Ford and General Motors are in trouble.
Higher prices have shifted demand from SUVs and other trucks, and their new sedans do not excite anyone.
Both companies' costs are too high, and that problem reaches far beyond health care.
For example, cutting GM's health spending by half would eliminate only 30 percent of its projected 2005 loss.
High overhead, product development costs and compensation weigh on Ford and GM's balance sheets.
Poor bets, such as Fiat and Jaguar, have drained cash, too.
Higher costs result in less exciting, less comfortable and less reliable products. Consumers will not pay as much for Ford and GM vehicles as for those offered by Toyota and others.
That crisis cannot be addressed merely by cutting production and staff, moving suppliers to China and better marketing.
Permanent improvements require fixing systemic ills that cause both companies to make cars people don't want to drive.
Immediate improvements require lower compensation for management and workers to bring costs into line with what consumers will pay.
Longer term, both companies must refocus brands, cut vehicle development cycles and costs, field convincingly differentiated products and boost manufacturing efficiency.
Legacy costs must be removed from the cost of making cars now.
Asian competition is too good for Ford and GM to carry those costs and compete. Without a strategy to deal with legacy costs, both companies seem destined for Chapter 11 or worse.
Sadly, Ford and GM management has not shown a clear grasp of those problems.
I am not investing my son's college money in their bonds.