By on June 20, 2008

titanic6.jpgTTAC’s Deep Throat and I have been talking about GM’s decline and fall for well over two years. My man’s mantra: “follow the cash burn.” And so we have, through foreign misadventures, asset fire sales, union payoffs, supplier bailouts and more. We’ve watched GM CEO Rick Wagoner mortgage the American automaker’s future to conflate the company’s bottom line— to little avail. Throughout this firestorm, we’ve wondered how the automotive and financial press could miss the simple fact that GM’s been taking in less than it spends for a long, long time. And now, suddenly, they’ve noticed. And now the end is near. Here’s how DT sees it going down…

In February 2006, The General halved its dividend to .25 a share. At the time, GM claimed it made the move “to support its ongoing turnaround plan, particularly in its North American business, to reduce costs and business risks, and to further enhance its financial flexibility.” Two years later, GM’s spending $3b a year on interest payments, burning through a reported $1b per month and contemplating borrowing $10b to bolster its liquidity. In short, the dividend is doomed.

Today's GM’s stock price: $13.79. According to DT, when the dividend disappears, the share price will fall through the floor. The elimination of GM’s dividend will have an enormous psychological impact— none of it good. Talk of a GM bankruptcy will erupt once again, driving institutional investors away from GM stock and scaring-off potential customers.

Meanwhile, ResCap, the mortgage arm of GMAC Financial, is headed for bankruptcy. GM will not have enough financial muscle (i.e. money) to rescue the lender. Co-owners Cerberus have already declared their refusal to throw good money after bad. What with all the bad news– June sales are going to be nothing less than horrific– the banks will refuse lend GM cash within their existing credit facilities. There won’t even be ten-foot pole marks on additional large-scale loan applications.

DT surmises that when ResCap goes Tango Uniform, GMAC will follow. Without GMAC as a lender of choice for GM dealerships, the automaker’s stores will find it nearly impossible to offer accessible, low-interest loans. GM’s sales will spiral even lower, even faster. And then…

DT reckons GM will file for bankruptcy protections well before it runs out of cash in North America. When I pressed him on a time line, he estimated it could be within the next three months if sales don’t recover from June. GM’s highly-touted, Hail Mary overseas operations won’t be included in the Chapter 11. Like Delphi, the filing will only cover U.S. ops (GM corporate and GMNA).

The day GM files for Chapter 11, they’ll unleash an extensive advertising and PR assault. The huge (and hugely expensive) campaign will assure customers, dealers and suppliers that the automaker’s business will continue. The offensive (in all senses of the word) will blame GM’s collapse—sorry, “restructuring” on rising gas prices, the general economy malaise, imports, etc. Customers will thrill to the revelation that all GM warranties will still be in force on existing and new cars.

DT says GM will immediately seek– and receive– Debtor-in-Possession (DIP) financing. How many billions they’ll Hoover-up to keep the lights on is anybody’s guess. Congressional hearings? Of course. Federal loan guarantees? You betcha. Strings attached? Plenty.

After six to nine months, GM as we know it will be dead. Under new leadership (one can only hope), the company will carry-out the brand restructuring that was due even before GM went nuts and bought Saab and HUMMER. Buick, Pontiac, Saab (in North America), Saturn and GMC will all be axed. DT has no doubts about what will happen on the sharp end: “dealers get fucked without recourse.” Only Chevrolet and Cadillac will remain in business.

Meanwhile, despite their political influence, the United Auto Workers will not be happy; the Mother of All Health Care VEBAs will not be funded. Period. The union will have to make do with what they have. DT figures the rest of the OPEB (Other Post-Employment Benefits) also face a grim, under-funded future.

DT and I have discussed GM’s post-C11 prospects at length. We both agree that bankruptcy will not stop General Motors from selling plenty of cars. Everything sells at a price, and the deals will be nothing less than astounding. But bankruptcy will definitely cut into GM’s volume. That’s the multi-billion dollar question: how much will Chapter 11 hurt GM’s sales from a “normalized” level?

Make no mistake: GM’s bankruptcy is going to hurt a LOT of people. But not, DT says, one smart cookie: Kirk Kerkorian. Captain Kirk will lend Ford the money it needs to stay solvent. FoMoCo’s stock price will soar on news of a GM C11. To the victor belongs the spoils. The rest is, as always, collateral damage.

Get the latest TTAC e-Newsletter!

60 Comments on “General Motors Death Watch 181: Bankruptcy...”

  • avatar

    con·flate Pronunciation[kuhn-fleyt]
    –verb (used with object), -flat·ed, -flat·ing. to fuse into one entity; merge: to conflate dissenting voices into one protest.

    Sounds classier than “inflate” but doesn’t quite mean the same thing.

  • avatar

    NoSubstitute :

    Wagoner’s PR boys conflated income from GM asset sales with overseas income and [the lack of NA income] to dress-up the company’s bottom line.

  • avatar

    Does DT expect a last-ditch mother-of-all fire sales event to try and keep the company from filing, or does he think the executives are resigned to Ch11 as a forgone (and fast-approaching) conclusion?

  • avatar

    Are we sure that the government can’t give GM a bundle of money to stay afloat without having to declare bankruptcy? It’s obviously not a smart thing to do from the government’s perspective (since it solves nothing, only feeding the black hole), but I can see the current management (who would be supplanted in a bankruptcy) trying very hard to get Washington to approve of such a move.

  • avatar

    The restructuring GM’s needed for decades but its management could not admit fault or give a shit. GM will be better off and if they do survive in tact with talented management who are not primarily bean counters and slick willies (i.e. engineering backgrounds – like all manufacturing companies should have…really). Ford will survive longer but they will be handcuffed when GM gets back in charge and overpasses them with ease as they will no longer be constricted an over bloated network that they cannot pare down.

  • avatar

    The government won’t let them enter Chapter 11, even though it pains me to say that as a small-government conservative. You can bet your ass the senators and congressmen from Michigan are working backroom deals as we speak to lend (read: give without expectation of repayment) GM enough cash to not only avoid Chapter 11, but also completely fund a turnaround without GM having to dip into their cash stockpile. I’d imagine that GM will get more money from the government than the company’s actually worth. Too bad it won’t force them to make the tough decisions.

  • avatar

    Post industrial society anyone ?

    When you guys hear from people in wanting to punt cash into any of the big 2.5 remember this phrase :

    British Leyland.

    It can and will only end up with one result unless someone decides finally that the US really deserves to design its own cars, but they get engineered and screwed together somewhere else.

  • avatar

    A couple things aren’t quite adding up. First, what happened to shuttering or selling Hummer?
    Second, why ditch Buick altogether when it’s one of the (if not the) best selling marques in China?
    And finally, I don’t see sales staying above anything more than a trickle once this bloodbath plays out; most people will be extremely gun-shy, fearful of getting Peugeot’d (or Alfa’d, Daewoo’d, etc.) on the parts and service front.

  • avatar

    No bailouts. Period.

    I will not vote for any House or Senate member who votes in favor of a bailout. As painful as it might be, we must let nature run its course in this matter so that the strongest, most intelligent, fittest, and/or most adaptable survive.

    It’s morally wrong to reward dysfunctional, bad management with my tax dollars, expecially since we’ve known of this bad management for decades.

  • avatar

    I paid $4.79 for gas this morning. I don’t see things getting better for GM by September.

    Even if GM had a viable small car contender, I’ve gotta think that few are in the car-buying frame of mind at these prices. And GM (a) doesn’t have a viable small car, and (b) makes no money on the small cars that it does have.

    To the lifeboats.

  • avatar

    ZoomZoom, you will be disappointed. Regardless of party, the Sta-Puft bed will be laid out for GM.

  • avatar

    Let’s just scuttle this ship and get it over with.

  • avatar

    If GM files under Chapter 11, expect Ford and Chrysler to scream bloody murder. By gaining protection from its creditors while it restructures, GM will be at a competitive advantage over the other two.

    A similar thing happened in the domestic airline industry, post-9/11. And take note of this: United Airlines operated under bankruptcy protection for three years.

  • avatar

    seoultrain :

    Are we sure that the government can’t give GM a bundle of money to stay afloat without having to declare bankruptcy?

    Assuming you mean GM filing (not the government), yes, they could rescue GM before BK. But GM NEEDS BK to get its house in order. Any bailout before C11 would be worthless. Which makes it possible, but not (God help my taxes) probable.


    Second, why ditch Buick altogether when it’s one of the (if not the) best selling marques in China?

    GM NA files. Chinese Buicks are insulated.


    If GM files under Chapter 11, expect Ford and Chrysler to scream bloody murder. By gaining protection from its creditors while it restructures, GM will be at a competitive advantage over the other two.

    Chrysler first. Then GM. Then Ford. As you point out, Ford will have to file to stay competitive. (Remember: you want to go into bankruptcy with as much cash as possible.)

  • avatar

    Saturn is not mentioned. I assume it too is killed, or the dealer network sold to China/India.

    I’m curious. How much influence does UAW have the assembly or cars? If GM really screws over the UAW by not funding the VEBA as promised, then how does GM expect any UAW member on the line to give a damn about the car he/she is building?

    Or does this also mean that all UAW employees are also locked out? I just don’t see how GM expects a new sellable car to be made when there are hundreds of pissed off UAW members with nothing left to loose.

  • avatar

    If we had a functional government, something would be in the works now. Kerkorian does not want to see Ford file; he’d lose everything he’s put in.

    Bernanke was temporarily successful in jacking up the USD with his BS comments about raising interest rates, but it looks like reality has returned. If any of the big 3 file, I can see the USD taking a big hit and oil jumping even more.

  • avatar

    mel23: Kerkorian does not want to see Ford file; he’d lose everything he’s put in. I think the plan is to let Ford get a dead cat bounce, sell the stock and THEN they file. Or not. As our Martin Martineck said, it's a pretty screwy way to invest, but hey, the guy's older than Moses. And probably smarter.

  • avatar

    Sold my car. Left only with a UJM motorcycle and a bicycle. Selling the house in the suburbs and moving to my old appartment thatw as rented.
    Pretty soon I’ll just walk to work and the UJM will be for fun only.

  • avatar

    The sooner they do it the better. They would stand a better chance of fixing the company. If Rick waits until there is absolutely no other option (some would argue that’s the situation now) it may be too late to save GM.

  • avatar

    When DW-GM started oh so long ago GM was entering its’ either 9th or 10th straight year of negative cash flow from GMNA auto operations. I don’t care how big you are, but if your largest division is eating cash quarter after quarter the only question becomes “when” you die, not if. The BOD and Wagoner (Aruba is lovely this time of year) should be taken out and shot for their mismanagement over the last half dozen years.

    We have been waiting since 1973 for GM to get it’s act together and produce a decent midsize automobile, and while the current Malibu is probably close, it is literally decades late. Since the 1920’s the core of GM has been the family car, and GM’s leaderships’ sheer laziness in making the core of their business not their continuing passion and chief concern has brought them to this point. It is sad day. The fact that the subprime crisis has cost them a cash cow and led to this is some form of irony squared. They got a little confused about what was said years ago about what business GM was in…..

  • avatar

    but hey, the guy’s older than Moses. And probably smarter.

    Interesting analogy Robert. Moses didn’t get to see the promised land, maybe Cap’n Kirk will!

  • avatar

    While I could see this scenario playing out, I don’t see it happening in the next three months.

    Just look at the first quarter balance sheet: $34.2 billion in long-term debt, $6 billion in short-term debt, $23.2 billion in cash and short-term instruments.

    Let’s suppose for the sake of argument that 2nd quarter looks a lot like this, but with $2 billion less in cash. That still leaves $21.2 billion in the bank and with the broker.

    That’s way too much cash on hand for a bankruptcy filing. GM needs to burn through more cash, so that their lenders are compelled to step upm, with their feet held to the fire by agreeing to put up more cash.

    With that much, GM could pay off its creditors with all of that money and disappear. They need to be in deeper so that the creditors have a vested interested in seeing GM turn the corner, not because they love America and apple pie, but so that they can get paid back.

    As time goes on, I see a federal bailout is far more likely than a BK. I’m not betting on it, but I would not be shocked if there was a federal loan guarantee package ala Chrysler provided in 2009.

    This would have nothing to do with the election, by the way. By that time, the credit crunch will be at its worst, and some of the banks will be on the verge of tipping.

    The Fed will do what it can, but it can only do so much, the federal government is going to have to intervene to prevent some nasty hits to the banking system. Subprime will have gone prime time.

  • avatar
    jerry weber

    It has been a long time since GM acted like a profit making car company. Al Sloan let the divisions make anything as long as it turned a profit. Yes caddys made more than chevys they always sold for twice as much.(but chevy sold so many more) The one achilles heal in the old GM was that they couldn't make an acceptable profitable small car. Since only losers wanted these things anyway, it was easy to postulate that cars were to grow larger not be small. Thus, chevys grew to be larger than older cadillacs. Pickup trucks went from cargo carrying to luxo with huge performance engines and up scale interiors. In fact, The station wagon was now an SUV. Money was made proportional to the size of the vehicle. The Hummer was the pinnacle of that argument. Had the fuel stayed under $3.00 a gallon, the general would have had some more fight left in him. However, we all know if you left shore with a boat load of oranges and everyone now wants grapes you can't just turn back (too many rotten oranges to dispose of). Also when you finally do decide to sell grapes, you find out the grape vendors who had that market to themselves (since you were the world's largest orange only merchant.)had better and cheaper grapes than you could supply. They had them at their outlets for years where grape buyers went to find them and kept returning. So the parable maybe should be lemons not oranges, I'll let Bob Farago decide.

  • avatar



    You conflate asset sales with overseas revenues in order to inflate your apparent financial strength. You don’t conflate your bottom line, unless you are mistaking it for some other financial measure.

    Speaking of which…

    You can’t really inflate your “bottom line” or balance sheet through asset sales, because before the sale the value appears on your books as a fixed asset, and after the sale the same value appears in your books, just this time listed as “cash.” And there are all sorts of reasons why you aren’t going to have hidden assets sitting around which are off your balance sheet but suddenly realizable for cash, which will then appear on your balance sheet. You may be conflating (or confusing) the balance sheet with the periodic profit and loss statement. In a profit and loss statement, you can jack up apparent profits by re-labeling, as operating revenue, cash raised through asset sales. You’d be committing a fraud, but you could do it.

  • avatar

    Kirk Kerkorian can sell his stock, bu the Ford family can’t. The decision to go Chapter 11 belongs to the Ford family with their Class B shares. As such, I don’t see Ford filing for Chapter 11 if only because the Ford family looses everything. My guess is that this is what KK is banking on – he can get some large degree of control at Ford by making an agreement with the family to infuse the company with the cash necessary to keep it out of bankruptcy.

  • avatar

    United Airlines operated under bankruptcy protection for three years.

    The laws have changed since then. Three years is no longer an option.

    While I could see this scenario playing out, I don’t see it happening in the next three months.

    Deep Throat is consistently poor at assigning timelines to his predictions. The best example would be GMDW 50, which predicts GM would hit its $10b cash floor in mid-February of 2007.

  • avatar
    Steven Lang

    I can tell you that the remarketing side of the auto business is in pretty bad shape right now. The metal isn’t moving at the auctions, and the ones that are buying frequently either self-finance their buy here pay here operations, or export the vehicles. In fact, many of the exporters are now trying to go directly to the dealerships to get their inventory.

    What concerns me far more in the near-term is whether several of the regional banks are going to fail. The Citibank’s and Barclay’s will always have their respective governments to defend them. But a bank that finds itself with an insurmountable level of unsellable debt will simply perish unless new regulations and liquidity are given to address that circumstance. There are literally over a hundred banks and financial institutions that are holding the hot end of an explosive stick.

  • avatar

    I’m still trying to figure out the real estate grab GM made a while back when buying those buildings near headquarters. They bought all that why?

  • avatar
    John Horner

    “Captain Kirk will lend Ford the money it needs to stay solvent.”

    I doubt it would be a loan. Kirk likes equity (stock).

    Ford doesn’t have the massive brand problem GM does and thus that part of a C11 filing wouldn’t help Ford like it could GM.

    Kirk could, by investing in Ford, actually force GM into C11 and thus help his investment in Ford. The Lion of Las Vegas is one sharp operator.

  • avatar
    John Horner

    “Just look at the first quarter balance sheet: $34.2 billion in long-term debt, $6 billion in short-term debt, $23.2 billion in cash and short-term instruments.”

    GM has more off-balance sheet liabilities than we can count. Underfunded employee pensions and health benefits. Obligations to pay employees and provide benefits even if they are laid off. Unfunded VEBA liabilities. Who knows how many capital leases GM is obligated to but which don’t show up on the balance sheet.

    A big problem with modern “balance sheets” is that there are in fact massive obligations to pay owed by many large companies which are not on the balance sheet.

    Take leasing as a simple example. If GM borrows $1M to buy a stamping press, then it owns the press and shows $1M of debt on the balance sheet. But, if GM “leases” the machine for 10 years with a zero residual value at the end of that 10 years then there is no debt. But, GM’s monthly payments on the lease might in fact be higher than they would be if the piece of paper were called a capital loan instead of a capital lease. To the bank which writes the papers it makes little difference, but in one case it shows up on the balance sheet and on the other it doesn’t. Whether as a capital loan or a capital lease GM still has to make the payments. This is one of the BS side effects of modern accounting practices.

  • avatar

    I want to thank you guys! I am getting a great education in bookkeeping and financial law.

  • avatar

    See you at GM Death Watch 200.

  • avatar

    @rtz :
    June 21st, 2008 at 12:08 am

    I’m still trying to figure out the real estate grab GM made a while back when buying those buildings near headquarters. They bought all that why?

    Because they wanted to get in just before real estate values drop, in order to maximize their loss in true GM fashion?

  • avatar
    jerry weber

    To Steve Lang, Am additional problem for the domestics is the factory lease. The companies have long promoted A 2-3 year subsidized lease program generally in lieu of cheap financing. Here is the rub. If Honda or Toyota program the residuals for say 47-52% at the end of the lease, they will almost certainly extract that from their own used cars. If say GM, Ford, or Chrysler does it even at a 35-45% level they will not get this at the factory sposored auctions. Worse, if the vehicle is a large SUV or Truck they will really take a bath. None of these losses which will be in the hundreds of millions, are on any balance sheet. They would only need to record the percentage they booked at the time of writing the lease, or book the profit/loss on the lease at the end when the unit is sold. Either way, this potential loss will turn into an actual loss the minute the returned lease car is sold. When I went to auto auctions years ago it was nothing to see 150 jeep cherokees go through a factory sale in one day. Those were happier times, when the jeeps and other SUV’s actually brought good money at the sales. The resale values of domestic iron haunts more than the retail consumers.

  • avatar

    I don’t think the stock falls through the floor if they cut the dividend. IMHO, investors have already factored in the chance that GM will cut the dividend into their valuation at $13.79.

  • avatar

    GM has more off-balance sheet liabilities than we can count. Underfunded employee pensions and health benefits. Obligations to pay employees and provide benefits even if they are laid off. Unfunded VEBA liabilities.

    GM’s last balance sheet stated liabilities of $185.4 billion. The VEBA liabilities are on the balance sheet.

    I had a reason for limiting my focus to just $40 billion of those liabilities, which are a fraction of the total. That’s because all creditors are not created equal, and that’s relevant to the situation.

    Surviving bankruptcy is not as simple as telling the court that you’d like to file it. Presumably, if GM filed, it would file under Chapter 11, which would entail a reorganization plan to put GM back onto its feet.

    But GM’s creditors would be able to vote on this plan. If they were to reject it, they could force a liquidation of the company (Chapter 7), which would mean Bye Bye, GM.

    (Tower Records’ final bankruptcy provides a recent example of BK backfiring — the company wanted to go 11, but their creditors refused to approve the plan and forced the company into 7.)

    Essentially, there are two classes of creditors, “secured” and “unsecured.” Secured creditors take priority over unsecured creditors.

    A GM bankruptcy plan would include a business plan and a financing plan to borrow more money that could be used to keep the business running.

    As it so happens, the secured creditors tend to include the same sort of financial institutions that would lend the company the money that it would need in order to get through this situation.

    This is where a potential conflict arises. If GM files, there will likely be a lot of banks and similar institutions who are secured creditors. If GM has enough cash on hand to pay them a large portion of what they are owed, they may just decide to vote against the reorganization plan, avoid throwing good money after bad, and take what they can get.

    If they could get $0.50-0.60 on the dollar, that becomes a realistic possibility. GM obviously can’t afford that if it wants to survive as a company.

    In that sense, GM has to play a game of chicken. If GM files, they can’t have so much money and easily liquidated assets on hand that the creditors would be motivated to not bother with the plan, force a sale and take what they can get. Rather, the creditors need to be so fearful of having their positions wiped out that they are willing to toss more money at the company in order to keep it afloat.

    This goes back to the old metaphor of having a problem if you owe the bank $100, but of the bank having a problem if you owe the bank $1 million. GM needs those creditors on both sides of the deal, and the less cash on hand that GM has on the day of the filing, the better.

    VEBA comes very low on this list. Its status is debatable — it seems that the UAW leadership misstated VEBA’s level of security to their membership — but it probably isn’t a secured creditor.

    If GM files, the VEBA obligation would likely be trimmed down substantially, as the union gets in line with all of the other creditors of lower status. The union will have to take what they can get, and they won’t be getting much.

  • avatar


    You forget one thing…. It’s an election year. If they couldn’t let Chrysler die in an election year, they certainly cannot afford to see GM go.

    Democrats will not allow that many union jobs to evaporate. Republicans will not let the big money supporters down.

    It will either be tax breaks or loans, but the government will step in. Had this happened next year, the story could be different.

  • avatar

    How much worse are June’s sales compared to previous monthts, historically?

  • avatar

    I bet GM has spent the past few years combining Buick, Pontiac, and GMC dealers just so they could kill them all at once more efficiently than as three seperate dealer networks. They do need to break out from the UAW’s deathgrip and dump Wagoner and his 15M self-pay for a horrid performance.

  • avatar

    GM will file for bankruptcy in 3 months? Respectfully, I don’t think so. Watch for a huge incentive announcement sometime Monday. I predict robust sales. Of course, we all have our own take on things…

  • avatar
    Steven Lang

    Jerry, your name sounds very familiar. I think we may have met a few times in the past.

    What’s taking place in the remarketing segment is an absolute monsoon. Honda and Toyota will have some issues, Nissan will have a bit more, but the Big 3 and many of the other brands that offered all too liberal leasing terms will be in a world of trouble.

    GM will most likely be hit the hardest. They managed to release an absolute slew of SUV’s and minivans that had virtually no brand equity with the public. These models will be extremely difficult to liquidate for two reasons.

    1) The once innumerable financing sources that were used to get these vehicles to wholesale and retail buyers is no longer able to handle the load.

    2) Most of these models, many of which have little to no cache due to their unpopularity here, will not be suitable to most of the primary export markets.

    That means what you will have left is GM’s primary dealer networks, the independents, and possibly a few distribution and remarketing intermediaries who may help them garner a better return. If these sources can’t find willing buyers who can fit the current credit requirements, you’ll likely see these vehicles held under the table for quite long time.

    The real losses will be in the billions. However the externalities of seeing these dinosaurs on the road when someone is looking for a fuel efficient car will likely cost hundreds of millions more. American vehicles are simply not seen as frugal these days. An overabundance of American trucks, minivans and SUV’s in the sales channels will most likely compound the biases that already exist in the marketplace.

  • avatar

    Tomanderson is correct. Even people who still think GM is General Bullmoose will be very reserved with their already limited cash, especially when build quality and gas mileage just aren’t close except on a sparse few models.

    Ok – what can be done with the refuse which is GM? What cars actually are worth saving ? Not many: Corvette, Malibu, Aveo(until/if the Volt), maybe just a couple others.

    I am not old enough (45) to have lived the GM hay days – all I know is my Olds Cutlass at 9 years old I sold it for … $85, the Pontiac Transport (blown engine at 110k), the Chevy nova (the Radiator on a 5 year old model fell completely in the fan at 35 miles an hour and my dad just left the heap there and called a tow truck). GM engineering should have gone on strike at the horridly cheap quality the white shirts required them to use. My Chevy Sprint (Suzuki) never needed anything but oil and gas for 115k – and it never got below 40 mpg.

  • avatar

    It’s just not gonna happen. GM will not file when there is one extra cent to keep the lights on. Why would the Rickster bail on $14 million a year? Not to mention private jet flights, free cars, secretarial support, power etc. which make the package far more valuable than even the most cynical suspect. Besides, some bank will bail them out. As long as GM doesn’t file, the loans are still on the books as good. And if worse comes to worse, Toyota will lend them the money. After all, GM is the best thing that ever happened to them. Too weak to thrive, too politically powerful to fail

  • avatar

    Here passes the glory of those who want to thrive on someones expense, or on illusion. Sooner or later the Einsteins law of relativity kicks in and those masterminding schemes on making huge wads of green by creating an illusory empire, have to perish.
    The backbone of any car company is -actually building cars. Engineering, building, sweating quality and detailing.No matter how you want to defy gravity, it returns you back to the ground, employees mostly in mud, but CEOs mostly in sandy beaches.Look Gm at yourself. Any subsidiary that you have can survive, in China, Korea, anywhere except USA. How come? No matter how you try to save, you can`t, unless you use honest means. You try to simulate diversity by rebadge- doesn`t work, not only you kill sales of the rebadge , you kill sales of the donor as well by diluting the image value.
    instead of improving quality you decided to use import, ready parts to sell them under domestic brands. Somehow fails. How come that universally good vehicle like AStra can`t sell very good under fake Saturn brand while it is a hit in Europe? Did you water it down that immensely?
    If you look at history, those who sweat onlythemselves, flourish. It has been proved zillion times, from Toyota to Bimmer, but Gm seems blind to that.
    Everywhere you save, seems God himself saves on you too.
    You think immigration will drive costs down? Sure it does at the same rate as quality. You think you can save on education and teachers? Sure you can, but later you get workers at assembly lines who do those seemingly tiny slips every day, giving huge advantage to those foreign companies that have learned to phase out quality problems. No matter where you save, if it deals with products you make, you are gonna loose big deal.A penny saved on bread and butter platforms or engines, is a dollar lost later.
    Your government wants to save by having no free education, later they loose tax money , because of failing Gm-like companies fail to employ quality workers.You see, no matter where you save it comes back.
    Does US really think that they can support the whole economy by dot coms, programmers and bubble makers and computer nerding while the rest of the world will manufacture for them tangible goods like good cars, tv sets and bikes?For godš sake, you must get your size-challenged butts( sorry!) up your sofas
    and start doing something about your manufacturing, your president and life sucking government? Why does the whole world have to pay with inflation for your extravagant no value =added life style of dollar printing and waste?
    Most of you are Christians, yet your business propogate the most unchristian values of ethics.
    SO is your Christianity just a mask?
    Christianity doesn`come from Bible, Church or what you say, it comes from what you act towards people around you.How can you pray lord almighty, then next day on Monday go to your office and deny a health care to a patient with concocted precondition saving Aetna or some other company money? No church can forgive your sins, as only human beings in flesh and blood next to you. And they can forgive you no sooner than you stop committing your greed and sloth crimes nationwide mister CEO!!!

  • avatar

    “your president and life sucking government? Why does the whole world have to pay with inflation for your extravagant no value =added life style of dollar printing and waste?


  • avatar

    Skooter- It would take too much non-car related info to type in order to explain how US is exporting inflation. (Have you ever thought how come that there are so many billionnaires in Russia , but none of them lives in USA?)

  • avatar

    jurisb: Skooter- It would take too much non-car related info to type in order to explain how US is exporting inflation.

    And in the end, the “explanation” will consist of a bunch of misinformation and opinion passed off as fact, so I’m not holding my breath.

    jurisb: (Have you ever thought how come that there are so many billionnaires in Russia , but none of them lives in USA?)

    There are plenty of billionaires in the U.S.

    Do you just make this stuff up as you go along?

  • avatar

    the pols will talk big about saving GM but do nothing of any consequence.
    Yes the Michigan will huff and puff & flapp around however there just isn’t any payoff in campaign contributions to build much support for a measure

  • avatar

    SKOOTER- I meant none of russian billionnaires live in US.

  • avatar

    Umm, and how many American billionaires live in Russia?

    I must be missing the point…

  • avatar

    If you have a “GM Credit Card,” you know, one of those cards that gives you a small credit towards a GM vehicle every time you use it, will GM weasel out of that discount with C11?

  • avatar

    So how long does this go on? I mean the demise watch?

    So who wants to lay money that it goes to D.W. 1001?


  • avatar


    I don’t think GM is going bankrupt in 3 months, nor this year, nor next. I just can’t buy that, even with the so bad cashburn they have. They may be go C11, just it’s not easy and a lot of blood will be spilled long before that. Enough argument has been given for that above.

    I don’t think ANY government should leave this 3 BIG ships to sink, why:

    1) You should keep the manufacturing AND most importantly, the Design and Engineering capability. without that, USA will become weaker and weaker, post industrial society or not.

    2) There just too much people “eating” from them and their suppliers. Can someone explain what is going to happen when about 1 million people goes unemployed tomorrow? Would ANY president, no matter from which party be “comfortable” with that? —> NO

    3) Steel, Auto, Defense, Food, IT, Banks and some other industries are strategic for any country. If you have them, you should try to keep them, with local capital. Don’t want to know what a foreign owned company will do if you fight their country.

    I agree the government bails the 3 if needed. They recently bailed the banks already. If they do, they must ask immediately: top management REMOVED, action plan to recover the company in at least 3 years, continuous follow up on everything.

  • avatar

    jurisb- How is GM dishonest? How is God punishing GM for saving? Why are you tying in free education? Why is Christianity a topic? What are you talking about?

  • avatar

    I’d like to request some quick clarification:

    If Chrysler files, and GM follows, Ford will _have_ to file, just to remain competitive. How will that affect Ford’s stock price?

    Any guesses?

  • avatar

    If Chrysler files, and GM follows, Ford will _have_ to file, just to remain competitive.

    Not at all. There is no relationship between these events.

    If Chrysler files 11, chances are good that it would be sold to an outsider, probably a foreign concern, for pennies. Cerberus won’t want to toss its own money at it, and its investors won’t want to throw good money after bad.

    If GM files 11, it will reorganize. The stockholders may or may not be crammed down. Stockholders come last, creditors come first.

    I don’t see Ford filing 11, frankly, but if it did, it would stand the best chance of recovery. The best thing about bankruptcy is the ability to reduce and restructure debt, and Ford’s primary problem at the moment is excessive debt. Operationally, things for Ford are positive, so their bankruptcy plan would almost surely be approved by their investors.

  • avatar

    The strangest thing about these times??

    Remember maybe a couple years ago all the talk was how GM was doing terribly, while hardly any attention was being paid to Ford? At that time, all the talk was on GM while Ford was arguably the one in a far worse situation.

    Here we are, a lot of talk is about Ford and them selling brands, Kerkorian, mortgaging the house, etc. Yet, arguably, GM may be in the worse situation.

    Everyone seems to ignore Chrysler. I suspect because they’re private, and arguably not nearly as important to the economy as GM and Ford.

    I don’t agree with government bailouts either. However, I look at the disgusting amounts of money being thrown at the banks lately and I have to believe losing GM would be far worse to this economy than losing Bear Stearns or any of the other handful of banks. Maybe JP Morgan will be allowed to buy GM to “save the economy”….

    On the other hand, New York I’m sure has a lot more pull than Detroit….being that cars are the root of all evil that exists in the US (pollution, foreign oil, greenhouse gasses, etc). Same way if Exxon was about to go under, nobody would care anyway. Expect a bailout for GM to garner far more cries and screams from the public than any of these banks have gotten. Mostly because for a lot of Americans they for some reason feel GM “deserves” to fail….

    And the Krekorian situation is not so hot either. Nothing more disgusting (but, I have to admit, brilliant) than using your deep pockets as a carrot to have Ford family members give up control of their company to you in exchange for “saving” it. Wow.

  • avatar

    “Meanwhile, ResCap, the mortgage arm of GMAC Financial, is headed for bankruptcy. GM will not have enough financial muscle (i.e. money) to rescue the lender. Co-owners Cerberus have already declared their refusal to throw good money after bad. What with all the bad news– June sales are going to be nothing less than horrific– the banks will refuse lend GM cash within their existing credit facilities. There won’t even be ten-foot pole marks on additional large-scale loan applications.”

    This seems to ignore the $60 billion refinancing package inked June 4, 2008 in which GMAC lent $3.5 billion to ResCap of which $750 million is secured by Cerberus and GM. This, if nothing else, will push out the day of reckoning much further than what is surmised above.

    As to GM filing within 3 months, we will have to wait until the end of September to find out if DT has any credibility.

  • avatar

    The propaganda machine of magazines praising new and past GM models is sad. Their articles and tests do influence folks to a degree, but it does a disservice to GM. Praising the Malibu is like telling your kid who got an F on their report card that “F“ stands for “Fantastic”. I respect the opinion of others who think GM will go bankrupt. However, if it does happen, GM needs to start from scratch. They need to take the route of Hyundai or Kia. Build reliable no frills transportation machines, and when that is perfected, then bring on the performance, options, and uniqueness. Right now, reliable transportation doesn’t exist with GM. What good are the heated seats, retractable tops, and seven welds on a gusset plate when your car is back at the dealership for transaxle warranty work?

  • avatar


    Without the THREE U.S. automakers combining into one there is no rationality to bailing out GM. GM’s cash burn is triple the street estimate and has lost all control over its sales, its product development and its future. The executives and the unions have the company hostage to government capital infusion. Bankruptcy is a viable answer that can push off creditors and force unions and management to make concessions that are impossible unless a loaded gun is at their head. There is too much capacity, too many models, too many plants, too many employees producing products that are more easily produced by others. The VW bug was the first indication that the Big Three did not have a clue to the needs and long-term preferences of the U.S. consumer. And today we have a glut of SUV’s that will ultimately have to be sold at a first-ever half-price sale. GM has already built them, they have already paid for them and no one wants them. You need cash, blow them out the door ½ price or less and they are out of inventory and cash hits the balance sheet.

    But to infuse GM with cash to keep it afloat without bankruptcy is no answer because next in line will be Ford and Chrysler. These three should be forced to combine and re-form to use their talents and capacity to building something we all need and that is energy independence.

    There is one industry that has a payback that cannot be overlooked as a place to re-train and invest and that is in renewable energy. Train those people, insist that the manufacturing capacity of GM be converted to energy and produce, once and for all, a source of energy that once in place CAN NEVER GO UP IN PRICE. In World War II Ford built a massive number of B-24’s in their new Willow Run plant in Ypsilanti. That change in production and product proved that it can be done and Ford did a spectacular job producing that airplane to the considerable consternation to the Nazi war machine. Fast forward to 2008 and our enemy is our own waste and inefficiency; energy independence is crucial to our national safety and we can actually budget part of our national defense budget to this end.

    I am not against giving money to GM…but I am against giving them money to build products that have no measurable or important upside to our economy long-term. I am against giving money to GM with Ford looking like that doggie in the window. Force them into solar, wind, wave and nuclear. Support them in their endeavor to re-tool and you got my money. Absent that, you will not get me to suggest giving them, their workers or their bloated retirees belly-aching about their co-pay when millions have no health care a single dime.

    The side benefits are obvious: our defense structure is enhanced because we no longer have to depend on a cartel of Bedouins in the Middle-East to determine for us how much oil we are going to use and our environment actually can become healthy in L.A. vs. choking to death sitting in traffic on the five. We put a pin in our energy costs once in for all and bankrupt our dear friends in the middle east forcing them to drive Chevy Cobalts and trade in their Bentleys.

    Here is what we said about the Chrysler/GM merger talk=
    “Two drunks walking down the street
    holding each other up…
    until they hit the curb,
    then they both fall down”

    Axxel Knutson 11.18.2008

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Jeff S: Yes but why should we become more dependent on Russia? A major reason we talk to Russia is to protect the...
  • Jeff S: My brother had a 64 Dodge Polara with a 440 that would dust TAs as well.
  • Jeff S: Agree about the definition of “pleasing” and I would add the word “gay” had a...
  • Jeff S: Neither am I. Long past the time of wanting either but I am glad both exist.
  • stuki: “At least we’ll have domestic production and won’t be at the whim of whatever happens on the other side...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber