By on March 8, 2007

buycostumescom.jpgGM CEO Rick Wagoner was once the automaker’s Chief Financial Officer. So why has GM twice delayed filing its 10-K financial statements (reporting their earnings for the fourth quarter and the ‘06 financial year)? You’d think that they’d be ship shape by now. "These are big complex businesses,” Wagoner told a reporter in Geneva yesterday. “When you do transactions at the end of the year it adds additional complexity." Fair enough. But Wagoner’s no dummy. The real reason for the delay is a fight over cash.

On November 30, 2006, General Motors sold 51% of their finance unit, the General Motors Acceptance Corporation (GMAC), to Cerberus Capital Management. Actually, Cerberus bought the net asset value of a large number of GMAC’s financial securities, with little value ascribed to the enterprise itself. Equally important, GM didn’t realize $14b. So far, GM’s net payoff is around $5b. This lump sum will soon be less.

Even as Cerberus was negotiating their GMAC purchase, the U.S. housing boom was going bust. So the money men at Cerberus included a “valuation period” before the closing statement. This last loving look at GMAC’s books will determine the final purchase price for Cerberus’ 51% GMAC buy-in.

Suffice it to say, things have not gone in GM’s favor. In the last six months, the U.S. housing market has tanked. In January, new house sales fell 16 percent. The situation is exacerbated by the fact that GMAC put $57b worth of its eggs– some 77 percent of its loan portfolio– into subprime mortgages. The current default rate: around 14 percent.

Fourteen percent of GMAC’s money is not about to disappear; the loans are collateralized against bricks and mortar. But all that defaulting does nothing for GMAC’s profitability. To wit: GMAC’s subprime subsidiary, Residential Capital, is laying off 1000 employees.

All of which means GM’s 10-K filing delay isn’t so much an accounting issue as a Mexican standoff. Cerberus and GM are locked in a dispute over the exact amount of “blowback” GM owes the investment group. There’s Wagoner’s “complexity.” 

Lehman Brothers analyst Brian Johnson reckons loan-loss provisions and mortgage securities write-downs could end up costing GM $900m to $950m in cash charges– in the first half of this year. The easiest and most likely way for GM to pay off Cerberus: surrender more GMAC shares to Cerberus. TTAC’s Deep Throat estimates another 10% should do it.

But even after the dust settles and GM’s accounts are finally filed, the dust may not settle. Lest we forget, GM still owns 49% of GMAC. A sustained housing market downturn would eventually reduce GMAC’s once bounteous cash to a trickle. Eventually, because GM gets its GMAC money in the form of dividends, and the GMAC sale eliminated dividend payments for two years post-sale.

If you’re beginning to get the idea that the GMAC transaction has turned into something of a headache for one of the “partners,” consider this.

You know those “zero percent to anyone with a pulse” finance offers GM’s used to move the metal? To “buy down” the obvious risk on these deadbeat deals, GM has made as-yet-unspecified payments to GMAC (an amount that probably begins with a “b”). You can bet that Cerberus will be taking an even closer look at these car finance deals in the days ahead, looking to further limit their exposure and protect their profits.

Meanwhile, GM Car Czar Bob Lutz has been predicting that one of his cross-town rivals is about to go belly-up. He’s not wrong. But GM’s determination not to file for Chapter 11 will take a major hit when The Glass House Gang seeks the court’s protection. FoMoCo will restructure its dealer network, shed its OPEB (Other Post-Employment Benefits) and force a new deal on the UAW. The disruption to parts provision and the Blue Oval Boyz’ huge cost advantages would eventually force GM to follow Ford into bankruptcy court.

Is waiting out Ford the “real” plan? Not according to Maximum Bob. "We're approaching the end of the beginning of the transformation of GM," Maxi Bob proclaimed.

I don’t think so. Yes, GM’s cut about as much fat as they can from their cost structure. Yes, their earnings will improve. But this year’s cash flow will remain negative. To stave off Chapter 11, General Motors needs many things to go right and, more importantly, nothing to go wrong. A GMAC meltdown, a strike at Delphi, a sudden gas price hike, a Ford bankruptcy, a supplier revolt– The General simply doesn’t have the financial strength to withstand a major attack on its cash reserves.

Like a sub-prime borrower looking at the loss of their home, GM is at the end of the line, hoping that its luck will hold out long enough for it to climb out of a hole– of its own making.   

 

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84 Comments on “General Motors Death Watch 112: The Three Headed Dog Days of Winter...”


  • avatar
    Paul Niedermeyer

    I agree with you that a Ford restructuring would put the biggest set of screws to GM. It’s like the airline industry; once they started their court-protected “make-overs”, the others had little choice.

  • avatar
    gard tombly

    Remember, Moe is their leader…

  • avatar
    graham p

    Things are tough when a rival’s bankruptcy begins to cause envy.

  • avatar
    cheezeweggie

    I wonder how much taxpayer money will be used to help bail out these idiots. The steelworers at Goodyear were smart taking a lump sum from the company for their pension program. Too bad the not-so-big-anymore 2.5 dont have the cash to do the same.

  • avatar
    tsofting

    I guess Chapter 11 has been a likely outcome for some or all of Detroits finest for some time now. Not because it is desirable, but because there is no other way, and where the alternative is even worse. Some may even think it is just as well, and a necessary requirement to transform the business and shed some or all of the so called legacy costs that have crept up and taken a serious stronghold around the legs of both GM and Ford. After all – airlines have been operating under the protection of the courts for years, emerging healthier at end of the tunnel. But, but, but – there's is one enormous difference between buying a car and buying an airline ticket. If you buy a fare with a Chapter 11-protected airline you're just perceived as smart, at least if the fare is the lowest. But – show me the person who will hold his or her head high and smug driving a car from a "bankrupt" manufacturer. A car is a statement about who you are and where you're going to a large portion of the car-buying public, and I don't think many consumers feel they need the rub-off from a bankrupt brand! So, it is indeed a dangerous path the General and their crosstown rival(-s) are embarking on if they bring their books to the judge and ask for protection. I don't think anybody can predict with any certainty what will be the outcome of that. This is indeed a downward spiral where the landing will be everyting and anything but smooth!

  • avatar
    nweaver

    cheeze: Probably El Zippo…

    Remember, the republicans are in charge and don’t give a flying [email protected]#)$(* about the auto industry, as neither the companies nor the union are major GOP donors.

    Also, the usual easier cheap washington fixes, import tariffs (eg, which helped to save Harley, and also was very punitive on trucks in the 80s), are now useless as the most deadly competition moved into the US to prevent that trick from working again (eg, the Goldwing is a 100% American motorcycle, and most all the Japanese makers make their pickups in the US).

  • avatar
    86er

    Well, maybe some piling on, but I’ve already said too much.

  • avatar
    cheezeweggie

    Chapter 11 isnt always the end of a brand. Nissan came back even stronger, albiet their management has it’s $&!t together.

  • avatar
    Brendan

    Also unlike airlines, GMs products are not as good as their competitors, where the airlines are virtually indisinguishable from one another. Except for Southwest and JetBlue, which make buckets of cash by catering to the customers needs, (weird, I know.)

    Anyway, airlines and car companies are too different to compare.

    GM’s handling of GMAC seems particularly ham-fisted. Why take Cerebus’ cash unless they are really desperate? GMAC is/was profitable.

  • avatar
    starlightmica

    Did Nissan go bankrupt? I thought Renault bought & restructured them before that happened.

    Oh, yeah, and if the US attacks Iran, the Reaper’s going to have a field day.

  • avatar
    Truthbetold36

    BAHAHAHAHAHAHAHAHA

    Selling part of GMAC was the worst thing you could do. A Harvard MBA grad (Wagoner)allowed this to happen. Doesn’t Business 101 tell you not to sell the cash cow?

  • avatar

    Truthbetold36:

    Clearly, they didn’t have a choice.

  • avatar
    Glenn A.

    Let’s not forget the provisions allowed under Chapter SEVEN bankruptcy. As in “the show’s over – doors are closed – we’re selling off the equipment to the highest bidder (in China).”

    The “big 2.37887” are one tripwire from Chapter 7 bankruptcy, not Chapter 11. Examples of said tripwires could be a Iranian cruise missile shooting a US vessel or US troops in the middle east, the price of gas going to $3.50 a gallon (it’s exceeded $3 a gallon in portions of two states effective today, I understand) or a “1 in 3 chance of recession in the United States during 2007” (per the ex-Fed Chairman).

    That’s probably why they haven’t filed Ch. 11 yet. Any accounting and tax experts out there? Can a company re-file as Chapter 7 after filing Chapter 11?

    Delays on the last quarter’s numbers of 2006 and total numbers for 2006 means – it’s going to be a bloodbath, and they are trying to get as many ducks in a row before the ceiling caves in.

    The Wall Street gang are going to take one look at the massively bad numbers upcoming and simply yank what little rug is left from under GM in terms of valuation of the company.

    Let’s also not forget that the “little” unheard of by Americans (conglomerate), Tata, from India is valued at a higher dollar figure than General Motors. That speaks absolute volumes.

    The local economies are going to have a tough time when all the GM, Ford and Chrysler dealerships essentially close.

    I fear that if these bankruptcies happen, any ongoing recession will obviously be worse and of longer duration.

    MG-Rover’s equivalent of Chapter 7 (total closure) meant that the pain was spread throughout the entire UK economy and regions because most MG-Rover dealers rolled over and died, at least closed-out their businesses or drastically down-sized. It’s tough to be a new car dealer when the car company dies. (Seen any new Glas, Borgward, Packard, Hupmobile or Cord dealer signs up lately?)

  • avatar
    Landcrusher

    tsofting makes excellent points about auto company bankruptcies, but I still think they are going to look at the courts as a godsend.

    First one to get it over with will be way ahead, when they should really be liquidated.

  • avatar
    Peter B.

    This all seems to be alot of smoke and mirrors. I think it is high time for an article concentrating on the taxpayer ending up funding the auto workers pensions. This is the only thing they can possibly be working on that matters to them. Perhaps they are just stalling in hope of a sympathetic democratic administration. I can already hear the cries: “these workers did nothing wrong!!”. The poor taxpayer of course is guilty, so has to pay.

  • avatar
    SherbornSean

    I don’t really buy the argument that Chapter 11 would tank sales. People seem to be able to find parts for all manor of cars out there, from Studebakers to Gremlins to Prowlers. I don’t foresee having a problem finding parts or mechanics for your Silverado or Malibu.

    I like these articles, but continue to see GM’s cup as half full. They had a great January and are taking share in high margin pickups.

  • avatar
    Steve_S

    I thought Ford had a secure line of credit through about 2010? If any of the US automakers go into bankruptcy and are not bought by another they are pretty much done. Unless they can get out of bankruptcy with little or no incoming revenue. There aren’t that many dumb people who would buy their 2nd largest purchase from a company they don’t know will be there in the next couple of years.

    As much as I’m looking forward to the new Camaro there is no way in hell I’d buy one if it looks like GM is in imminent collapse.

  • avatar
    tsofting

    SherbornSean:
    It is probably not a question of being able to find parts for your 2007 Escalade, I am sure you’re gonna be able to do that. But – the smell of “having made it” that the ‘Slade is supposed to convey will most likely be very stale when war-type headlines in all national media proclaim that the maker has gone belly-up. That is not the smell of success, to say it politely. I wish I could be as optimistic as you, but sorry, I don’t see the General’s (or FoMoCos) bottle as half-full.

  • avatar
    tom

    Well, what can you expect if you sell the majority of the single profitable part of your company?

    Even if GM manages to get off lightly out of this recent trouble, they’ll still miss GMAC’s money in the long term.

  • avatar
    Joe Chiaramonte

    Anecdotal evidence:

    My wife and mother-in-law went car shopping yesterday. Mom only wanted to visit Honda and Toyota dealers. Her explanation: “American cars are unreliable and built cheaper because of the wages and pensions they have to pay their union workers.”

    When a 70-something lady holds this belief to be true, *KNOW* that we have now been “educated” enough – by the procession of news – to be mentally prepared for someone to file Chapter 11.

    The race to the “finished” line is almost over.

  • avatar
    hondaboy55

    I like this article because it brings into the auto business the fact that along with Autos the car companies have allowed their MBA people to branch out into other money(making) enterprises. These enterprises should, like diversifying your IRA investments smoooothe out the years cash flow. Be it in or out. Unfortunately the auto finance business branched out into a few too many of the easy money profit vehicles since their inception.

    Funny thing is that GM got people twice with the same scam, and now its gunna get them a little in the end.

    0% financing sold a lot of Stupid Useless Vehicles to people that (and most can’t) afford to feed them. Payments on ownership were cheap, but payments on usage were through the roof. I watch people at the pumps even at $2.50/gal empty their wallets twice a week just to get to work.

    At the same time GM roped people into getting a house they could barely afford with 2% interest* ( for the first 3 years, then ballooning up to 16% written so small you can’t see it, not to mention it was most likely written in Starbuck.)

    Rightly so, GM and hopefully F, and C have done this, and its now coming back to get them good. Proves they are really not in the business of building cars, just looking for a fast buck.

    For a consumer, a legacy cost is paying for a purchase that did not make sense to begin with.

  • avatar

    I think the continued delay in showing 2006 results does indeed point to the fact that things won’t be so rosy in GM’s case.

    As for Nissan, they were on the brink of bankruptcy until Renault bought a big chunk of them and gave them billions to restructure. But Nissan/Renault is becoming one big, convoluted mess. While Nissan is still making a nice profit, things aren’t looking so good for them in a number of areas. Of course, GM, Ford, and Chrysler would all love to be in Nissan’s position right now.

  • avatar
    hondaboy55

    Glen A: For the big guys there is no such thing as chapter 7. As long as these guys are tied into the banking industry in some way there will be no Ch 7 for them cause they get their money from us. Its not their money they are playing with.

    Delta: tied to GE capital.

    GMAC there is still 2 years left for Fannie May and Freddie Mac to buy out their sub prime, and get it paid for by us.

  • avatar
    hondaboy55

    I also think Americans have enough exposure to bankrupt companies that buying from a car company in ch. 11 will not phase many. Remember Chrysler back in the day, Lee went very publically to Congress.

  • avatar

    The current default rate: around 14 percent.

    I can’t help but wonder how many of these loans are in Michigan, defaulted by former employees who took out low rate loans with GMAC as a job perk to buy houses and now have to default on them because they’ve lost their job with GM.

  • avatar
    hondaboy55

    Well the good thing for consumers who are smart. Like those who took Mitsubishi up on their No payments for a year, then just drop off the keys in 365 days. Is that for those who got a house and paid 1 or 2% got a really good deal and a tremendous amount of living space for 2 to 3 years. (no money down, low payments, think of it as a great rental paid in part by greedy business people.) Now that there is a glut of unsold homes on the market, and that the values of those homes has remained stagnant, or declined. Means that those who are loosing these homes are not really loosing much, unless they fight to keep it by paying the bollooning payments.
    But would be smart to let the sub prime lenders take the big hit, and come back and buy again in a year or so.

    Stick-it-to-da-man!

  • avatar
    hondaboy55

    Now that I think about it. Mitsubishi financed cars for people, took the hit on depreciation too. Just like the sub primes, and it only looks good because of the housing market downturn because the value of the asset did not appreciate.

    I-loveit.

  • avatar
    Luther

    Graham p: Things are tough when a rival’s bankruptcy begins to cause envy.

    Nice! – LOL

    Stay tuned for the next episode of the real-life classic “Payton Place meets Monty Python at the Three Stooges bar & grill”. Brought to you by – The 1935 Wagner Act.

    Hondaboy55: GMAC there is still 2 years left for Fannie May and Freddie Mac to buy out their sub prime, and get it paid for by us.

    Naturally.

    Wow accountants can get creative! How do they come up with these shell games? Must be at Cabo with a bottle of Wobo and Sammy screaming satanic verses in their ears. Or not.

  • avatar
    rtz

    Saudi oil on the way down: http://www.theoildrum.com/

  • avatar
    50merc

    GM’s auditors might possibly be one reason for the delayed financials. A “clean” auditor’s opinion rests on the assumption that a firm is a “going concern.” An insolvent or unsustainable business can’t, for example, use normal depreciation of assets — they’d have to be immediately written down to liquidation value. Perhaps the auditors (or the lawyers who provide auditors the assurance that voluntary or involuntary bankruptcy isn’t imminent) can’t bring themselves to conclude GM is a “going concern.” If they say it is and then GM goes into bankruptcy, the auditors, stockbrokers, etc., will be sued six ways to Sunday.

  • avatar
    mikey

    30 maybe 40b in the bank Feb sales up 3%.The new crossovers big SUVs selling well,full size pick ups,Impalas,Solstice,G6 all doing well.
    A new Camaro and a RWD Impala coming soon.
    G.M is finally getting the message.Build what GM does best big powerfull, garish American cars and trucks.
    G.M will not go bankrupt today, tommorow,or next year.

  • avatar
    Hippo

    IMO we would probably want to keep one US auto manufacturer, GM is by far the best of the 2.5 and it seems that pro actively seeking chapter 11 ASAP and eliminating the union and dealer burden would give them a major tactical advantage even if the others follow later.

  • avatar
    WilliamsLanding

    If I buy a GM car today, lots of parts are made by folks like Delphi. Let’s see … oh yes, Delphi is bankrupt!

  • avatar
    Glenn A.

    If (big if) any of the 2.38977 go Chapter 7 (if that is indeed possible, and why would it not be?) and entirely close, it won’t be the parts which are unavailable – it’ll be the closed dealers and the vaporized warrantees that will pinch the buyers’ asses. Oh yes, the evaporated resale value, too.

  • avatar
    hondaboy55

    Yup first one in 11 gets out of the gate in better shape than the rest. Unless they all jump in before the big negotiations begin the remaining ones will have a harder time once it becomes clear who will be paying the liabilities. And if the one or two not wet get a sales benefit (I don’t think so-but..) cause they ain’t in bankruptcy it will be harder for them even more to get in. The last one into see the judge may actually be the one to loose.

    Judge gets to see all the cards when the bets are placed.

  • avatar
    mikey

    So MR GM walks into court tells the judge,listen guy these unions are a pain in the ass and thier screwing up my buisness.Do me a favor and dump em wiil ya?
    Oh and judge could ya do the same for the dealers.Thanks see ya on the golf course.
    I’ll betcha GM wishes it was that simple

  • avatar
    hondaboy55

    It is that simple, but they use numbers not words.
    Think about the arguements Iacoca used. “We would be handing over a complete dealer network to the Japanese If C went under”

    They got a loan guarantee, the five sided building got millions of worthless tanks, and critics said it would have been a better deal all around if the government just bought every american a k-car.

    Delta did the same thing, leveraged all their assets, showed no profits, high costs, and got the book rewritten.

  • avatar
    hondaboy55

    Sorry I have intimate knowledge of Delta, so its my favorite example.

  • avatar
    hondaboy55

    Camcordia is the word I think I have seen used on this board over and over again. And I understand it applies to the transportation appliance. As long as cars are being thought of as an appliance, that brings them to the level of an airline ticket. Just something to get you to work etc. For whatever time they last for.

    In addition, the very same issues are on the table at GM, and Delta. Our pension costs are too high. Our pilots union contracts are costing us the ability to be competitive. Crank that sausage grinder.

    These are two reasons I like to compare the two. The business structure, and areas of cost exposure are very similar. And they are often hit by the same surprises. (oil)

    Now that the airlines have almost all been through the judges revolving door and his magic erasable pen. The airline industry is now able to deal with higher fuel costs. And for some reason has seen the wisdom of cutting flights so as not to run empty planes around the hub. They couldn’t figure this out before? Its as if they did the dumb things to ensure they could visit the judge.

    Delta stopped running an almost entirely empty plane to Dallas. Why did they do such a stupid thing to begin with? (Dallas=AA land) Hey how long is the list of stupid things we won’t see from GM, F, and C after the meet the big man?

  • avatar
    Hippo

    ___________________________________________________
    If (big if) any of the 2.38977 go Chapter 7 (if that is indeed possible, and why would it not be?) and entirely close, it won’t be the parts which are unavailable – it’ll be the closed dealers and the vaporized warrantees that will pinch the buyers’ asses. Oh yes, the evaporated resale value, too.
    _________________________________________________

    Well, as far as I’m concerned we are already there.
    The only way I will buy a GM car (and I will not even consider the other 1.5) is if it is discounted enough that I can afford the risk of a possible repair without having the inconvenience of interacting with a dealer and where the lack of resale price wouldn’t be much of a problem.
    Obviously hordes of people look at it the same way if you look at sales numbers.

    Under this criteria Honda and Toyota products are the only ones on the market worth paying MSRP for.
    GM could build the best car ever tomorrow and it wouldn’t change a thing, turning around current perceptions is like turning a carrier around.

    A dramatic gesture and a new really new beginning may be the best way.

  • avatar
    cbrjim

    Am I the only one who smells a rat? The domestic automakers have to be throwing the fight in the name of globalism. There is no way the manipulation and mistakes of the last 2 decades was accidental. Soon Ford, GM, and whats left of Jeep will be “foreign” companies. So much for “this is my country”

  • avatar
    hondaboy55

    $35,000,000.00/yr buys a really cool drug we all know nothing about.

  • avatar
    hondaboy55

    It is a strange equation: The US is the largest consumer on the planet, taken into account the smallest population/unit squared. The smallest producer of tangible goods. Largest pervayor of leverage asset scams…… Priceless equation.

    The world is actually paying us to be consumers. I guess thats why what GM does really doesn’t matter.

  • avatar
    tony-e30

    The CEO of D.R. Horton, hockey sponsor extroardinaire and the nation’s largest homebuilding company just said; “I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year,” Tomnitz said. (Thanks MSNBC)

    This minor prognostication, along with my own of $4.00 gallons of gasoline this summer, would precipitate a decline of truck/SUV sales on par with the past 15 months. Too hard to imagine?

    Could GM even afford to hold out for Ford to declare bankruptcy if this happened?

  • avatar
    Glenn

    Gas is $3.29 a gallon already on March 8 2007, in New York in a few stations, and nearly that (and over $3.00 a gallon) in both California and Hawaii.

    I think the 2.39878978988789 executives should be singing the blues about the SUV / truck / crossover / oversized and overpowered vehicles they’re trying to pawn because “trying” is going to be the watch word in 2007.

    As D. R. Horton said “…’07 is going to suck…”

    Glenn A.

  • avatar
    Geotpf

    There’s a reason people won’t buy a vehicle from a bankrupt automaker, and it has nothing to do with the lack of prestige of the brand, although that doesn’t help.

    One word:

    Warranties

    People will be afraid thier 5 year/100,000 mile powertrain warranty will be only useful for toliet paper, and avoid the brand like the plague. If they don’t think the company will last as long as the warranty does, they will look elsewhere. This is a lot different than an airline, where one only cares about the airline surviving long enough for the plane to land.

    A car company that goes into Chapter 11 (reorganization) will soon have sales drop further by people afraid of thier warranties that it will inevitably never climb out of bankrupcty and go into Chapter 7 (dissolution) and shut down.

    In some ways, Chrysler was actually the strongest of the Detroit 3-before 2006, they were actually profitable, but the Germans have decided to make as much a mess of things as possible, so this is no longer the case. But Ford is probably in the worst situation. Lutz is probably right that GM is in the best shape, but that’s damning with faint praise.

    If one of the three does go out of business, it will save the other two, since demand for new vehicles won’t drop, and Toyota et al don’t have the manufacturing capability to make up the difference-but the other two Detroit players sure do.

    Of course, I’m assuming GM doesn’t buy Chrysler outright, which doesn’t make sense to me. Having GM build large SUVs for Chrysler and having Chrysler build minivans for GM would be the most likely outcome of those talks with no equity stake (of course, assuming both GM and Chrysler survive).

  • avatar
    Rastus

    With a GM car/truck…there is a good chance indeed that you will need to use your Warranty. I had to have my transmission yanked from a previous GM vehicle …at 3,000 miles. Yes, that's right…practically right off the showroom floor! Perhaps it was one of those saboteurs on the assembly line "guaranteeing" future work for his kind. As the above example clearly demonstrates….owning a domestic can be expensive. Not only in terms of money, but in repairs, and the entire INFRASTRUCTURE which supports this idea of a "business". So, based upon my story and the countless Others we've been witness to the past few days (on the other DW series)….let me just say this: It will be GOOD when one (if nor more) of these companies go bankrupt. If 2000 people can replace the "work" of 10,000 others, is not that a good thing? That is a HUGE jump in productivity and efficiency. Clean modern plants to replace the chimney smokestack polluters of days gone by. Line workers who now teach their children the value of an education…and the public, in turn, get to drive clean efficient Toyotas. How can ANYONE claim this is all going to turn out poorly? Ok, so you say the tax payers will pay. Maybe. The Exxon Valdez, while a disaster, was in a way a good thing. It heighten the publics awareness to environmentalism. One may even say disasters such as the Valdez paved the way to the modern "Green" movement…and look, a tangible outcome is something you and I can now own and drive: A Prius!! Look at the earthquakes which have devastated California in years past. Have not better building standards come about as a direct result? Has there not been a furtherance of the state of Civil Engineering? Yes, indeed, there surely has. Look at the AIDS epidemic. All those who died of HIV, or those who currently are suffering…they have done more in the furtherance of the state of science and medicine than anything else of late. Future generations will benefit. Look at the Ozone Hole over Antarctica. It is healing based upon the actions we as a global people have taken to care for our planet Earth. Look, too, at the loss of the Sony Walkman. An entire industry has died and in turn we now have iPods! Thank you Steve Jobs. Where would we be without you? So, what I'm saying is this: Don't fear the Reaper. It's ok to watch one of these companies die. It can also be argued that it's a GOOD thing. Humankind will one day look back on General Motors much the way they look back upon Woolworth's: Something rather unremarkable and not worth grieving for. I remember when the PC first came about. The idea was that one could "tinker" with an automobile, but very VERY few people could understand something as complex as a computer. Well…people have risen to the challenge. New frontiers have been blazed and new wealth has been created. 

  • avatar
    shamu

    I am not a huge fan of GM or the Detroit product line in general, but I feel compelled to speak out against all the union-bashing. Aren’t our beloved BMW’s, Porsches, etc. built by German autoworkers that are in a union that is more polwerful than the UAW (board seats.) I drive a bulletproof Mazda 626 that was built by UAW labor- many Corollas are built in Cali by UAW labor…..I submit that unionized transplant factories would still produce wondeful products…after all, both Germany and Japan are more collectivist societies than the US, yet their autos are admired.

  • avatar
    Rastus

    shamu,

    You have to understand, one of the compelling reasons why so many Americans buy huge pick-ups and SUV is because they hold dear the image of “rugged individualism”.

    It’s part of our culture. Yes, one might even say Toyota is so successful in dealing with the US workforce is because THEY come from a culture where most everyone is treated with respect. Here, everyone, from day one, is indoctrinated into the “ME” attitude. Everything revolves around ME. And at what expense? The answer is usually “Who cares?”.

    So yes, the US is a nation of rugged individuals.

    See how those cowboys roam…see how they roam:

    http://truckphotos.freeservers.com/traffic_jam.jpg

    (the concept of actually “SHARING”…ANYTHING, even a RIDE, is considered crazy! )

  • avatar
    cheezeweggie

    Sharmu: Do the German and Japanese unions work with or against the companies ? It seems that so many Americans have the us vs. them mentality (mamagement included).

  • avatar
    shamu

    rastus,

    point taken about American indivdualism. I guess what I was trying to say is that unions in and of themselves do not make for good or bad autos– in the end, it is how the product was designed or the assembly line was set up. Although detroit has its’ legacy costs, I would imagine the sociual welfare state set up in other countries does make for higher tax costs for businesses and workers in those countries.

    Although I think that in theory the government assuming the costs of Detroit’s legacy costs would be a good idea, I have to wonder what the mangement 2.5 would really do with their billions in newfound savings. Although I’d like to think they would finally see the light and design some world-class practical yet fun passenger cars, something about past behavior leads me to believe they’d blow it all on new big SUV designs, management bonuses, etc.

  • avatar
    shamu

    cheezeweggie,

    Japanese unions have traditionally been more cooperative with management, not really that sure about the workings of German ones…perhaps some of our overseas friends could fill us all in?

  • avatar
    Rastus

    That’s not speculation of the future…it is a very clear assessment of the very past 30 years! Yes, “Bonuses”…bonuses galore…for building X-Cars, Cavaliers, LTDs, Cordobas, K-cars, etc.

    Rewarding themselves for a building crappy products is the core of the problem they are facing today. In other words, Greed (or you might say, “rugged individualism”).

    But hey, the GMT-900 is very successful! The only (and I repeat ONLY) reason they decided to sweat the details this time around is because of Toyota’s new Tundra.

    Speaking of which, I saw a new one on the road today for the first time. Actually, it was parked, and the midnight blue metallic paint on the base model was Beautiful…no lie.

  • avatar
    mikey

    RASTUS
    I can think of many words to describe the Tundra.Beautiful wouldn’t be one of them.

  • avatar
    Rastus

    I’m no fan of the Tundra myself…was just commenting on the finish (paint job).

  • avatar
    Martin Woodman

    If any of the American automakers go bankrupt in the USA, what would happen to their subsidiaries in the rest of the world?
    Delphi is closing one of its plants in Southern Spain after reciving about 60mil€ from the local governement thus COMPROMISING to keep production in there until 2010.
    They are firing all of the 1300 workers, ignoring the unions and “running away” with the money of the spanish taxpayers, its that supported by the bankruptcy laws in the USA? Do them allow the companies to do the same in the rest of the world?

  • avatar
    starlightmica

    But hey, the GMT-900 is very successful! The only (and I repeat ONLY) reason they decided to sweat the details this time around is because of Toyota’s new Tundra.

    Yep, Rastus, with a rumored price tag of $1 billion once the Tundra specs leaked out. That’s got to come from somewhere else, such as the Aura’s grab handles and other details that add up.

  • avatar
    OverheadCam9000

    Glenn A

    Can a company change from Chapter 11
    to Chapter 7?

    Oh Yes, see —> Collins & Aikmen, bankrupt
    auto parts supplier.
    For Sale, Cheap!

  • avatar
    mikey

    So GM spends a biilion or so, sweats every detail and builds the best truck to ever roll of an assembly line.
    I really don,t see a down side

  • avatar
    hondaboy55

    Funny thing this morning when I tuned in to this site on my other computer that does not have a cookie identifying me as a regular.

    To the right of this DW was an ad, big metal looking bracket and a few pins. I clicked on it and Total Automotive landing page intorduced me to a solution to my door hinge problems on 99 and newer Chevy and GMC C/K series trucks and SUV’s

    The site had center stage comments sent in by users of the product, and they all commented favorably on how neat-o the product was to install.

    On all my hondas with 250K plus, and my Dakota ’88 with 120K no door hinge problems. And these guys are saying how easy it was to change both sides in just one afternoon.

    Are those door hinges so bad that the much less used passenger hinge also falls apart in just a few years? I don’t know what year the cmt900 came out, but ifn its part of the “’99 and up” well thats sad.

    Sweat the details…..Not.

    In any filing for bankruptcy protection, you are just making an application. Before hand your lawyers advise you on the best action to take. If you know you are making money and have the prospect to get over the “hump” and get back on yer feet, Ch 11 is the way to go. 7 is for liquidation mostly, and assets are divied up by the judge. Its also for cases where the fire sale does not meet debts. You are protected for some personal items.

  • avatar

    Mikey I don’t think that there is a downside to the amount of effort and money put into the GMT 900s but I believe the point is a feeling that GM only made the extra effort because of Toyota. In my opinion too often in the past GM did not put the engineering resources and money and into their products because they felt they did not have to. Just make the best cars and trucks you can. That should be the underlying goal of every car maker. With Toyota and Honda I can actually believe they are trying their best. With GM in the past it was impossible not to feel that GM was deliberately holding back and cheating its customers by not designing and building the best cars they knew how to build.

  • avatar
    Joe O

    Hey Gents,

    I’ve believed the following for awhile now, and with each new piece of evidence it seems to hold true:

    The American MFRs are no longer “the big dogs” in the field. They may have strong rest-of-world components, but their domestic side is failing and has grown, steadily, weaker in the face of foreign giants. Toyota and Honda, among others.

    When I look at this situation, I see companies with alot of assets, poor management, and a luke warm product line. Luke warm defined by the fact that there are stars out there among the offerings, but they are tempered by some of the total crap.

    To me, this situation reminds me of when you need to start using guerilla tactics…so to speak. They have tried to take on their nemesis directly, and have had mild success in some areas. A win the battle, lose the war situation so to speak.

    I think it’s time to start getting small and fluid. GM and Ford have long product cycles, and clients nowadays want freshened car every 3-years; freshened to the point where outward and inside indicators show a “new” car.

    To do this, I think they need to cut product development way down. Stop trying to fill every market niche, and form a core. Stop flagrantly flaunting their inability find a corporate identity.

    Cadillac has done well because it never lost it’s identity; only taken it in new directions. They’ve improved quality, gotten some very unique and nice styling, and stayed loyal to the brand and to it’s customers.

    Saab had tremendous identity. Quirky and unique, orthopaedic seating, strong small engines. Saab should build the 9-5, 9-3, and 9-2 (or a 9-3 hatchback). It should parts share those parts which are not visible, but should provide it’s unique feel and driving experience. Stop the cheapness and the bad pricing schemes.

    I don’t think the problems are the cadillacs and saabs…they have a brand identity, they have a following, and they make only a few key models.

    The problems are the chevys and pontiac style brands. What does it mean to own a Chevy anymore, or a Pontiac?

    Well, Chevy’s are built like a rock and an american revolution. I don’t know about you, but when I think of that I picture a Silverado. In my mind, they need to focus on building Silverados, redo the Impala which still has some credibility, and either cut their small-car out of the equation or put some serious resources into it.

    Chevy could do well as a brand by selling only a mid-size truck and full-size truck, mid-size car, and maybe a small SUV. They need to stop spending resources on other efforts.

    Anyway…the real root of my idea is that I think we need a few new american brands and to close down some old ones. Saturn can stick around, as they are quickly becoming the american car brand that imports european people’s cars (and this ain’t no v-dub).

    Then, we need to stop calling them american brands. First off is the perception that american iron is crap iron and that the only people who buy american cars are brand/country loyalists (nothing wrong with that, just like there are loyalists who buy VW despite their recent reliability record).

    Besides which, it’s become meaningless. Foreign automakers have done a fine job setting the mindset that they are american built now. And for good reason. They’ve got a ton of plants in our country.

    Sometimes, it’s best to start over. You get the initial customers who buy you because you are new and don’t have any image-baggage. No one expects much of you.

    And in business/sales, expectations are everything. The lower the expectations, the more you can exceed them.

    Restructuring only counts in a failing business when it’s radical. So far, I haven’t seen radical.

    Joe O.

    P.s. I hope my ramblings made sense…I kept stepping away from my desk and then restarting. Not a good recipe for a quality posting.

  • avatar
    mikey

    JOE 0
    Actually it was a good post well thought out.
    SHERMAN LIN
    I couldn’t agree with you more, GM will live with the mistakes of the past for a long time.
    Believe me I know first hand how arogant and stuborn GM management can be.
    There is still a lot of work to be done at GM.
    Dumping the dead wood nonproductive layers of bloated mangement comes to mind.As does kicking a few dealers out[IMO both groups are responsible
    for many of the problems at GM.]
    But in the area of quality GM has made huge strides,and slowly, very slowly consumers are starting to see it.
    Now as long as GM keeps thier eye on the ball and we can bring products to the market like the Impala and GMT900,maybe will see the death of the Death Watch

  • avatar
    starlightmica

    mikey:

    Supposedly 1 billion more than originally budgeted. Ouch.

  • avatar
    ihatetrees

    Re: RF’s comment…
    To stave off Chapter 11, General Motors needs many things to go right and, more importantly, nothing to go wrong. A GMAC meltdown, a strike at Delphi, a sudden gas price hike, a Ford bankruptcy, a supplier revolt

    Delphi could blow up very quickly if Cerebrus asks Judge Drain to wipe the slate. The ‘deadlines’ keep getting extended.
    Then again, if Cerebrus walked, would the whole process / mess start again with a new (and much weaker and more confrontational) firm?!? Could the new firm just buy the patents and move the production lines south/overseas? Sure, GM dies in the process, but millions of GM vehicles currently on the road are gonna need future parts. Is that a viable business plan?

  • avatar
    mikey

    STARLIGHTMICA
    Ouch is right,but who is the winner?First off the truck buyer get the best possible truck.Next in line is us 1/2 million employees that get to keep our job!
    Far as I’m concerned a billion bucks well spent

  • avatar
    ZoomZoom

    mikey wrote: “Next in line is us 1/2 million employees that get to keep our job! Far as I’m concerned a billion bucks well spent”

    Well, it’s easy to decide what to do with other peoples’ money, especially when you stand to benefit from it.

    I have to wonder why you’ve stopped at keeping an auto manufacturer in business? Why not cut out the middleman company? Why not just take the money from us taxpayers and just GIVE it to the 2.5 employees? Better yet, Congress could just pass a law that every taxpayer must “adopt” a 2.5 employee and his family. Each taxpayer should pay an employee’s mortgate, property taxes, car payment, private school costs for the kids, college tuition, new clothing every month, and weekly grocery bill? Oh, and don’t forget a trip to the movie theatre once a week and that Cancun vacation every year!

    Do you get my point here?

    No one person has any moral right to decide that the other 320-350 million other taxpayers’ money “should” be used to assist any private company. Or any private individual.

    At what point did you begin to believe that it’s your own free pot of gold at the end of the rainbow?

  • avatar
    SherbornSean

    A billion bucks to guarantee success of your most profitable product is small money. GM blew a lot more on robots that couldn’t paint, on the Fiat fiasco, and on the Zeta architecture that was killed because it was no better than Holden’s.

    Newsflash: the best selling pickup in America in February was Silverado. Hickup or trend? We’ll see.

  • avatar
    BostonTeaParty

    Zoom Zoom, you’re points not relevant, whos talking pots of gold and lucky charms? think you stepped a bit too far into that one.

  • avatar
    ZoomZoom

    I don’t think so, BTP. The question will eventually revolve around whether or not to use taxpayer money to bail out a private company. And that’s exactly what I’ve spoken to.

  • avatar
    BostonTeaParty

    Ok if thats what you think, but if a company wants to spend x amount of dollars to do what it sees fit with so what. It just so happened that the cash ironed out problems in a damn good truck that made it an even better product, and the follow on is that its putting money into the coffers of a company that supports a great deal of people which mikey said. And mikey doesnt decide where the money is spent, if they asked the us minions at GM it would generally be spent a hell of a lot better. I’d guarantee that if that money hadnt been spent on the 900’s GM would have been screwed by now, the fat lady would definately be singing and a recession would be swallowing america, then there would be government bailouts, well more than happens now with companies linked to senators etc. You’re still counting your chickens before they’ve hatched me thinks.

  • avatar
    mikey

    ZOOM ZOOM
    G.M got the billion out of thier own pocket, not the taxpayers,and now the GMT900 is kicking ass.G.M.has hit a home run and we needed it and I’m damn proud to be part of it

  • avatar
    Glenn A.

    Zoomzoom wrote “No one person has any moral right to decide that the other 320-350 million other taxpayers’ money “should” be used to assist any private company. Or any private individual.”

    You sound like a Constitutionalist, zoomzoom. I happen to agree with you. Unfortunately, 99.9% of the politicians and lame-stream media that tells the sheeple how to think, don’t agree with us.

    It’s called socialism for the richest and poorest and capitalism for the working stiffs (i.e. “survival of the fittest for those in the middle” coz good luck, yer job just got exported to Mexico / China).

    I for one am sick of it. Chrysler should have died in 1980, of natural causes and any or all of the big 2.33432433 currently should die if they cannot cut the mustard. If the money-lenders didn’t see any benefits to lending Studebaker-Packard any more money in 1956 (even though the line of credit was promised earlier, as part of the merger) and likewise in 1980 with Chrysler, why should we the people bail out these companies?

    So the executives can give themselves huge bonuses for building Vegas, Chevettes, Monzas, flaming Fieros and Pontiac Azteks?! Or, for that matter, explosive Pintos, K-cars, Gremlins or Pacers?

    I don’t think so…

  • avatar
    oboylepr

    the GMT900 is kicking ass……

    There is always a surge when a new model hits the lots. Time will tell if the GMT900 PU’s are really successful, Personally I think they will succeed if, The Texas coast is left alone by mother nature, if there is not a recesion, if there is no interuptions to oil supplies from the middle-east, if The US refrains from colobering Iran, if the Democrat controlled Congress does not go all green, if GM avoids CH 11, if, if, if….. The GMT900 SUV’s are not selling as well as anticipated so it’s too early to tell if the 900’s are succesful.

  • avatar
    Joe O

    Hey gents,

    Something to consider: industry specific tax breaks or taxes are a way of targeting companies and either granting them money or taking money from them. A common day example is the talk of an “Oil Profit Windfall Tax”; as if when a company makes a sudden extreme profit it becomes the realm of the government to take some of that money.

    Anyway. My point is that it’s not black and white, unfortunately. Currently, auto industries have a series of taxes and incentives throughout their program that have some of the same effects as would a government payout.

    What is the difference between the government reducing taxes on a company (or industry) vs. paying them? Well, in one scenario the government loses a certain amount of tax dollars. In the other, the government directs a certain amount of tax dollars. You can decide which is better.

    By the way, France subsidizes Airbus directly, which outrages me personally. A private company should not be government subsidized.

    While 1/2 million people might lose their jobs in the current carmakers go under, I think the economy would be able to handle it. Being in that mindset, I find myself on a mostly empty boat, but I believe the economy is no longer affected to the same degree by fluctuations in the manufacturing industry….

    Besides which, I think that the best thing for the mfrs. and the US is for them to be destroyed in such a way that all baggage gets taken care of (or left behind) and a true opportunity for a phoenix situation arises.

    Joe O.

  • avatar
    my12by60

    Ch 11 vs. Ch 7 Examples:

    Assume that today, outside of BK, GM as a global whole has total revenue of 100 and total costs of 105, all in cash (forget the bogus GAAP adjusted profits that GM keeps reporting, only cash flow will matter in BK). So GM is spending 5 more dollars than it takes in each year. If you drill down into the global GM numbers, you will see that GM NA is the real source of the cash flow deficit. Let’s say that GM NA has 60 of total revenue and 70 in total costs for a deficit of 10. And let’s say that all other GM ops have total revenue of 40 and costs of 35 for positive cash flow of 5. The net of GM NA and all other global ops is negative cash flow of 5. This is steady negative cash flow is eating up GM’s cash account quarter by quarter. GM has been selling assets for the past two years to keep restocking the cash account. What GM is frantically trying to do is bring NA ops to at least to breakeven cash flows to keep from having to file the NA auto subsidiary. But employee buyouts, plant closures, cost cuts, etc. have as yet not been enough to restore positive cash flow because market share losses and weak pricing power are working against GM in NA.

    If GM does have to file the NA ops (international subsidiaries that are cash flow positive will not be filed), it will be using the rules of BK to shed costs that it can’t shed outside of BK. If GM NA enters the court with 60 in annual revs, it may restructure around an assumed 40 in revs to allow for the sales fallout of filing. Plants will be closed, retiree benefits will be slashed or eliminated, pension plan will handed over to the PBGC, wages and benefits for remaining workers will be cut, work rules will be completely revamped, dealers will be chucked, existing common stock will be cancelled, new common stock will be given to existing bondholders in exchange for their bond principal (drastically reducing or eliminating GM’s cash interest costs), etc. This will take NA costs from 70 pre BK down to say 30. GM NA will then exit under a Ch 11 reorg with revs of 40, costs of 30, positive cash flow, good return on equity and a sustainable and defensible business plan for a reduced share of the NA auto market.

    Ch 7 only happens if GM NA simply can’t get costs down below 40 in our example. Then all assets are liquidated and asset sales proceeds are distributed to creditors as partial repayment of their debts. Ch 7 is unlikely for GM IMO because GM does have some products that fill a need in the marketplace and that can compete if they can be built with a competitive cost structure. Right now, GM can’t make its cost structure competitive because of union contracts. State franchise laws are also a big problem for right-sizing the dealer network.

    If GM can stop the NA cash burn then it has a chance of staying out of BK. But a filing by F or Chry will allow those companies to fix their cost structures and either or both will then emerge and start taking share from GM with lower priced products. I think they might all end up filing eventually, especially if we get a recession and auto sales tank.

  • avatar
    abcb

    Joe O:

    Tax incentive are there to lure company, they are money that the company pays the government but doesn’t have to because of the break. Government can budget for that, they can say hey for 2007 we are suppose to get 100 mill from auto tax, but because of tax break, we can only get 25 mill, so our budget is decreased by 75 mill.

    Handing money to the car company directly out of tax i pay is something completely different. it be like government had budget of 100 mill and all of sudden it has to give GM 75 mill so all remaining social services can only spend 25 mill.

    In the end it is like having us tax payers give the auto company money, but at least the incentives the government can plan for it, and other social services isn’t going to get the short end of the stick.

  • avatar
    Joe O

    Abcb –

    I wasn’t saying it was the same thing. But I was pointing out that tax payers continue to pay the same amount regardless of a new incentive for a corporation, and therefore the tax money the government no longer receives from the corporation must either be made up through:

    A. Decreased spending
    B. Increased taxation

    Yes, sometimes incentives are in place to attract business. But once a business is established, incentives are merely there to help support the business…and then they fall into the category I named above. They stop being incentives, and start becoming breaks.

    I was pointing out that there are two ways of helping the industry from a monetary government standpoint. Tax incentive/break, which reduces total government income, or handout, which increases total taxation or debt.

    The third way is decreased bureaucracy, but I’ll eat my shoe if our government ever decreases the bureaucratic hurdles :)

    I think GM could be saved if they cut out sarbanes-oxley by itself….

    Joe O.

  • avatar
    hondaboy55

    my12by60 is right about what happens in the bk department. His example is right on. And these companies will use this as the ultimate union renegotiation chip. Just like the airlines, both made it very publically known what costs they were unhappy paying, and got it taken care of in court.

    While they most likely are way overpaying on labor when you look at the entire cost of a person on the job, and post retirement. Do they have a productivity number for uaw people? does it go up/down?

    It will be interesting to see how they take care of their dealership networks. To pee off the dealerships more than they are doing by producing undesirable product for the masses, might make more dealers jump ship than they need to. How are they planning on inviting the overpopulated to leave? Maybe those unhappy GM dealers will start selling those chineese cars. Timing might even be close to spot on for them hu? I mean they ARE coming right? How did Hyundai begin with their dealerships?

    Thats a 12 shooter GM keeps loaded for trimming its toe nails ain’t it? auto-reload, laser sights, wide dispursal shotgun like pellet load…..

  • avatar
    Hippo

    Yes, that’s pretty much how it works. From the point of view of one that wants to see GM succeed they should use the opportunity and go into chapter 11 asap. The first to file wins, in particular if the others take some time to follow.
    Only other option is to force the union into a strike when the contract is due and file then in such a way as to get the best possible terms.

  • avatar
    Raymond

    I grew up in a GM household. My dad retired from GM after 42 years of service. In those days, 50s and 60s in the north, most folks went to work for a company and in return for their loyalty, the company provided retirement benefits. It was their deal for the time in service. Hourly employees did not design or engineer the cars coming down the production line. Why do you all insist on blaming them? They worked with a promise of healthcare benefits and pensions. You all seem to think it is moral to go into court and take that away. My dad worked two jobs most of his life to pay for my college educationso that I would not have to work in a factory without air conditioning doing a rudundant job 8-10 hours a day.

  • avatar

    Raymond I have some quesions. Why is it that you throw the term “greedy” and “self centered” when discribing the position of someone other than the retiree?.

    Why is the shareholder greedy and self centered if they want to have some profit instead of losses. They are the owners aren’t they?

    Are the customers “greedy” and “self centered” if they want more money to go into R & D and higher quality components instead of going to the retirees? Do you expect them to readily buy what they would consider a lesser car so that the retirees can have more?

    One of my jobs is a union blue collar job. I am a former minor union official. I understand the whole, “a promise is a promise” argument. It may not be moral to change the retirees benefits but here is question that I am sure the unions are looking at themselves right now. If paying less in healthcare benefits to retirees saves the companies in question (GM, Ford, Chrysler) is that not preferable to the company going under? If the latter happens the retirees will get less benefits anyway.

    You are also not going to sway many people because although the benefits were promised, not only are they are unsustainable but they are currently platinum plated.

    My father recently passed away, he was 91 and my mother who is 85 is currently living in a very nice assisted living facility in California.

    They both worked for the government, my dad for the county and my mom for the city. The vast majority of people would think they had a gold plated retirement. They both have a defined benefit retirement plan until they die and the survivor each continues to recieve their spouses retirment in addition to thir own until they die. They also get social security. They also recieve cost of living adjustments to their government pensions. The one thing they don’t get and the vast majority of people don’t get is healthcare benefits. They get medicare. To cover what medicare does not cover mt parents each paid around 200 dollars, 400 dollars total a month for a health insurance supplement. If the firmer big three could pay their retirees a set dollar amount to help them get supplemental insurance and the retirees would have to pick up the balance (and yes the amount the retirees pay would go up each year) is that not preferable to letting the companies go under?

    I don’t think anyone here wishes ill on the retirees but the fact is that many people like myself will not currently consider a domestic auto. The former big three have taken steps to correct their past sins but it is going to cost money and they don’t have any left.

    If the union and the retirees are unwilling then I could just as easily and be justified in calling the union and retirees “greedy” and “self centered”.

  • avatar
    my12by60

    Raymond,

    I am no expert in the auto industry. And I don’t know exactly how the blame for the current situation at GM should be shared between labor and management. But I do know that the blame should be shared in some fashion. That says nothing about your dad who may have been a great employee.

    But when you suggest that some of us here in this forum want to see benefits be “taken away” from folks, that is simply not true. Most here are simply making the observation that benefits will be taken away, not that we necessarily want that to happen.

    And who is the party responsible for taking away these benefits? The answer is auto consumers, as mentioned by the prior poster. Auto consumers are simply unwilling to pay GM enough for its products so that GM can afford to pay all of its wages, benefits and other costs. That is what has GM headed for a BK court.

  • avatar
    TireGuy

    shamu wrote:
    I am not a huge fan of GM or the Detroit product line in general, but I feel compelled to speak out against all the union-bashing. Aren’t our beloved BMW’s, Porsches, etc. built by German autoworkers that are in a union that is more polwerful than the UAW (board seats.) I drive a bulletproof Mazda 626 that was built by UAW labor- many Corollas are built in Cali by UAW labor…..I submit that unionized transplant factories would still produce wondeful products…after all, both Germany and Japan are more collectivist societies than the US, yet their autos are admired.
    ____

    You are right, that in Germany the unions have a strong position, especially in the automotive industry. And here, as in the US, the workers at VW, BMW, DCX etc. get paid better than other workers, according to the housetariffs. However, the Unions have always been willing to negotiate in case a company runs into problems. They agreed with VW the 4 day week. They have agreed moderate pay increases in the last years, etc. In the US, the relationship is absolutely confrontational. The UAW is known for having thrown quite some companies into bankruptcy, even though they had the chance before to negotiate some cost reductions which helped the companies to survive. A big problem in Chapter 11 will be that if GM asks the court to set aside the labor union contracts and the health and benefit contracts, the obligation on the union to keep peace terminates immediately after the judge grants consent. Therefore the UAW can go on strike. Altogether, the hardliner UAW union and the risks arising out of this scenario have probably also kept the GM Management away from Chapter 11. Even if they file, it will be difficult to come out in good shape. As was stated before – who will buy a car with a 5 year warranty if he doesn’t know whether the company will then still be there? When BenQ Siemens filed for bankruptcy in Germany last year for their mobile phone business, people stopped buying there mobile phones, the oparator companies delisted then, etc. – there was nothing left to be reorganized after a few weeks. No business any more.

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