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Unspeaked
Nov 10, 2008, 09:25 AM
Continuing the struggles in the auto industry, GM lost nearly $800million in market cap this morning as it was downgraded to sell from hold, with a target price of zero.

Analysts believe government intervention is inevitable and shareholder return will be nothing.

LINK (http://www.marketwatch.com/news/story/deutsche-bank-cuts-gm-sell/story.aspx?guid=%7BCAFEF63F%2D017D%2D42E2%2D874A%2D14146A6D20A5%7D)


Deutsche Bank sees GM shares as likely worthless
Automotive giant may have trouble funding past December, broker warns

By Simon Kennedy, MarketWatch

LONDON (MarketWatch) -- Shares of General Motors Corp. got downgraded to sell from hold and were labeled Monday as likely to be worthless by Deutsche Bank, which said the car maker may not be able to fund its U.S. business past December without government intervention.

GM's shares, part of the Dow Jones Industrial Average, dropped 17% to $3.62 in early action, continuing their recent retreat.

Deutsche Bank analyst Rod Lache said in a note to clients that he believes the government will be compelled to intervene to shore up Detroit-based GM through a capital infusion or loan.

Deutsche Bank also maintained its rating on Ford Motor Co. at hold.

If GM manages to avoid bankruptcy, equity shareholders are unlikely to get anything back, Lache said in slashing his target price for the shares to nil from $4.

"Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the U.S. economy," the note said.

"As part of GM's restructuring, we are also convinced that a large number of stakeholders who are senior to GM's equity will have to settle for pennies on the dollar," it added.

A report by the Center for Automotive Research last week estimated that 3 million jobs could be lost in the first year if all three major Detroit manufacturers were to halt U.S. production.

In addition, the economy could lose $156 billion over three years through lost wages as well as lower receipts from social security and income taxes, according to Sean McAlinden, the center's chief economist.

"Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like," said Lache.

He estimated the U.S. may have to provide GM with at least $10 billion in loans to keep it afloat through 2010 and as much as $25 billion to fund the company's cash burn and restructuring.

As for Ford, Deutsche Bank said the company still has the potential to restructure without falling into bankruptcy, again possibly on the receiving end of government assistance.
If Ford can avoid impairments over the next year or two, it may be able to boost its market share from the inevitable shrinking of GM and also benefit from more competitive labor costs.

Simon Kennedy is the City correspondent for MarketWatch in London.

P-Worm
Nov 10, 2008, 01:14 PM
Wow. That is one serious downgrade.

P-Worm

bassproguy07
Nov 10, 2008, 01:21 PM
I really love all things Chevy, and Pontiac....Theyre muscle cars are among the greatest of all time. We are finally seeing them return to the MUSCLE era and now they might go under?? I will seriously cry if this becomes the downfall of american muscle, because we know damn well ford cant make a decent muscle car and hasnt since the 80s. and dodges version of re creating the charger was a definate fail on the looks factor. I must say the challenger is an amazing piece of machinery

bradl
Nov 10, 2008, 01:30 PM
I really love all things Chevy, and Pontiac....Theyre muscle cars are among the greatest of all time. We are finally seeing them return to the MUSCLE era and now they might go under?? I will seriously cry if this becomes the downfall of american muscle, because we know damn well ford cant make a decent mustang and hasnt since the 80s.

It already is the downfall of it. In fact, while they listened to the demand of American buyers and built bigger cars/trucks, they should have easily seen the writing on the wall for which direction to head, in terms of innovation. Case in point: compare gas prices for a given day between April 1998 and April 2008, then from April '08 to now for a given city. Do the Big 3 (GM, Ford, Chrysler) honestly think that any person is going to want to buy a bigger car that consumes more fuel with gas prices on the rise each one of those years (granted, it's on a downward turn now, but in April of this year, it was at least $4.65/gallon in CA), and those oil companies taking in outlandish profits? It's almost as if they were getting fleeced secretly while the consumer was getting fleeced publicly. If they had started their innovation back in 2002 like Toyota and others had, they honestly would be in a better situation than now (but then again, anything outside of liquidation is better than what they're in now).

BL.

Sdashiki
Nov 10, 2008, 01:47 PM
Free market? :rolleyes: The people have spoken. Your cars sucked for far too long.

Unspeaked
Nov 10, 2008, 02:02 PM
Free market? :rolleyes: The people have spoken. Your cars sucked for far too long.

Wait a minute - if the GM cards made in Mexico are ours, what's the make all the Toyotas manufactured in the United States?

Kamera RAWr
Nov 10, 2008, 02:12 PM
Well, I suppose thats what the big 3 get for making crap cars for so long. Yes, they've made a few nice cars (of course thats just my opinion), but mostly garbage. The cars have been pretty bad as fuel efficiency is concerned and cheaply made. I haven't seen the interior of the new Corvettes and while I like Corvettes, I remember looking at the last generation some years back with my dad and I recall it being very cheap looking and plastic like. Same goes with last generation Firebirds and Camaros. While I do personally like them on the exterior, the interior is utter trash. They really were made to be disposable.

If I look at just my work place and what they drive... a majority of people don't drive American made vehicles. The ones that do are mostly Ford, Chevy or Dodge trucks. In fact, I'd say the majority of trucks are American, but cars dominate and most are Asian. Awhile back I asked some people about this for the hell of it. Many people there just recognize American cars are the garbage they are.

I'd like to hope that the American automotive industry won't go completely under, but that may be inevitable. Its very important for us to keep a good manufacturing base. We really do need to keep more of those jobs here and the auto industry is a big one. What will happen if we're no longer able to manufacture our own things? We're already far too dependent on China and others.

Music_Producer
Nov 10, 2008, 03:29 PM
They could have been #1 had they kept their electric car in production (from 10 or so years ago) Instead they scrapped those and destroyed them.. idiots.

Kwill
Nov 10, 2008, 04:03 PM
I wonder how much stock I can purchase at nil dollars. Odds are stock is bound to multiply tenfold over the next few years.

theBB
Nov 10, 2008, 04:16 PM
I'd like to hope that the American automotive industry won't go completely under, but that may be inevitable. Its very important for us to keep a good manufacturing base. We really do need to keep more of those jobs here and the auto industry is a big one. What will happen if we're no longer able to manufacture our own things? We're already far too dependent on China and others.
I would not worry about it too much. Even if they declare bankruptcy, they will still be designing and manufacturing cars and trucks. They may manufacture fewer and reduce the number of brands, but considering they cannot sell all of the ones they currently do, that is not so bad. Bankruptcy will allow them to offload the pension and health care costs to taxpayers and wipe some of their commercial debt. Any yapping about government help is the last ditch efforts of shareholders from losing money, rather than trying to help the workers. A lot of airlines declared bankruptcy, but we still have more than enough planes flying. I am glad the government did not interfere then and I hope it will interfere now.

Besides, this is a large auto market, there will be tons of car factories in the US, even if they have Japanese or Korean brand names on them.

mkrishnan
Nov 10, 2008, 04:23 PM
I wonder how much stock I can purchase at nil dollars. Odds are stock is bound to multiply tenfold over the next few years.

10x0=0. ;)

(Seriously, I do wonder at the likelihood that the end result will truly be that GM's common shares become completely valueless based on the terms of whatever form of bailout they receive, either private or public).

GSMiller
Nov 10, 2008, 06:52 PM
How are you supposed to sell something if it's value is zero :confused:

Schtumple
Nov 10, 2008, 09:46 PM
How are you supposed to sell something if it's value is zero :confused:

Isn't that the point...?

valdore
Nov 10, 2008, 09:54 PM
Well, I suppose thats what the big 3 get for making crap cars for so long. Yes, they've made a few nice cars (of course thats just my opinion), but mostly garbage. The cars have been pretty bad as fuel efficiency is concerned and cheaply made. I haven't seen the interior of the new Corvettes and while I like Corvettes, I remember looking at the last generation some years back with my dad and I recall it being very cheap looking and plastic like. Same goes with last generation Firebirds and Camaros. While I do personally like them on the exterior, the interior is utter trash. They really were made to be disposable.

If I look at just my work place and what they drive... a majority of people don't drive American made vehicles. The ones that do are mostly Ford, Chevy or Dodge trucks. In fact, I'd say the majority of trucks are American, but cars dominate and most are Asian. Awhile back I asked some people about this for the hell of it. Many people there just recognize American cars are the garbage they are.

I'd like to hope that the American automotive industry won't go completely under, but that may be inevitable. Its very important for us to keep a good manufacturing base. We really do need to keep more of those jobs here and the auto industry is a big one. What will happen if we're no longer able to manufacture our own things? We're already far too dependent on China and others.

A lot of the view that the domestics are garbage comes from outdated information. Sure it was true up to a few years ago, but they've done well improving.

I bought a new '05 Ford Focus three and a half years ago - not a thing gone wrong with it, no recalls, no repairs, no warranty work needed. That never would have happened ten or twenty years ago with a Ford automobile.

yg17
Nov 10, 2008, 10:41 PM
I really love all things Chevy, and Pontiac....Theyre muscle cars are among the greatest of all time. We are finally seeing them return to the MUSCLE era and now they might go under?? I will seriously cry if this becomes the downfall of american muscle, because we know damn well ford cant make a decent muscle car and hasnt since the 80s. and dodges version of re creating the charger was a definate fail on the looks factor. I must say the challenger is an amazing piece of machinery

Muscle cars are the downfall of GM. Maybe if they stopped pissing away money into things like the new Camaro, GTO and Corvette ZR1 and made a cheap, reliable, economical car instead, they wouldn't be in this situation. But when gas was at 4 bucks a gallon, who wants a car that gets 20 miles to the gallon?

jbernie
Nov 10, 2008, 10:47 PM
They could have been #1 had they kept their electric car in production (from 10 or so years ago) Instead they scrapped those and destroyed them.. idiots.

more uninformed commentary from the peanut gallery.

The EV1 was electric only, limited range, no simple way to recharge, carried two people, and a retail price of $80,000 if it was ever offered for sale, when gas was costing around $1 per gallon, after spending billions of dollars in R&D they couldn't jusify it.

The Volt is powered by electricity only using the internal combustion engine as a generator to create electricity so it runs at a constant RPM and does not need to rev higher to go faster or climb hills etc, the range is no different than a regular car, put in some gas and you can keep going, you do not need to park at a recharge station to be able to continue your journey, it carries 4 people, will have a retail price around $40,000 and will be offered for sale.

The Volt is the replacement for the EV1 and has come about due to advancements in technology that did not exist when the EV1 was developed. Just look at the difference in the batteries, the battery for the volt is about half the size of the EV1.


http://en.wikipedia.org/wiki/General_Motors_EV1
The Gen 1 cars got 55 to 75 miles (90 to 120 km) per charge with the Delco-manufactured lead-acid batteries, 75 to 100 miles (120-to-160 km) with the Gen 2 Panasonic lead-acid batteries, and 75 to 150 miles (120 to 240 km) per charge with Gen 2 Ovonic nickel-metal hydride batteries. Recharging took as much as eight hours for a full charge (although one could get an 80% charge in two to three hours).

The same goes for the whole opinion on here that because a vehicle is built by GM, Ford or Chrysler the quality is poor, Toyota has been far from perfect in the last 18 months, but people on here and in the media like to give them a free pass because apparently everything you do before that made you god like excuses you for a screw up now, except for the fact that the recalls affects the Tundra, Camry, Avalon, Sienna, etc, you know those mainstream bread winners for Toyota.

bassproguy07
Nov 10, 2008, 10:51 PM
I think they designed these retro muscle cars due to the fact that most of the baby boomer generation is approaching retirement, and most of the people who buy such cars are those who can afford them. I personally think the ZR1 was a waste, but they did it anyways. Kind of like ford developing the GT, didnt last long. I hope that we wont lose our american cars, but with the way the economy is it is looking like it. Its hard to compete in america when you have a lot of the foreign car companys like toyota and honda building plants in the US and giving the consumers quality for a low price. We will just have to wait and see, but I hope it is ford that goes under not GM. Where will all the hip hop stars get their escalades??

Edit: last I read, the ZR-1 gets some 26 to 30 mpg?? maybe more?? so I dont think its a matter of gas prices but a matter of car cost.

joepunk
Nov 10, 2008, 11:17 PM
more uninformed commentary from the peanut gallery.

The EV1 was electric only, limited range, no simple way to recharge, carried two people, and a retail price of $80,000 if it was ever offered for sale, when gas was costing around $1 per gallon, after spending billions of dollars in R&D they couldn't jusify it.

The Volt is the replacement for the EV1 and has come about due to advancements in technology that did not exist when the EV1 was developed. Just look at the difference in the batteries, the battery for the volt is about half the size of the EV1.

As I see it, the idea is that if GM had continued to develope their electric cars instead of scraping the entire program GM could have had a Volt like vehicle (and many more) years ago instead of as a concept/production model car that it is today.

Padraic
Nov 10, 2008, 11:52 PM
http://en.wikipedia.org/wiki/General_Motors_EV1
The Gen 1 cars got 55 to 75 miles (90 to 120 km) per charge with the Delco-manufactured lead-acid batteries, 75 to 100 miles (120-to-160 km) with the Gen 2 Panasonic lead-acid batteries, and 75 to 150 miles (120 to 240 km) per charge with Gen 2 Ovonic nickel-metal hydride batteries. Recharging took as much as eight hours for a full charge (although one could get an 80% charge in two to three hours).

As I see it, the idea is that if GM had continued to develope their electric cars instead of scraping the entire program GM could have had a Volt like vehicle (and many more) years ago instead of as a concept/production model car that it is today.

That's the way I see it too... And let me ask this, how many people here work more than 55 - 75 miles from work round trip? I never have, in fact I have a 45 minute commute one way right now and don't have a 55 - 75 mile commute. If GM had kept their original electric cars and Ford had kept their 'Blue' program and both companies had worked to make those vehicles profitable, think of where we'd be now.

SactoGuy18
Nov 11, 2008, 12:27 AM
I can see GM in North America being reduced down to three divisions:

Chevrolet--family cars plus Corvette
Cadillac--luxury cars
GMC--light trucks

They should have done this about eight years ago.

MacNut
Nov 11, 2008, 01:07 AM
Buick will be chopped.
Pontiac will be folded into Chevy.
GMC will split into light duty and Commercial.
Cadillac will stay intact.

The rest will be sold off.

I could actually see GMC sold off and run as a separate company that just makes heavy duty and rebranding the light trucks under Chevy.

I don't see Chrysler surviving. Maybe selling off the Jeep brand.


Would the government allow Ford and GM to merge?

Evangelion
Nov 11, 2008, 06:27 AM
A lot of the view that the domestics are garbage comes from outdated information. Sure it was true up to a few years ago, but they've done well improving.

I bought a new '05 Ford Focus three and a half years ago - not a thing gone wrong with it, no recalls, no repairs, no warranty work needed. That never would have happened ten or twenty years ago with a Ford automobile.

Um, Ford Focus isn't really related to Ford USA. Focus was created by Ford Europe, and it was then brought over (with some modifications) to NA.

iGary
Nov 11, 2008, 06:40 AM
Get ready for another bailout in 3... 2... 1...

Kwill
Nov 11, 2008, 08:36 AM
10x0=0. ;)
Exactly. Zero risk comes with the caveat of zero gain.

Schtumple
Nov 11, 2008, 10:19 AM
Get ready for another bailout in 3... 2... 1...

You just wait, when wall street does finally utterly crash, on all the displays in time square there will be a giant "Financial re spawn in 5, 4, 3..." :p

mkrishnan
Nov 11, 2008, 10:20 AM
You just wait, when wall street does finally utterly crash, on all the displays in time square there will be a giant "Financial re spawn in 5, 4, 3..." :p

:D

It appears your economy has unexpectedly quit. Would you like to restart it?

eRondeau
Nov 11, 2008, 10:58 AM
Actually the problem really isn't GM's cars, as ******* as they are. The problem is their future pension liabilities. A company as large as GM probably has three pensioners for every current employee, and that ratio will be going up rapidly. That means that every employee working now, has to produce enough profit to support his share of the company's current operations and management, plus his own salary, plus the pension of 3-4-5 retirees, forever. It's like a pyramid scheme and it simply isn't sustainable. Especially when pensions have been negotiated to around 80% of pre-retirement income, plus lifetime benefits. So really, don't blame GM -- they're doing the best they can against impossible odds. Blame the UAW and their blind greed, to give their members unreasonable retirement luxury at the expense of their employer's very future.

Perhaps the best thing that could happen is for the feds to say "No" and GM to go bankrupt. Sure it would decimate the economy of the world for a few years, but we'll recover. But after that, people will start earning what they deserve again -- and factory workers won't make more than doctors anymore.

Unspeaked
Nov 11, 2008, 11:14 AM
So what happens to the pensions if GM goes bankrupt?

Do the retires lose them?

What about if the government takes them over?

IJ Reilly
Nov 11, 2008, 11:43 AM
The reason the target price goes to zero is because in most bankruptcy reorganizations, shareholder equity is wiped out.

MacNut
Nov 11, 2008, 11:58 AM
and factory workers won't make more than doctors anymore.To be fair, Doctors are making out big as well at the expense of the sick.

iSee
Nov 11, 2008, 12:02 PM
There's no obligation on the government to honor the pensions, but realisticallty, we don't want to have a flood of homeless, starving and sick retirees all over the place either.

RE the contracts between the UAW and GM, you can't blame one side or the other--they both made this deal. Blaming the UAW more than GM is silly.

Also, Ford makes some great cars and so does GM (Buicks are not my cup of tea, but my in-laws have one and d*mn is it nice--blows the snot out of my wife's BMW--makes it look like a, er, Honda...which is what I drive).

I think the biggest problem the auto industry in general has is dealerships--how well can you do, long term, if the face of your company tries to scam your customers in any way possible?

But for domestic auto makers, the mistake they made, of course, was to basically bet the farm that gas prices would never go over $2/gal. Would it have killed them to hedge their bets a little? Just divert a small percentage of resources away from making bigger trucks into making a couple good smaller lines? I mean, the big-truck thing was mostly a fashion thing anyway (most of the people buying the big SUVs had little need for them) and the fashsion would have changed at some point, even if gas/oil prices hadent surged.

Kwill
Nov 13, 2008, 10:22 AM
Two insightful commentaries from Time.com:

Is General Motors Worth Saving? (http://www.time.com/time/business/article/0,8599,1858702,00.html?cnn=yes)

The 50 Worst Cars of All Time (http://www.time.com/time/specials/2007/article/0,28804,1658545_1657686,00.html)

IJ Reilly
Nov 13, 2008, 11:33 AM
Two insightful commentaries from Time.com:
The 50 Worst Cars of All Time (http://www.time.com/time/specials/2007/article/0,28804,1658545_1657686,00.html)

Very entertaining reading, this is. He managed to hit most of the low spots, though I'm surprised he managed to find only one Fiat car for his list, and no Renault cars. My favorite comment: "the Yugo had the distinct feeling of something assembled at gunpoint."

Gray-Wolf
Nov 13, 2008, 11:55 AM
The reason the target price goes to zero is because in most bankruptcy reorganizations, shareholder equity is wiped out.

Delta did the same thing. When reorganized, they started back at $20 a share. Hopefully, GM will as well.

IJ Reilly
Nov 13, 2008, 11:59 AM
Delta did the same thing. When reorganized, they started back at $20 a share. Hopefully, GM will as well.

But what happened to existing shareholder equity in that case? Probably it was wiped away, and new stock was offered. The only time I can recall existing shareholders not getting completely stiffed in a bankruptcy reorganization was when K-Mart went Chapter 11. I believe the shareholders kept some fraction of their equity that time, but they really had to gang up on the courts to get it.

Unspeaked
Nov 13, 2008, 12:11 PM
Very entertaining reading, this is. He managed to hit most of the low spots, though I'm surprised he managed to find only one Fiat car for his list, and no Renault cars. My favorite comment: "the Yugo had the distinct feeling of something assembled at gunpoint."

I agree that was a great read.

He really did rip the Yugo - I think he thought it was the worst of the lot.

leekohler
Nov 13, 2008, 12:15 PM
Get ready for another bailout in 3... 2... 1...

Yep. But either way, this is probably the end of a lot of GM car brands as others have said.

IJ Reilly
Nov 13, 2008, 12:22 PM
I agree that was a great read.

He really did rip the Yugo - I think he thought it was the worst of the lot.

Come to think of it, wasn't the Yugo actually a Fiat design?

JNB
Nov 13, 2008, 01:49 PM
Come to think of it, wasn't the Yugo actually a Fiat design?

I believe it was a copy, or homage, or just misguided Xeroxing. Most unlikely car to have been the star of a movie (Drowning Mona). I can't believed he omitted the early '70's Subarus, though.

IJ Reilly
Nov 13, 2008, 02:08 PM
I believe it was a copy, or homage, or just misguided Xeroxing. Most unlikely car to have been the star of a movie (Drowning Mona). I can't believed he omitted the early '70's Subarus, though.

Looking it up, the Yugo was based mechanically on the Fiat 128 under license from Fiat.

Thanatoast
Nov 13, 2008, 02:18 PM
Yep. But either way, this is probably the end of a lot of GM car brands as others have said.
I'll believe when I see it. Not that GM doesn't need to consolidate but each division has it's own consituency...

ChrisA
Nov 13, 2008, 02:27 PM
Wait a minute - if the GM cards made in Mexico are ours, what's the make all the Toyotas manufactured in the United States?

We own two cars. Mine is a Ford made in Mexico and my wife's is a US made Japanese car. It's it odd that Toyota can come to the US, build a factory and make money while the US company can't. It's really to bad we can't let GM fail. In the long run it would be better.

ChrisA
Nov 13, 2008, 02:40 PM
Muscle cars are the downfall of GM. Maybe if they stopped pissing away money into things like the new Camaro, GTO and Corvette ZR1 and made a cheap, reliable, economical car instead, they wouldn't be in this situation. But when gas was at 4 bucks a gallon, who wants a car that gets 20 miles to the gallon?

You got it slightly wrong. The Camaro, GTO and Corvette ZR1 were a "cheap, reliable, economical car" that sold at a very high price. They made a ton of money off those cars.

The problem is that it cost not much different to make a Toyota Colloa as a Corvette or an SUV. But peole for whatever reason are willing to pay more for the Corvette.

I own a Ford ranger pickup. I bought it brand new for $12,000 (in 1993) and the time I parked it next to a Ford Explorer. I opened up the hood and doors and compared parts. ABSOLUTLY IDENTICAL from the front seat forward. Every eletrical cable and bolt and screw was the same. Under the truck ame story from tail pipe to bumber. The differentce was the Ranger has a truck bed in back and the explorer had seats. BUT,... the explorer cost over twice as much money. Damned expensive seats, I say. You don't have to think hard to see why Ford liked to sell SUVs

IJ Reilly
Nov 13, 2008, 03:15 PM
We own two cars. Mine is a Ford made in Mexico and my wife's is a US made Japanese car. It's it odd that Toyota can come to the US, build a factory and make money while the US company can't. It's really to bad we can't let GM fail. In the long run it would be better.

One of the biggest differences between the US auto makers and the overseas manufacturers is that the US companies are burdened by huge health care costs, not just for their current employees, but for their retired employees as well. So even if they make a good product (which on occasion they have done) it will end up costing more than the import. GM may "fail" in the sense that bankruptcy and reorganization seems quite likely at this point.

dXTC
Nov 13, 2008, 03:47 PM
I know exactly what GM needs to do to return quickly to profitability:
Reintroduce the Pontiac Aztek.

.

...snerk.

...snicker...

...bwaaaHAHAHAHAHAHAAAAAA!!!!

Seriously, though...

I can see GM in North America being reduced down to three divisions:

Chevrolet--family cars plus Corvette
Cadillac--luxury cars
GMC--light trucks

They should have done this about eight years ago.

Agreed. Buick's well overstayed its welcome; it should've exited alongside Oldsmobile, but such a move would have looked really bad to shareholders at the time.

Much of Pontiac could be folded into Chevrolet, as "sport"-branded versions of their Chevy counterparts, and the S-10 and Equinox can be moved to GMC. Either the Yukon or Suburban could be ditched. The Uplander can go bye-bye as well; let Chrysler have the fading minivan market to itself.** Cadillac can absorb one or two Buick models as entry-level models.

I also envision Cadillac taking the Saturn Sky for itself (adding a little Caddy bling, of course) and the rest of the Saturn brand sold off. The Sky is the only GM product that seems interesting at the moment, in my insignificant opinion.

**P.S. Don't get me started on Chrysler's current minivan lineup-- they're downright fugly now.

Dustman
Nov 13, 2008, 03:53 PM
In my opinion, GM's cars have always been worth $0.00.

GorillaPaws
Nov 13, 2008, 10:34 PM
I just saw a ton of ads for the new Hummer truck on tonight's college football game. Not only is investing tons of R&D into making massive SUV's a dumb move right now, dumping advertising dollars into promoting something nobody wants to buy may also be part of the problem with GM's strategy.

I've got an idea... how about using those dollars to catch-up on fuel efficiency like all of your foreign competitors have been doing for the past decade. Oh, and you can take the budget you've been spending on lobbying the government against higher fuel standards and put that into your fuel economy R&D too. If GM gets a bailout of some kind, every us taxpayer should get to kick GM's CEO in the nuts. Not seeing gas prices rise is like getting run over by NASA's crawler transporter that has a top speed of 1/mph fully-loaded (and may be the only vehicle on the earth to get worse fuel economy than the Hummer).

http://upload.wikimedia.org/wikipedia/commons/6/6d/Crawler-Transporter.jpg

mountainman0
Dec 7, 2008, 01:50 AM
GM needs to be saved. It is through GM that we, as the United States, have begun more responsible development of cleaner fuel burning vehicles. SAVE CHEVY!!

ProwlingTiger
Dec 7, 2008, 01:58 AM
Even though I'm a Ford guy, something must be done.

However, at what point should the government decide what businesses deserve help and which don't? I like a capitalistic, free-market society, and if a business happens to fall through, well, that's the risk investors take.

I still don't know whether to make heads or tails of this, but I feel if we look at the Great Depression (history repeats itself) we can properly determine the resolution to this mess. If Obama borrows a page from FDR, we may be on the right track.

BornAgainMac
Dec 7, 2008, 05:26 AM
If all 3 companies go away it might be a good thing too. Wait a few years and think about what they did to get that way and start a new company and start over with a new name. It could be the greatest thing ever.

nick9191
Dec 7, 2008, 05:46 AM
:D

It appears your economy has unexpectedly quit. Would you like to restart it?

Economy will die in...

...About a minute.

Schtumple
Dec 7, 2008, 06:30 AM
GM needs to be saved. It is through GM that we, as the United States, have begun more responsible development of cleaner fuel burning vehicles. SAVE CHEVY!!

I thought the reason GM needed saving was because they cba to invest in cleaner fuel R&D/better MPG, and that's why they're sinking...

mkrishnan
Dec 7, 2008, 07:22 AM
I thought the reason GM needed saving was because they cba to invest in cleaner fuel R&D/better MPG, and that's why they're sinking...

Yeah, right. I don't think any reasonable analysis of their balance sheet would justify this logic. Unless I completely misunderstand what "they cba to invest" means....

GM did start investing in clean fuel and high MPG, quite a long time ago, but they've never invested in it in a serious way. That's why they keep showcasing fuel-efficient cars that they'll sell in five or ten years and meanwhile everyone else releases them.

That's why they sell 20MPG hybrids of giant SUVs that, at this point, hardly anyone even wants anymore anyways, and make a big deal about their highly fuel efficient 30MPG sedans when their competitors normal gasoline cars made 36 or 38 or even 40MPG without any really special technology years ago. If GM had been serious in its investment in high fuel efficiency, don't ask why they don't have a Prius on the road. Ask why the Cobalt or the Saturn version of the Astra, released into the middle of this quagmire, get 25-30% worse fuel efficiency than same-segment Hondas.

If this is in part to blame for GM's fiscal blows, then it's just another sign of the general mismanagement at GM and nothing specific to the environmental issue. This is the same confused product strategy that builds a pretty good car and then buries it on page 78 of the product catalog after endless pages of crap, and wonders why no one notices it. This is the same confused product strategy that allowed them to not only let their traditional brands founder in brand identity but could even take in a relatively iconic (if quirky) brand like Saab and then even turn its two car lineup into a hodgepodge of oxymorons.

william sire
Dec 7, 2008, 07:24 AM
Well it looks like we will finally see it happen. What should have happened all along. If a business fails to manage itself properly it should fail. Afterwards they'll be poorer but wiser.

quagmire
Dec 7, 2008, 10:29 AM
Yeah, right. I don't think any reasonable analysis of their balance sheet would justify this logic. Unless I completely misunderstand what "they cba to invest" means....

GM did start investing in clean fuel and high MPG, quite a long time ago, but they've never invested in it in a serious way. That's why they keep showcasing fuel-efficient cars that they'll sell in five or ten years and meanwhile everyone else releases them.

That's why they sell 20MPG hybrids of giant SUVs that, at this point, hardly anyone even wants anymore anyways, and make a big deal about their highly fuel efficient 30MPG sedans when their competitors normal gasoline cars made 36 or 38 or even 40MPG without any really special technology years ago. If GM had been serious in its investment in high fuel efficiency, don't ask why they don't have a Prius on the road. Ask why the Cobalt or the Saturn version of the Astra, released into the middle of this quagmire, get 25-30% worse fuel efficiency than same-segment Hondas.

If this is in part to blame for GM's fiscal blows, then it's just another sign of the general mismanagement at GM and nothing specific to the environmental issue. This is the same confused product strategy that builds a pretty good car and then buries it on page 78 of the product catalog after endless pages of crap, and wonders why no one notices it. This is the same confused product strategy that allowed them to not only let their traditional brands founder in brand identity but could even take in a relatively iconic (if quirky) brand like Saab and then even turn its two car lineup into a hodgepodge of oxymorons.

Next time do some research, the Cobalt is VERY competitive in fuel economy.

http://triton.imageshack.us/Himg255/scaled.php?server=255&filename=picture3ng6.png&xsize=578&ysize=480

I will give you the Astra, but besides FE it is a pretty good car.

To further help destroy the perception of American cars not being competitive with the Japanese mainstream, here the the Malibu vs Camry vs Accord.

http://triton.imageshack.us/Himg150/scaled.php?server=150&filename=picture1nf0.png&xsize=578&ysize=480

mkrishnan
Dec 7, 2008, 10:44 AM
Next time do some research, the Cobalt is VERY competitive in fuel economy.

Sorry... I was talking about the Cobalt when it was originally released... in 2005, when it was initially released, the best option in terms of fuel efficiency was 25/34 (under the old formula). In comparison the most fuel efficient non-hybrid Civic in 2005 was 36/44 (the HX).

That was also the time period when GM was heavily advertising the fuel efficiency of their 30MPG cars...

You're right, though, that the newest revision of the Cobalt is more worthy in that aspect. That's something they could (and should) take more credit for.

On the other hand, in the intervening three years, while the Cobalt's fuel efficiency has improved substantially, where is the hybrid small sedan? And I'd still like to hear what the plan is for producing and delivering the extra plug-point electricity that a transition to plug-in hybrids will require.

quagmire
Dec 7, 2008, 10:50 AM
Sorry... I was talking about the Cobalt when it was originally released... in 2005, when it was initially released, the best option in terms of fuel efficiency was 25/34 (under the old formula). In comparison the most fuel efficient non-hybrid Civic in 2005 was 36/44 (the HX).

That was also the time period when GM was heavily advertising the fuel efficiency of their 30MPG cars...

You're right, though, that the newest revision of the Cobalt is more worthy in that aspect. That's something they could (and should) take more credit for.

On the other hand, in the intervening three years, while the Cobalt's fuel efficiency has improved substantially, where is the hybrid small sedan? And I'd still like to hear what the plan is for producing and delivering the extra plug-point electricity that a transition to plug-in hybrids will require.

Yeah, I went back and looked up the initial FE numbers for the Cobalt when it was released. Damn GM sucked back then. At least they have improved it while the Japanese got worse....

GM's hybrid cars are certainly lacking. The hybrid Malibu is a joke. Gets only 1 MPG better then the 4 banger/6 speed auto combo. The Volt is looking to be a class leading plug in hybrid, but it will cost a pretty penny unfortunately....

IJ Reilly
Dec 7, 2008, 11:02 AM
A very interesting article about GM's overseas operations, which are actually profitable and growing.

General Motors' strength is overseas

As the U.S. automaker's revenue has fallen in the U.S., forcing it to turn to the government for a bailout, international operations have remained profitable.

By Ken Bensinger

December 7, 2008

Nearly three-fifths of the employees at General Motors Corp. work for a company that makes cars that are admired, popular and profitable.

They just don't work in the United States.

GM has a bigger presence outside the U.S. than in it, employs more people in other countries than here, and actually makes money selling cars everywhere from Sao Paulo to Shanghai. Its U.S. revenue has sunk 24% in the last three full years, but in the rest of the world, GM can boast a 28% increase.

Now, as lawmakers mull whether to provide billions of dollars in loans to keep the Detroit-based company from collapse, GM's global reach has become in many ways its most overlooked asset and a key to its ultimate survival.

"A major argument for keeping GM out of bankruptcy is the strength of its foreign footprint," said Kimberly Rodriguez, a partner at accounting and management consulting firm Grant Thornton, which works with auto companies.

Yet because of the deeply intertwined nature of GM's global operations, if the company goes down here, she said, "there will certainly be problems for the company worldwide."

Company officials declined to discuss what would happen in the event of a bankruptcy. GM's foreign units are separate corporate entities, which means they would probably be shielded from a U.S. filing and could continue to operate without concerns of a U.S. court seizing their assets, for example.

Still, if the automaker's U.S. operations fail, as GM says they will without an immediate cash infusion, it could set off a chain reaction that would not only put U.S. parts suppliers out of business, but could throw off production schedules overseas and freeze up GM's foreign plants.

That, in turn, could have a ripple effect on its overseas competitors.

"I am very concerned about GM because we share suppliers with [GM subsidiary] Opel," said Klaus Berning, head of sales and marketing for Porsche, which produces all of its vehicles in Europe.

GM says it has been the world's top-selling carmaker for the last 77 years, edging out rival Toyota Motor Corp. last year by a narrow margin. But where GM sells the bulk of its cars has changed dramatically.

Through the first nine months of this year, 4.3 million of the 6.7 million cars and trucks GM sold -- nearly two-thirds -- were purchased outside this country.

And of the company's 252,000 employees, 152,000 work abroad, building Chevys, Opels, Vauxhalls, Holdens and Buicks in 33 countries.

"Those overseas businesses over the last several years almost uniformly have been quite profitable, and they have, in almost every case, been able to send dividends back to help us address funding issues in the U.S," GM Chairman and Chief Executive Rick Wagoner told members of the House Financial Services committee Friday, lobbying for a favorable vote this week on an aid plan.

Yet because the U.S. continues to be GM's largest single market in terms of revenue, with $115 billion in sales last year, and because it was founded by William Durant in Flint, Mich., more than a century ago, this truly global car company is still looked upon as a quintessentially American one.

...

http://www.latimes.com/business/la-fi-gmworld7-2008dec07,0,5011709.story

MacGeek7
Dec 7, 2008, 11:05 AM
I'm tired of the U.S. government performing bailouts when it has no right to do so. These companies need to go bankrupt so that it allows other companies that are doing something right to continue to make progress and work their way up.

IJ Reilly
Dec 7, 2008, 11:27 AM
I'm certainly not a fan of using taxpayer's dollars to rescue corporations, if only because it gets the government in the business of choosing winners and losers in the economy. But the reality is, government does this all the time with tax policy, and hardly anyone flinches. In this case the government does need to step up, or we're really going to be in a world of hurt. It's not about GM, Chrysler or Ford at this point -- it's about everyone else.

rdowns
Dec 7, 2008, 11:33 AM
I'm certainly not a fan of using taxpayer's dollars to rescue corporations, if only because it gets the government in the business of choosing winners and losers in the economy. But the reality is, government does this all the time with tax policy, and hardly anyone flinches. In this case the government does need to step up, or we're really going to be in a world of hurt. It's not about GM, Chrysler or Ford at this point -- it's about everyone else.

I agree. I'm no fan of bailouts (these are loans actually) but if GM, or to a lesser extent, Chrysler were to fail, the impact on the economy would be horrific.

ProwlingTiger
Dec 7, 2008, 11:34 AM
I'm certainly not a fan of using taxpayer's dollars to rescue corporations, if only because it gets the government in the business of choosing winners and losers in the economy. But the reality is, government does this all the time with tax policy, and hardly anyone flinches. In this case the government does need to step up, or we're really going to be in a world of hurt. It's not about GM, Chrysler or Ford at this point -- it's about everyone else.

Exactly: Its not about GM Chrysler or Ford. So what if they go belly up. We have Honda, Toyota, etc. Sorry, I know its tough.

MacGeek hit the nail on the head. Let companies that are profitable survive, its called capitalism.

IJ Reilly
Dec 7, 2008, 11:38 AM
Exactly: Its not about GM Chrysler or Ford. So what if they go belly up. We have Honda, Toyota, etc. Sorry, I know its tough.

MacGeek hit the nail on the head. Let companies that are profitable survive, its called capitalism.

I know what it's called. I also know what it will be called to have several hundreds of thousands more jobs lost in this economy.

mkrishnan
Dec 7, 2008, 11:39 AM
Yeah, the downstream impacts are phenomenal...

The Times brought up the interesting angle on the impact on healthcare today (http://www.nytimes.com/2008/12/07/us/07uninsured.html). There are so many other profound consequences to hundreds of thousands of jobs being lost, and hundreds and hundreds of billions being taken out of the GDP.

My bitching is aimed more squarely at using this opportunity to induce long term reform among these three. I do want to see layoffs. Executive layoffs. Particularly at GM, there are a large number of completely useless executive level employees. They've got to go -- not because they're starving the company in terms of their labor costs, but because they're starving the company in terms of their utter inefficacy.

I don't completely disagree with the contribution that higher labor costs play in the Big Three difficulties. On the other hand, however, ten years ago, Ford was making billions in profit, largely on US sales, because they had the pulse of the market and they were making hot products. Granted, those hot products were bad for the environment, but they did evolve because of where the consumer was and not because Ford had some prestanding obsession with trucks. Ford stopped paying attention to customers right before they stopped making money. GM has never understood their customers. And Chrysler... /facepalm.

So I want to see changes that make the Big Three consumer focused again. And I want to see changes that put them on the long-term road to recovery. I sympathize with the labor cost issue, but I also don't think it does any great service to our country to continue to migrate $30/hr UAW jobs into $18/hr non-union transplant jobs, or to write off our retirees because they become an inconvenience. We need a national plan for healthcare, and that will help with this, but the core of the turnaround strategy for the Big Three absolutely has to be consumer and product focused and not cost-cutting focused. Cost-cutting -- trying to solve this just by attacking the labor disadvantage or supply chain inefficiency -- is exactly the thing that has prolonged the death of these companies over the last decade. It has not helped them turn themselves around.

So I want to see a bailout, but I want it to be pretty brutal with the auto industry executives. They can go find a new line of work. I want to see the Big Three become great again. Without them.

zap2
Dec 7, 2008, 11:42 AM
Exactly: Its not about GM Chrysler or Ford. So what if they go belly up. We have Honda, Toyota, etc. Sorry, I know its tough.

MacGeek hit the nail on the head. Let companies that are profitable survive, its called capitalism.

Its not about the companies, it about the people working for them, and its about the hit our economy will take with the lose of all these jobs. People will be broke, more companies will close(because less people will have money to spend), and the government will have to help more people out.

Bailout the big 3 is the cheapest and quickest way to fix out economy. We just need to make sure the money we give these companies has enough strings on it so we can be sure the big 3 spend it wisely and make good cars

IJ Reilly
Dec 7, 2008, 11:47 AM
Yup, health care costs are one of the major reasons why the Big Three moved most of their domestic assembly to Canada. I've been saying for years now that we'd get universal health care in the US when the big corporations demanded it. And lo and behold, that is precisely what's happening now.

I've gone back and forth on whether the government should rescue the automakers. A lot of their troubles are self-made (though a number were beyond their control). Philosophically I'm against it -- but this last employment report made up my mind in the other direction. It's the better of the bad options.

Dont Hurt Me
Dec 7, 2008, 11:54 AM
Its a tough sale saying we should bail out these bums. Look at all the stupid stuff they do?
I couldnt help myself today and went to look at a new Challenger Base S.E. Model. The dealer has the gull to slap $4000 on top of the price as a " market adjustment":eek: In other words lets just be a greedy bastard and ask 4 more grand then the car is worth. Chrysler scratches its head and wonders why it cant sell cars. D.A.s. Do these guys really deserve a bailout?

quagmire
Dec 7, 2008, 11:55 AM
Exactly: Its not about GM Chrysler or Ford. So what if they go belly up. We have Honda, Toyota, etc. Sorry, I know its tough.

MacGeek hit the nail on the head. Let companies that are profitable survive, its called capitalism.

And if capitalism wins this case, it will further destroy this country's economy. It's not just about the people who work for the Big 3 losing their jobs, it's also the suppliers, etc. Sticking to the 100% free market, 100% capitalism, 100% anything will not work. There needs to be regulations, there needs to be some protectionism of ones industries, etc.

Don't hurt Me: Please realize the dealers are separate from the manufactures.

rdowns
Dec 7, 2008, 12:11 PM
Its a tough sale saying we should bail out these bums. Look at all the stupid stuff they do?
I couldnt help myself today and went to look at a new Challenger Base S.E. Model. The dealer has the gull to slap $4000 on top of the price as a " market adjustment":eek: In other words lets just be a greedy bastard and ask 4 more grand then the car is worth. Chrysler scratches its head and wonders why it cant sell cars. D.A.s. Do these guys really deserve a bailout?


Dealers are not the manufacturers. In fact, dealers are hurting big time- thy can't get credit to finance their inventory and consumers can't get credit to buy/lease cars. We're in a vicious cycle here. Effing banks that took bailout money are still hoarding cash.

rdowns
Dec 7, 2008, 12:13 PM
Exactly: Its not about GM Chrysler or Ford. So what if they go belly up. We have Honda, Toyota, etc. Sorry, I know its tough.

MacGeek hit the nail on the head. Let companies that are profitable survive, its called capitalism.

It would be remiss if people didn't know that we are subsidizing the Japanese manufacturers with US plants to the tune of hundreds of million of dollars in tax incentives.

Dont Hurt Me
Dec 7, 2008, 12:17 PM
Jacking up prices isnt going to help the manufacturers the dealers nor the banks. There is so much blame to spread around its a wonder they are in business, greedy CEO's and executives with golden parachutes, the greedy union doing sloppy work and getting paid when not working, greedy dealerships and greedy banks. GREED by everyone in involved.

Its why the taxpayers are bailing out wall street. Greed with no checks and balances.

mkrishnan
Dec 7, 2008, 12:23 PM
Its why the taxpayers are bailing out wall street. Greed with no checks and balances.

The alternative you offer, in contrast, is like Nero playing his fiddle and watching Rome burn. Of course it feels good to say, "Screw you, greedy capitalists, burn in Hell." What exactly, however, is the historical precedent that allows you (or any of us) to predict what the consequences of this will be? Where else can you point in history when the government of a large nation with a dominant portion of the world economy can walk away from bedrock industries and survive as a nation?

takao
Dec 7, 2008, 12:46 PM
and how long would this current talked about 17 billion bailout/credit last ? if you are lucky end of march ... .. how is this supposed to help if they (chrysler + Gm) need 11 billion in december to make it until january


don't forget that the other car manufacturers aren't sleeping either and quite a bit of them have plenty of steam to pull through a bad year with lots of rebates
just today on TV they estimated that next year prices for cars in europe will be around 10-15% less than this year (which was a rebate battle to begin with)

Dont Hurt Me
Dec 7, 2008, 01:54 PM
We allways here about free markets, let the market decide etc,,, what happened to that one? Gm could have been building better small cars since the 80s and they choose not to. Bushco just a few years back was giving big tax breaks to companys buying the bigger SUVS. Congress OK's trade deals like letting Korea sell 600,000 cars here and they only allow 5,000 U.S. made cars. Its a srcew job and the U.S. tax payer/US worker is the pivot man constantly.

IJ Reilly
Dec 7, 2008, 02:42 PM
Nobody "deserves" a bailout. The banks that got one didn't deserve it -- they got themselves in trouble, even more so than the automakers. So what are we supposed to do, watch one major economic institution after another fail? Then when we're all living in cardboard boxes, we can say "they got what they deserved?" No thanks. The truth is, we'll get what they deserved.

takao
Dec 7, 2008, 04:16 PM
Nobody "deserves" a bailout. The banks that got one didn't deserve it -- they got themselves in trouble, even more so than the automakers. So what are we supposed to do, watch one major economic institution after another fail? Then when we're all living in cardboard boxes, we can say "they got what they deserved?" No thanks. The truth is, we'll get what they deserved.

well at what sum would draw the line with the big three ? ... how exactly will this bailout give the ma competition advantage big enough to get profitable again ? against international competition which might get supportive actions from their governments as well all while starting from a better financial position in the first place ?
development of a new car plattform takes years (2-3 minimum) and even if you have a plattform already it still takes 1-2 years to come up with new models
not counting time it takes to replace factory lines and development of smaller engines

how much money will it cost you which might be much more wisely invested into infrastracture projects ?

Unspeaked
Dec 8, 2008, 12:34 PM
and how long would this current talked about 17 billion bailout/credit last ? if you are lucky end of march ... .. how is this supposed to help if they (chrysler + Gm) need 11 billion in december to make it until january

LINK (http://finance.yahoo.com/tech-ticker/article/140964/Big-Three-Bailout-15B-Just-a-Start-Whether-GM%27s-Wagoner-Stays-or-Goes?)

Big Three Bailout: $15B Just a Start Whether GM's Wagoner Stays or Goes

Congress appears very likely to throw a lifeline to the struggling automakers, but one that is highly conditional and only likely to buy them a few months.

According to multiple reports, Congress is set to provide the "Big Three" a $15 billion loan with the money coming from the previously approved $25 billion loan to help them meet fuel-efficiency standards vs. from TARP.

The loan is designed to help GM and Chrysler avoid imminent bankruptcy, and buy both the industry and Congress time to come up with a (hopefully) more comprehensive solution.

"They're going to have to restructure, and all their stakeholders are going to have to restructure," President-elect Barack Obama said on NBC's Meet the Press. "Labor, management, shareholders, creditors -- everybody's going to recognize that they have -- they do not have a sustainable business model right now."

Among issues being discussed:

Limitations on executive pay and restrictions on how any government loans could be used. Additionally, pressure is mounting on GM to remove Rick Wagoner as CEO. (Ford's Alan Mulally and Chrysler's Bob Nardelli haven't been on the job nearly as long.)

Warrant for taxpayers that are senior to existing stakeholders to ensure any Federal loans are repaid first.

The creation of a Federal oversight board led by a "car czar" and including the Secretaries of Treasury, Energy, Labor, Commerce, and Transportation plus the Environmental Protection Agency.

It's hard to say which is more frightening the idea of the auto industry being run from Washington, D.C., or that experts like Economy.com's Mark Zandi say the Big Three will utilmately need $75 billion to $125 billion in order to avoid bankruptcy.

IJ Reilly
Dec 8, 2008, 12:49 PM
well at what sum would draw the line with the big three ? ... how exactly will this bailout give the ma competition advantage big enough to get profitable again ? against international competition which might get supportive actions from their governments as well all while starting from a better financial position in the first place ?
development of a new car plattform takes years (2-3 minimum) and even if you have a plattform already it still takes 1-2 years to come up with new models
not counting time it takes to replace factory lines and development of smaller engines

how much money will it cost you which might be much more wisely invested into infrastracture projects ?

I don't really have answers to any of your questions, but I do know that it's only partly about product. The automakers would not be in such dire straits at this particular moment if not for the credit crisis and the recession. Of the three, Ford is in better shape because they started making the tough restructuring choices earlier. Chrysler, we really don't know as much about since they are privately held. The mating with Daimler was a disaster for both companies, but especially for Chrysler. Ironically, they might not be able to survive alone now. GM has been in trouble for years, if for no other reason than they are stuck with huge costs for retired employees, which only get worse as the company downsizes.

These are supposed to be loans, btw, not grants. But I do worry about how the taxpayer's interests will be protected if these companies do end up in bankruptcy.

As for the lost opportunity costs, I don't think anyone is concerning themselves about that now. It seems all of the major economic powers are prepared to print however much money it takes to revive the economy.

mkrishnan
Dec 8, 2008, 01:38 PM
I don't really have answers to any of your questions, but I do know that it's only partly about product.

I still think you're under-weighting this. Without the issues of the current economic crisis, and even perhaps if your magic wand could rid them of their longstanding financial obligations vis-a-vis labor, retirees, and vertical manufacturing, you would still be stuck with the following situation, particularly at GM and Chrysler:

- They would still be making cars and trucks that are not much wanted by consumers.

- They would be able to price them much more aggressively (maybe even as aggressively as the Koreans), but they would be talking people into buying cars they fundamentally don't want based on their discount pricing.

- As the result of that discount pricing that they would probably be pursuing to avoid loss of market share, their vehicle operations themselves would still not be that profitable.

- And they would still be losing marketshare, because they don't do good vehicles as well as the Europeans, they don't do quality as well as the Japanese, and they don't do down-market as well as the Koreans (and God help them if Tata starts selling cars in the US).

In contrast, if they made good products, they would be taking the same pounding that Toyota and Honda are taking, they would be engaging in cost cutting and layoffs just like they are, and they would be on the razors edge, but they would at least be in probably survivable territory right now instead of definitely not survivable territory.

That's why I really think that they need a consumer focused revolution and not a cost-cutting one.

econoline06
Dec 9, 2008, 06:12 AM
I really love all things Chevy, and Pontiac....Theyre muscle cars are among the greatest of all time. We are finally seeing them return to the MUSCLE era and now they might go under?? I will seriously cry if this becomes the downfall of american muscle, because we know damn well ford cant make a decent muscle car and hasnt since the 80s. and dodges version of re creating the charger was a definate fail on the looks factor. I must say the challenger is an amazing piece of machinery

Return to the muscle era??? When fuel is going nowhere but UP? Wow, nice insight there dude. Yeah fuel may have dipped down temporarily here (around $1.60/gal) but it is going up, no doubt. It is simple supply and demand. Target price for next year is around $6/gal. Go enjoy your "muscle" car then.

An amazing piece of machinery IMO is a car that gets at least 40 mpg.

econoline06
Dec 9, 2008, 06:16 AM
I still think you're under-weighting this. Without the issues of the current economic crisis, and even perhaps if your magic wand could rid them of their longstanding financial obligations vis-a-vis labor, retirees, and vertical manufacturing, you would still be stuck with the following situation, particularly at GM and Chrysler:

- They would still be making cars and trucks that are not much wanted by consumers.

- They would be able to price them much more aggressively (maybe even as aggressively as the Koreans), but they would be talking people into buying cars they fundamentally don't want based on their discount pricing.

- As the result of that discount pricing that they would probably be pursuing to avoid loss of market share, their vehicle operations themselves would still not be that profitable.

- And they would still be losing marketshare, because they don't do good vehicles as well as the Europeans, they don't do quality as well as the Japanese, and they don't do down-market as well as the Koreans (and God help them if Tata starts selling cars in the US).

In contrast, if they made good products, they would be taking the same pounding that Toyota and Honda are taking, they would be engaging in cost cutting and layoffs just like they are, and they would be on the razors edge, but they would at least be in probably survivable territory right now instead of definitely not survivable territory.

That's why I really think that they need a consumer focused revolution and not a cost-cutting one.

I agree but the 'big 3' will never do those things. They have their heads too far up their tail-pipes. I like to be an informed consumer, so before I bought my Yaris I looked at Honda, Toyota, Ford and GM. The Ford and GM cars (Cobalt and Focus) were both in the area of about $17,000.....seventeen freaking thousand dollars!! For a subcompact that will last half as long as a Toyota or Honda and that get worse fuel economy...

Another thing I hate about the big 3 are their "employee only" advertisements. Way to alienate the rest of the consumers. That is what interoffice memos are for, douche bags!

quagmire
Dec 9, 2008, 07:40 AM
I agree but the 'big 3' will never do those things. They have their heads too far up their tail-pipes. I like to be an informed consumer, so before I bought my Yaris I looked at Honda, Toyota, Ford and GM. The Ford and GM cars (Cobalt and Focus) were both in the area of about $17,000.....seventeen freaking thousand dollars!! For a subcompact that will last half as long as a Toyota or Honda and that get worse fuel economy...

Another thing I hate about the big 3 are their "employee only" advertisements. Way to alienate the rest of the consumers. That is what interoffice memos are for, douche bags!

So much for being informed..... :rolleyes: The Cobalt and Focus don't compete with the Yaris. They compete with the Corolla, Civic, Sentra, etc. The Aveo is the Yaris competitor for GM( Ford doesn't have one). Though I still wouldn't fault you for choosing the Yaris or Fit over the Aveo. The interior may be decent, but exterior design is too ricey for me and fuel economy does suck.

How do you know they will last half as long?

whooleytoo
Dec 9, 2008, 09:17 AM
I'm not American - but what I would find so galling about these bailouts is this:

When these companies - through a combination of lack of foresight & poor luck - fall on hard times, the average Joe on the street has to bail them out, at great cost.

Yet just a few months ago, the price of oil was soaring, sending the price of everything upwards; travel, food etc. Everyone was hurting, yet did private industry help out? Ease off? No, the oil industry cashed in on the collective crisis with Exxon Mobil in particular generating record revenue two quarters in a row.

It seems this spirit of help & co-operation works only one way.

I'm far from a right-wing capitalist, but I think this new era of subsidising subsiding industries is a worrying one. Companies aren't rewarded for being smart, or profitable. Just "big", too big to be allowed fail.

I think they're just opening a bottomless pit which no amount of bailouts can fill.

IJ Reilly
Dec 9, 2008, 10:27 AM
I still think you're under-weighting this. Without the issues of the current economic crisis, and even perhaps if your magic wand could rid them of their longstanding financial obligations vis-a-vis labor, retirees, and vertical manufacturing, you would still be stuck with the following situation, particularly at GM and Chrysler:

I don't think I'm under-weighting these things at all. Product is what we know best, as consumers. As you can see from this thread, about 90% of the discussion is about product. Everyone who's ever had a problem with a car from a specific manufacturer or even with one of their dealers is more than ready to extrapolate this experience into a characterization of the entire company, if not the entire domestic auto industry. I'm introducing some of the controlling factors in the current crisis that aren't product-related.

As far as product is concerned, we should not forget that all of these companies were raking in the bucks just a few years ago -- and it wasn't because they were selling products consumers hated. And as the article I posted above indicates, GM may look like an unmitigated disaster to us in the US, but the company is actually profitable and growing abroad.

Also, this morning I heard that Volkswagen and Saab are asking for assistance from their governments. The US manufacturers may be the canaries in the coal mine, but that doesn't mean the problems in this industry are not widespread.

takao
Dec 9, 2008, 03:50 PM
As far as product is concerned, we should not forget that all of these companies were raking in the bucks just a few years ago -- and it wasn't because they were selling products consumers hated. And as the article I posted above indicates, GM may look like an unmitigated disaster to us in the US, but the company is actually profitable and growing abroad.

Also, this morning I heard that Volkswagen and Saab are asking for assistance from their governments. The US manufacturers may be the canaries in the coal mine, but that doesn't mean the problems in this industry are not widespread.

GM is growing abroad ? where exactly ? their korean daughter daewoo perhaps ?

also Saab asking for money ? Saab _is_ GM just like Opel ... that GM is asking for money in multiple countries is kinda giving you insight how bad the situation is for them ...

for VW i just read that it's their daughters Volkswagen Bank and Volkswagen Financial Services which wants to take a part of the german banking guarantees .. it's not like they ask for an additional deal made for them with loaning them money like GM

rdowns
Dec 9, 2008, 04:08 PM
GM is growing abroad ? where exactly ? their korean daughter daewoo perhaps ?



Link (http://www.latimes.com/news/printedition/front/la-fi-gmworld7-2008dec07,0,5602941.story)



Nearly three-fifths of the employees at General Motors Corp. work for a company that makes cars that are admired, popular and profitable.

They just don't work in the United States.

GM has a bigger presence outside the U.S. than in it, employs more people in other countries than here, and actually makes money selling cars everywhere from Sao Paulo to Shanghai. Its U.S. revenue has sunk 24% in the last three full years, but in the rest of the world, GM can boast a 28% increase.

IJ Reilly
Dec 9, 2008, 04:23 PM
GM is growing abroad ? where exactly ? their korean daughter daewoo perhaps ?

also Saab asking for money ? Saab _is_ GM just like Opel ... that GM is asking for money in multiple countries is kinda giving you insight how bad the situation is for them ...

for VW i just read that it's their daughters Volkswagen Bank and Volkswagen Financial Services which wants to take a part of the german banking guarantees .. it's not like they ask for an additional deal made for them with loaning them money like GM

http://money.cnn.com/news/newsfeeds/articles/djf500/200812031156DOWJONESDJONLINE000710_FORTUNE5.htm

Volkswagen is having problems in general it seems.

http://www.ft.com/cms/s/0/c6b92cf6-c5fd-11dd-a741-000077b07658.html

takao
Dec 9, 2008, 04:38 PM
http://money.cnn.com/news/newsfeeds/articles/djf500/200812031156DOWJONESDJONLINE000710_FORTUNE5.htm

Volkswagen is having problems in general it seems.

http://www.ft.com/cms/s/0/c6b92cf6-c5fd-11dd-a741-000077b07658.html

exactly what i said: their banking has problems and they try to squeeze money out of the government ... it's not like they have real financial problems when they are currently investing 1 billion in opening new factories in the US and their daddy Porsche just made a 13 billion euro profit thanks to their ripping of hedge fonds

and if a german car maker is in problems it's BMW

as for saab: pathetic .. how many workers are in sweden exactly ?

edit: answering for myself:
http://www.gm.com/europe/corporate/about/employees/
looking at that chart it sure is easy to see how much administration/marketing personal is wasted just for maintaining Vauxhall and Saab as separate brands.. at least for vauxhall you don't need any engineering as it seems ;)

edit2: at least we know now for which brand the fat lady will sing first:
http://www.gm.com/europe/corporate/market-performance/brands/

0.4 marketshare europe wide or for every Saab sold nearly 20 as many Opel/Vauxhall and still 5 times as many Daewoo/Chevrolet sold

edit3: other interesting statistics
http://www.gm.com/europe/corporate/sales/model/
Gm euro sales per model

IJ Reilly
Dec 9, 2008, 05:09 PM
The credit side of selling cars has become a problem for the auto companies just as it has for the banks. I'm not trying to justify anything. I'm only pointing out that the problems in the auto industry are not limited to US companies, and neither are the government efforts to help them limited to the US government.

mkrishnan
Dec 9, 2008, 07:29 PM
Product is what we know best, as consumers.

I was on the other side of the fence, too... I'm not saying that quality and efficiency are not important -- I spent more than half the time I was in the automotive industry working either on manufacturing efficiency, quality, or organizational efficiency, and somewhat less than half working on product design. Granted I wasn't there for decades, but I also don't believe this problem requires decades of research to understand.

I think you make my own case for me. These same companies -- particularly Ford -- were making lots of money selling cars and trucks customers wanted a decade ago. It hasn't even been that long in the scheme of things since Ford lost their dominant position in the midsize sedan segment (which at the time was also the dominant segment of sedans in general).

In each of these cases their decline was heralded by strategic decisions to ignore product development in favor of organizational efficiency. Ford started losing money when numerous vehicle programs were canceled or delayed in response to the Explorer/Firestone crisis, a time when they should have been aggressively pushing to stay relevant in the market.

They do need to react to this economic problem, because it's woven into every single fabric of everything we do as a species, at this point, unless perhaps one has the luxury of living in a log cabin somewhere in Hokkaido or on some tiny island in the Pacific.

But they will never be strong unless they relentlessly pursue making good products.

IJ Reilly
Dec 9, 2008, 11:53 PM
Not just a decade ago, but two or three years ago. So long as fuel prices stayed relatively low and the public was buying loads of SUVs and trucks, the big three were doing fine. What they lacked was the products that would appeal to the public when fuel became expensive. In this the overseas competitors had an advantage, because they've been selling vehicles into markets with high fuel prices for decades. This is very similar to the events of 1970s, when the Japanese automakers were poised to jump into the breach when fuel-efficient cars were demanded in the US, and not necessarily because they were so much smarter, but because these were the kinds of cars they were already making for their own markets. What's really different between now and the 1970s is the immense cost overhangs the US auto industry has inherited, which gives them far less flexibility to deal with the crisis this time around.

Could they have done a much better job anticipating higher fuel prices and the demand for more efficient cars? Certainly, but then so could the American car-buying public have done, buy not continuing to demand land yachts even as fuel prices steadily increased during the decade. I can see why the automakers saw so little reason to develop products that so few Americans seemed to be demanding.

takao
Dec 10, 2008, 03:06 AM
Not just a decade ago, but two or three years ago. So long as fuel prices stayed relatively low and the public was buying loads of SUVs and trucks, the big three were doing fine.

were they ? they still had hundred of billions in debt 10 years ago don't forget that ;)

and it's not like nobody warned them ... they have been warned over and over again and simply didn't bother to diversify enough in model typs but instead continued to offer countless brands all too similiar and refused to switch to a more global approach and still continued to develop cars too focused on seperate markets
Ford refused to sell the new Mustang in europe officially ... despite they easily would have made thousands of sales if they could keep the price similiar to the US price (and perhaps offered more engine options)

IJ Reilly
Dec 10, 2008, 10:33 AM
Most companies have debt, lots of it. The fact remains that the US automakers were selling very profitable SUVs and trucks hand-over-fist until just a couple of years ago. I was always amazed by the durability of this fashion trend, in the face of the cost of fuel which was steadily increasing over most of the decade. Personally, I decided to trade a full size car for a subcompact in 2002, knowing where fuel costs were heading, but by no means was I part of a significant shift in American car buying at that time.

Anyway to be clear I am not defending the practices of the automakers. Many of their problems are of their own making. I am only attempting to point out that some of them are not, and also that other supposedly smarter automakers could well find themselves in similarly dire straits if this recession and credit crisis continue and deepen. The weaker will fall first, but the stronger are not immune.

mkrishnan
Dec 10, 2008, 02:25 PM
Most companies have debt, lots of it. The fact remains that the US automakers were selling very profitable SUVs and trucks hand-over-fist until just a couple of years ago.

True, but in 2000, Ford also had the primary small car on the Car and Driver Top Ten list (the Focus, which in 2000, was excellent in terms of core design, and was reasonably competitive on fuel economy -- mine was 28/36 I think). Even after botching quality in the first year, it remained on the list solidly for several years.

And then what happened? One of their brilliant ideas to cut costs after the Firestone crisis was to not refresh it after 2-3 years like everyone else did, and not replace it with the second generation version they designed and launched in Europe in a respectable (long side) amount of time after the first generation, but to try to keep the old version for almost a decade.

And this is most specifically not in the category of fuel-hungry trucks.

IJ Reilly
Dec 10, 2008, 03:35 PM
Again, I am not defending the automakers by any means. They've made plenty of mistakes.

alphaod
Dec 11, 2008, 01:01 PM
I hope they don't get a bail out. Then they will have for Chapter 11 protection, and all labor agreements with be dissolved. Finally all workers will de-unionized, nobody gets silly benefits and outrageous pay and GM is profitable again. This is why Wal-Mart works. It's better for the economy.

IJ Reilly
Dec 11, 2008, 01:26 PM
I hope they don't get a bail out. Then they will have for Chapter 11 protection, and all labor agreements with be dissolved. Finally all workers will de-unionized, nobody gets silly benefits and outrageous pay and GM is profitable again. This is why Wal-Mart works. It's better for the economy.

Ridiculous. These companies (especially GM) have been shrinking for 30 years now, to the point where they've got more retired employees than working employees, more than three times as many. The unions have made concession after concession both on current labor costs and the funding of pensions and benefits. It's the automakers who've been unable to meet their obligations, not labor.

rdowns
Dec 11, 2008, 01:31 PM
I hope they don't get a bail out. Then they will have for Chapter 11 protection, and all labor agreements with be dissolved. Finally all workers will de-unionized, nobody gets silly benefits and outrageous pay and GM is profitable again. This is why Wal-Mart works. It's better for the economy.

Your fantasy makes for nice Internet posting.

There will be no chapter 11. They either get the loans or they get liquidated. No one will buy a car from a company in bankruptcy. Anyone willing to buy an American car will head over to Ford, or more likely, buy Japanese.

The *****storm of that would drag us into a recession the likes of which we haven't seen since the 30s. Do you have any idea of the amount of GM bonds and loans that are held by our troubled financial institutions and pension funds?

What about the hundreds of thousands thrown out of work? When GM goes, they take a whole lot of automotive suppliers and auto dealers with them. Many of these suppliers are key to Ford. Not to mention all the small businesses located near GM plants and offices.

I just don't think we have a choice here but to try and make this work. The alternative to not giving them these loans and holding a gun to their head to fix the problems is worse than giving the loans, IMO.

With the loans granted, everyone (GM, labor, creditors, bond holders, suppliers) will need to get it together and make some very painful but necessary compromises. I don't think that can happen without the federal govt. holding a gun to their heads.

IJ Reilly
Dec 11, 2008, 01:37 PM
I can see where there could be Chapter 11 filings, I just don't know of any automaker that has ever emerged from bankruptcy and continued to operate.

Unspeaked
Dec 11, 2008, 02:20 PM
There will be no chapter 11. They either get the loans or they get liquidated. No one will buy a car from a company in bankruptcy. Anyone willing to buy an American car will head over to Ford, or more likely, buy Japanese.

I can see where there could be Chapter 11 filings, I just don't know of any automaker that has ever emerged from bankruptcy and continued to operate.

Rather than Chapter 11, don't you think it's more likely that if the bail outs don't happen GM will likely sell off its assets to a competitor (I'm guessing a foreign one) who probably has a better chance of making those assets useful than GM itself has?

The new entity would be free of obligations that are currently weighing the Big 3 down, but presumably would still need much of the parts, labor, etc currently in use to function - hence, a minimal economic impact (outside of lost pensions, health care and the like).

I just can't help but think this would be a much better solution than either a bailout or a Chapter 11 restructuring.

mkrishnan
Dec 11, 2008, 02:53 PM
Rather than Chapter 11, don't you think it's more likely that if the bail outs don't happen GM will likely sell off its assets to a competitor (I'm guessing a foreign one) who probably has a better chance of making those assets useful than GM itself has?

GM's assets are largely valueless to any such entity...

- At the current point in the game, they don't have a lot of technology that another automaker would need, although they probably do have bits of valuable IP here and there (particularly in electric vehicles).

- Their brownfields are worse than useless. No sensible outsider would want them. No American company would want them either. Whether it were a US carmaker like Ford, a transplant like Toyota or Hyundai, or a maker that doesn't sell cars here today (like Tata), they'd be better off with a greenfield.

And none of the transplants are critically undercapacitized, especially not in a global, long-term sense.

Any third party motivated primarily by revenue / profit growth (as opposed to any kind of civic obligation or love for GM) would be better off just growing their own business opportunistically -- the ROI on the customers they steal from the sinking GM ship would be so much better than the ROI on taking GM assets over in order to get a larger share of those customers.

IJ Reilly
Dec 11, 2008, 04:05 PM
The primary purpose of Chapter 11 is to put creditors on hold. As pointed out earlier, GM is profitable and growing outside of the US. So I suspect Chapter 11, government rescue or otherwise, GM is going to be selling some assets to other car companies, probably at fire-sale prices. I don't see how they can escape this. Same goes for Ford. GM also has extensive real estate holdings in the US, some of which no doubt will be marketed to raise cash, no matter what else happens.

Unspeaked
Dec 11, 2008, 04:09 PM
The primary purpose of Chapter 11 is to put creditors on hold. As pointed out earlier, GM is profitable and growing outside of the US. So I suspect Chapter 11, government rescue or otherwise, GM is going to be selling some assets to other car companies, probably at fire-sale prices. I don't see how they can escape this. Same goes for Ford. GM also has extensive real estate holdings in the US, some of which no doubt will be marketed to raise cash, no matter what else happens.

That's more along the lines of what I thought.

Wouldn't the chance of getting the profitable overseas business, IP rights for their work with electric cars and vast property in the hands of people who'll do something more productive with it be more beneficial (in the long term) than trying to bail them out?

IJ Reilly
Dec 11, 2008, 04:19 PM
That's more along the lines of what I thought.

Wouldn't the chance of getting the profitable overseas business, IP rights for their work with electric cars and vast property in the hands of people who'll do something more productive with it be more beneficial (in the long term) than trying to bail them out?

As a point of order, I have to object to the use of the term "bailout." They aren't getting cash grants. If they get anything, it will be loans in which the government has a senior position. Like this approach or not, it's less of a "bailout" than if the government gave the companies huge investment tax credits.

GM will almost certainly have to shed some its assets, but it doesn't necessarily follow that it's better for them to go under in the process, and it also doesn't necessarily follow that the buyers will use them more productively. If you consider the number of bank mergers we've seen over the past ten years, I think it's awfully tough to argue that the new superbanks which were created are more productive than their former component parts.

Unspeaked
Dec 11, 2008, 04:46 PM
As a point of order, I have to object to the use of the term "bailout." They aren't getting cash grants. If they get anything, it will be loans in which the government has a senior position. Like this approach or not, it's less of a "bailout" than if the government gave the companies huge investment tax credits.

GM will almost certainly have to shed some its assets, but it doesn't necessarily follow that it's better for them to go under in the process, and it also doesn't necessarily follow that the buyers will use them more productively. If you consider the number of bank mergers we've seen over the past ten years, I think it's awfully tough to argue that the new superbanks which were created are more productive than their former component parts.

I agree with you about the use of "bailouts" but since that's the generic term that's been used by the media for this, I figure it's clearer and more consistent to refer to the loans this way.

I also get what you're saying about GM not having to go under, but if all that happens is it comes out of this process with a government loan and its most desirable assets sold off, what's the point of even continuing operations?

takao
Dec 11, 2008, 05:05 PM
The primary purpose of Chapter 11 is to put creditors on hold. As pointed out earlier, GM is profitable and growing outside of the US. So I suspect Chapter 11, government rescue or otherwise, GM is going to be selling some assets to other car companies, probably at fire-sale prices. I don't see how they can escape this. Same goes for Ford. GM also has extensive real estate holdings in the US, some of which no doubt will be marketed to raise cash, no matter what else happens.

the problem with selling assets is that nobody is going to buy the crappy, worthless assets with huge debt ... if the the situation will get more dire they might be forced to sell the better pieces just to keep the boat afloat (Opel, Daewoo sure will find some happy place and those are single handedresponsible for any growth outside of the US .. mainly because of the Daewoo -> chevrolet renaming)

IJ Reilly
Dec 11, 2008, 05:14 PM
I agree with you about the use of "bailouts" but since that's the generic term that's been used by the media for this, I figure it's clearer and more consistent to refer to the loans this way.

I also get what you're saying about GM not having to go under, but if all that happens is it comes out of this process with a government loan and its most desirable assets sold off, what's the point of even continuing operations?

It will depend on what's left over of course, if what remains is viable. It would be better for US economic interests if GM was not forced to divest themselves of all of their profitable subsidiaries, leaving over only an unprofitable shell company. That would clearly not be worth the effort.

I think they could also sell some of their extensive real estate holdings to raise cash.

the problem with selling assets is that nobody is going to buy the crappy, worthless assets with huge debt ... if the the situation will get more dire they might be forced to sell the better pieces just to keep the boat afloat (Opel, Daewoo sure will find some happy place and those are single handedresponsible for any growth outside of the US .. mainly because of the Daewoo -> chevrolet renaming)

I think you answered your own question. GM does have some valuable assets. The open question is whether they could sell some of these and end up with a viable company. I don't know the answer to that question. I doubt anyone does at this point.