Detroit just does not get it

Hubbert CurveS&P downgraded to “junk” status two of the largest automakers in the world, Ford and General Motors, because these companies have been thoroughly mismanaged:

… decades of management miscues … led Standard & Poor’s yesterday to cut the credit ratings of both the world’s largest car maker and Ford Motor Co. to junk-bond status for the first time. GM and Ford, once icons of American manufacturing, have blundered over issues ranging from design, vehicle size and fuel economy to union contracts and meeting the challenge from rivals such as Japan’s Toyota.

“They have a pretty bad track record on guessing the market,” says Thomas Stallkamp, 58, who was president of Chrysler Corp. before it was acquired by Daimler-Benz AG in 1998 and is now a partner at the New York buyout firm Ripplewood Holdings LLC. “They went with the sure bet, and the market moved around them.”
GM, Ford Stumbled to Junk on Designs, Unions, Japan’s Challenge – Bloomberg.com

Their marketing departments have brainwashed many Americans into a bigger-is-better attitude on personal transportation. They completely ignored the fact that we will run out of oil eventually. Now it is becoming increasingly clear that we will run out of oil sooner, rather than later, and we might be hitting world-wide peak oil before 2010. Even the heavily subsidized gas prices in the US are steadily increasing. With the gas price over $2.20/Gallon (55 cents/liter), SUVs are becoming a much less popular choice, despite the slick, macho ads on cable TV.

So the dino-fuel-guzzling SUV’s follow the fate of the dinosaurs, and they are dragging down the greedy, short-sighted companies that created them:

A broad, sustained, long-term strategy was missing, says Ian Beavis, 52, a former Ford marketing manager who launched the Lincoln Navigator SUV in 1997 and is now a consultant at the Shop LLC, a marketing firm in Long Beach, California.

“Short-term profits, that’s all that was driving it,” he says. “Everyone looked at how much they were making on Navigators and Expeditions and said, `Oh, my goodness, we can make more of this.”’

And why are short-term profits all they care about? Because the executive “compensation packages” are tied to short-term goals. The focus on the next quarterly earnings statement in corporate America has spawned some of the worst corporate scandals in history, and it has laid the groundwork for massive economic collapse, once we hit peak oil.

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