Topic: GM Hints It Could Go Broke

[sirAQUAMAN64]

Chapter 11 will do nothing good for these companies. It'll obliterate sales,

Well you got 2 choices.  Stay the course, burn through the government loans then implode or re-organize under Chapter 11 which will allow GM to ditch Pontiac, Buick, Saab, etc and all those dealers.

If the government can guarantee warranties then a certain amount of Americans will always stick with GM.  10% market share beats 0%.

I don't believe bankruptcy is the answer or will solve the problem. It will worsen it. And under bankruptcy protection companies are very limited with their allowable actions and need to raise significant funds to emerge, which make it even more difficult.

Dougjp, good read. Was wondering whether or not The Source by Circuit City was profitable (assumed not, but I was wrong). As much as I don't like them or their mall locations, they are often the only place I can find specific AV/other cabling and associated parts.

[safristi]

dougjip......so......companies are being held to the same level of scrutiny tou and I are when getting a LOAN..................deadbeats PAY THRU the NOSE...capice......GM needs Chap 11    reorganize... their hourly costs are $70 plus dollars per hour...Toyota around $40 (all in...health pay  pensions etccc)...the AV American Manufacturing pay around $30......how can GM survive ...even with $100BILLION and that albatross...not to mention Product..bloated staffing....lousy product...too many  brands too many dealerships and NO CREDIT LOANS to CUSTOMERS!!!!


 Hell if U had a condo in Florida But your mortgage was shakey in Canada ...wouldn't ya sell the Fl Condo and pay off/down yer HOME Mortgage?

[dougjp]

Oh my.....here we go, strap in.

http://www.msnbc.msn.com/id/27824057/

Sorry but....They (US politicians on both sides) think they made the perfect "Catch22" to, in their inflated conceited minds, save their sorry politician asses from criticism, but instead they make fools of themselves and cause a Depression.

In not a fan of bailouts, however this has now turned into a bad joke all around. The money can't assure anyone that any car Company can be economically viable in this climate! Not these 3 Companies or any other! Forgetting all the problems they brought upon themselves, right now no auto maker can give such assurances required to make such a business plan when their customers can't get credit or afford to keep their houses, the wages they have to pay are way too high, they have too much overhead  in terms of dealers and product lines etc. ! All of this has to be blown away before there is even hope! No business plan can be made that is anything more than a con. What are they going to do, tell everyone again that they are in process of developing new little and greenie cars? Its already been said too many times! Give me a break...does anyone think a "plan" will make any difference compared to what they have in front of them right now, or would be fooled by anything any Plan said?

I doubt it would happen, but what should happen right now is GM should go back and file for Chapter 11 immediately, and Chrysler for Chapter 11 or 7 windup. Then apply to the government for $ 25 billion in debtor in possession refinancing/orderly asset sale loans. So that path may not be viable either, its the only one with a chance. Their car sales in November or December will be at Chapter 11 levels anyway. The odds of getting any future financing of any kind are almost nil due to these impossible to meet conditions. At the very least, Chapter 11 would save 7-10 billion the 3 will burn through by the new year (GM alone is now estimated to be burning $ 5 billion a month with further sales drops).

There is a very real possibility that behind closed doors this is exactly the scenario the politicians want to see unfold, which is why they are doing this.

Ontario, we have a problem.

[articsteve]

Their car sales in November or December will be at Chapter 11 levels anyway. The odds of getting any future financing of any kind are almost nil due to these impossible to meet conditions. At the very least, Chapter 11 would save 7-10 billion the 3 will burn through by the new year (GM alone is now estimated to be burning $ 5 billion a month with further sales drops).



 

[safristi]

...I've never heard ANYONE....explain HOW they are burning through $5BILLION a MONTH.............any takers

[sailor723]

...I've never heard ANYONE....explain HOW they are burning through $5BILLION a MONTH.............any takers

I'm a little unclear on that as well (and I'm sure i don't understand the accounting. I read that their results for the latest 3 months was a loss of 2.5 billion (just over 800 million a month) Does this claim of "burning through" 5 billion per month mean that they are now losing 15 billion in this quarter

[tpl]

I thought the monthly figure was the amount that was paid to suppliers, payroll, debt service, health care, pensions etc.    So if they make less than that amount in sales they are making a loss.      In detail of course one would have to allow for corporate income  taxes, currency costs from  and for foreign ventures ( Opel, Vauxhall, Holden etc)

[dougjp]

Two different things. There's cash flow, "what's in the bank" which is what the burning through (losing) cash is about, and profit/loss.

In terms of cash flow, all it takes is for sales to drop while all other Company activities including day to day production and expenses continue as before. Inventory increases as it isn't turned into incoming cash, and we know that's one of the things that happened. Suppliers (Accounts Payable) get paid as before, or maybe they are trying to get paid early now (uses more cash)? Loan repayments are made without new loans available? All of this is working against them.

[DockMan]

FWIW, GM has never paid well (in recent history anyway), ever since Lopez ran the procurement department. That still was in my opinion the beginning of the end for General Motors....you reap what you sow and GM treated, and in many cases, is still treating their suppliers like dirt. I know that I would not be supplying GM right now, not at net 180 from PPAP terms anyway. Better not to have the business at all.

[SkiBunny]

BNN Squeezeplay had the Ontario trade minister on.   I only caught 1/2 of it but he seems very worried that unless Canada/Ontario gets a deal going with the Auto Co's in Canada BEFORE the US gov acts that we might well see a situation where all the Ontario Big 3 jobs are repatriated to the USA.  First time I have heard anyone on government sound that worried in public.   

Yep I saw that too.  Seems like a reasonable assertion, but also a lost cause.  Not with my tax money please!  If you watch that channel, no doubt you've regularly seen Kevin O'Leary repeatedly saying and pleading that they gotta let them "go to zero".     

[SkiBunny]

If any of the Big 3 file for Chapter 11, they are done. The factories will be stripped of anything useful and shuttered.

Yes that seems like a definite possibility.  Slow credit markets make a post-reorganization or takeover difficult.  I think the greatest hurdle is the excess capacity.  Production and employment levels must be curtailed to meet the expected demand for the next several years.  That means auto jobs should disappear anyway, and throwing taxpayer money at it is at best a temporary and poor allocation of limited capital resources.  As multibillionaire money manger Eric Sprott wrote last week, the auto bailout is such an abuse it's almost laughable.   

[tpl]

If any of the Big 3 file for Chapter 11, they are done. The factories will be stripped of anything useful and shuttered.

Yes that seems like a definite possibility.  Slow credit markets make a post-reorganization or takeover difficult.  I think the greatest hurdle is the excess capacity.  Production and employment levels must be curtailed to meet the expected demand for the next several years.  That means auto jobs should disappear anyway, and throwing taxpayer money at it is at best a temporary and poor allocation of limited capital resources.  As multibillionaire money manger Eric Sprott wrote last week, the auto bailout is such an abuse it's almost laughable.   

I disagree. Surely the whole point of Chapter 11 is that the company can keep working. For sure SOME plants will close, SOME model lines will cease production immediately and LOTS of people will be laid off but cars will still be produced and some dealers will keep on selling them.

[DockMan]

I disagree. Surely the whole point of Chapter 11 is that the company can keep working. For sure SOME plants will close, SOME model lines will cease production immediately and LOTS of people will be laid off but cars will still be produced and some dealers will keep on selling them.

Been through a big customer in the states going through chapter 11, it is basically "work-out" under court mandate and protection. (I currently sit on the unsecured creditor committee for that case) As TPL said it is all about making the business work, however possible. If there is no hope the case is converted to chapter 7 (liquidation) on a very quick basis. In the US the unsecured creditor committee, the claimant and a few others including the receiver can motion at any time for case conversion to chapter 7. Everyone has to have faith that the re-org will work or it will not last long.

[SkiBunny]

If any of the Big 3 file for Chapter 11, they are done. The factories will be stripped of anything useful and shuttered.

Yes that seems like a definite possibility.  Slow credit markets make a post-reorganization or takeover difficult.  I think the greatest hurdle is the excess capacity.  Production and employment levels must be curtailed to meet the expected demand for the next several years.  That means auto jobs should disappear anyway, and throwing taxpayer money at it is at best a temporary and poor allocation of limited capital resources.  As multibillionaire money manger Eric Sprott wrote last week, the auto bailout is such an abuse it's almost laughable.   

I disagree. Surely the whole point of Chapter 11 is that the company can keep working. For sure SOME plants will close, SOME model lines will cease production immediately and LOTS of people will be laid off but cars will still be produced and some dealers will keep on selling them.

... but to keep working they'll need capital, and with the seized capital markets, they'll quickly be forced into mass liquidation instead.  So says amanda and some others on the the squeeze play show you mentioned.  I believe them because it's the opinion of more than just the self-serving auto execs and the whining unions.

What REALLY stinks is that some Bush admin dummies publicly let it be known, before the senate vote thursday, that the Admin would bail out these loser companies.  So the union wouldn't make any wage concessions as the Senate demanded, i.e., to lower GM's average compensation from their reported $73/hour to the thirtysomething average rate of the imports

[airbalancer]

So the union wouldn't make any wage concessions as the Senate demanded, i.e., to lower GM's average compensation from their reported $73/hour to the thirtysomething average rate of the imports

you sound as bad as Barrie at making up number

wage     $26 Gm        $23 Toyota
benefits  $23              $20


the kick is they include the retirement pension into today works per/hr
$17 GM  $3 Toyota

These # were from the National

[SkiBunny]

So the union wouldn't make any wage concessions as the Senate demanded, i.e., to lower GM's average compensation from their reported $73/hour to the thirtysomething average rate of the imports

you sound as bad as Barrie at making up number

wage     $26 Gm        $23 Toyota
benefits  $23              $20


the kick is they include the retirement pension into today works per/hr
$17 GM  $3 Toyota

These # were from the National

Well the national might be reporting the canadian number, but who cares, because it's the U.S. that matters as to whether the Big 3 go bust or bailed out.  Canada is  irrelevant to the outcome.

$73/hour is the amount in the US from GM, including benefits of current and retired employees.  Widely reported on NBC, CBS, ABC recently.

Here's the comparison of the wages + benefits among automakers in the US:

http://mjperry.blogspot.com/2008/11/should-we-really-bail-out-7320-per-hour.html

And here's The New York Times' (a liberal paper) break down of $73:
http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?_r=2&hp

So i wasn't "making up a number" as you accuse, thank you.

[SkiBunny]

... And the only way for the Big 3 to escape those punitively high labor costs, in the absence of UAW concessions, is via bankruptcy. 

[DockMan]

... And the only way for the Big 3 to escape those punitively high labor costs, in the absence of UAW concessions, is via bankruptcy. 

  The trouble that the auto industry is in is exactly why there are bankruptcy laws. With some impossibly difficult restructuring suddenly made possible, a company that employs thousands (and many more indirectly) gets to make necessary adjustments to its business and hopefully emerge a going concern. The financing is a huge issue and IMO insurmountable without a government backstop to secure the necessary financing to get in and out of bankruptcy.

Government handouts at this stage are foolish and IMO a reckless use of taxpayer dollars. The fact that on top of that cost they would need to create a new bureaucracy (at what cost, you'll never know) to "oversee" the conditions put on the money is further proof that it is a silly idea.

[safristi]

..who ever accused the GOV of COMPETANCY..........more like knee Jerk tokers wakened UP once in a while from their back bench snoozerama./ Lollapalooza -re-elect ME TOUR..and YELL "IT WASN"T ME" but I'll FIX IT..........................


 ANY BETS!!!?   all the POLS are MORE FOCUSED on Parliament's OPENING in late January and their "POSTURING" POSITION vis a vis their "SKINS"..................


 the US has wasted MORE on this CZAR_RINA Bailout FEST than anyone can COUNT...Dracula....................drive a stake thru it's HEART before wa ALL GET SUCKED DRY.............

[Honda Owner]

.you reap what you sow and GM treated, and in many cases, is still treating their suppliers like dirt

Not just their suppliers......