Topic: GM Hints It Could Go Broke

[Wetson]

Awwww pooooooooor little unions are sh&tting their pants.  They've taken too much and from the sounds of it the pool is almost dry.  With any luck GM will survive sans Unions and with a new corporate philosophy, outlook, and strategy.

http://www.citynews.ca/news/news_28946.aspx

'I Didn't Think This Day Would Ever Come.' GM Workers Live In Fear As Company Hints It Could Go Broke
Friday November 7, 2008
CityNews.ca Staff

They repeat the words as if they were in a foreign language or like they can't quite understand what they mean. "General Motors warns it could run out of money by next year."

It's certainly hard to fathom that sentence at first or even at second glance.

The biggest company in the world made that stunning pronouncement on Friday, hours after confirming it had suffered staggering losses totaling $2.5 billion in the third quarter. The news means drastic cost cutting has already begun, with GM chopping 3,600 jobs across North America. Five-hundred of them will come at its Oshawa plant starting in January.

The cuts will be temporary - for now. They come on top of 400 job eliminations announced a few months ago.

The news has cast a pall of gloom and fear over the city that depends on the automotive industry to survive. And many aren't sure they'll be able to.

"I'm in my 50s now so I don't know what there is for me," worries one GM employee, who has only been there for 6 years.

"I have young kids. I'm concerned about, you know, bills, payments," adds another. "If this place does close up, where are you going to go?"

Others worry about how it will affect future generations.

"My kids and everybody's kids have to try and survive on $10 an hour jobs because they're never, ever going to be able to own their own house on a $10 an hour job," one man points out. "I think there is a possibility if it goes bankrupt, and if it does, there's going to be a lot of people in trouble.

"I didn't think this day would ever come."

The union is equally fearful, pleading with the government to step in before the engine of the economy sputters and dies.

"I am absolutely scared, absolutely scared," admits CAW Local 222 president Chris Buckley. "On behalf of my members in General Motors, I can't stress enough the seriousness of this situation. It's bad news all around, and again I can't stress enough our government must react. If our government continues to turn their backs on this crisis, our auto industry is going to disappear."

He predicts the middle class could go, too, if GM goes broke.

The industry group representing GM, Ford and Chrysler in Canada is asking for new aid from the provincial and federal governments. The Prime Minister's office says Ottawa will consider the request, but only if it amounts to a short term solution and is affordable in tough times.

In the meantime, with the holiday season now just a month away, there are fears the words "Merry Christmas" will be ringing hollow in thousands of homes across the province, as GM - and maybe Santa - both face a long and devastating layoff.

[tpl]

There are two problems here imo.

1. Should the Cdn gov support American companies without a legal guarantee with penalties attached that the factories and jobs will stay in Canada.  I'd say no, there must be penalties attcahed to any major help,  but if the US gov, provoked by the UAW insists that the much bigger US bailout monies come with an insistence that all production/jobs be repatriated to the USA then what is a company to do?

2. Should the Canadian Gov support laid off auto workers from the Detroit 3 any more than laid off fishermen in NL or forestry workers in BC?    Probably not with a big BUT. The Auto problem has come on so quickly unlike the years long decline of the fishery and the forest products business that some special treatment is called for. But what?   I don't think special EI treatment is the answer for more than a few montsh anyway.

Any pol who finds a suitable solution to the above certainly deserves to  keep their job.

[PMREdmonton]

I don't think the taxpayers should be paying for the union to keep their exorbitant salaries and benefits.  There would have to be some guarantees from the car companies in terms of employment/product development and the union would have to agree to wage/benefit concessions to keep auto production at price competitive levels.

[Arthur Dent]

The union is only part of it - GM's current management is staggeringly incompetent. Trim the dealer network, cut the union job banks, clear out the board of directors and upper management and then they might have a chance. Any money the government gives them in GM's current form is wasted.

[PMREdmonton]

The union is only part of it - GM's current management is staggeringly incompetent. Trim the dealer network, cut the union job banks, clear out the board of directors and upper management and then they might have a chance. Any money the government gives them in GM's current form is wasted.

Lots of sacrifices need to be made from the top down to save the franchise which is in the best interests of Canadians and Americans in the long run.  I suspect those sacrifices will not be made until they file for bankruptcy and undergo a massive re-organization.

[Leviathan]

"I didn't think this day would ever come."

That's rich  All the doom & gloom reports up until now where, what, fiction? And how the hell does Wagoner still have a job?

[SkiBunny]

I agree with all of you.   

However, according to US news yesterday, Mr Obama urged an immediate $50-billion bailout for the big 3.  That's twice as much the $25-billion the Dems in congress have been pressing for.

I'd say let some go bankrupt.  The plants and equipment are still valuable and not going anywhere.  They'll re-open with new investors and new managers in some kind of bankruptcy re-organization or takeover.  Workers will have to accept lower wages & benefits, in accordance with what they're worth.   

For example, factory workers in the mississippi toyota plant are paid less than half as much as their unionized counterparts in Big 3 plants up north.

[montrealvue]

I'd say let some go bankrupt.  The plants and equipment are still valuable and not going anywhere.  They'll re-open with new investors and new managers in some kind of bankruptcy re-organization or takeover.  Workers will have to accept lower wages & benefits, in accordance with what they're worth.   

I agree with you 100%.  Bankrupcy is the only solution.  They need to cut the fat to a  minimum and kill off the useless management at the top.  A bailout is like throwing money away, the same inept management will continue making the same mistakes and only dig the hole deeper.    GM needs to re-emerge as a much smaller, leaner company with 2 or 3 brands.  Having brands like Pontiac, GMC and Saturn is an exercise in futility.  They got themselves into this mess, any money taken from taxpayers to help them will have to be pryed from my cold, dead hands.

[montrealvue]

I'd say let some go bankrupt.  The plants and equipment are still valuable and not going anywhere.  They'll re-open with new investors and new managers in some kind of bankruptcy re-organization or takeover.  Workers will have to accept lower wages & benefits, in accordance with what they're worth.   

I agree with you 100%.  Bankrupcy is the only solution.  They need to cut the fat to a  minimum and kill off the useless management at the top.  A bailout is like throwing money away, the same inept management will continue making the same mistakes and only dig the hole deeper.    GM needs to re-emerge as a much smaller, leaner company with 2 or 3 brands.  Having brands like Pontiac, GMC and Saturn is an exercise in futility.  They got themselves into this mess, any money taken from taxpayers to help them will have to be pryed from my cold, dead hands. 

[Sir Osis of Liver]

If any of the Big 3 file for Chapter 11, they are done. The factories will be stripped of anything useful and shuttered. That's the reality. No one will spend money on a major purchase like a car if there is any sign the company won't be there in the future.

All you have to do is look at the history of the smaller manufactures in North America like Studebaker, Packard, Hudson and Nash.

There are somewhere between 2.5 and 3 million people who work directly and indirectly for the big three. The US has lost 1.2 million jobs this year so far, and will likely shed another 1.2 to 1.5 million jobs next year. Add in another 2.5 million and the die will be cast for a very, very long recession, if not depression.

This will hit everybody hard.

[Sir Osis of Liver]

For example, factory workers in the mississippi toyota plant are paid less than half as much as their unionized counterparts in Big 3 plants up north.

I thought Toyota paid equivalent wages to unionized workers? Have I been mislead?

The state of Mississippi also essentially paid for the Toyota plant. Pretty hard for the Big three to compete, when southern states are buying plants for their competitors.

[barrie1]

The Southern states that is some of them do not allow any form of Unions in them at all and the wages they pay are terrible for any one to live on as well. GM is not the largest corporation in the world and has not been for a while either. I believe Exxon is the largest one now and has been for a while as well. Until the market comes back there will be a slow market for all of the builders period as even the imports are down sales considerably as well. GM will not go bankrupt as they still sell millions of cars a year but will suffer from the financial decline like the rest of them. They have been in worse economic times before and always make it thru. PS the wages the folks make at the plants in Canada are almost identical for all the builders no-matter where they are from so don't be useing that excuse at all on here as its not true. As always it seems the folks who claim to dislike GM the most know the least about what they are stating as well. 

[Wetson]

Barry.  You're absolutely right that GM isn't the world's largest company.  Of all companies it's.......

1. Wal-Mart Stores
2. Exxon Mobil
3. Royal Dutch Shell
4. BP
5. Toyota Motor   
6. Chevron   
7. ING Group   
8. Total   
9. General Motors   
10. ConocoPhillips

http://money.cnn.com/magazines/fortune/global500/2008/

[articsteve]

For example, factory workers in the mississippi toyota plant are paid less than half as much as their unionized counterparts in Big 3 plants up north.

I thought Toyota paid equivalent wages to unionized workers? Have I been mislead?

The state of Mississippi also essentially paid for the Toyota plant. Pretty hard for the Big three to compete, when southern states are buying plants for their competitors.

I thought Toyota paid equivalent wages to unionized workers? Have I been mislead?

NOPE.

Skinhunny and Sara Palin share many close personality traits.
 

[ovr50]

Barrie - "GM will not go bankrupt as they still sell millions of cars a year but will suffer from the financial decline like the rest of them. They have been in worse economic times before...."

They "could" go bankrupt, as least into some kind of a financial reorginization. It is a possibility. A distinct possibility.

They do sell millions of cars a year BUT they are losing money so selling cars is not the only thing, making a profit on the sales is the key. The heavy incentives to make sales today has a financial cost. No corporation can continue to operate at a loss and burn up cash - the only end result to that is financial reorg (or a buyer or cash injector); or bankruptcy. No other choices. 

"They have been in worse economic times before..." - maybe but it could only be in the 30s and GM in the 30s is not the same company that it is today nor did it face the same level of competition in the 30s. I would say GM (and Ford and Chrysler) are facing their WORST FINANCIAL TIMES EVER. This is not some little financial hiccup that will disappear in 6 months, this may last a few years. GM CANNOT continue to burn up the cash at the present rate and survive in it's present form.

All the world's auto makers are facing the same difficult times, it's just that the Domestic 3 have been having trouble long before this current financial crisis hit the fan 2 months ago. Now, it is very serious and a company like GM will not be immune to the consequences. I predict Chrysler will be gone from it's present form; and GM and Ford both substantially altered by this crisis.

I do not wish to see any of these 3 companies go bankrupt as the effect on NA will be huge; but what I say above is closer to the truth than all the wishful thinking in the world.

[articsteve]

I said this 2 years ago.  CHAPTER 11

which will allow them to eliminate dealer obligations therefore allowing them to ditch Pontiac, Saab, Buick

reduce pensions by about 50%

stiff some suppliers

and most importantly terminate all union agreements

[Patate]

I said this 2 years ago.  CHAPTER 11

which will allow them to eliminate dealer obligations therefore allowing them to ditch Pontiac, Saab, Buick

reduce pensions by about 50%

stiff some suppliers

and most importantly terminate all union agreements

Always the "let's make those unions pay", as if it was their fault in the first place.  GM's management has been for years, even decades.. the US governement has to take its responsabilities and make an universal healthcare system.  The last thing we need in this time of crisis is to blame the high wages and keep on cutting on the middle class.

[ovr50]

"the US governement has to take its responsabilities and make an universal healthcare system."

Never going to happen. Period.

And there is more than enough blame to go around - lousy management, union contract levels out of pace with global competition, poor product planning, short term thinking in a long term business (management again), Detroit's inability to build smaller vehicles profitably that the public wants to buy, and Detroit reliability issues (real or perceived) and the list goes on.......

[sirAQUAMAN64]

I think the government will be forced to bail GM and help Ford (don't know what to do about Chrysler - thank God they're not still talking merger, what a mess and distraction of resources that would have been). And it'd be the right decision and best option for "domestic sovereign safety", the economy as a whole and for market optimism/morale, to limit further widening of the trade deficit, save good paying American jobs (which are high profile these days), and the health care benefit/pension obligations they're receiving from the companies today which would be transferred to the goverment/elsewhere instead. $50B low cost loan is a small price to pay, especially after the $700B+ they spent on the financial crisis. From all I've read and understand, from 2010 onward Ford and GM would be profit machines - just need to get there (yeah, yeah, heard that for awhile and hasn't happened, but think they're much closer). Ford is on it's way directionally IMO which will bear fruit within a year, GM getting there but has further to go and makes some pretty questionable choices at times.

[articsteve]

the health care benefit/pension obligations they're receiving from the companies today which would be transferred to the goverment/elsewhere instead

A small % of those costs would be transfered to various governments.  Generally, employees would be SOL.

Without Chapter 11, GM will never reorganize enough to re-invent itself.  I can hardly see where just government cash will turn around GM with it's massive debt and pension/health obligations.  Are they still paying dividends to shareholders 
In may and June/08 they issued dividends.