• Jeff Matthews

Will They Drive to Sea Island Next Year?

Well the big news out of Detroit—and we are Not Making This Up—is that Ford Motor is going to start building “small fuel-efficient cars.”

That’s right.

Four years after crude oil prices broke the $50 a barrel ceiling on their way to nearly $150 a barrel—and then round-tripped all the way back to $45—Ford Motor is going fuel-efficient.

Here’s how the Wall Street Journal broke the story via email:

NEWS ALERT from the Wall Street Journal

Ford Motor plans to tell Congress it is retooling itself to build small fuel-efficient cars and break from the past strategy of focusing mainly on large pick-up trucks and sport-utility vehicles, a person familiar with the matter said. —Dec. 1, 2008

It wasn’t all that long ago that Ford management was complaining about the impact of rising gasoline prices on sales of its bread-and-butter truck business instead of doing something about it, like, say, making smaller, fuel-efficient cars.

In fact, it was just two years ago that CEO William Ford, Jr. described the situation in an email to Ford employees:

“An unprecedented spike in gasoline prices during the second quarter impacted our product lineup more than that of our competitors because of the longstanding success of our trucks and S.U.V.’s…”

That was in August 2006, which was six years after the Toyota Prius first hit the U.S.

Today, the same William Ford, Jr. is telling the Wall Street Journal:

“We want to come blasting out as a global, green, high-tech company that’s exactly where the country and the Obama administration want us to head.”

The time to “come blasting out” green was back in, say, 1993—when Eiji Toyoda, the William Ford, Jr. of Toyota, decided to develop a car that could get 47.5 miles per gallon, 50% better than Toyota’s best small car at the time. After $1 billion and a lot of hard work, that car became the Prius.

Water under the bridge, you may say. And, politically speaking, you are correct. The Not So Big Three will get a bailout, because it’s hard to explain to a powerful union that Wall Street bankers and bond dealers ought to be bailed out but not Flint line workers.

And they will get their bailout despite the public outrage at the fact that the men who helped oversee the industry’s decline flew private jets to Washington to ask for the money.

Some, of course, rose to the defense of the Not So Big Three. Former baseball commissioner Fay Vincent was moved to write a Wall Street Journal op-ed piece with the following howler, “Do you think any member of Congress or the Senate has been to Iraq on a commercial jet? Of course not. Never.”

Mr. Vincent seems not to understand that commercial jet service between Dulles and Baghdad is rather spotty these days, while that between Detroit and D.C. is quite robust.

But the public was not fooled. The public intuited that the guts of the problem stemmed from the way the companies have been managed—witness Toyota’s 15 year head-start on Ford when it comes to getting with the green thing—and there was no better demonstration of that fact than the way it apparently never crossed the minds of these men that it might appear outrageous to be gassing up a fleet of G-IVs to travel to Washington to ask for money to bail out their truck-and-SUV-dependent businesses.

So we here at NotMakingThisUp wonder what that same public might say if it came to light that early this year, the already-ailing General Motors took over an entire resort—Sea Island, Georgia—for its executives.

For a full week.

And we wonder what that public might say if it furthermore came to light that GM, according to the astonished source who told us this story not long after it occurred, required that those same executives be ferried around the resort only in their own brand of cars?

Let’s hope they don’t take the private jets to Sea Island next year.

Jeff Matthews I Am Not Making This Up

© 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

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GENERAL

The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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