 Break-Up Their Global Dreams

Posted By:Phil LeBeau

Topics:CEOs and CFOs | Economy (U.S.) | Economy (Global) | Automobile Industry

Companies:Toyota Motor Corporation | General Motors Corp | Honda Motor Company, Ltd. | Ford Motor Company

Remember the roaring late '90's? Remember when then Ford CEO Jac Nasser bought Volvo and put it together with Land Rover, Jaguar, and Aston Martin? Back then, GM CEO Jack Smith and his top lieutenant Rick Wagoner snatched up Saab as an upscale brand to compliment Cadillac. Back then we were told bigger is better! Economies of scale would make it easier for GM and Ford to leverage these brands around the world and grow sales.

Ten years later the global dream for the Big 3 is on its death bed. Ford [F Loading... () ] has sold off Jaguar, Land Rover, and Aston Martin. Volvo will go soon (for a fraction of what Ford paid and what it would have been worth a few years back) and the Premier Auto Group Nasser built is a distant memory. At GM [GM Loading... () ], Saab is for sale and it will soon peddle off a sizable chunk of its German subsidiary Opel. Detroit is in full retreat.

Blame it on the global recession. What started in the U.S. In late 2007 has spread to Europe, Latin America and Asia. GM CFO Ray Young told me last week how the credit crisis has wacked sales in Russia and other European countries where GM was growing quickly. Not anymore. The drop in auto sales has created a glut of auto factories and turned niche brands into luxuries Detroits auto guys can no longer afford to hold.

It's also creating a chance for up and coming auto makers from India and China to buy some potentially valuable assets for a song. Take Volvo. Ford bought the Swedish auto maker in '99 for $6.45 billion. It will soon complete a sale and be lucky to get between $1 Billion and $1.5 Billion. Think about that. Volvo, an established brand with incredible safety and engineering assets will soon be off loaded at a fire-sale price. That's because the balance sheets of auto companies around the world are burning up fast. From Daimler in Germany, to Toyota in Japan, to Renault in France, everyone is doing whatever they can to cut losses, conserve cash, and make sure the core operations are strong.

Ten years ago, who would've thunk it. Back then auto makers were drunk with profits and it was all about building the global auto giant. Not anymore.

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- Ford Motor [F Loading... () ]