Daimler stock has plunged more than 40 percent since early 1999, shortly after the former Daimler-Benz acquired American icon Chrysler. And Daimler is not alone. The shares of Ford and General Motors trade at seven to eight times earnings, one-third of the market average. GM stock rose recently on the bizarre report that media companies were buying it as a way of acquiring GM's Hughes Electronics subsidiary, owner of the DirecTV satellite business. The world's largest producer of cars and trucks was so much excess baggage in that rumored deal.
Companies still produce as many cars and trucks as they can, then cut prices to attract consumers.
And, of course, Wall Street doesn't think in any other term. Governments, mindful of employment consequences, restrict or discourage production cutbacks. But labor typically is 20 percent or less of an auto company's costs. But most companies, intent on gaining market share, are reluctant to shrink. But look at capability rather than size, advises J. Ferron, the Detroit-based automotive practice leader for PricewaterhouseCoopers.