Saturday, October 22, 2005

GM and Ford Losses; How Could This Have Happened?

Just days after General Motors announced that its catastrophic financial performance would result in massive restructuring of the company, Ford Motor Company earlier this week reported that its North American Division has suffered a $1.2 billion third quarter loss and Ford too would restructure beginning in January, resulting in job cuts and plant closings. What has brought about these tremendous financial losses for Ford and GM? The Washington Post reports that Ford attributes it to "the future arriving faster than the automaker had anticipated because of the sharp rise in fuel prices."

Yes, those sharply rising fuel prices must have really taken these auto execs by surprise. Who could ever have foreseen a sharp rise in fuel prices in a world where most of the petroleum extraction takes place in a region torn apart by war and acts of terrorism, in a world in which the nation with the largest population has undertaken a massive industrialization program resulting in a blossoming of its use of petroleum products, and where the nation that uses the largest share of the worlds petroleum has a large share of its refineries in a region beset by hurricanes? Yes, in a world like that, these auto execs have staked their companies futures over the last few years to the sale of gas-guzzling SUVs and trucks, displaying the kind of vision that up to now I had thought was reserved for the Bush Administration.
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