Pros Say: Don’t Save Failing Automakers
General Motors is set to follow Chrysler into bankruptcy as the global auto industry struggles with the economic downturn and looks to government intervention to turn around failing business models.
Market experts told CNBC that the stalling automakers should be sold off for scrap and not given new funding.
‘Clear Out the Bad Guys’
“The motor industry is oversupplied at the moment … You’ve got new guys coming in with good efficient production in the third world. The old suppliers are in pretty desperate trouble and they don’t know how to handle it,” Roger Nightingale, strategist of Pointon York told CNBC.
“General Motors is an example and Chrysler is an example, Fiat is as well, Opel, of course terrible,” Nightingale said.
“You have recessions and recessions should be aloud to clear out the bad guys and Opel was the least affective of the motor industry organizations in Germany, it should have gone under,” he said.
Good Money After Bad?
“These handouts are still going on, whether it be bank, auto industry, and it doesn’t lead them to a better place. You could argue it’s still prolonging the agony,” Mark O'Sullivan, director of dealing from Currencies Direct, told CNBC.
“There needs to be a complete restructuring of the business. All that they’re doing it putting more debt on the table that needs to be absorbed by the global markets. As long as they’re happy to take the debt they know it’s not a problem. The day they stop taking the debt it becomes a problem,” O'Sullivan said.
Autos Are Political Pawns and Not for Investing
Autos were up globally Monday ahead of GM's expected bankruptcy filing. John Haynes from Rensburg Sheppards said he doesn't invest in auto companies because "they're political pawns more than they are decent vehicles for generating returns. Ian Beattie from New Star Asset Management joins the discussion.
GM's Bankruptcy Good News for Ford
General Motors will file for Chapter 11 bankruptcy Monday. "There's definitely appetite from US customers to buy American cars. For Ford, being out there in a more healthy condition, this could prove to be quite an opportunity to gain some share at a time when GM and Chrysler are struggling," Arndt Ellinghorst from Credit Suisse said.
Auto Stocks Rise as GM Bankruptcy Looms
If GM "goes down", as it is likely to, expectations are that capacity will be taken up by Asian automakers and European parts makers, which is a "fairly good message" because Europeans and Asians will sell more cars than the US, Ralph Silva from TowerGroup said.