Gm Needs Money What Are The Real Effects

[ray23]

For anyone who doesn't think this is Thai related remember Chevrolet has assembly plant here.

CNN had an interview this morning with a part of Obama's economic team. One of those was the Governor of Michigan. Most of the assmbply plants have been located there for years in Detriot. She talked about the loss of 400K jobs.

I think that is huge understatement, maybe in the assembly plants. But think about what goes into cars. All the nuts, bolts, tires, wheels, wires, connectors, glass, plastic. Those are all produced from Raw mateials not at the assempbly plants but other company's and manufactors a very far reaching list of entities. 400K in job losses is no where near, what the real loss will be. That will hit Thailand hard.

I really don't see that the banks are losing up the purse strings yet, matter of fact read that the Brits a had a little chat with their banks about passing on the savings to the consumer. Seems well over due in the states to me. The American banks seem to be working on the something for nothing theory still.

This is in the real world now, me I don't agree with the government bailing these entities out, not because I don't recognize the importance. But wasn't the idea in bailing out the banks to get them to loan?

Me I think it's time to grab these bankers by the collar drag them into an office and flat tell them. Loan and do it at fair rates. Or your on your own. We will fund banks that loan to help the real economy.

This something for nothing junk is what got us in trouble in the first place.

I do believe that is my second rant this week, time for a chill pill

General Motors Says It May Run Out of Operating Cash This Year

By Jeff Green and Mike Ramsey

Nov. 8 (Bloomberg) -- General Motors Corp., seeking U.S. aid to avoid collapse, said it may not have enough cash to keep operating this year and will be ``significantly short'' by the end of June unless the auto market improves or it adds capital.

Available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June, the largest U.S. automaker said yesterday as it reported a $4.2 billion third-quarter operating loss. Merger talks with Chrysler LLC were suspended.

``Things are clearly deteriorating more quickly than people expected,'' said Jill Fields, who manages $2 billion in high- yield debt as managing director at Babson Capital Management LLC in Springfield, Massachusetts. ``They're either going to need aid or they're at risk for filing'' for bankruptcy.

GM's outlook and Ford Motor Co.'s $7.7 billion cash burn added urgency to automakers' pleas for government help after a quarter in which U.S. industrywide sales plunged 18 percent. The companies are asking for $50 billion in new loans, a person familiar with the plan said.

Chief Executive Officer Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli renewed the push for assistance in meetings with U.S. House and Senate leaders in Washington on Nov. 6. Wagoner said GM also has been in contact with the staff of President-elect Barack Obama.

``We have sufficient liquidity to continue on plan,'' Mulally, 63, said in an interview with Bloomberg Television. Dearborn, Michigan-based Ford reported an operating loss of $2.98 billion.

Ford rose 4 cents to $2.02 in New York Stock Exchange composite trading, paring the shares' decline this year to 70 percent. Detroit-based GM fell 44 cents, or 9.2 percent, to $4.36. The stock has tumbled 82 percent this year.

$73 Billion in Losses

Yesterday's cash forecast was the bleakest yet from GM, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

A bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,'' Wagoner, 55, said in a Bloomberg Television interview. GM said on Oct. 24 that bankruptcy ``is not an option.''

Should GM take such a step, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan.

Bailout Optimism

A U.S. rescue package for GM, Ford and Chrysler is likely before President George W. Bush leaves office in January, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor.

``Either the federal government provides money for a bailout and lets the industry retool, restructure, and move ahead, or the industry dies,'' Virag told Bloomberg Television.

Babson Capital's Fields said GM and Ford bonds already are trading at ``bankruptcy levels,'' so the automakers are relying on ``a political decision'' to avert that fate. She wouldn't say whether the holdings she manages include GM or Ford debt.

GM's 8.375 percent bond due in July 2033 fell 4.3 cents to 24 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34.83 percent.

Ford's 7.45 percent note due in July 2031 dropped 3.5 cents to 34 cents on the dollar, yielding 22 percent.

Chrysler Talks

While GM didn't specify any prospective partners in saying merger discussions were being halted, the biggest U.S. automaker had been in negotiations on a tie-up with Auburn Hills, Michigan-based Chrysler, people familiar with the plans said.

Consideration of a strategic acquisition was ``set aside'' to focus on ``immediate liquidity challenges,'' GM said.

GM's per-share operating loss was wider than the average estimate on an adjusted basis of $3.94, based on 10 analysts surveyed by Bloomberg.

Including a non-cash, $4.9 billion one-time gain related to unloading retiree medical bills, GM had a net loss of $2.5 billion, compared with a $38.9 billion year-earlier loss on a tax-accounting charge. GM's auto sales in the U.S., its largest market, fell 21 percent.

GM's cash use in the fourth quarter should be closer to the levels in this year's first and second quarters, when it was about $3.6 billion, Chief Financial Officer Ray Young said on a conference call.

GM said it is trying to boost cash by $20 billion by the end of next year, an increase from a July 15 plan for $15 billion.

Asset sales, a part of the strategy, have been hampered because potential buyers can't get financing, Chief Operating Officer Fritz Henderson said. GM's Hummer brand of sport-utility vehicles is among the businesses on the block.

Ford's Loss

Ford also said it was accelerating savings programs including a 10 percent reduction in salaried-job costs, expanding on a 15 percent slash this year; deeper cuts in production; and a smaller capital-spending budget.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Revenue plunged 22 percent to $32.1 billion.

The loss for Ford excluded a gain for shedding future retiree medical bills under a new union contract. Including the gain, Ford had a net loss of $129 million, or 6 cents. The net loss a year earlier was $380 million, or 19 cents.

Ford's U.S. auto sales tumbled 25 percent in the quarter.

To contact the reporters on this story: Jeff Green in Detroit at [email protected]; Mike Ramsey in Detroit at [email protected].

Last Updated: November 8, 2008 00:01 EST

[lannarebirth]

This is a long term orchestrated bankruptcy in progress. Shareholders, both common and preferred will be wiped out. bondholders, probably, likewise. re-organization with design to dump retiree obligations on the taxpayer. No amount of cash in the interim will keep that from happening, so probably no point in giving them any. It will be sold as a systemic risk trigger, and that might be so. No one at all should be surprised by any of this.

[lannarebirth]

Here's an email response I received today on a quey about GM from a member of a group I belong to. He's extremely knowledgable, and not particularly bullish on the outcome.

"Chapter 11 is corporate reorganization. Chapter 13 is personal reorganization. Chapter 7 is liquidation.

GM would file a Chapter 11 IF EITHER it determined it would try to reorganize its financial structure and operations and survive OR it determined it would be better for creditors to have an orderly cessation of its affairs. A Chapter 11 is normally filed on a Friday so that the debtor corporation can get a Federal BK judge to accept its petition and enter a temporary order of protection (stops creditors from seizing collateral) aka ‘automatic stay’. Under an 11 and presuming the company intends to reorganize, people do report for work (there might be a week or two suspension). They continue to work to the extent that the company has the resources to pay them and provide them with raw material, etc.

That’s where pre bankruptcy planning is very important. The debtor company has to squirrel away enough money in a bank with which the debtor hasn’t any debts (to have their money in the lead bank to whom the debtor owes money would subject the debtor to ‘setoff’ of its vital cash against pre petition debts). So, theoretically, GM would continue to operate in a Chapter 11. But, as a practical matter, where to do covertly stash a $100B ‘bankruptcy war chest?’ Those kinds of numbers would be noticed. And as another practical matter to which you allude, who in their right mind would buy a car from a BK company?

I’ve worked with debtor counsel with a puny $200M AMEX traded (back in the ‘80s) mobile home manufacturer. They kept the doors open for about 8 months (2 plants open 4 plants closed, 25 retail sales centers open, 85 sales centers closed). I cannot imagine trying to organize a GM bankruptcy plan. Just not possible IMO.

Like you say, either they get your tax dollars or cities will burn. Let what will happen just happen. Detroit hasn’t had the foresight to build reasonably efficient cars as a private entity, why would they make better decisions when run at the whim of the IQ of a Congressperson?

The dominoes are falling and the government just doesn’t have the speed or enough hands to stop the chain reaction. I was on takeover teams in the late ‘80s and early ‘90s for S&Ls and banks. We had our hands full closing down the relatively small number of institutions that were, in substance, insolvent or hopelessly below minimum regulatory capital requirements. Presently, there are VASTLY more banks that have fallen below minimum regulatory requirements or outright insolvent because of FNMA/FRE stock worthlessness and/or bad lending. The Fed and Paulson knew the government could not take down that many institutions even if they had the cash to do it; they simply don’t have the knowledgeable people to get the job done. It takes years to ‘grow’ an RTC. So, they recapitalize a couple biggies and let them take over the hundreds of smaller fish using their greater and more capable staff.

Too many dominoes, too few people, too little money; even for Uncle Sam, IMO. Let’s roll."

here's another from another pretty smart member:

" I haven’t studied the financial statements of GM, which means that my comments don’t carry anything of substance that is well rooted in knowledge about GM’s financial problems. Personally I do not have a problem with GM vehicles – I bought my wife a Buick Le Sabre and it’s a nice car. I relegated myself a Toyota pickup, and it’s a hel_l of a truck. Frankly, I think domestic and foreign vehicle quality is pretty good these days if you buy a decent brand, though I came to hate Ford with a passion and wouldn’t buy another in my lifetime. Ford can disappear altogether and I would only say good riddance.

What I think could be going on with GM and the automakers are derived from a sense of what non-tech corporate America generally has been doing in recent years. Think airline stocks, which have been chronically and repeatedly mismanaged – they’re business school case studies in rolling bankruptcies. The recent management strategy has been to drive an airline in bankruptcy so that the court will gut the pension liabilities of the company. This recently happened with UAL -- attack labor costs and pension costs through bankruptcy. In UAL’s case, the employees were part owners (the deal from the previous round of bankruptcy) and still management was able to drive the company into the ground again and impair the very people who were propping up the company and working hard to help it survive.

So, I ask the non-rhetorical question, are we sure that GM does not have the same goal, which is to drive the company toward bankruptcy to provide the political desire to fund a bailout, or if that does not happen, to drive the company toward bankruptcy in order to destroy the labor contracts, or both in concert or in series (first into bankruptcy to reorganize and then re-emerge with a money bailout)? Personally, I think GM management wants to destroy the labor contracts. Foreign auto plants in the US don’t have the same labor burdens. And if the US were to adopt a comprehensive health care system, that would be another business labor expense transferred from the company books. I think the entire agenda is to create a crisis within the American auto industry to produce the political support for a radical restructuring of the US auto industry management-labor relationship.

What a case study for the progression of American business in recent decades – replace defined-benefit pension plans with 401K plans, lobby to unload health case benefits into an nascent national health care system, and work to dump union labor. By eliminating good jobs for non-university trained workers, we’re creating a vast pool of unemployed or low-paid workers who cannot afford to live as part of an “affluent” middle class. The irony is that this is what is killing the American economy, which is based on consumerism. If the ultimate goal of free-market capitalism is to concentrate wealth in the hands of the elite, then it creates a society that is anathema to the original founders of our democracy and sows the seeds of its own demise.

I’m getting off this slippery soapbox."

Edited November 8, 2008 by lannarebirth

[ray23]

Good Post

[Kf6vci]

Excellent posts!

Due to the high visibility of car manufacturers, i would be surprised if no giant and ultimately misguided bailout would take place. Letting banks and companies fail is tough but might be better in the long term for the economy and the markets. At least this is Jim Roger's view.

Whatever happens, 2009 is bound to be a horrible year!

[jcon]

great post lanna.

that second guy's quote is fantastic.

[cclub75]

Yes we can !

Obama and all the other clowns in Washington have only very simple idea :

-give tax payer's money (and/or printed) to car manufacturers... so they continue to make cars that... less and less people will buy.

Roughly.

But I agree with lanarebirth : they will do everything to keep the companies. Of course, the cars "companies" will be different... but GM and the others will "survive".

Too symbolic to fail. Or more precisely : too symbolic to disappear (because failure is already acted).

Too obamian, if I may say.

Yes indeed, we can.

[ray23]

Man I laughed outloud when I read this post. He isn't even in office yet, but sure replaced the Bush comments fast

[MJP]

For anyone who doesn't think this is Thai related remember Chevrolet has assembly plant here.

CNN had an interview this morning with a part of Obama's economic team. One of those was the Governor of Michigan. Most of the assmbply plants have been located there for years in Detriot. She talked about the loss of 400K jobs.

I think that is huge understatement, maybe in the assembly plants. But think about what goes into cars. All the nuts, bolts, tires, wheels, wires, connectors, glass, plastic. Those are all produced from Raw mateials not at the assempbly plants but other company's and manufactors a very far reaching list of entities. 400K in job losses is no where near, what the real loss will be. That will hit Thailand hard.

I really don't see that the banks are losing up the purse strings yet, matter of fact read that the Brits a had a little chat with their banks about passing on the savings to the consumer. Seems well over due in the states to me. The American banks seem to be working on the something for nothing theory still.

This is in the real world now, me I don't agree with the government bailing these entities out, not because I don't recognize the importance. But wasn't the idea in bailing out the banks to get them to loan?

Me I think it's time to grab these bankers by the collar drag them into an office and flat tell them. Loan and do it at fair rates. Or your on your own. We will fund banks that loan to help the real economy.

This something for nothing junk is what got us in trouble in the first place.

I do believe that is my second rant this week, time for a chill pill

General Motors Says It May Run Out of Operating Cash This Year

By Jeff Green and Mike Ramsey

Nov. 8 (Bloomberg) -- General Motors Corp., seeking U.S. aid to avoid collapse, said it may not have enough cash to keep operating this year and will be ``significantly short'' by the end of June unless the auto market improves or it adds capital.

Available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June, the largest U.S. automaker said yesterday as it reported a $4.2 billion third-quarter operating loss. Merger talks with Chrysler LLC were suspended.

``Things are clearly deteriorating more quickly than people expected,'' said Jill Fields, who manages $2 billion in high- yield debt as managing director at Babson Capital Management LLC in Springfield, Massachusetts. ``They're either going to need aid or they're at risk for filing'' for bankruptcy.

GM's outlook and Ford Motor Co.'s $7.7 billion cash burn added urgency to automakers' pleas for government help after a quarter in which U.S. industrywide sales plunged 18 percent. The companies are asking for $50 billion in new loans, a person familiar with the plan said.

Chief Executive Officer Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli renewed the push for assistance in meetings with U.S. House and Senate leaders in Washington on Nov. 6. Wagoner said GM also has been in contact with the staff of President-elect Barack Obama.

``We have sufficient liquidity to continue on plan,'' Mulally, 63, said in an interview with Bloomberg Television. Dearborn, Michigan-based Ford reported an operating loss of $2.98 billion.

Ford rose 4 cents to $2.02 in New York Stock Exchange composite trading, paring the shares' decline this year to 70 percent. Detroit-based GM fell 44 cents, or 9.2 percent, to $4.36. The stock has tumbled 82 percent this year.

$73 Billion in Losses

Yesterday's cash forecast was the bleakest yet from GM, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

A bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,'' Wagoner, 55, said in a Bloomberg Television interview. GM said on Oct. 24 that bankruptcy ``is not an option.''

Should GM take such a step, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan.

Bailout Optimism

A U.S. rescue package for GM, Ford and Chrysler is likely before President George W. Bush leaves office in January, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor.

``Either the federal government provides money for a bailout and lets the industry retool, restructure, and move ahead, or the industry dies,'' Virag told Bloomberg Television.

Babson Capital's Fields said GM and Ford bonds already are trading at ``bankruptcy levels,'' so the automakers are relying on ``a political decision'' to avert that fate. She wouldn't say whether the holdings she manages include GM or Ford debt.

GM's 8.375 percent bond due in July 2033 fell 4.3 cents to 24 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34.83 percent.

Ford's 7.45 percent note due in July 2031 dropped 3.5 cents to 34 cents on the dollar, yielding 22 percent.

Chrysler Talks

While GM didn't specify any prospective partners in saying merger discussions were being halted, the biggest U.S. automaker had been in negotiations on a tie-up with Auburn Hills, Michigan-based Chrysler, people familiar with the plans said.

Consideration of a strategic acquisition was ``set aside'' to focus on ``immediate liquidity challenges,'' GM said.

GM's per-share operating loss was wider than the average estimate on an adjusted basis of $3.94, based on 10 analysts surveyed by Bloomberg.

Including a non-cash, $4.9 billion one-time gain related to unloading retiree medical bills, GM had a net loss of $2.5 billion, compared with a $38.9 billion year-earlier loss on a tax-accounting charge. GM's auto sales in the U.S., its largest market, fell 21 percent.

GM's cash use in the fourth quarter should be closer to the levels in this year's first and second quarters, when it was about $3.6 billion, Chief Financial Officer Ray Young said on a conference call.

GM said it is trying to boost cash by $20 billion by the end of next year, an increase from a July 15 plan for $15 billion.

Asset sales, a part of the strategy, have been hampered because potential buyers can't get financing, Chief Operating Officer Fritz Henderson said. GM's Hummer brand of sport-utility vehicles is among the businesses on the block.

Ford's Loss

Ford also said it was accelerating savings programs including a 10 percent reduction in salaried-job costs, expanding on a 15 percent slash this year; deeper cuts in production; and a smaller capital-spending budget.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Revenue plunged 22 percent to $32.1 billion.

The loss for Ford excluded a gain for shedding future retiree medical bills under a new union contract. Including the gain, Ford had a net loss of $129 million, or 6 cents. The net loss a year earlier was $380 million, or 19 cents.

Ford's U.S. auto sales tumbled 25 percent in the quarter.

To contact the reporters on this story: Jeff Green in Detroit at [email protected]; Mike Ramsey in Detroit at [email protected].

Last Updated: November 8, 2008 00:01 EST

British banks have told Brown to bog right off. Shocking since they just had all of our great grand children's future income.

http://www.timesonline.co.uk/tol/news/poli...icle5114787.ece

[midas]

What a case study for the progression of American business in recent decades – replace defined-benefit pension plans with 401K plans, lobby to unload health case benefits into an nascent national health care system, and work to dump union labor. By eliminating good jobs for non-university trained workers, we’re creating a vast pool of unemployed or low-paid workers who cannot afford to live as part of an “affluent” middle class. The irony is that this is what is killing the American economy, which is based on consumerism. If the ultimate goal of free-market capitalism is to concentrate wealth in the hands of the elite, then it creates a society that is anathema to the original founders of our democracy and sows the seeds of its own demise.

I’m getting off this slippery soapbox."[/i]

This is the type of situation I tried to allude to weeks ago in a different thread but I wasn't

eloquent enough to write this. And it's not anti-American bashing as some TV members

have accused me of-it's a genuine concern about these huge structural changes that are occuring

in the USA economy. It's so much harder to these people than those in Asian countries

because without salaries they have gone so much further to fall -their lifestyle has to change

in such a drastic way and I am not confident they can adapt............................

[MJP]

What a case study for the progression of American business in recent decades – replace defined-benefit pension plans with 401K plans, lobby to unload health case benefits into an nascent national health care system, and work to dump union labor. By eliminating good jobs for non-university trained workers, we're creating a vast pool of unemployed or low-paid workers who cannot afford to live as part of an "affluent" middle class. The irony is that this is what is killing the American economy, which is based on consumerism. If the ultimate goal of free-market capitalism is to concentrate wealth in the hands of the elite, then it creates a society that is anathema to the original founders of our democracy and sows the seeds of its own demise.

I'm getting off this slippery soapbox."[/i]

This is the type of situation I tried to allude to weeks ago in a different thread but I wasn't

eloquent enough to write this. And it's not anti-American bashing as some TV members

have accused me of-it's a genuine concern about these huge structural changes that are occuring

in the USA economy. It's so much harder to these people than those in Asian countries

because without salaries they have gone so much further to fall -their lifestyle has to change

in such a drastic way and I am not confident they can adapt............................

Midas,

It's called the Fourth World.

The rate of change in an organisms environment is the critical factor in that organisms survival. Adaptation to changes takes time. It is unlikely physical comparison may be drawn between the depression we face today with the conditions of the Great Depression of the 1930's. This is due to the welfare state, for better or worse.

[hyperdimension]

That will hit Thailand hard.

I'd like more details of how Thailand would be impacted. Would GM's operations in Thailand be deemed low-cost enough to escape downsizing?

[VegasVic]

Here's an email response I received today on a quey about GM from a member of a group I belong to. He's extremely knowledgable, and not particularly bullish on the outcome.

"Chapter 11 is corporate reorganization. Chapter 13 is personal reorganization. Chapter 7 is liquidation.

GM would file a Chapter 11 IF EITHER it determined it would try to reorganize its financial structure and operations and survive OR it determined it would be better for creditors to have an orderly cessation of its affairs. A Chapter 11 is normally filed on a Friday so that the debtor corporation can get a Federal BK judge to accept its petition and enter a temporary order of protection (stops creditors from seizing collateral) aka ‘automatic stay’. Under an 11 and presuming the company intends to reorganize, people do report for work (there might be a week or two suspension). They continue to work to the extent that the company has the resources to pay them and provide them with raw material, etc.

That’s where pre bankruptcy planning is very important. The debtor company has to squirrel away enough money in a bank with which the debtor hasn’t any debts (to have their money in the lead bank to whom the debtor owes money would subject the debtor to ‘setoff’ of its vital cash against pre petition debts). So, theoretically, GM would continue to operate in a Chapter 11. But, as a practical matter, where to do covertly stash a $100B ‘bankruptcy war chest?’ Those kinds of numbers would be noticed. And as another practical matter to which you allude, who in their right mind would buy a car from a BK company?

I’ve worked with debtor counsel with a puny $200M AMEX traded (back in the ‘80s) mobile home manufacturer. They kept the doors open for about 8 months (2 plants open 4 plants closed, 25 retail sales centers open, 85 sales centers closed). I cannot imagine trying to organize a GM bankruptcy plan. Just not possible IMO.

Like you say, either they get your tax dollars or cities will burn. Let what will happen just happen. Detroit hasn’t had the foresight to build reasonably efficient cars as a private entity, why would they make better decisions when run at the whim of the IQ of a Congressperson?

The dominoes are falling and the government just doesn’t have the speed or enough hands to stop the chain reaction. I was on takeover teams in the late ‘80s and early ‘90s for S&Ls and banks. We had our hands full closing down the relatively small number of institutions that were, in substance, insolvent or hopelessly below minimum regulatory capital requirements. Presently, there are VASTLY more banks that have fallen below minimum regulatory requirements or outright insolvent because of FNMA/FRE stock worthlessness and/or bad lending. The Fed and Paulson knew the government could not take down that many institutions even if they had the cash to do it; they simply don’t have the knowledgeable people to get the job done. It takes years to ‘grow’ an RTC. So, they recapitalize a couple biggies and let them take over the hundreds of smaller fish using their greater and more capable staff.

Too many dominoes, too few people, too little money; even for Uncle Sam, IMO. Let’s roll."

here's another from another pretty smart member:

" I haven’t studied the financial statements of GM, which means that my comments don’t carry anything of substance that is well rooted in knowledge about GM’s financial problems. Personally I do not have a problem with GM vehicles – I bought my wife a Buick Le Sabre and it’s a nice car. I relegated myself a Toyota pickup, and it’s a hel_l of a truck. Frankly, I think domestic and foreign vehicle quality is pretty good these days if you buy a decent brand, though I came to hate Ford with a passion and wouldn’t buy another in my lifetime. Ford can disappear altogether and I would only say good riddance.

What I think could be going on with GM and the automakers are derived from a sense of what non-tech corporate America generally has been doing in recent years. Think airline stocks, which have been chronically and repeatedly mismanaged – they’re business school case studies in rolling bankruptcies. The recent management strategy has been to drive an airline in bankruptcy so that the court will gut the pension liabilities of the company. This recently happened with UAL -- attack labor costs and pension costs through bankruptcy. In UAL’s case, the employees were part owners (the deal from the previous round of bankruptcy) and still management was able to drive the company into the ground again and impair the very people who were propping up the company and working hard to help it survive.

So, I ask the non-rhetorical question, are we sure that GM does not have the same goal, which is to drive the company toward bankruptcy to provide the political desire to fund a bailout, or if that does not happen, to drive the company toward bankruptcy in order to destroy the labor contracts, or both in concert or in series (first into bankruptcy to reorganize and then re-emerge with a money bailout)? Personally, I think GM management wants to destroy the labor contracts. Foreign auto plants in the US don’t have the same labor burdens. And if the US were to adopt a comprehensive health care system, that would be another business labor expense transferred from the company books. I think the entire agenda is to create a crisis within the American auto industry to produce the political support for a radical restructuring of the US auto industry management-labor relationship.

What a case study for the progression of American business in recent decades – replace defined-benefit pension plans with 401K plans, lobby to unload health case benefits into an nascent national health care system, and work to dump union labor. By eliminating good jobs for non-university trained workers, we’re creating a vast pool of unemployed or low-paid workers who cannot afford to live as part of an “affluent” middle class. The irony is that this is what is killing the American economy, which is based on consumerism. If the ultimate goal of free-market capitalism is to concentrate wealth in the hands of the elite, then it creates a society that is anathema to the original founders of our democracy and sows the seeds of its own demise.

I’m getting off this slippery soapbox."

Lanna, Uncle Sam will bailout GM and will put limits on executive pay and bonuses, and they will also get union concessions and they will take over the healthcare under Uncle Obamas new plan. My guess would be that they will also force GM's hand in the direction of CNG, fuel cell and battery vehicles (which in the long run will be a good thing). I have disagreements with a few things in your post, but do not have the time now to get into it, however the final paragraph is spot on!

[MJP]

That will hit Thailand hard.

I'd like more details of how Thailand would be impacted. Would GM's operations in Thailand be deemed low-cost enough to escape downsizing?

GM's problem, along with all western companies and governments, is unfunded future pension liabilities. This will make 'sub-prime' look like an old ladies tea dance. I suspect pensions aren't offered to Thai workers so expect more manufacturing facilities to close in the west only to be re-established in the east.

[gobs]

The final paragraph from your correspondant, Iannarebirth, is very right and bright...

There was the same debate in France some years ago, when the giant tyres manufacturer Michelin decided to "delocate" and re-organize a hudge part of its production...

No middle class, no consumers and... no profit.

Best regards

Gobs

[ray23]

My guess on impact will be that another export area will be effected. Remember a lot the eport numbers you see are way up from exporting high tickets items like vehicles. That one has always thrown me a I believe they use gross numbers and not the net to Thailand.

As I recall that non tariff agreement included computer parts, anyone know if that included the computers used in vehicles these days are they manufactored here in Thailand?

If GM BK's which seems like a huge possibilty at the momnet will that extend to international operations?

There suppliers will not be on top of the list to be paid. Can you imagine the 90 day receivables on something like this.

That one is far beyond me.

In the end in this kind of financial climate car loans are not going to be a easy to obtain. People are not going to be in big hurry to part with cash right now.

As I said this has far reaching effects, far beyond the assembly plants.

There is a history in this area, the Government has bailed out Chrysler before We are not talking about Starbucks here or Circuit City.

[Pakboong]

Here’s why a bailout for GM and/or Chrysler is a bad idea.

http://www.thetruthaboutcars.com/editorial...hrysler-and-gm/

[Lost in LOS]

I read in the post today that bush wont help out the car companies unless the democrats sign a free trade agreement with Columbia....... typical US government up to something, someone is going to make some money on this one. one has nothing to do with the other

i think we need to bail them out the car companies, because of the millions of jobs it will save, but with conditions. for example, dissolve the unions [something they will never do] it cost about 80 dollars [no, i dont remember exact figures] an hour for someone in seniority to do a mundane job on an assembly line, after considering all the benefits. we are competing against countries that don't pay that in a long week, cant compete. how about basing the pay on what they are actually doing, as putting a screw in a car everyday might only be worth 10 dollars an hour. this is why we are no longer competitive with the world, asia is kicking our butt [other than bad workmanship, another union problem because you cant fire someone that doesn't do their job properly]. You say how will they live on lesser pay and I say how will they live with no job at all? I will always take lessor pay rather than none. flame away but it is the truth

Edited November 12, 2008 by jimmys

[midas]

I read in the post today that bush wont help out the car companies unless the democrats sign a free trade agreement with Columbia....... typical US government up to something, someone is going to make some money on this one. one has nothing to do with the other

i think we need to bail them out the car companies, because of the millions of jobs it will save, but with conditions. for example, dissolve the unions [something they will never do] it cost about 80 dollars [no, i dont remember exact figures] an hour for someone in seniority to do a mundane job on an assembly line, after considering all the benefits. we are competing against countries that don't pay that in a long week, cant compete. how about basing the pay on what they are actually doing, as putting a screw in a car everyday might only be worth 10 dollars an hour. this is why we are no longer competitive with the world, asia is kicking our butt [other than bad workmanship, another union problem because you cant fire someone that doesn't do their job properly]. You say how will they live on lesser pay and I say how will they live with no job at all? I will always take lessor pay rather than none. flame away but it is the truth

nothing to flame...............its reality

[Pakboong]

The GM CEO makes $40,000 per day. I don't think he needs bailing out. At least he shouldn't. If he feels so strongly about saving the company, perhaps he could donate his salary to the cause.

[ray23]

I agree nothing to flame. However anyone noticing that the vehicles asseymbled here and sold here are not really that much cheaper to the purchaser. My Chev Colorado cost $20,500 when I bought it new four years ago.

So it kind of make you wonder what happen to that cost of the guy at $80.00 an hours and the Thai who is making what $50.00 week. Built here purcashed here, so no shipping I would assume no tariffs not an import.

[midas]

I agree nothing to flame. However anyone noticing that the vehicles asseymbled here and sold here are not really that much cheaper to the purchaser. My Chev Colorado cost $20,500 when I bought it new four years ago.

So it kind of make you wonder what happen to that cost of the guy at $80.00 an hours and the Thai who is making what $50.00 week. Built here purcashed here, so no shipping I would assume no tariffs not an import.

ray - isn't because of taxes - like in Singapore and Malaysia they

impose huge taxes on vehicles and I dont know why ?

evidently they haven't caught onto this yet in Cambodia

where cars are quite cheap and Im not sure about Vietnam

[maccaroni man]

I read in the post today that bush wont help out the car companies unless the democrats sign a free trade agreement with Columbia....... typical US government up to something, someone is going to make some money on this one. one has nothing to do with the other

i think we need to bail them out the car companies, because of the millions of jobs it will save, but with conditions. for example, dissolve the unions [something they will never do] it cost about 80 dollars [no, i dont remember exact figures] an hour for someone in seniority to do a mundane job on an assembly line, after considering all the benefits. we are competing against countries that don't pay that in a long week, cant compete. how about basing the pay on what they are actually doing, as putting a screw in a car everyday might only be worth 10 dollars an hour. this is why we are no longer competitive with the world, asia is kicking our butt [other than bad workmanship, another union problem because you cant fire someone that doesn't do their job properly]. You say how will they live on lesser pay and I say how will they live with no job at all? I will always take lessor pay rather than none. flame away but it is the truth

nothing to flame...............its reality

A couple of weeks ago I noticed GM stock at under 6.00 dollars and was shocked as I remembered thinking I was a fool for not buying in the 70's when it was at 20.00. hence I did a search and found that Ford is at 2.00 and some change? down form 60.00 and less than 24 months ago GM was over 60.00. I asked my investor friends who are now too old to care and have thus cashed out of everything but while they were in they did well so i trust their advice, they said stay away from GM it will go bust and buy Ford since then GM has dropped again and Ford has moved up. Their reasoning is the Ford Family, they believe that the Ford shares are very cheap and that the Ford family will take over the company and then deal with share holders directly. I read an article 2 days ago that said GM will run out of money before it can save itself, I don't know and I have a hard time betting against an industry that is thread into the over all economy.

But with Obama wanting an immediate 25% reduction in military cost, this would be a big hit in the working dole that pays for a large part of the american union work force; i.e. the war machine buys boats, planes, cars, trucks, heavy equipment, textiles, food........ thus I do not think a bail out is what is needed as much as a labor cost reduction, lower competitive pricing,and letting the market forces do their will.

[BEENTHEREDONETHAT]

If they bail out the car companies, what about the airlines in trouble and some chain stores like sears are on the brink. Where does it end?

I don't think it will work any better than the 700billion whoops 810 billion bank bailout.

[lannarebirth]

If they bail out the car companies, what about the airlines in trouble and some chain stores like sears are on the brink. Where does it end?

I don't think it will work any better than the 700billion whoops 810 billion bank bailout.

And what about all the "non sub prime" mortgagess that re upside down on their mortgages? They'll be asking for the same deal soon. Why wouldn't they?

[ray23]

Thanks for the info on taxes. Probably it I know they really like taxing bikes over 200 CC.

[henryalleman]

For anyone who doesn't think this is Thai related remember Chevrolet has assembly plant here.

CNN had an interview this morning with a part of Obama's economic team. One of those was the Governor of Michigan. Most of the assmbply plants have been located there for years in Detriot. She talked about the loss of 400K jobs.

I think that is huge understatement, maybe in the assembly plants. But think about what goes into cars. All the nuts, bolts, tires, wheels, wires, connectors, glass, plastic. Those are all produced from Raw mateials not at the assempbly plants but other company's and manufactors a very far reaching list of entities. 400K in job losses is no where near, what the real loss will be. That will hit Thailand hard.

I really don't see that the banks are losing up the purse strings yet, matter of fact read that the Brits a had a little chat with their banks about passing on the savings to the consumer. Seems well over due in the states to me. The American banks seem to be working on the something for nothing theory still.

This is in the real world now, me I don't agree with the government bailing these entities out, not because I don't recognize the importance. But wasn't the idea in bailing out the banks to get them to loan?

Me I think it's time to grab these bankers by the collar drag them into an office and flat tell them. Loan and do it at fair rates. Or your on your own. We will fund banks that loan to help the real economy.

This something for nothing junk is what got us in trouble in the first place.

I do believe that is my second rant this week, time for a chill pill

General Motors Says It May Run Out of Operating Cash This Year

By Jeff Green and Mike Ramsey

Nov. 8 (Bloomberg) -- General Motors Corp., seeking U.S. aid to avoid collapse, said it may not have enough cash to keep operating this year and will be ``significantly short'' by the end of June unless the auto market improves or it adds capital.

Available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June, the largest U.S. automaker said yesterday as it reported a $4.2 billion third-quarter operating loss. Merger talks with Chrysler LLC were suspended.

``Things are clearly deteriorating more quickly than people expected,'' said Jill Fields, who manages $2 billion in high- yield debt as managing director at Babson Capital Management LLC in Springfield, Massachusetts. ``They're either going to need aid or they're at risk for filing'' for bankruptcy.

GM's outlook and Ford Motor Co.'s $7.7 billion cash burn added urgency to automakers' pleas for government help after a quarter in which U.S. industrywide sales plunged 18 percent. The companies are asking for $50 billion in new loans, a person familiar with the plan said.

Chief Executive Officer Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli renewed the push for assistance in meetings with U.S. House and Senate leaders in Washington on Nov. 6. Wagoner said GM also has been in contact with the staff of President-elect Barack Obama.

``We have sufficient liquidity to continue on plan,'' Mulally, 63, said in an interview with Bloomberg Television. Dearborn, Michigan-based Ford reported an operating loss of $2.98 billion.

Ford rose 4 cents to $2.02 in New York Stock Exchange composite trading, paring the shares' decline this year to 70 percent. Detroit-based GM fell 44 cents, or 9.2 percent, to $4.36. The stock has tumbled 82 percent this year.

$73 Billion in Losses

Yesterday's cash forecast was the bleakest yet from GM, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

A bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,'' Wagoner, 55, said in a Bloomberg Television interview. GM said on Oct. 24 that bankruptcy ``is not an option.''

Should GM take such a step, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan.

Bailout Optimism

A U.S. rescue package for GM, Ford and Chrysler is likely before President George W. Bush leaves office in January, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor.

``Either the federal government provides money for a bailout and lets the industry retool, restructure, and move ahead, or the industry dies,'' Virag told Bloomberg Television.

Babson Capital's Fields said GM and Ford bonds already are trading at ``bankruptcy levels,'' so the automakers are relying on ``a political decision'' to avert that fate. She wouldn't say whether the holdings she manages include GM or Ford debt.

GM's 8.375 percent bond due in July 2033 fell 4.3 cents to 24 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34.83 percent.

Ford's 7.45 percent note due in July 2031 dropped 3.5 cents to 34 cents on the dollar, yielding 22 percent.

Chrysler Talks

While GM didn't specify any prospective partners in saying merger discussions were being halted, the biggest U.S. automaker had been in negotiations on a tie-up with Auburn Hills, Michigan-based Chrysler, people familiar with the plans said.

Consideration of a strategic acquisition was ``set aside'' to focus on ``immediate liquidity challenges,'' GM said.

GM's per-share operating loss was wider than the average estimate on an adjusted basis of $3.94, based on 10 analysts surveyed by Bloomberg.

Including a non-cash, $4.9 billion one-time gain related to unloading retiree medical bills, GM had a net loss of $2.5 billion, compared with a $38.9 billion year-earlier loss on a tax-accounting charge. GM's auto sales in the U.S., its largest market, fell 21 percent.

GM's cash use in the fourth quarter should be closer to the levels in this year's first and second quarters, when it was about $3.6 billion, Chief Financial Officer Ray Young said on a conference call.

GM said it is trying to boost cash by $20 billion by the end of next year, an increase from a July 15 plan for $15 billion.

Asset sales, a part of the strategy, have been hampered because potential buyers can't get financing, Chief Operating Officer Fritz Henderson said. GM's Hummer brand of sport-utility vehicles is among the businesses on the block.

Ford's Loss

Ford also said it was accelerating savings programs including a 10 percent reduction in salaried-job costs, expanding on a 15 percent slash this year; deeper cuts in production; and a smaller capital-spending budget.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Revenue plunged 22 percent to $32.1 billion.

The loss for Ford excluded a gain for shedding future retiree medical bills under a new union contract. Including the gain, Ford had a net loss of $129 million, or 6 cents. The net loss a year earlier was $380 million, or 19 cents.

Ford's U.S. auto sales tumbled 25 percent in the quarter.

To contact the reporters on this story: Jeff Green in Detroit at [email protected]; Mike Ramsey in Detroit at [email protected].

Last Updated: November 8, 2008 00:01 EST

IMHO its no use that the US government bail out GM, FORD or CHRYSLER. Simply because they produce cars of the past. Just look how many home-made US produced cars are sold outside the US. US produced Pick Ups and sedans are just slurping to much benzine. The Japanese and Europeans car producers make economical and much better cars. They produce 1,2 and 1,6 turbo diesels who consume 5 liter per 100 km and have an high performance with very low emissions, and almost maintenance free, only every 30 or even 50K. Also in the Pick Up and SUV market you see hardly an home made US vehicle outside the US.

In short there is no export market anymore for US produced cars, and in the home market they can not compete with Japanese and European produced cars. Is it not so that the profits from the 3 sisters come only from their plants outside the US.

To change this will take a lot of time and capital, and that they just don't have both of that anymore.

A few years ago FIAT and RENAULT where planing to make an partnership with GM but after seeing the financial situation they stopped their plans. 6 months ago the Italian investment bank UNICREDIT give a warning that in next 5 years at least one of the 3 sisters if not all will go bankrupt.

I'm afraid they go the same way as US producers of consumer electronics, there is not even one mayor US company who produce TV sets anymore.

[ace]

If they bail out the car companies, what about the airlines in trouble and some chain stores like sears are on the brink. Where does it end?

I don't think it will work any better than the 700billion whoops 810 billion bank bailout.

And what about all the "non sub prime" mortgagess that re upside down on their mortgages? They'll be asking for the same deal soon. Why wouldn't they?

Hey, anyone ever drive a Trabant? I did, it's a fine example of a state owned car company product. The petrol tank is mounted over the engine and utilises the power of .......... gravity to feed in the fuel. Body's actually cardboard. Really, laminated.

Too big to fail. 4 little words that will live on in infamy.

[ray23]

Interesting that is the first fuel System that Harley Davidson had, made from an old tomato can.

Couldn't agree more with retooling. The development had been going on for along time. They could have had a car on the road years ago that would get 100Klsm or more from a US gallon.

But fuel was cheap as it is getting to be again. It was when they were looking at $5.00 a gallon, that they started paying attention. To little to late.

Who was the biggest consumer in the world the Americans. But not, as someone well pointed not one TV made in America. So who were being the worlds largest comsumer, a lot with credit cards.

So you got a world economy some of which have picked up the same bad habits as American's

So who do you sell those cars to. Won't be Americans thay can't get credit and you don't buy new cars when you don't have a job.

For this utopia world economy to work there has to be balance there is none now.

Until that balance exists there will be no real recovery.

I blame my own Country as someone pointed Unions didn't help a lot although there was huge need for them at first. Remeber all those countries the world complain about children working, That was Amreica at one point in it's hostory, Heck I wa working on a farm at age 9 when summer vacation came along. The schools were scheduled for it. I got the same as an Adult based on what I produced. I gave my pay to my mother. That was life in America five decades ago, not that long ago really. My parents weren't cruel, all kids did it. Factored into the family budget for the year.

What happened to the Country I knew, something for nothing. I deserve this level of living, not that I have to earn it. I blame that on my generation, my kids never worked on a farm. But when I had a side businesses they did go with me. I wanted them know you had to work for money, didn't just happen. Believe me it was still shock to them when they became adults. Man that first pay check is a real eye opener, whats FICA why did they take money way from me.

So being the brillant people we are we send out brightest and best over seas to teach someone else to do our jobs for pennies on the dollar. OOPS!!!!! what do you mean I have to learn to a be a fry cook now.

Who were the people who benifitted from all this the Top cats at GM Ford ECT, The Wall street guys. Well they raped the system to much, so now we have to bail them out. Hard to see any real benefit to the average working American in this.

If I sound bitter it is because I am, I have seen a wonderful country being destroyed by nothing but greed.

Even with all this I haven't lost hope for the Country, I dont have much faith in the corporate types and politicians. There are still some good ones out there, But I think they are overwhelemed these days. But, I still have faith in the American people, they will adapt and they will recover. Question is how hard will the powers to be, make it to do that.

The mind set of the people who call the shots hasn't changed one bit. Bush says ya I will go along with the bail out, if you give me a fair trade agreement with Columbia, you got to be kidding me.

Bush hosting the economic session for the G -20 to promote his ideas about the world economy. Man thats enough to make you puke.

You know people need to work earn money and to sell to one another on a equal basis, face the same regulations in protecting their employees, deal with the same health and safety issues. Same import taxes ect. Before you have an even palying field. Then competion has a chance to work, if you can make a gidget cheaper then me and meet the same standards then you must be a better business man then I am. Ok I have no problem at all with that. I can hold up my end.

But ham string make me have to do more for my employees, pay more import fees and taxes, no I can't compete. It's all out of balance.

America is the subject but the truth is, this goes much deeper then just one country of any size.

The average person is goign to adapt all over the world, now if we can just get the policies makers to pay attention.

[Farma]

For anyone who doesn't think this is Thai related remember Chevrolet has assembly plant here.

It looks like the plant in Rayong will be laying off staff soon. Got a call from a relative this morning saying he expected to lose his job soon.