One possible cost-cutting move -- simply eliminating poor-selling brands like Buick, which is down nearly 24% this year -- may be a nonstarter because of the costs involved. Franchise contracts with dealers require the automakers to buy them out should a brand fold; the last to do so, Oldsmobile, cost GM more than $1 billion in payouts to dealers.
"The Big Three are trying earnestly to do what's necessary to right-size, but it's not easy," said William Diehl, president and chief executive of BBK, a consulting firm specializing in auto industry restructuring.
Part of a turnaround plan has to focus on developing attractive products and revamping marketing to get consumers buying. But the current sales environment is dismal.
This year, U.S. vehicle sales are on pace to drop below 13 million units, compared with more than 16 million in 2007. Forecasters don't expect sales to top 15 million before 2011 at the earliest.
Shelly Lombard, an auto analyst at debt research firm Gimme Credit, suggested that the Big Three should ask for more than the $25 billion now proposed.
"I'm not sure what they're looking for is enough," she said. "The last thing you want to do is come back for more, because then you'll really get kicked in the teeth."
--
jim.puzzanghera@latimes.com
ken.bensinger@latimes.com
