BUSINESS

Automakers' Future: The Smaller 3 Or Big 1?

01/02/2009 05:12 am ET | Updated May 25, 2011

CNBC's Phil LeBeau predicts that the idea of Ford selling Volvo -- along with GM selling Saab -- would be the beginning of a new era for the "Big Three:"

Call this the start of the Big 3 becoming the smaller 3. Starting tomorrow and playing out over the course of the next week Detroit's auto makers will be telling Congress how they plan to get back in the black. For the American auto makers it will likely mean shedding brands.

Ford is now looking at selling Volvo. It's a brand with an incredible reputation worldwide that should bring Ford between 1 and 1.5 Billion dollars. In better times, Volvo would bring bigger bucks. That said, Ford will take what they can get.

Doug McIntyre, of 24/7 Wall Street, considers an alternate future -- a Big Three merger, in which they become The Big One:

Look at the GM (GM) 10-Q. The company had $3.3 billion in sales, general, and administrative expenses. That is all of those white collar workers, the R&D and product development staffs, the marketing men and dealer relations people, and the accountants in the basement of the headquarters in downtown Detroit. Ford's (F) number is nearly as large and Chrysler's must be $2 billion. Robert Nardelli makes a lot of money.

Added up, those costs of being in business, costs that are duplicated among all three companies, are $33 billion a year. Even in Detroit, that is a lot of money.

Car CEOs will argue to Congress that they can cut costs more and make better cars. None of them can take out $20 or $25 billion. None of them has the balance sheet to make all of the new cars that they will have to and spend all of the R&D money necessary to be competitive five years from now.

Suggest a correction