Will a Government Bail Out Save Ford & GM?

US Legacy Autos are in serious trouble of going bankrupt. They totally missed the electric vehicle (EV) industry, and now its simply too late for them to have any chance, not to mention they are stuck with these legacy systems, holding them back now.

Ford and GM are likely going to be able to offer tax incentives for their electric vehicles, which may help their EV sales a little bit. But it's all temporary. As soon as Tesla ramp up, their cars are just significantly so much better than anything GM or Ford can offer particularly at the same price point. It's not even close.

There doesn't seem to be two ways about this, they are going to go bankrupt. And what does the US government do for their corporations when they go bankrupt? Well as long as they are all paid up with their cronyism, then they get bailed out. And that is what many people are expecting. Ford and GM to get bailed out.

Well let's review this scenario and go over the potential outcomes, and see if it's actually possible to still save Ford or GM with an enormous bail out of tax payers money. Or are the US legacy autos beyond saving now, and a bail out would just be a waste of money at this stage.

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[thosoz]

500, 000 cars out of Shanghai this year.
Berlin and Texas getting closer.
Public perception changing.
This thing is going to EXPLODE.

[SpeakerKevin]

I don't think Tesla will want to retrofit legacy auto factories. They made that mistake once (Fremont), and I'm sure it will be the last time.

[CR]

Those legacy OEM pension liabilities are astronomical — tens of billions of USD.
Tesla pension liability = $0.

[kbmblizz]

Old ICE plants are liability to EV. Tesla is more like tech than legacy auto. Labor isn't the problem, Big3's supply chain is of little value to Tesla. Human capital that drives innovation does not come from ex-UAW.

[cazcam]

It's quite a worrying thought, both GM & Ford biting the dust… But inevitable! They are dinosaurs, they have had their time in the sun, but it's time for change, and the dinosaurs have to go. Fond farewell to legacy carmakers! :-)

[WentzCraft]

Legacy probably has 1 or 200 billion worth of assets they could liquidate and pay out to their workers as severance. Mind you there would be no one to buy it. Retrofitting a factory for a special purpose is not as easy as it sounds. In most cases its just easier to build new. Retrofitting requires demo, removing it's entire contents, sometimes the equipment was installed during construction and would need floors or walls removed to get it out. Tesla would need to blow out half the building to get some of there equipment in. You can't start testing or commissioning until the old stuff is out and the new is in. Then there would be inspections and returning the building to code laterally reengineering the building. All of this to wind up with a factory that's the wrong shape to work efficiently. When you build new, you can have the whole factory commissioned and in operation before all the walls and roof are clad.

[natedogg]

I can't believe you brought up Biden trying for a second term, I didn't know the US Presidency was a remake of Weekend at Bernies. I do agree the about not wasting taxpayers money and bailing out big auto, but rather bailing out the workers.

[tominpuertorico]

Legacy auto factories are less than worthless to Telsa, with the exception of the land. All those factories would have to be bulldozed.

[tribalypredisposed]

The dealerships are going to die, people will stop paying for expensive repairs on ICE cars whose value has plummeted, the automakers will not have the battery supply to make the EVs buyers are demanding so new car sales will also be down, and used too. So automakers will need a sharp reversal of the laws against direct sales by automakers and that will be hard as the remaining dealerships will fight to the death against it, leaving automakers without distribution or repair support in areas of America.

The automakers are so lost that they are asking for the wrong bailout today. If they want to survive they need the government to invest in the mining companies developing the mines automakers will need to have the possibility of having the battery cells they will need. The EV tax credit doesn't get them much here, just a brief spurt in profits.

When we get to the end of this for GM and Ford, bailouts just will not be possible. There will be huge areas of America where they cannot sell you a car or provide repairs and support. The battery cells they need will not exist and the mines to supply new battery cell factories will not exist. When they ask for help there just will not be a scenario where giving them money works, a bailout is for a company having short term problems that has a path to future stability and profits. GM and Ford would need the government to pay for everything for five years while they converted factories and so on. That is way more than a bailout.

[DoctorJack]

What u say is logical and the way it should play out. However, people are highly resistant to change. Unfortunately, I foresee many of the people employed at legacy autos to ride the sinking ship all the way down to protests and hoping that they can hang on to their jobs. An odd thing happens when one is suddenly about to lose this job they have been at for a while. Even though it’s a job that someone hated, when they are forced to quit, we seem to fight and hold on for dear life. I hope I’m wrong.

[MarkXHolland]

What astonishes me is that people are still buying brand new gas and diesel SUVs. They are not cheap, yet they will be utterly worthless in a few years!

[ibnorml]

Ford's current story: Year over year market share has been declining since 2015. Ford sold about 2.6 million cars in 2015, and only 1.1 million cars in 2020. Ford has been hit hard by the pandemic, BUT their sales were steadily declining since before the pandemic.

Same story for GM: Year over year market share has been declining since 2015. GM sold about 3 million cars in 2015, and only 1.4 million cars in 2020. Their sales were steadily declining since before the pandemic (although not as rapidly as Ford's).

Both companies need a Manhattan Project to switch to EVs, but are unwilling to do it. How long they will last on their current path is a guess but bankruptcy is a foregone conclusion UNLESS they do something drastic over the next few years.

[thetagmarket]

I remember back in 2019 when UK retailer Mothercare finally threw in the towel after nearly a decade of bad management and losses... all of which was reported widely over the years.
The first sign of trouble came as early as 2011 - some eight years ahead of the final bell.
The day the closure was announced, media interviewed (now redundant) Mothercare employees. Many uttered this unbelievably ignorant statement:
"I'm gutted... this was totally unexpected... !"
UNEXPECTED??? Please... the writing was on the wall for nearly a decade... WHY did you (as an employee) not make plans ten years earlier to re-skill or re-train?
If the employees of a company (or industry) refuse to see the future, they only have themselves to blame. If anyone working in the ICE industry (includes automakers and the entire supply chain, aftermarket suppliers, petrol stations, car insurance industry...) don't see the writing on the wall NOW, then it will be hard to sympathise with them when this all goes pear-shaped.

[GiesbertNijhuis]

Painfully clear prediction, this video is!

[ricwilmot]

I wonder how many Ford and GM executives hold Tesla stock.

[MrSchweppes]

Great video!
Thanks!
FSD Beta 9.2 is out! :)))

[fredbloggs]

FSD in trucking could wipe out as many as 7.4 million jobs.

[johnoberle]

I was all for it in 2009. Actually Ford wasn’t bailed out like Chrysler and GM.
Not for it this time they get sucked dry by investors and high CEO pay.
Golden opportunity to learn a lesson but they failed.

[songckim]

Bail outs wont help legacy autos because their leaderships lack of vision (whether long or short term), initiative, boldness, and decisiveness will be resuscitated to prolong their cultural dysfunction.

[marqbarq]

Ford wasn't bailed out. Never took the money. I predict Tesla buys Ford. GM vanishes.