Size matters?

I see companies like Ford are now in pretty desperate straights, indeed General Motors has said it would run out of cash in the first half of next year. The world's biggest car company said that this year's cash levels would approach the bare minimum required and that next year the company would be in a worse position unless it gets government help, or sells assets, or the economy improves. GM lost $4.2 billion (£2.7 billion) in the third quarter of 2008.

So, then we see car manufacturers burning money at the kind of rates that were once the province of the dot com bubble. When these big companies had money available at cheap rates they bought marques such as Saab and Volvo. In 2002 under General Motors Saab lost $500 million. To quote Forbes magazine, "If there is one company that doesn't understand quirky, it is GM. General Motors kept some of Saab's traditional styling cues and its funky features but began filling the car with parts from Opel."

Ford paid was an astounding $6.5 billion for Volvo and in in a good year Volvo could make $400 million. The math were pretty challenging. Ford Motor executives kept talking about a new vision, "One Ford," meaning similar cars around the world. One thing that Volvo was not was a Ford. The old Volvo focused on building incredibly robust if a little quirky cars,that were people focused, high on comfort and safety. Ford gave us low investment cars like the S40 and V40. Not bad cars but remarkably similar to the Focus.

Giant global management then just does not hack it.

Then there is car size as a measure of financial markets. Look at today's cars, they have got bigger and bigger, faster and faster just at a time when congestion charges and taxation are growing. My contention here is that the delay in designing and producing cars means that as vehicles get bigger and more costly they are lagging the economy by at least 3 years and are thus only in kilter with market trends and needs for a brief period in time and since all financial markets are cyclical this is not good news.
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