Transcripts

"The Economy and the Markets at Mid-Year"-Josh Feinman of Deutsche Asset Management & James Awad of Zephyr Management on Chrysler & GM's Survivability

SUSIE GHARIB: So ultimately, will Chrysler and GM survive as leaner and meaner players in the auto market? To answer that, we turned to Josh Feinman, chief economist at Deutsche Asset Management and James Awad, investment strategist at Zephyr Management. I began by asking Josh how much does the success of GM and Chrysler depend on what happens in the economy?

JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MGMT: I think quite a bit they need the economic conditions to improve, to perform a better base for car sales. I mean, they need to see labor markets start to get better and confidence come back, credit markets improve. I think we're starting to see a little bit of that. But we need go a lot further before, you know, the outlook for GM and Chrysler can materially improve.

GHARIB: Now, GM and Chrysler say that this is a new beginning. They're reinventing themselves. Do you think that they will be able to pull that off? In other words, what will we be seeing from GM and Chrysler a year from now?

JAMES AWAD, INVESTMENT STRATEGIST, ZEPHYR MGMT: I think it will still be a work in progress. We won't be able to admit defeat or declare victory. They will be smaller and more efficient and there will be new products. We will have to look at what it is they're putting in the marketplace. It will be absolutely key to determining their future success.

GHARIB: So Josh, when do you expect Chrysler to get better?

FEINMAN: I think it will be a graduate process. I think we hit bottom. I think we're going to see edging up over the second half of the year and then further improve in 2010 but I think it's going to be still a level of car sales well below the peaks that we got to before the crisis.

GHARIB: And when consumers are ready Jim to start buying cars, they'll have a lot of choices. Do you think that there's a stigma about buying a car from a company that's been tainted by bankruptcy?

AWAD: I don't think so. It's interesting in the month after Chrysler declared bankruptcy, the sales were actually better than expected because people perceived the values so it's a very local decision. I think people are going to look at the product that's being offered, the price, the deal that they can get, the credit that they can get. So I think that bankruptcy will be viewed as something in the past. I know the government is behind -- in one case the government, in the other case Fiat are behind these companies so I think it's going to be a level playing field.

GHARIB: All right. Let's take a break here and we'll be back in a few moments with more of your thoughts.