By on May 4, 2007

frtiz2.jpg"We have a continued sense of high urgency." Last Sunday, I ressurrected auto industry analyst Mary Ann Keller’s 2005 call to GM to face its problems with “a sense of urgency.” Yesterday, GM’s CFO reassured analysts and reporters by seeing Keller’s heightened mental state and raising it a Mel Brooks. High urgency? What the bleep is that? Whatever it is, it better be the management equivalent of Viagra.

"Our business is not generating the kind of returns we expect,” Fritz Henderson told the money men and journalistic jackals, announcing a 90 percent drop in GM’s first quarter earnings (from $602m to $62m). Ya think?

At the risk of overthinking this, I find it a bit strange that Fritz said GM’s not getting the returns they “expect” not “expected.” I take that to mean there’s an ongoing discrepancy between management expectations and market reality, in a “what the Hell do we do now?” kinda way.

Just in case we hadn’t quite grokked the overarching irony of GM’s circumstances, while Fritz was busy yap dancing, Car Czar Bob Lutz told a hack that GM’s on-again, off-again, on-again, off-again Zeta platform cars are on again. Maybe. Meanwhile, GM's [theoretical] world-beating small car is still stuck in global limbo.

Despite ongoing product confusion, results from GM's overseas operations (net income up $264m to $304m) indicate that it would be relatively smooth sailing for the corporate mothership if it weren’t for the gaping hole in its side known as the North American automotive unit (GMNA).

Although GMNA's first-quarter net losses narrowed from $292m to $46m, Fritz [rightly] credited structural cost savings. In other words, we’re cutting our way to prosperity! Only, you know, not. But hey! GMNA's revenue per vehicle (RPV) rose by $1,064!

Yes well, in a perfect world, an uptick in small car sales would have lowered the number. While GM is selling larger, more highly contented vehicles, they're flogging fewer of them (sales down 9.5 percent in April, 100k fewer vehicles sold during the quarter). And the revenue figure doesn’t include the cost of the additional content. In fact, the actual cost per vehicle could well be rising faster than the RPV.

Addressing the subject of sinking sales, Fritz flagged the fact that GM’s rental fleet cutback accounted for 60 percent of the automaker's reduced throughput. U.S. retail sales were “only” down four percent. Yes but– sales of the vehicle carrying the hopes of a nation the company– the refreshed Chevrolet Silverado pickup– tumbled 7.2 percent.

And things are about to get even trickier. GM’s urgently high— I mean “highly urgent” CFO acknowledged the United Auto Workers (UAW)-shaped storm clouds gathering on the increasingly bleak horizon. Fritz played the “we’re all in this together” card.

“We have to continue to make significant improvements,” Henderson admitted, continuing the automaker’s unspoken policy of not speaking about long- or short-term targets. “That is on our minds as we go into collective bargaining, as well."

As predicted, GM’s almost about to gonna sort its union problems at its Lordstown and Fairfax factories. This proto-success returns the Delphi UAW UXB (unexploded bomb) to its rightful position under the Chairman’s chair.

To prepare for a UAW payoff at their bankrupt former subsidiary and mission-critical parts supplier, GM's allocated an additional $100m (up to $500m) for the first year of any Delphi deal. They've also increased the ongoing estimated cost of a Delphinian solution by an additional $100m per year (now $100m – $200m per year). And they still insist they're going to save $2b on parts costs over the next five years. (Someone should tell Delphi's private equity owners.) 

Short term, the Delphi problem pales in comparison to the ongoing disaster over at their GMAC finance unit. Thanks to sub-prime loan implosion, their former cash cow has turned into a vampire bat.

This quarter, GM’s 49 percent share "earned" it a $115m loss. (GMAC dividend RIP.) Fritz took a stab at singing the sun will come out tomorrow, but his heart wasn’t in it. ”When you're in the midst of the kind of maelstrom we're in with nonprime, I think it's important to take it quarter by quarter.” And take it like a man.

Bottom line: with its continuing cash conflagration, GM needs to start selling a whole bunch of profitable vehicles in North America, and soon. Goldman Sachs analyst Robert Barry isn’t optimistic. He told Automotive News that GM’s NorAm results were weak "given that we are at the peak of GM's product cadence."

Barry may not know the half of it. According to TTAC’s Deep Throat, as bad as GM is doing overall, it’s far worse on the coasts. In particular, California is becoming more and more of a GM-free zone. That situation needs sorting now, in a super highly urgent way.

But how? As long as Toyota is the price leader and GM has to discount its vehicles to sell, GMNA can only hope for breakeven or slightly better. And face much, much worse.

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71 Comments on “General Motors Death Watch 121: On the Fritz...”

  • avatar

    Thanks to sub-prime loan implosion, their former cash cow has turned into a vampire.

    many a voice on this website predicted this problem for GMAC, how come they could not see it?

    What is it with GM? Do they want to crash & burn or what?

  • avatar
    Paul Niedermeyer

    “California is becoming a GM-free zone”

    When I lived there 15 years ago, the only thing the Chevy dealers stocked were Suburbans, Pick-ups and Corvettes.

    I bet Tundra will be asymetrically popular in CA. Suburbans aren’t exactly in a growth mode. Leaves the ‘Vette.

  • avatar


    Just like an impending train wreck, there’s not much to do here but watch GM go through the moves. As the forces were set in motion decades ago, there’s far too much momentum to stop quickly, and the cars are stuck on rails with nowhere to go.

    The only variable is how far the splatter will go.

  • avatar

    When a company is going bankrupt, management tries to extract as much income for themselves as possible. It is far less personally risky for management to grab millions of income now than to try to save the company and make greater money in the long-term future.

  • avatar
    Sid Vicious

    I get here early but there’s always one guy (building maintenance) ahead of me in the best parking spot. And he used to drive an Avalanche until this week. Now he’s driving a Kia. I don’t need to tell you why.

    Only Detroit could put three trains on one track heading toward one another for a collision like never seen before. Who drops first? It’s like they’re in a foot race to suicide.

    This is just unbelieveable. I have never seen such a string of bad news in my lfe. Everyone repeat after me: fuel prices, UAW, housing, a supplier base in absolute crisis, rising commodity costs, China – and then throw in a couple of wildcards like terrorism and Iran. And these are the things that are totally out of management’s control.


  • avatar

    The end is probably near. I don’t see a customer panic yet since the medai largly ignores this situation in favor of useless drivel about Rosie or some stupid governement thing. When the American Idol series ends maybe someone will realize milions of jobs at thousands of businesses are in danger of being lost.

    At the end of the day I see a government bailout coming. It will depend on whether your a pitcher or a catcher then, if you get my drift.

  • avatar
    Alex Rashev

    "continued sense of high urgency" – sounds too much like "Defend the revolution!". As in, an oxymoron. "their former cash cow has turned into a vampire bat" – this is priceless. Just imagine it visually happening – someone should make a GM Deathwatch cartoon.

  • avatar

    When I lived there 15 years ago, the only thing the Chevy dealers stocked were Suburbans, Pick-ups and Corvettes.

    Funny, these are the only three US vehicles I would buy (have bought in the past)
    Now with PO on the horizon the Vette would be the only option if I could painlessly pay for it cash and write it off instantly.

    If only one US car maker would survive I would like it to be GM, but they don’t seem to have the “huevos” to run it into the wall to get rid of the union.

  • avatar

    This has been clear as day for about 8-9 years, and if klaxons were wailing relative to the “continued sense of high urgency” then we’d all be deaf by now, and probably screaming with pain.

    The GM story, once we’re through all the spin and apologias, will be that of mad mismanagement and a near criminal disconnect from what customers needed, in favor of what management wanted to make.

    Effing sad – because there are a lot of truly gifted car people working for the GM brands, they just didn’t stand a chance against the spreadsheet numbskulls who thought you could make cars with Excel.

  • avatar
    jerry weber

    The new models were supposed to do “it”. ie. reverse the decline. However, I have read no journal article (and I read most all) that puts gm new products at the head of their class vis a vis the competition. )the exception the new 900 trucks won motor trend and some other awards. however the $3.00 and $4.00 gas is already killing this whole segement.) As for the cars and crossover suvs, I keep reading, improved over their replacements but not there yet. This is a result of falling several model changes behind the competition and trying to catch up with one new model. You see gm is shooting at a moving target, the Japanese, Koreans and Germans are not designing what you see in the showroom, they are one and two generations ahead. The fact that toyota alone will outspend gm on product development next year by billions and spend all of this money on only three lines of vehicles spells disater for gm. I think it was you Bob who said you can’t shrink your way to profitability year after year, amen.

  • avatar

    This is all playing out as if it’s been pre-scripted. In a way, it’s as though some people predicted the future for GM years ago, and now we are just watching the events unfold.

    GM said that their GMT-900 SUVs would “save them”. Didn’t happen. GM then said their GMT-900 trucks would help them. They aren’t.

    GM’s new truck sales are below expectations, and from here on in it can only get worse. Toyota’s aggressive Tundra marketing campaign is running at full steam, and sales will only continue to increase. Next year, the new F-150 is supposed to arrive, which will further dent GM’s truck sales. Meanwhile, GM’s trucks are eating into F-Series sales. It’s a viscious cycle going on between Ford and GM truck sales. Dodge and Nissan are caught in the middle, while Toyota will continue to gradually see increased Tundra sales.

    It’s amazing irony that GMAC is now sucking money out of GM, instead of making money.

    GM is indeed at the peak of a new wave of products, and even so their sales and profits are not so hot. GM’s most profitable vehicles, it’s trucks and SUVs are already out. In the next two years, GM does not have that many high-profit vehicles coming out. Meanwhile, Toyota’s new Highlander comes out in a few months, a new Sequoia is around the corner, and the new Corolla hits next year. Honda has a new Accord coming soon too.

    Things don’t look good for GM for the next two years. It’s not even known if GM’s two-mode hybrids will be profitable.

    jerry weber,

    You make a good point about R & D spending. Toyota already outspent GM in 2006 in terms of R & D, and this margin will only grow. Honda, Nissan, and even BMW profits for Q1 2007 all dropped by a considerable amount. Honda and BMW are two very successful automakers, keep in mind. Meanwhile, Toyota will soon announce it’s Q1 results, and they are set to post a record profit of over 13 Billion. Toyota was more competitive than GM at a time when GM vastly outspent Toyota. Now with Toyota outspending GM, the situation will only get worse.

  • avatar

    High urgency?
    Lets see I’m going at 4:00 I won’t see a white collar above superviser level[sunny Fri afternoon]
    In about 2 weeks we will see high urgency commitee formed .3 general supervisers 2 floor supervisers and a couple of hand picked blue collars[we have many titles for the blue collar guys but for the sake of decency I will personally censor that]
    About a 1/2 million a year in pay checks.
    They will buy some desks,build some new offices and hold many meeting to discuss, how we can save money?
    I’m sure we will see graphs and new bulliten boards
    E.D.S will whip up a new program{they don’t work for nothing}
    No doubt I will be told to cut back on staples/ball points and other high urgency waste.
    The program/commitee will go on for 6 months or so then gradually fade away.
    Nothing of any significance wil be accomplished but some
    overpaid underworked leach,can tell the folks in Detroit that we have achieved our HIGH URGENCY! objective.
    That should get him promoted,or at least a nice bonus.

  • avatar

    We recently looked at the GMC Acadia vs. the Honda Pilot. My wife, a diehard Honda fan, wanted to look at the GMC because she liked the looks and specs. I was shocked she even considered it. But we both agreed we needed to give the Home Team an at-bat.

    The GMC looked great, and had good interior space and ergonomics. However, the interior looked and felt as though it was designed to last about 5 years. Everything felt about 90% there.

    The Honda, even though it’s on an older platform and due to be replaced, was on a whole order of magnitude better in terms of quality, fit and finish, and the intangible “feel”.

    Given our history with three previous Honda products, it was an easy decision. There’s a new Pilot in the driveway.

    The Big 2.5 automakers have lost an entire generation (or two) of buyers who will not even consider thier products due to previous experience.

    It’s been said here before, but the Big 2.5 will need to develop class leading vehicles that demonstrate quality over the long haul. Not just 90 days, or 3 years, but 5,7,10 years. When they can do that consistently, they will start to win back the buying public.

    Unfortunately, they don’t have that much time. The Japanese automakers, and now the Koreans, have relentlessly improved their quality and built tremendous loyalty from their customers. The Europeans and Lexus/Infinity/Acura destroyed their hold on the luxury market, and the Chinese are poised to attack from the bottom of the market.

    The domestics counted on trucks and SUV’s to carry them, and now gas prices and the inroads the competition has made on those fronts is killing that cash cow. Did they really think the Japanese companies would sit by and watch all those profitable truck sales go unchallenged?

    After all these years, thier best answer to the Civic is the COBALT? Didn’t anyone actually sit in an Accord before the G6 came out? Didn’t it occur to them to develop the Focus for more than just Europe? Why is there no 300C Diesel? And why is the person responsible for green-lighting the Aspen still on the payroll?

    It’s not rocket science. You benchmark the best in class, then you build ’em better. You sell at a competitive price and you stand behind the product.

    Someone else thought of this before. The Detroit automakers should go to the Automotive Hall of Fame and look up the guy.

    His name was Soichiro Honda.

  • avatar

    I simply refuse to believe that there is no one with policy influence in Detroit that has a passion for driving and who’s thinking is outside of the NASCAR – drag driving (racing??) box. It may be a difficult process to build a quality machine, but a half wit can recognize an inferior product. These men must be ignorant of modern autmotive technology – that is, technology released after 1970. They are not being asked to build a challenger to the Koenigsegg CCX or Zonda R, or to an Evo for that matter – but poised, stable, well handling reliable transportation that is affordable to most. Surely that is not an insuperable task? Where does their R&D funding go?

  • avatar


    Amen. Soichiro Honda, along with Kiichiro Toyoda, Alfred Sloan and Henry Ford all go down as some of the greatest automotive people in history.

  • avatar

    Here’s the part I don’t get:
    But Wagoner’s relentless drive to cut costs has played well on Wall Street. GM’s shares rose 58 percent last year, the most of any company in the Dow Jones Industrial Average.
    What is it with Wall Street? Do they expect GM to “relentlessly” cut its way to profitability? How do you cut your way to a 58% increase in share price? What do these guys see that I don’t?

    Or more likely: How long before the bubble bursts?

  • avatar

    evohappy9: Where does their R&D funding go?
    Short Answer: Trucks. (Not to mention the efforts to marginally improve the fuel efficiency of those trucks eg. 2-mode hybrids…)

    You know, before Bill Ford stepped down, I used to think that Ford would be the first of the Big 2.5 to file for Bankruptcy. Now I am convinced that it is GM, and Ford has a fighting chance.
    At least Mulally isn’t in TOTAL denial.

  • avatar

     I'd like to propose a new topic of conversation: how do they dig themselves out of the hole they're in? If you were magically named CEO of GM or Ford, what would you do, short-term, medium-term, and long-term? Alternatively, is the game already over? Is there no saving the Big 2.5? If people think that that's really the case, then we can stop trashing management and the UAW for being stupid, because they're doomed either way.

  • avatar

    My company shows the same symptoms as GM – the old culture of our glory days is simply too deeply ingrained for change to be possible.

    Everyone can see the trainwreck coming, but there are too many entrenched interests to allow even the changes that everyone agrees need to be made – someone might lose some turf.

    All the managers are long term with no new blood brought in at the upper levels (Give Ford credit here). Since the uppers have all known each other for 30 years, there’s no accountability for their errors – “Good old Bud tried hard, you know, so let’s give him a raise”. Our long-terms plans department was causing too many headaches for the operators, so we waited for a retirement and then closed it. Now we can focus on next quarter’s results without anyone nagging.

    So, watching GM is like watching your older brother struggle with an incurable inherited disease. You know the same thing is going to happen to you too.

    Yes, the big 2.5 are going to die. You can’t teach an old dog new tricks fast enough

  • avatar

    Put me in charge sure Day 1 dump 1/2 of the bloated management Day 2 dump1/2 the dealers,kick the other 1/2 in the ass.
    Day 3 call the UAW/CAW in for a meeting,point out what I did on day1 and day2,you guys wanna talk?cause day 4 is right around the corner.
    Mikey for CEO but first I gotta get my ass into my other job.

  • avatar

    Where I work, a few years ago the boss saw that he couldn’t increase the budget. So, to make the most of the existing budget, he proposed to hollow out the agency. All of the “grunt” work would be handled by outside vendors (who presumably could do it better, faster, cheaper) while we manned the visible front lines of customer service. Sounded good in theory, except for the little fact that the vendor could not in fact do it better or cheaper, and it got the boss fired.

    That said, if named the CEO of Ford (the hell with GM… they are toast) I would –you guessed it– hollow out the company. It’s painful but all American production would be gone, replaced completely with production from Canada, Mexico and Brazil.

    Mazda would design my small cars, while Ford of Europe would design my mid-size cars. Ford of Australia would design my large cars. I’d retain an engineering staff in Dearborn to do trucks. I would see if I could sucker, um, I mean, entice someone into taking PAG off my hands.

    It still may be too late. Ford (and the rest of “Detroit”) lost far too many Americans by building decades of pure, unadulterated crap (I could tell you stories about my 1980 Mustang).

  • avatar

    Omnivore just my opinion but before you can address a problem you have to acknowledge the problem exists. The problem is that the people running GM are in denial and out of touch. GM’s board has never held GM’s senior management accountable for basically being morons. If the board doesn’t see a problem how can they change senior management?

  • avatar

    GM has already hired bankruptcy specialist Jay Alix. I’d just stroll over there and have a quiet word with Jay. And then file.

    At this point, there’s no other way to sort out GM’s union problems, bloated dealer network and brand obesity.

    Oh, and I’d fire as many members of GM’s current management team as I could without completely destroying the company’s ability to make vehicles. But if I had to…

  • avatar

    I think the bosses ought to take a cue from Steve Jobs and go for the $1 salary until the company turns around (say until they post a profit for an entire year or gain market share for an entire year) and then tie the salary directly to profits, up to a reasonable level (yes I know that’s rather subjective, but anyway). Do that for the whole board of directors and tell anyone who doesn’t like it to take a hike.

    That should buy (a-hah) them some goodwill with the rest of the company and then go from there. I’m not sure about rest but there seem to be a lot of good ideas already floated.

  • avatar


    1) File Chapter 11
    2) Kill Buick, Pontiac, and GMC. If at Ford, Kill Mercury, sell PAG, and keep Volvo and Mazda.
    3) Fire 1/3 of the dealers
    4) Void the union contracts and start over.
    5) If the unions strike, move production offshore. I hear the Chinese work REAL cheap.
    6) Cut retirees health benefits by instituting real cost-sharing.
    7) Fire 1/3 of the top 5 layers of management.
    8) Engineer small cars in Europe, and bigger cars and trucks here. Engineer all platforms to be world-compliant.
    9) When it’s all over, sell the whole deal to Kirk Kerkorian and retire to the golf course.

  • avatar

    @jerry weber:
    I have read no journal article (and I read most all) that puts gm new products at the head of their class vis a vis the competition.

    Indeed, it’s funny, I keep reading these Car and Driver previews where the car is touted *by the Car and Driver contributing writer* as the Big 2.5’s Toyota killer (“Finally”), and then the C/D comparo for that segment comes out a few months later, and the Toyota killer is in last place. This cycle repeats every few months since circa 2000, possibly earlier.

  • avatar

    Omnivore, I don’t think the game is completely over. And I think we all have ideas regarding how they could dig themselves out of the hole but let’s face it, their options are extremely limited at this point.

    Now, if I were magically named the CEO of GM:

    1. Could I jettison Buick, Pontiac, and Hummer at least? Probably not. Look how expensive closing Oldsmobile became…

    2. Could I jettison the expensive UAW contract terms? No. And we’ll see how that whole process will play out later this year.

    3. Could I shift R&D monies from trucks and emphasize more fuel efficient cars? Absolutely. However, is that an appropriate solution if they are not profitable? (See Opel/Saturn Astra, Cobalt, etc.)

    I am much more optimistic about Ford these days. Although they have mortgaged themselves to the hilt, they haven’t sold the family jewels (Ford Credit, Mazda, Volvo, LR) yet. I have more faith (yes, it’s just faith) that Alan Mulally can pull off a recovery.

  • avatar

    So let me see if I’ve got this right; the management have just released that they’re in a tailspin and can’t work out what to do? May I offer some possibilities as to why your profit margin is so low?

    1: You waste money of concepts with no effort put in (i.e Chevy Volt which needs government money to work out how to make it)
    2: You squander cash on rebates for cars which nobody wants.
    3: You blow dough on management who are oblivious to common sense.

    Can you lot get this idea through your thick skulls? You can cut all the jobs you want, close as many factories as you like and cry as much as you want to whoever will listen to your story. But you don’t stop your market share slide you’ll NEVER increase your profit margin realistically. That’s what your industry is all about….CARS! Make cars that people want to buy, not what YOU think they ought to buy. Here’s another piece of information, many Americans seems to like the offerings you have in Europe. So, work out a way to make them meet the government standards they need to and build them in the United States for customers to buy. DON’T import them from Europe where the Euro is at an all time high against the dollar so the cars become unprofitable. Think about it, if the car is unprofitable, how can your profits increase? It’s not logical! Don’t build cars just to keep your market share up; build cars to make money. Which means make cars that people want (I get the feeling I’m repeating myself here).

    I know people will say the answer to my next question is “GM arrogance” but I’m going to ask it again with all the naivety of a 5 year old child:

    Why can’t GM look at what is making the competition so successful and emulate that?

    Quick case study: Hyundai 15 years ago was the byword for “shoddy”. It was down there with “Yugo” and “Lada” (Did you lot have “Lada” in the United States?. But the CEO of Hyundai, Mr Chung Mong-Koo (now known as prisoner 435627!) looked at why the Japanese cars where selling in their droves and realised it was their quality and reliability. So he issues a mandate to all his managers and employees to start emphasising reliability and working it into new cars. Hyundai re-entered the American market (among others) and is now known (affectionately, in my opinion) as “The poor man’s Toyota”. See what a little hard work can do for you?

    Fact is, GM’s profits do suck but I will concede that they are trying to slim down, get rid of plants they don’t need, putting the thumbscrews on suppliers and making people redundant. However, the latest press release shows it isn’t enough. So if all that cutting wasn’t enough, what else could be bringing their profits down? Their health and pensions legacy? Well, if that true, how will they fix it? I suppose the only answer would be for GM to ask for…..concessions…..from….the…….?

    Oh dear.

  • avatar

    I just had a thought. What is the situation with talent at GM? GM is a HUGE institution. Assuming they have a deficit of the talent needed, can they possibly find enough talent at any price?

    Has the modern labor relations system with people moving companies all the time been a factor?

    I am guessing that in the past, GM could keep more innovators because people would stay in spite of poor treatment because that was what people did. Now, those people leave the politically competent ladder climbers to run the companies without them. Is it even possible to find people who can make the needed changes? Also, if you look outside, who on the inside will be staying? It’s a nasty catch 22, isn’t it?

    Flattened management and reduced employer/employee “loyalty” could be a factor, but how much?

  • avatar

    Lokkii's points are accurate. When the history books are written, its not that management was greedy or evil: they were incestuous. As lifers, all they know is the GM way. Can Wagoner draw on his tremendous experience working for other organizations in other industries as inspiration for changes in GM? Oh yeah,as for his other work experience… What middle-manager will crusade for change that may affect his boss' tenure at GM? That's why Bill Ford deserves some credit, he thought outside the Detroit box when it came to his successor. Is anyone in the Buick organization going to tell management "you know, I think my division is redundant, lets ax it"? Is senior management going to ax Buick knowing that everyone in all the other divisions will worry about the same fate for their individual divisions, thereby eroding any support for( or cooperation with) that senior manager? This is not a unique tragedy unfolding in Detroit. One just has to look one county to the north and see the brick palace on Big Beaver in Troy. Ozymundis (sp?)? This was a monument K-mart built for itself. For many of the same reasons, they went in 30 years from owning the American discount shopping market to having to declare bankruptcy as formerly unknowns such as Wal-Mart and Target ate their lunch. K-mart management couldn't contemplate that there was a better way to do things than the way that brought K-mart to the top. When failing they didn't change, they did the same thing, "just more of it". GM is urgently doing more of what got them in trouble. As was said in another article, the definition of insanity is… GM hopes to fix itself by breeding more management wholly within the GM organization. How is someone who wants to fundamentally change that organization expect to rise within its ranks? A 30 year "stealth" career toeing the GM line until he reaches the top then reverses everything he's done and been taught? Its a train wreck because the train can't escape from following the tracks laid for it.

  • avatar

    May 4th, 2007 at 3:31 pm

    My company shows the same symptoms as GM – the old culture of our glory days is simply too deeply ingrained for change to be possible.

    This is a bit off the mark, but I wonder at what point an organization becomes so large that it works at odds to its own goals.

    Working for a 35 person company, I can safely that that 35 is way, way under that point.

  • avatar


    I am not sure you can do that. Yes, you could lay off half the management, but is the management still that bloated? I haven’t been following GM that closely, but most US companies have vastly reduced their management over the last two decades. That’s one of the reasons people move jobs so often. Once you know you aren’t moving up, you leave.

    The dealers have contracts. Can you dump them like that?

    The UAW can’t back down anymore than Arafat could. Instead, you would have to figure out if you could really survive putting them all on the street without first bankrupting the company (which may solve the dealer contracts) and relocating the whole thing to a right to work state.

    PS. Have you seen what Sen. Levinson is trying to get passed? He wants to end right to work states. He wants to solve Michigan’s problems by giving them to everyone else. I know misery loves company, but seriously!

  • avatar

    “According to TTAC’s Deep Throat, as bad as GM is doing overall, it’s far worse on the coasts. In particular, California is becoming more and more of a GM-free zone.”

    now thats funny! i recall multiple chevy ads being run here claiming “more chevys are sold in southern california then anywere else” or something to that effect.

    oh gm… how you humor me

  • avatar

    It is one major problem i see at GM is that there are too few outsiders, higher up the tree that have had experience outside of the GM walls, and its starting to really tell. Their GM-ness runs too deep that it does blind them to the obvious. A little morality and humility would not go amiss. It would give more faith to us workers, but i can’t see it happening. Theres too much cheerleading and looking at the brightside still. I dont know if its the American way to do things by always being positive and never being negative but a dose of realism needs to be administered quickly.

  • avatar

    GMAC: I guess that whole Westinghouse finance catastrophe 15 years ago was never brought up in the board meetings…Loans have to be paid back?
    Coast sales: GM sells cars? Not since the late 80’s out here.
    I have NEVER bought a car that got less than 25mpg (except for one work truck – and I got rid of that in 6 months) in 35 years. Welcome to my world America. Trust me, you’ll like it. Maybe Rickie W. not so much.
    It sure would be nice if every time I heard a GM biggie speak they didn’t seem to be so damned surprised about what is going on in the world.
    Hah, KMart! My 78 year old mom reminded me that back when I used to manage for them back in the early 80’s I would come over and tell them that Kmart would never survive. Lasted a hell of a lot longer than I thought they would though. Never underestimate the power of inertia. Eventually friction will win out.

  • avatar

    “In fact, the actual cost per vehicle could well be rising faster than the RPV.”

    Yup. The new Malibu will whittle away more profit for GM. Does anyone think GM can make it up in volume? GM wont stay alive in NA by selling Aveo, Cobalt, Malibu, Impala, anyone-of-the-world-beating-small-cars. It is, and always has been, high-content/high-margin GMT900/Lambda or die. Wagoner and Lutz were correct in throwing money in that direction. How could they have predicted OPEC, Putin, Chavez, Nigerian rebels, Reid, Pelosi, Federal Reserve, Katrina coming in and stealing/regulating/destroying oil industry resources? (hence $3.00 gas – If the political maggots would go away, gas would be what, 30 cents a gallon or so).

    The Delphi negotiations are going to be really painful…For both sides. I see GM bailing out of the US and importing cars and building trucks/SUV/CUV in Mexico. For those posting “Just get rid of the UAW”… They cant…By law… Moving to a right-to-work state makes no difference since the fed maggots override the state maggots (The Feds have more/bigger guns).

  • avatar

    The only way to turn this ship around is with a Chapter 11 filing under which the bloated dealer network and costly union contracts can be set aside, and even then the chance of survival is low.

    What GM needs in the US is two brands with arguably best in class product in each segment they compete in. Chevy and Cadillac, period. Buick, Pontiac, Hummer, Saturn, Saab and GMC are all simply costly distractions. Why do you need a separate brand for Import Fighting (Saturn)? Every car and truck now faces import brand competitors, so everyone needs to be up for that fight. Why do you need two nearly identical truck lineups from Chevy and GMC? Simple, you don’t. Want to sell a stylish FWD near luxury car, fine make it a great entry level Cadillac not a wannabe Saab. GM is spending around $3.4 billion dollars per quarter on selling, general and administrative expenses. I bet you can cut that in half by getting rid of the brand bloat. $1,700,000,000 every three months buys one heck of an engineering team!

    Finally, set the white collar compensation structure to be 10% less than Toyota and Honda are paying in their US divisions and provide for upside bonuses based on matching Toyota and Honda financial results. Nobody, including the CEO, should be paid any better than Toyota’s CEO.

  • avatar

    I hope nobody minds that I interrupt the usual chants of “the sky is falling” with a few relevant facts.

    1. While Silverado sales are down, they are holding up better than F150/Ram/Titan. And the bogeyman isn’t Tundra; it’s the housing market, which drives spend on trades, which drives spend on pickups.

    2. The product – which is the thing that matters – is much improved. The Silverado has finished #1 or #2 in just about every comparison test. The Acadia/Outlook have been highly reviewed by every major publication, and sales are starting to follow. The Aura is the NACOTY winner. Finally, the upcoming introductions of the Malibu, CTS, and Camaro are highly anticipated by insiders.

    3. Word is starting to get out that entire divisions are on the mend. Cadillac is back in the sense that consumers under 60 are starting to take it seriously and compare the CTS to the G35, 530 and C350. Saturn is for real, for the first time sporting a product line that is the equal of its excellent dealer network. Buick and Pontiac are up next, with G8 and Rendezvous introductions on the horizon.

    4. Any wonder why the #1 performing stock in the DJIA last year was GM?

    PS: those of you who truly believe that GM is going bankrupt – why not short their stock? Don’t you deserve the rewards of your analysis?

  • avatar

    Back atcha:

    1. Whether or not the Silverado is doing well relative to the F-150/Ram/Titan/Tundra, whether or not the U.S. housing slow down caused April’s seven percent drop, isn’t relevant.

    As Rick Wagoner said, the GMT900 pickups are key to GM’s turnaround. The fact that sales are flattening this early in the Silverado’s product cycle is very, very bad for the company’s health. Period.

    2. Forget awards and subjective measures of product excellence. When you’re talking about GM’s survival, all that matters are sales and market share– across the board.

    As stated in the article, GM’s sales and market share are down AND we’re looking at the peak of GM’s new product cycle. If things are going badly now…

    3. “Word is starting to get out that entire divisions are on the mend.” Huh? Are you referring to the so-called perception gap? Are you saying that it’s only a matter of time before GM’s sales catch fire? I only hope that people inside GM don’t share your optimism. I fear they do.

    4. Yes, there’s lot of wonder why GM’s stock is doing so well. Regular readers will know that I’ve been wondering that for quite some time.

    I don’t short GM’s stock– or own any automotive stock whatsoever– because doing so would damage my ability to report the truth.

  • avatar


    With respect to #2 on your list, add profits! Selling more cars at a loss doesn’t help.

  • avatar
    Turbo G

    Didn’t GM still make like 62 million? That is a lot better than losing money, no?

  • avatar

    Turbo G:

    It’s all about cash burn. GM has predicted that ’07 will be cash negative.

  • avatar
    Gardiner Westbound

    The domestic automakers have burned me too many times. My unrestrained glee at their failures includes disdain for their captive imports, Jaguar, Volvo, Mazda, etc. Their market free-fall confirms my contempt is widely shared.

  • avatar

    One of the threats to the pick up truck market is gas…but not the obvious. Around these parts, pick ups are indeed used by contractors and city works crews. But in private hands a great many were purchased for the express purpose of towing a boat. Anyone priced marina gas lately? Ouch! When you can’t afford to run the boat, you sure as hell don’t need to tow it anywhere.

  • avatar

    While Silverado sales are down, they are holding up better than F150/Ram/Titan. And the bogeyman isn’t Tundra; it’s the housing market, which drives spend on trades, which drives spend on pickups.

    That’s a tad subjective. Meanwhile, back in the real world: “In February’s sales, Ford’s claim to having the nation’s top-selling pickup truck ended with the Silverado knocking it out of first place for the first time in 20 months. In March, GM sold 55,626 Silverados, down 8.6 percent from a year ago. Sales of Chrysler’s Dodge Ram pickup, which at five years old is aging, were down 1.1 percent to 38,301. Toyota’s Tundra sold 13,196 in March, up 11.8 percent from a year ago.”

    So, no, Mr. Wagoner, it is definitely not the Tundra…

  • avatar

    I’m surprised no extrapolations have been done based on GM’s current savings and their rate of cash loss and how much longer they can continue at the current rate.

    It just seems like if money is lost(and not made) every single quarter; how can this go on for so long? When various airlines over the decades went bankrupt, it just didn’t seem like such a long slow process. It seemed like suddenly it was on the news and they were going bankrupt right then and there.

  • avatar
    jerry weber

    The car companies like gm and ford had considerable reserves in plant, and finance businesses that they tapped to keep going, others like the airlines did not have these assets. However, in the case of gm and ford they have committed most of these assets to replenish their cash hord to keep operating. This drain of cash must stop in the next year or two for both companies or it is endsville. The big question is, will it be too late, and will the fuel prices be the final coup de gras for the domestics?

  • avatar

    If I had the opportunity to be in charge of GM, Ford, or Chrysler? The answer is simple: I would do exactly what RF mentioned. That is, file for Chapter 11, get rid of as much current executives and management as I possibly could, and completely start over. If I had to, I would even start from scratch, and build a new corporate culture from the ground up.

  • avatar
    Steven Lang

    A few things…

    First off, a lot of folks here are acting like GM North America is the entire company. You need to look at the total picture of GM’s operations which is the key reason why GM’s stock has gone up substantially over the last year.

    Second, it doesn’t make any sense for GM to invest their best resources towards the North American divisions of Buick and Pontiac. Buick lost it’s cache for almost a decade now and Saturn is now taking up a lot of the new product line that would have typically gone to the old Indian division. Both of these divisions will die a natural death due to slimmer product lines and scant resources. This will be far cheaper for the General to do.

    Third, I’ll bet anyone here that GM will not be the first of the legacy big 3 manufacturers to go bankrupt. If anyone here would like to take me up on the bet, let me know.

  • avatar

    “If you were magically named CEO of GM or Ford, what would you do, short-term, medium-term, and long-term?”

    – I’d start with trimming the fat. Eliminate the people who just collect a paycheck and do nothing. I’d pay extra attention to supporting functions like HR, IT and accounting.

    – I’d relocate different brand HQ in different location. Epsylon, GMT 360, OutlookEnclave and consanguine sibblings are bad sign of thinly disguised badge engineering. Give each brand some independance. Special care would go to Saab.

    – I would seek experienced employees in the area of design and engineering and put them in charge of designing cars.

    – I’d tell the union to take a hike. Either you accept cutbacks (a.k.a be realist regarding the employment situation) or I’ll just open new _flexible_ factories in the South, next to Nissan, or more South to Mexico.

    – I’d rotate my white collar workers to the factory floor, send them to dealerships as trainees, keep them in check with reality.

    – I would buy a huge fleet of competitor’s cars and loan them in rotation to my employees. Show them who the ennemy is, where are the standards to meet and where they are to be beaten.

    – I would cap all salaries to $350,000 including stock options and other trickeries. If you can’t live off that, well, here’s the door.

    – I would tell Wall Street that we are in the business of selling cars, not making speculators happy. We have a duty to our stockholders and it is to bring consistent, good results.

    – I would build just as many cars as will sell. I’d turn Cadillac, Corvette, Saturn and Pontiac as buil-to-order only cars. Expand the array of options (yes you can have leather+4cyl+sunroof) and let them customize as many things as possible.

    – I would make Saturn and Pontiac internet only. You can test drive cars on the lot, but there is no stock. Place your order right there, or on the net, but we’re no working on comission. And we are nice to you.

    – I would fix chevrolet. Get rid of all the Chevy trucks (you’ll have to buy a GMC branded one, they are the SAME anyway) get rid of the ugly Malibu, Impala, Crapobalt. Give the HHR a diet and better engine. Bring back decent design that do not shame the name of the Impala and Malibu ir yore.

    And many many more things. And yet, I’m happy I don’t have that job…

  • avatar

    It’s sad, but the chickens are aroosting come.
    35 years of continuous loss of market share proves that the GM “culture” is incapable of making the necessary changes to exist in new environments. That’s 35 years of negative inertia; it’s physically impossible to reverse that with the same business model. Yes, reducing costs at the 2.2 = Big Bonus Checks. But you can only de-content a consumer product for so long. (Has anyone had a Fig Newton lately? It’s probably one half the size/weight it was a generation ago. Now, it’s like a cookie for Barbie.)
    The real shame is that the perps responsible will be living large on their ill-gotten swag.
    I’m no fan of the UAW, but why on earth should they give back anything? The suits richly deserve about 80% of the blame for the current situation.

  • avatar

    I grok that you are right.

  • avatar
    Martin Schwoerer

    SherbornSean et al:

    Here’s my humble opinion on the stock market. GM is still downtrending when you look at the 5-year chart, as well as in the 2-year time period.

    From a one-year perspective, GM is indeed up, but it is losing momentum and I think it will be a strong sell rather soon.

    Why did GM overperform this year? I would say because the market does not predict long-term company value. The market is concerned with short-term overvaluation and undervaluation. GM went up this year because it went down a little too far last year.

    Let’s not award the stockmarket too much ability to predict a bankruptcy. Neither Kmart’s nor Enron’s downfalls were on the charts six months before the fact. In today’s mouse-click environment, large investors get out (and short) when they see a stampede coming, not earlier.

    By the way, I think shorting a stock is best left to geniuses and fools. Be sure of what you are before you do it.

  • avatar


    Most of your measures require available funds. Even laying off superfluous employees/management costs money.

    When we begin a project with a new client – the first message we present them with is:


    Then we study their business, to identify where the distance between what they are and what they would have liked to be is the greatest.
    Then we institute a program to try and make those gaps disappear.

    Unfortunately, often it’s actually simpler (and cheaper) to start up a new operation, independent of the “mothership”, than it is to fix her up. There is enormous gravity pull in monoliths such as GM, and turning them into something that makes sense in today’s world is on a par with mounting a D-Day landing — and I’m not joking. (There are more people in GM than there were in Normandy during that landing, both sides combined. And there’s more metal in motion in GM than was involved in Normandy – floating, flying and rolling. That’s what selling 8 million vehicles a year involves). Now offer some quick solutions.

    My chief outtake from your list: identify the people and assets who have the will to build great cars, and who are willing to stake their careers on the bet coming out somewhere down the road.
    That’s good – and that’s about what will do it. But reality impinges: these people have financial obligations, they’ll get offers from wealthier competitors, GM doesn’t have the funds required to retool or redesign. It would actually be wiser for such driven talent to start up their own new car maker.

    Instead, the GM “solution” is doing what it’s always been doing, while waiting for their customers to lose their minds and begin thinking the cars are any good. All with a “sense of high urgency” apparently.

    The “dirty secret” of companies such as GM is that management has actually lost control of the beast, and it’s living its own life independently of whatever they may decide or not decide.

  • avatar
    jerry weber

    Another key problem with gm is what fleet sales have done to their resale values. You can perhaps end fleet sales (although cutting back is what is really happening)but the damage done to former owners of gm products lingers on. ie. you don’t think when an owner brings in a three year old caddy, chevy, or pontiac he gets a higher trade in today just because there are less of the new models in rental fleets? No he gets a soft number from a gm or competitor’s dealer and figures, I’ll take the low number from toyota and then have a used car in three years that will be strong for trade in. I know many people who have done this. How does gm stop this blood letting?

  • avatar

    Even though GMAC has turned into a “vampire bat” it’s probably a good thing GM only owns 49% or they would be losing double the money.

    In previous Death Watches it was suggested it was a bad idea to sell GMAC since they were making GM so much money, looks to me that GM might have lucked out on that deal.

  • avatar

    Buick and Pontiac are up next, with G8 and Rendezvous introductions on the horizon.

    Wow, more self delusions. Remember what the GTO was supposed to do for Pontiac? How about the Solstice? Here on the west coast Buick and Pontiac are already dead. Almost nobody buys the things and dealerships are closing. Meanwhile the smallest Toyota dealership in the area is moving 200 new vehicles per month while the largest is doing 600 per month. I would bet that there isn’t a single Buick-Pontiac-GMC dealer in the San Francisco bay area which sells over 200 units per month these days. And guess what, a new G-spot or Rendevous isn’t going to change that. A company cannot give up on the fast growth portions of the US marketplace and still thrive. This great products just around the corner which will save the company line is nothing but noise. So what if Saturn will soon have an almost as good as the other guys product line. Showing up after the game is over with a promising lineup of these-guys-are-it rookie players is just sad.

  • avatar

    What should GM do now?

    Sell the company to Kerkorian or Magna.

    File chapter 11.

    Complete the Waggoner plan, force GMC, Pontiac and Buick into one division (not everything Rick is doing is wrong). Close unnecessary dealerships.

    Close Saturn, it will never be profitable.

    Dump all current pensions and health care costs on the government.

    Sell Opel.

    Do not offer the UAW a new contract. Hire replacement workers.

    Learn that to win future buyers, the small entry level cars can be sold at a loss, but must be nice enough that you have repeat customers who want to buy your more expensive product. Do not deliberately punish buyers for buying the less expensive models (an old GM habit).

    Accept 10-15% US market share as a reasonable target.

  • avatar

    Wow, more self delusions. Remember what the GTO was supposed to do for Pontiac? How about the Solstice? Here on the west coast Buick and Pontiac are already dead. Almost nobody buys the things and dealerships are closing.

    Wait a second. While i’m sure other Pontiac models are not selling well, Solstices are in HOT demand where I live (S. FL). Dealers can’t get enough of them and are charging MSRP+. Even worse for the SKY.

    I would bet that there isn’t a single Buick-Pontiac-GMC dealer in the San Francisco bay area which sells over 200 units per month these days

    I would bet the same could have been said about Buick-Pontiac-GMC’s dealers in the San Fran area for the past 20 years. The left-coast bay area isn’t exactly indicative of the buying habits for the rest of the nation :)

  • avatar

    BoredLawStudent wrote, … Solstics … Sky…

    They amount to 1/2% of GM’s output and they’re trending down. And if you’re having trouble finding a Sky, come up to the Twin Cities. You can drive one away today (although they’re a little difficult to find out in the acres of unsold Auras).

    Lutz has got to go. He’s done a mediocre to poor job of defining new cars for GM that sell in ridiculously low numbers when GM needs a hit that seels in the tens of thousands very month. They don’t need another SSR or GTO, they new an Impala that puts the Camry away.

    Of course, then they’re fighting a perceived value proposition. As one commenter recently pointed out, very low trades hurt now and will hurt for years. Getting the fleets under control will help but it’s an uphill battle. And I’m not so sure it’s fleet sales as it is reliability, durability and desireability issues.

    Colleagues in the market for a car now who have a GM to trade are wondering if they should put themselves through the humiliation of massive depreciation again. It hasn’t escaped their notice that, with a reasonable trade or down payment, they’ll be rightside up on a Toyota or Honda where they wouldn’t be on a GM. They see a lot of potential value in a Hyundai and peace of mind in a very long warranty.

  • avatar
    jerry weber

    There is always that question of do image cars put luster on a brand and then help sell the vanilla jobs. These solstices, ssr’s and even corvettes cannot replace solid selling family iron. GM does not need low volume show cars, they need the old chevy impala USA’s #1 choice for family transportation. Only it won’t be easy to go up against companies that have made this market their own. Toyota, honda, and now huyndai have been on a mission for some time and the stuff that is getting all the good reviews and awards in the press has been tweaked and improved at least every four years like clockwork for the last two decades. You don’t drop one of these cars on the scene from above, you work at it like a religion. Does GM have time to do this, I doubt it because the other guys will have moved on up by the time GM catches their current offerings.

  • avatar

    You make some good points, but I think there’s more common ground than either of us acknowledges
    1. We both agree with Wagoner that the GMT900 is critical to GM’s turnaround. You see the glass as half empty because sales are down. I see it as half full because market share is up.
    2. We also agree that what matters to GM are revenues and profitability. I only mention all the improvements in GM’s product portfolio because I believe they are necessary for improving its economic health.
    3. I further believe that improvements in the product portfolio have improved the public’s perceptions of Cadillac and Saturn. This is relevant because in order to get a sale, you first need to get the buyer to even consider you. Five years ago, the only people who considered Cadillac had a foot in the grave and the people who bought Saturns did so to avoid getting ripped off by the dealer.
    4. The improvements in GM’s stock price are no mystery – investors expect higher returns.

  • avatar

    You are right about GM stock being on a long term downtrend, and I agree that the 5 year trend is much more important than the 1 year.

    I was suggesting to all the GM doomsayers that they short GM as basically “put your money where your mouth is.”

    It’s easy for amateurs like us to criticize stock analysts and fund managers for bidding up GM’s stock; apparently it’s much harder to put up your own cash.

    Full disclosure: I neither own nor short GM stock, but I do own Honda, because they build quality product (at least in my experience) and because I believe they will continue to improve revenues and profits over the long haul.

  • avatar

    The US is clearly entering a severe recession. The DJ probably has hit a high. New home sales are way off, fuel prices are at mafia extortion levels despite a world glut of crude, domestic car sales can only go one way. US govt has stopped publishing M3, the broad measure of money supply, but others are calculating it to be increasng at an annual rate of about 13%. This is probably a good time to short GM. The safest way to do this is with an inverse fund, or a bear fund. I am invested differently, but your comments regarding shorting do bring to mind the imminent drop in the DOW.

  • avatar

    GM’s stock did drop by about two bucks after they announced thier profit for the first quarter (it was 17 cents a share; analysts expected an 87 cent a share profit, so of course it fell).

    I guess the good news from GM’s perspective is that they aren’t losing money at the moment. If they can more or less break even for a long time, they can survive.

  • avatar

    “I guess the good news from GM’s perspective is that they aren’t losing money at the moment. If they can more or less break even for a long time, they can survive.”

    Nope. GM is cash negative. Unless they sort that out, they will bleed to death.

  • avatar

    I think of friends past just starting out with toddlers and mortgages. They were proud of their brand new Chevy’s. Then the paint pealed and the engines died. Being young and cash strapped, they broke out the plastic to keep the metal rolling until they could bail out of the deal without losing too much money. None of them buy new cars anymore and I learned my lesson from their experiences and shy away from anything domestic. When I look back at how the these companies screwed them I have no sad feelings for GM. Let the pig die.

  • avatar

    A few points on how Toyota at least does things.

    1. The salary raises this year were on average, 1000yen per month, that is about $100USD per year. Toyota relies instead on hefty bonuses that are tied to company wide performance. I think the bonuses are somewhere around 25K this year. The amazing thing is that these are negotiated with unions because every single salaried person below a group manager is unionized. But in Japan, the unions work with the companies to ensure mutual survival and working benefits. It’s no wonder why the Japanese senior management are shocked at how the UAW act.

    2. All engineers go through 6 months of training before they start doing any useful work so to speak. The first month is spent in classrooms learning the company history, different ways that things are done (Toyota Way), etc. Then you go spend 2 months in a factory. That’s right. The top valedictorian genius engineer has to get his hands dirty shoving seats into cars from 8pm to 5am (this actually happened to a friend of mine). Right next to the regular assembly workers. THEN, you spend 2 months in an actual dealership selling cars. Then you come back and visit a variety of parts of the company so that you know what parts do what (in a very general sense albeit) and writing a short report. Only after doing all this, do you get to start your real first assigment.

    3. Although I love sporty cars, focus group after focus group of people actually spending money on buying cars show that the vast majority of car buyers view cars as a basic appliance. I think you will start to see more sporty cars coming from Toyota, but they will not be BMW replacements. I got a fairly well-to-do friend fo mine to buy a BMW 330. The same driving feel that most of us love and crave made him feel like the car was crap after several long trips. He traded in to a Lexus ES. Toyota is not out to replace BMW. It’s there to supply cars to the people like my friend.

  • avatar

    # John:
    May 6th, 2007 at 6:32 pm EDITING

    About getting new blood into GM: I think they are still smarting about Ross Perot parachuting onto their board via EDS, pointing out their cluelessness, and having to pay him to go away.

    RF, you should invite Mr. Perot to do a Podcast with you.


  • avatar

    According to TTAC’s Deep Throat…

    I’ve really enjoyed reading the General Motors Death Watch series, but I’m continually perplexed by the mention of Deep Throat. I can understand that Mr. Farago might be concerned that too many details might reveal his source’s identity, but the few details we have received border on useless.

    I did a site search for the name, and found eleven occurrences in articles: GMDW #s 43, 47, 50, 58, 63, 69, 80, 84, 85, 112, and 121. Also, Mr. Farago mentions him in a comment on GMDW 84.

    In DWs 43, 47, 50, 63, 80, and 85, our inside man (or woman) speculates about the (then-)future or makes claims about the (then-)present without any obvious use of inside information. (Side note: A follow-up of his predictions’ hit/miss ratio would be interesting.)

    DWs 58, 69, and possibly 112 seem to be actual inside information, although they’re lacking in verifiability. The latter was largely speculative, too, but I’m willing to concede it might have been informed by knowledge not available to the general public. The same goes for his mention in this article (121).

    Deep Throat’s appearance in Death Watch 84 was to relate a fairly useless anecdote, and his appearance in the comment section was as a “Bankruptcy 101” tutor; neither required an inside man.

    Like I said, I really enjoy this series, and I’ve learned a lot I wouldn’t have otherwise, but I really think if Mr. Farago wants to implicitly put himself in the role of Messrs. Woodward and Bernstein, he needs to provide something with more gravitas than, “Checkers piddled in the Oval Office.”

  • avatar


    I have been short GM common since Q4 of 2005. I am down 50% on the position. Not good. I also own a bunch of the Jan 09 puts with a strike price of 10. I am down 25% on that position. Not good. However, I expect both of these positions to be ultimately profitable. The positives you cited in your laundry list are all just soundbites. The soundbites need to translate into positive cash flow for GM on a consolidated basis. Per GM’s own earning’s release slide show(found on the GM website), GM ended Q1 07 with $1.7B less cash than it started the quarter with. And one of the call in questions from an analyst was asking why GM’s accounts payable were up $3B from yearend. Fritz did not have a very convincing answer. If you subtract cash infusions from asset sales, GM has been burning cash to operate the business for two years. Just watch the reported liquidity figure each quarter and that will tell you whether or not any of the soundbites are actually translating into increased survival odds for GM.

    GM has some foreign business units that are growing and generating profits and cash flow. At some point GM is going to have to decide whether the next $1B of available is going to fund ongoing negative cash flow at GMNA or going to fund the necessary capital budget for one of these foreign businesses that is actually succeeding in its market. I don’t see GM allowing GMNA to drag these other successful business units down into the same sinkhole that GMNA is in. At that point, GM will file GMNA and restructure the business. GMNA is hopeless as a stand-alone business unit given its liability load (think retiree healthcare) and cost structure (think UAW wages, benefits and work rules). A bad economy and continued high gas prices will only speed up the cash burn at GM. I predict right now that cash burn in Q2 of for GM on a consolidated basis will be worse than the $1.7B cash burn from Q1. Let’s talk again when the slides come out at the end of Q2.

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