One On One With George Magliano of Global Insight
Wednesday, March 29, 2006
|
|
|
|
SUSIE GHARIB: Joining us now with more analysis on the new fuel economy standards and other issues facing American auto makers, George Magliano, director of auto industry research at Global Insight, the New York consulting firm. Welcome to NIGHTLY BUSINESS REPORT, George.
GEORGE MAGLIANO, DIR. AUTO INDUSTRY RESEARCH, GLOBAL INSIGHT: Thanks for having me on.
GHARIB: Looking at these new fuel economy standards, do you see them having a major impact on the auto makers or is this just one more stress on top of all the other huge problems that they`re facing?
MAGLIANO: It`s just one more stress and I think you`ve hit it right on the head when you were talking about the standards. Number one, it`s only a 10 percent increase phased in over time going out to 2011. Number two, the manufacturers on the technology basis are moving in that direction anyway. And number three, the standards themselves will be different depending upon the size of the sport utility or the light truck. And the smaller SUVs will have much higher standards than the bigger ones and the manufacturers basically are producing in that way and they can handle that a lot better than just a blanket increase in fuel economy standards across the entire line.
GHARIB: The other news from the auto sector today is the possibility of a strike at Delphi which is a key parts supplier for General Motors. What impact -- if there is a strike, what impact might that have on General Motors?
MAGLIANO: A strike at Delphi is a major negative for General Motors. It`s a major negative for their recovery plans. It would in very short order shut down some of the key plans for General Motors, most of them producing big SUVs at this point in time. And that would drive them probably into bankruptcy if they were out for any prolonged period of time, very big negative.
GHARIB: So there is a potential that this could be a catalyst for bankruptcy?
MAGLIANO: Yes, it could be a catalyst, but the potential of a strike today is fairly low and we think we will go past this deadline this week without the union contracts being thrown out or without any strike and we don`t expect to see anything really negative on the strike front occur in the short run. So it`s an issue...
GHARIB: Let`s explore this bankruptcy thing. Let`s say that worst case scenario something like that would happen. What happens then to some of the plans that General Motors has been talking about as part of its turnaround, for example, selling a controlling interest in GMAC, its financing arm. What happens with something like that?
MAGLIANO: I think that`s probably the one issue right now that sits on the sale of GMAC is what happens if GM does go bankrupt. What is the liabilities of the person who has bought GMAC? So that`s probably what`s holding up the final deal right now. As far as the rest of the turnaround plans go, it makes it that much more difficult but it doesn`t end what General Motors has to do on a day-to-day and a long-term basis.
GHARIB: Let me move along here, let me move along here because we`re running out of time and I would like to ask you about Ford and some of the other auto makers. How`s Ford doing in your assessment in terms of its turnaround?
MAGLIANO: Ford is doing much better from a cost-cutting point of view. They always have been much more aggressive than General Motors as far as closing plants, reducing staff and running leader as far as overall overhead. But where Ford is really lacking right now, we feel is in their long term product programs and we think actually General Motors with their new crossovers, their new platforms for family cars is doing much better than Ford as far as reorganized their products and getting them back on track and the big issue is selling more cars and trucks without big incentives on them.
GHARIB: All right, that`s the issue for all of those. Thank you very much, George, for coming on the program.
MAGLIANO: Thank you very much.
GHARIB: We`ve been speaking with George Magliano, director of auto industry research at Global Insight.
