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Fiat News

Discussion in 'Alfa and Maserati' started by Mopar392, May 15, 2019.

  1. aldo90731

    Staff Member Level III Supporter

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    We will have to wait to see what the world looks like in a post-pandemic era.

    This morning Warren Buffet sold off his entire holdings in the airline industry citing that the world has changed forever; he doesn’t see a bright future for air travel any longer. This from someone who had, until now, invested heavily in air, sea and rail transportation.

    At this point it is anyone’s guess what the automotive sector will look like. On the one hand, the pandemic may force people out of mass transit and into their vehicles. On the other, employers may force workers to work from home in unprecedented numbers, eliminating most households’ need for owning two vehicles.

    Aeronautics was many countries’ main export. With that gone, will automaking take its place? Will EU keep its automotive regulatory plan on schedule? Can EVs even survive on their own without strict regulations and buyer incentives? Too many questions are still up in the air.
     
  2. Dave Z

    Dave Z It's me, Dave
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    I'm sure the Treasury and Fed will spend hundreds of billions of dollars trying to prove Buffet wrong...

    One of the annoying things about the airline bailout was that the CEOs know the industry runs into problems every few years, but instead of setting aside reserves, they deliberately worked themselves into debt to raise their share price through buybacks — because the CEOs are paid based on share price.
     
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  3. Doug D

    Doug D Virginia Gentleman

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    It may eliminate the need for two vehicles, but it won't eliminate the want. I have been working from home for the past 2+ years - well before the pandemic forced us to stay-at-home. With my wife at work all day, I do find things requiring a 2nd vehicle to be available. Some trips are needs while other trips are wants.
     
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  4. aldo90731

    Staff Member Level III Supporter

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    Indeed. I work from home and own two vehicles. But a Fiat 124 Spider can hardly qualify as a need.

    I couldn’t justify owning a $50,000 Wrangler and, say a $50,000 Challenger, just to have them parked in the garage all day. But something like a Fiat Spider makes a want easier to justify.

    Still, in the aggregate, the lower the need for two vehicles, the lower the likelihood households will do it.
     
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  5. freshforged

    freshforged Well-Known Member

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    And most Corp boards are made up of ceos/cfos from other companies, meaning they are predisposed to take care of executives first and foremost.
     
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  6. Dave Z

    Dave Z It's me, Dave
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    Yes, the interlocking-boards concept brings all sorts of conflicts of interest, especially when CEOs justify their pay by looking at other companies.
     
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  7. Dave Z

    Dave Z It's me, Dave
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    My son's car is going on the auction block, so to speak, because of this virus, though used cars have nearly no value now. The insurance costs more than the car.
     
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  8. aldo90731

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    Given Mr. Buffet’s track record predicting sectors, my guess is if he can’t see a future for airlines, the chances of them surviving in current form are very small.

    Thing is, flying an aircraft at half capacity to provide sufficient distancing is a money-losing proposition. Worse, airlines are not allowed to serve/sell food any longer, which had become an additional revenue item.

    Another interesting factoid: the larger the aircraft, the more likely it to be grounded. Apparently, every single Airbus double decker around the world is grounded with no plans to fly any time soon.

    The CEO of Southwest was interviewed yesterday. When asked if his airline was safe to fly he said yes; every passenger will wear a face mask. If you don’t have one you will be given one. But when asked how was Southwest handling passengers sharing lavatories and touching many surfaces, he didn’t have an answer.

    I have to travel for work. But I am happy to let other passengers serve as guinea pigs as the airlines figure out the way forward.
     
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  9. somber

    somber 370,000 miles

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    Buffet buying into airlines was a pretty big change for him. In a 2002 interview he said:

    “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money. But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You've got huge fixed costs, you've got strong labor unions and you've got commodity pricing. That is not a great recipe for success. I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: 'My name is Warren and I'm an aeroholic.' And then they talk me down.”
     
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  10. aldo90731

    Staff Member Level III Supporter

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    Yes, he made headlines when he bought first into airlines and then into rail. His divesting of all airline stock is a big deal now. Can’t imagine the airlines are happy.
     
  11. freshforged

    freshforged Well-Known Member

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    Screw’em, just like they’ve been screwing their customers for decades.
     
  12. aldo90731

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    Indeed. It is an industry in desperate need for a complete rethink.
     
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  13. KrisW

    KrisW Well-Known Member

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    Cheap money got the airlines into this mess, but it was indirect. Low interest rates made it really easy to lease aircraft, but there has also been a phenomenal boom in the leasing industry - some big real-estate players got into it back when the bottom fell out of property, then the Chinese arrived about five years ago, looking to diversify their own real-estate-heavy investments... after all, plane leasing is basically the same as developing office blocks, except that they fly, right? .. right?

    So, with leasing companies offering planes at too-good-to-be-true rates to airlines, the airlines set about filling these new planes, cutting prices to drive demand, until we end up with airlines running an inherently capital-intensive business on razor-thin margins, dependent on customers to keep over-consuming their product. A lot like 2007-2008 in the US car market, really.
     
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  14. Dave Z

    Dave Z It's me, Dave
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    There was also the turning of profits into stock buybacks.
     
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  15. freshforged

    freshforged Well-Known Member

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    That can just be read as “executive bonus”
     
  16. aldo90731

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    I’m sure Mr. Buffet made his decision after speaking with the airlines’ CEOs, industry experts and listening to the advise of his analysts.

    But yeah, airlines had gotten to the point of being little more than cattle cars with wings.

    I know colleagues who traveled frequently that loved to play the frequent flyer/loyalty games. I wonder if the airlines are going to be honoring those programs. They are usually the first things to go out the window in times of financial distress.
     
  17. Morty

    Morty Well-Known Member

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  18. aldo90731

    Staff Member Level III Supporter

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  19. Morty

    Morty Well-Known Member

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    Would be nice, would it not?:D
     
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  20. Tony K

    Tony K Active Member

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    I think some folks would be surprised at how much the airline industry relies on paid cargo shipments on long-haul especially during the slow months. I think we're going to see a redistribution of utilization to match the new reality post-COVID of less travel in what used to be busy season, so not only will passenger airlines reduce aircraft, to some extent, so will cargo airlines such as FedEx, in turn subcontracting out loads to passenger airlines. Civil Reserve Air Fleet regulations may drive that to some extent in the US.

    Well, so far, Delta and American haven't shown any signs of such. Right now, you can get a flight to Munich in July for 50,000 "Sky Pesos" + taxes ($1xx). That's pretty low, considering low season deals to same were 30k and high season is usually 6 digits.
     
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