Some interesting numbers on GM and Ford
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Registered User
Joined: Aug 2001
Posts: 2,400
From: Michigan's left coast
Some interesting numbers on GM and Ford
Just to make it clear, I don't agree with the conclusions of this article - but there are some fascinating financial numbers:
http://online.wsj.com/article/SB122669746125629365.html
There are two things to take away from this:
1) This sort of waste has to stop - not next year, or next decade. Now! This is toxic to our country's finances and our ability to compete in the manufacturing sector.
2) Bailing out the auto industry is not going to take a "mere" $25B. I think that a couple quick back-of-the-bar-napkin calculations puts us into the $100B range very quickly - and that's assuming that there isn't any hidden ugliness somewhere in the books or operations.
http://online.wsj.com/article/SB122669746125629365.html
In 1993, the legendary economist Michael Jensen gave his presidential address to the American Finance Association. Mr. Jensen's presentation included a ranking of which U.S. companies had made the most money-losing investments during the decade of the 1980s. The top two companies on his list were General Motors and Ford, which between them had destroyed $110 billion in capital between 1980 and 1990, according to Mr. Jensen's calculations.
Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
1) This sort of waste has to stop - not next year, or next decade. Now! This is toxic to our country's finances and our ability to compete in the manufacturing sector.
2) Bailing out the auto industry is not going to take a "mere" $25B. I think that a couple quick back-of-the-bar-napkin calculations puts us into the $100B range very quickly - and that's assuming that there isn't any hidden ugliness somewhere in the books or operations.
Registered User
Joined: Jan 2003
Posts: 176
From: Cleveland, OH
hard to ignore those numbers. One of the reasons you see such callousness and angst towards the big three.
People cry about what will happen to the economy or jobs. WTF is gonna happen if we just continue down this path.
The worlds gotta be laughing at us
People cry about what will happen to the economy or jobs. WTF is gonna happen if we just continue down this path.
The worlds gotta be laughing at us
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Joined: Jun 2000
Posts: 3,463
From: SoCal
I say give them the $25B that they were already granted but do it sooner and once it's gone that's it. I read a report that estimated the total gov't bill from picking up all social needs if GM and Ford go down starts at $200B.
Can anyone really point a hypocritical finger at GM and Ford and their request for $25B when we just allowed a $700B bailout package to be rammed through Congress that rewards such great managed entities like Freddie, Fannie and AIG. Those were supposed to be the institutions we "trust" to manage money, investments and real estate.
Many say the auto industry didn't evolve with the times. That is true except how were they supposed to? How were they to break the UAW and how could they get away with dumping their pensions and healthcare obligations on the gov't like the airlines did. We wouldn't stand for it. We can talk product all day but how could they run a business to compete with foreign low cost producers with all their overhead costs and regulations holding it all in place. This nation holds them at a higher standard and it's no wonder they seem to fail in the eyes of many.
So to answer the question: We have to allow them to stop the waste. We have to allow them to shed obligations in order to compete. Their business plan doesn't work right now because we won't let them.
The whole idea of this bailout is so that the taxpayers don't brunt the full burden of the auto industry's collapse right now. This is a big band-aid with hopes that paying their bills until the economy gets better will allow them to worry about these problems on their own as they have for the last 30-40 years.
What the author of that article needs to figure out is how much of that ~ $465B spent since '98 went into product development vs. healthcare and pension obligations. I don’t know about you but keeping tens to hundreds of thousands of Americans in good healthcare and a check in the mail every week has been good for my society.
Can anyone really point a hypocritical finger at GM and Ford and their request for $25B when we just allowed a $700B bailout package to be rammed through Congress that rewards such great managed entities like Freddie, Fannie and AIG. Those were supposed to be the institutions we "trust" to manage money, investments and real estate.
Many say the auto industry didn't evolve with the times. That is true except how were they supposed to? How were they to break the UAW and how could they get away with dumping their pensions and healthcare obligations on the gov't like the airlines did. We wouldn't stand for it. We can talk product all day but how could they run a business to compete with foreign low cost producers with all their overhead costs and regulations holding it all in place. This nation holds them at a higher standard and it's no wonder they seem to fail in the eyes of many.
So to answer the question: We have to allow them to stop the waste. We have to allow them to shed obligations in order to compete. Their business plan doesn't work right now because we won't let them.
The whole idea of this bailout is so that the taxpayers don't brunt the full burden of the auto industry's collapse right now. This is a big band-aid with hopes that paying their bills until the economy gets better will allow them to worry about these problems on their own as they have for the last 30-40 years.
What the author of that article needs to figure out is how much of that ~ $465B spent since '98 went into product development vs. healthcare and pension obligations. I don’t know about you but keeping tens to hundreds of thousands of Americans in good healthcare and a check in the mail every week has been good for my society.
Registered User
Joined: Mar 2005
Posts: 3,123
From: Melbourne, Australia
Well, well, well ...
The banks will consume $700 in one fowl swoop.
Anyway, I'd like to know the story from the other side as the WSJ has been beating GM, Ford's death beat for many years.
Pot. Kettle. Black.
The banks will consume $700 in one fowl swoop.
Anyway, I'd like to know the story from the other side as the WSJ has been beating GM, Ford's death beat for many years.
Pot. Kettle. Black.
Thread Starter
Registered User
Joined: Aug 2001
Posts: 2,400
From: Michigan's left coast
This whole "my favorite industry sucks less than your favorite industry" thing is getting a bit old and played-out. Yeah, so the banks crashed and burned and probably wiped out more money than they ever made as profit - that doesn't make the auto industry look any better.
BTW, I wish everyone would stop spouting the $700B figure just because it showed up in some headlines. The running total in the US is now more like $2.25T, and the rest of the world has thrown maybe another couple trillion on top of that. And then there's the roughly $3T lost in the world stock markets due largely to the banking collapse. That's quite an impressive clusterf*ck for only a decade or so of malfeasance!
What "other side"? Is there some "other side" to these numbers that I can't comprehend with my mathematically-challenged brain? Do I print out these numbers, hold up the paper to a light, look through it from the other side, and pretend that it looks like profit? Is there some "other side" to the fact that these two companies have taken a half-trillion dollars in the past decade and turned it into balance-sheet insolvency, a broken supply base, and cries for government assistance?
Hey, if there's some "other side" to this, feel free to dig it up and share it with us - but frankly, I don't think it exists. We can spout opinions related to why the Big 3 found themselves in this position and what should be done (or not done) to remedy the problem, but there are facts that are ugly and biased against those who acted without competence.
BTW, I wish everyone would stop spouting the $700B figure just because it showed up in some headlines. The running total in the US is now more like $2.25T, and the rest of the world has thrown maybe another couple trillion on top of that. And then there's the roughly $3T lost in the world stock markets due largely to the banking collapse. That's quite an impressive clusterf*ck for only a decade or so of malfeasance!
Anyway, I'd like to know the story from the other side as the WSJ has been beating GM, Ford's death beat for many years.
Hey, if there's some "other side" to this, feel free to dig it up and share it with us - but frankly, I don't think it exists. We can spout opinions related to why the Big 3 found themselves in this position and what should be done (or not done) to remedy the problem, but there are facts that are ugly and biased against those who acted without competence.
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Joined: Mar 2005
Posts: 3,123
From: Melbourne, Australia
Eric, when the story starts off with... 'Roger and Me' and goes on about the incompetence of Roger Smith... it's a desperate attempt to justify arguments to kill off GM, Ford... it's the WSJ that looks after it's financial institutions which keep loaning money to the handicapped automakers that cannot pay loans back... is the way I view it.
We've gone through this tiring argument many times before. You mention nothing new except use some figures that WSJ has used to substantiate why the domestic automakers should be killed off. But wait, since 1993 both GM and Ford also made some substantial profits... but even then, WSJ were still very enthusiastic about hammering nails into the coffins of the American auto industry.
In regards to the "other side", you would have balance the argument (WSJ) up with how GM, Ford used the money they borrowed to pay their bills. But it seems you don't feel there should be good reason to justify their methods?
We've gone through this tiring argument many times before. You mention nothing new except use some figures that WSJ has used to substantiate why the domestic automakers should be killed off. But wait, since 1993 both GM and Ford also made some substantial profits... but even then, WSJ were still very enthusiastic about hammering nails into the coffins of the American auto industry.
In regards to the "other side", you would have balance the argument (WSJ) up with how GM, Ford used the money they borrowed to pay their bills. But it seems you don't feel there should be good reason to justify their methods?
Registered User
Joined: Mar 2005
Posts: 3,123
From: Melbourne, Australia
One other thing I forgot to add Eric.
If (of all companies) Renault can make a silk purse from a sow's ear (Nissan) there is hope for GM yet.
I just get peeved when I continue to read doom and gloom, and also from those doom-gloomers who use figures to justify why the entire local auto manufacturing industry should be killed off mercilessly, without any regard to the cost of doing so and the resultant repercussions that will follow.
I'm of the view that what might be good for Wall Street isn't necessarily great for John Doe!
If (of all companies) Renault can make a silk purse from a sow's ear (Nissan) there is hope for GM yet.
I just get peeved when I continue to read doom and gloom, and also from those doom-gloomers who use figures to justify why the entire local auto manufacturing industry should be killed off mercilessly, without any regard to the cost of doing so and the resultant repercussions that will follow.
I'm of the view that what might be good for Wall Street isn't necessarily great for John Doe!
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