Those incredible market valuations for Internet companies are no longer mere curiosities to auto executives. America Online, the Internet high-flier that plans to buy US media giant Time Warner, has a stock market worth greater than General Motors and Ford Motor Co. combined. You could almost squeeze in DaimlerChrysler, too.
All three automakers are valued less than Yahoo!, the Internet portal that barely existed when the cars that debuted at the Detroit auto show this month went into development.
There may be a lesson or two in all this for the auto industry. For instance, carmakers might be more valuable if they sold all their assets and kept only the brands. AOL and Yahoo! got where they are through relentless brand-building.
But here's a thought. Might AOL, Yahoo! or some other Internet wonder be ready to use some of its wealth to get into the car business?
Morgan Stanley Dean Witter analyst Stephen Girsky was asked at the recent Automotive News World Congress whether General Motors - the world's largest industrial company - could be targeted. 'It is improbable,' Girsky said, 'because GM has a great poison pill. Its car business.'
That's true and it says something about the lack of investor regard for the auto industry. But the car business still churns out lots of cash - more cash than any other industry in the world, more cash than the online world could ever dream of. Unfortunately it has been around for more than 100 years. Investors aren't excited about a business with few surprises left. What drives the unbelievable Internet values is the fact that the opportunities for web businesses seem boundless.
But if the Internet kids are really smarter than the rest of us they know investors will someday sour on their stocks. Not because the companies won't someday become hugely profitable (though most won't), but because they will someday be predictable - and investors will lose interest. The web companies will never be richer than they are now - even when they are making money. Internet giants will crave assets as they get older. So why not buy brick and mortar while they can? Why shouldn't one of these crazily valuable web giants strike now - and buy a car company?
They can't continue to live life on the edge - gaining and losing 20 percent of their market value in a single day. AOL's takeover of Time Warner is no sure thing because by the time the deal closes AOL may be worth only half of what it is now. Things are that uncertain in the wacky world of web stocks.
There is nothing wacky about car company stocks. For investors, that's the problem. Where's the fun and profit? But if Amazon.com's Jeff Bezos is really worth more than BMW's Quandt family - and you have to check Amazon's share price on the hour to know if that remains true - he probably still envies the Quandts. The BMW owners worry about fluctuations in the British pound that undermine their Rover investment. But sterling doesn't shift by 15 to 20 percent a day like Bezos' wealth often does.
So Bezos-types might want to buy into the real world while they have the chance. They could get a media company or a retail chain or a cruise line. Or they might fancy a big, dumb manufacturing company.
And if they can afford it why not make it a carmaker? Where better to find Internet users than in an automobile? The arrival of voice-activated telematics will make in-car web use as easy as listening to the radio.
Radio programmers value their drive-time audiences above all. Of course, radio stations don't buy car companies to gain listeners. And that wouldn't be the point for Internet companies, either.
There is simply no business like the car business - no consumer industry that sells mass volumes at such high prices year after year. Nothing comes close. Nothing ever will.
And boring predictability may be just what investors need as the pace of change accelerates in the new century. Compared with technology companies, carmakers are big immovable objects with assets that no other industry will ever have. The price of entry is prohibitive. There has been no successful mainstream auto manufacturing start-up since shortly after World War II.
The auto business is cyclical. But the definition of cyclical is that your company and your industry bounce back from hard times. Some of the hottest new business sectors and high-flying technology companies are anti-cyclical. Once down they will stay down.
If they are really clever, the Internet moguls will look hard at the auto industry. But Girsky is probably right. No one with the resources will give a thought to spending hard-earned market capital on an automaker. And it will be their loss.
