Ford is on fire, in a good way. Can it last? The history of the auto sector says that companies get on these runs. So, they're in the early stage of a really strong run. Will it last forever? History says these things come and these things go. It would appear that they've got quite a bit left to mine. Indeed, Ford's recovery is rooted in three words: product, product and product.
Can GM-and Chrysler, for that matter-get to where Ford is now? General Motors actually has a very good lineup right now, but they're in a negative media situation. Getting rid of 240 dealers has cost it a lot of near-term market share. Chrysler is still in a pile of doo-doo. Its fundamental problem comes down to the same three words that did Ford so well: product, product and product. Daimler cut back most product programs when they owned Chrysler, so it does not have a lot in the pipeline. That is the whole idea behind Fiat [taking control]mdash;they're riding to the rescue with a whole pile of product.
Would you ever invest in GM? Nope. GM, and in fact anything in the auto sector, is not for the widow-and-orphans type of investing. If you are truly dependent on your money, I would not put a penny into automotive. And that would include any of the parts manufacturers, as well.
Let's talk about the Chevy Volt electric car-$41,000 is a hefty price tag compared to its rivals. What's your take? As long as it requires one penny of government subsidy, it's not going to be fully successful. And it's questionable whether they'll ever be able to market it and have people buy it without government money. ...As long as there's gasoline available at any sort of respectable price, alternative fuels are going to be limited in terms of demand. Most people believe there's going to be adequate fuel in the ground going out 30 to 50 years. The other big issue with alternative fuels is that there are too many of them for a true winner to emerge. The cost is potentially trillions of dollars for any one of them, and you can't do them all.
Are we underestimating the capacity of societies to change their mind? I think the exact opposite. The tendency is to overestimate the willingness of consumers to embrace an alternative technology. The only way they will do it is if it's better and cheaper and gives them more of the metrics that they're looking for....If you really want to be environmentally friendly, use a price mechanism-increase the price of gas.
What's your perspective on Toyota's recent troubles? They've proven categorically that they're just another vehicle company. I was of the mistaken belief that they were different. And it turns out they're no different from anybody else. They'll do stupid things. They'll try to grow too fast. They'll abandon quality for volume. There's a dozen mistakes this year that they've been proven to have made.
Do you see any political changes or uncertainty on the horizon? What we're going to discover is just how bad an investment the $100 billion governments put into the industry was. They're going to lose most of that. As this happens, I expect politicians to do a lot of stupid things. It wouldn't surprise me at all if they ended up doing some things that totally disrupt the marketplace. We talked about the Volt. The government has a lot of money in GM. It's the only company out there with a plug-in electric right now. So, they could put major incentives on the Volt so that a company they own is guaranteed to sell them.