Funny how when trucks were big...GM got beat up for being late to the market and slow to pour resources in it. I remember when 2002 Trailblazer came out, the magazines lambasted it for being 18 months too late to the party. The fact is...GM is a business..and businesses have to invest in making products people want. Trucks were desireable, and far more profitable than cars...you would have to be stupid to turn you heade to that as a business. Also note that before Katrina, the idea of gas over $3.00 a gallon, and oil at $150 a barrel was simply not seen as immediatly possible. A carmaker simply could not develop future products assuming the kind of increase we have seen in oil prices (driven largely not by insufficant supply, but speculative demand fueled by an explosion in the number of commodities traders in oil). Keep in mind 2005 is still just under a 4 year model cycle ago. Had GM not invested in trucks when they did...they likely would be bankrupt by now because that is what kept the doors open a lot of years.

2008 has been a hectic year on the auto industry with millions less in sales, and oil and gas prices simply unimaginable when the cars we were driving today were designed. All I am saying is..I simply don't think it is fair for anyone to say "told you so" when it comes to gas or building trucks at this point. Now that we have seen the worse however...if GM makes it through...they do have to make changes that will allow them to be successful in scenerios we have seen this year.

 

And as one more note before I go to bed, it would be a huge gesture if taxpayers were actually receiving stock in GM for their contribution to the company. In fact, I don't even think I'd have an issue with it then.

 

Here is what you miss though...either way you dig deeper into your pockets..bail out or not. The thing is...the bail out is much cheaper.

See my earlier post-

A lot of times there are things that you have to do that emotionally **** you off...but you do them because they are the lesser of the two evils. Mark my words, GM going out of business will have a much farther reaching effect into your own life than the bail out would.

 

Isn't getting the loan paid back enough? Not to mention alll the strings that government will attach to any loan (fuel economy, domestic jobs, etc). I think the government would be better served with assets being offered as collateral. Then if GM does go bankrupt, the government can liquidate the assets and get something from it. If the government gets stock, and GM goes bankrupt they have worthless paper. If GM pays the government back, then they get the lein on their assets released.

 

That may be true if it were a sure thing that this bailout is going to absolutely cement their success. Without any kind of public,"This is our game plan, these are the things we're going to change, and this is why it will work" release, me and the rest of the monkeys are left wondering,"Well hell...Is this going to fix it? Am I just throwing money at an Enron? What's gonna keep them from just doing this every few years?"

I do not have a shred of confidence in the decisions of AIG's leadership now because they escaped a crucial step of the capitalism model -- that bad choices are not rewarded with more money.

I get what you're saying. I just feel that the taxpayers are not getting squat for this increased burden in terms of a reward. All we're being told is that,"If you don't do it, our demise will screw you more...so write the check out to..."

 

Scott... You are one of my dearest friends.

What you do makes a difference. What I do makes a difference.

It is best to concentrate on what makes a difference.

There truly are more pressing issues elsewhere. The faithful will remain so. For those who are not so inclined, let there be no hard feelings.

There is too much work to do. The solution has little to do with this debate.

 

Here is what I would do...if I were making a game plan.

If I were the government I would rather invest in the loaning money busines than the auto business.

I would take Cerbus's 51% of GMAC off their hands. They are using it to manipulate GM to the point that is simply unacceptable..and a threat to national well being. The government should give Cerbus whatever they paid GM and call it a day. Then the government should sell 2% of GMAC back to GM, and provide GMAC with access to CHEAP cash to loan that they are encourged to be aggressive loaning. Then GM can use cheap, and easy to qualify for fiancing as a way to get sales up. As GM starts to recover, there would then be a schedule on which they would have to slowely repurchase GMAC back from the government and operate it. In this scenerio, both GM and consumers are helped.


I know it will never happen...but just an idea.

 

Not sure how looking at the financial results prove I'm 90% wrong in my assumptions, but here's what's available.


GM stock closing price (11/12/08): $3.08.

Net income as of September 2008: $-25.4 billion

GM Assets as of September 2008: $110.4 billion
GM liabilities as of September 2008: $170.4 billion

GM's total equity of September 2008: $-59.9 billion

Cash on hand: $16.2 billion

Profit margin: -6.98%

Average return on Assets: -8.63%

In the 3rd quarter 2007, GM lost $47 billion largely due to a $38 billion charge against it's assets. On an adjusted basis, 3Q 2007's loss was $1.6 billion. This quarter was $4.2 billion.

GM got a curtailment gain of +$4.9 billion due to changes in the UAW contract that was claimed.

$652 million was claimed due to it's comittments to Delphi, $251million related to GMAC, $641 related to restructuring.

Production losses this quarter in US, Europe and Asia were largely countered by strong growth in Africa, the Mid East (largely from Holden), and GM Latin America. China held steady.

Globally, GM's sales were down 11%.
In North America, it's 20%.

GM Europe's income was down 15%
GMLA's income was up 37%
GMAC lost $2.5 billion

Again, I'm not sure what assumptions of mine are proven wrong by this information, save that GM Europe's money this quarter is down sharply compared to last year.

Fact remains that GM has businesses in in countries with high tarriffs against American cars, so GM is still doing business in those countries with locally made vehicles. GM prides itself being a global company, with manufacturing operations all over the world.

Currently, labor in the US is cheaper than Canada, Europe, and if I'm not mistaken, Australia and Japan as well. GM imports German Opels as Saturns, and exports Saturn Skys to Germany as Opels.

The problem is and continues to be General Motors North America and it's market and sales in the United States.

A few curiousities regarding a cash strapped General Motors moving money into China:

GM made money in China:
http://money.cnn.com/news/newsfeeds/...7_FORTUNE5.htm

GM to raise stake in China made vehicle:
http://www.reuters.com/article/merge...15884420081112

Despite financial trouble, GM continues to invest in China:
http://money.cnn.com/news/newsfeeds/...7_FORTUNE5.htm

GM decides to unveil new Buick in China instead of Los Angeles:
http://money.cnn.com/news/newsfeeds/...ab9260f007.htm

 

There seems to be an assumption that if GM or either of the other two of the Big Three “fails” that the unemployment that results and the ripple effect through other sectors of the automobile industry will be both complete and permanent.

May I be so bold as to suggest that this is a false assumption based more on fear than on reality.

GM “failing” (failing as in closing its doors in North America) would, without question, be an economic catastrophe and a very painful one…it’s even more than likely that I would be unemployed myself as “father” has pointed out.

However, that does not mean that the economy can’t recover or that these workers’ jobs will never be replaced whether with other jobs or other opportunities.

I suppose it goes to the heart of the axiom that certain businesses are “too big to fail”.

Perhaps I’m just being foolish but I believe that the American people and the American economy is simply too vibrant and too resilient for the “to big to fail” mantra to be true.

Might I suggest a new axiom - “any business that is too big to fail is simply too big”.

 

Keep in mind...in a lot of cases what would be lost are disproportionaly high paying manufactuering jobs. Those will not be regained.

While there is a slight chance that the sky may not fall if GM fails...I feel with economy the way it is...it is not work risking. We are talking the difference between recession and depression.

The problem is...making cars is so expensive....you have to be a huge business to do it anymore.

 

You are assuming that manufacturing will all go "somewhere else"...there really is no reason to assume that.

Our current economic downturn is part of a cycle...I know that many people alive today were either children during the last cycle or not even born yet but trust me when I say, we've had recessions (yes, even a depression) before and we'll have them in the future...yes it's painful but survivable.

When the dust settles from this economic downturn; companies who build cars here will very likely still be building cars here and hiring people even if GM isn't among them. Granted that they may not pay the UAW level wages for the work but a major part of GM's problems is that the wages they are paying is more than the jobs are actually worth in today's market.

Virtually all the international nameplates have plans to expand existing plants and/or build new, additional plants - there is no reason to think that those plans are all going to change.

 

I think you have a different set of glasses on than most people (to be expected). Really..if there is no US auto industry here...and all the supplier sgo bankrupt...what incentive is there for foriegn makers to make anything here?

 

Bob, you are correct that the economy would recover, and those worker's jobs would eventially be replaced.... someday.

But it would likely be of little comfort to you if you were to be suddenly unemployed, lose your home because you are no longer making money, have to get a job at a retail store at a fraction of what you are likely making now, not to mention the strain on your family. Depending on the state you live in, you might not even get benefits because your state financed would be nonexistant because of a lack of taxes from the auto industry as well as it's workers.

Today, there are towns in my home state of Pennsylvania that have never recovered from the days when steel mills shut down and are borderline ghost towns populated only by old people who were unable to move.

Certain entities are in fact too big to fail, and represent a item of national security if they do. In war time, it's auto factories that are converted to produce war machinary. Take away that capacity, and we'll have to outsource our war machinary to China.

If Ford or Chrysler was failing, I would simply state the reasons why it failed, bashed them for being so foolish (they also jumped onto the large truck & suv bandwagon with nearly the same results as GM), and they would ride off without me advocating for their rescue. GM is different.

As I said, even if it means decimating GM's upper management as a condition, GM needs to get help.

The first help that GM (in fact ALL) industry needs is to get loans to buyers. That alone would eradicate half the problem if not more. Simply giving money to GM I agree would do zilch.

The second help is the already approved funds for converting to small cars. Ford can use it to offset the cost of transforming it's truck plants to make Euro version Fords that's on the way. Chrysler can use it to create small cars which they are lacking (the smallest Chrysler is currently a "truck"... the Caliber).

Ironically, GM has a major problem when it comes to these funds. They are being given only to companies that have a reasonable chance to recover (which GM currently doesn't have), and second, GM doesn't have any new small cars coming out save the Cobalt replacing Cruize. GM could use the money to convert a factory to manufacture the Beat, but we already know what the issue is with that.

Finally, any additional money GM gets should be used EXCLUSIVELY for reorganization. Not nickel and dime stuff, but to shut down divisions and buy out workers.

I am in no way just simply advocating handing over to GM's management billions of dollars in cash, loans or not. I am advocating an "All Hands On Deck" effort to correct and save the General Motors Corperation. We need to do whatever needs to be done, investigate what happened and what went wrong, and if necessary or it proves correct to do so, remove whoever should be removed.

There's alot riding on GM surviving.

 

Great posts Scott, Jason and a few others....Yall should know full well, where I stand on this by now!! It has been my opinion for a long, long time that there are those in the media who revel in the thaught of shutting down the big 3, and in particular GM!!! Just as there are those who would like to bankrupt this country! It's no surprise to me, what cnbc is saying/calling for. I believe very strongly, the media cabal is directly responsible for this culture of hatred for the American brands. I hear it from people every day, and can't even fathom how people in this country could be so blind! But I guess IF people listen to the same crap everyday, pretty soon they start believing it, no matter how ridiculous! I have been argueing with people for days about this, it's really begining to make me ill!

 

I've said for months now that they are too big to fail, and have been called names among others things for stating that. Some, in this very thread have given me grief about it, now only to come in here to sniff Scott's butt.

But I will say this, and this is an issue that continues to be skirted by many on here . . . the time of the unions has come and gone. We can't make China or Japan, or anybody change their ways. We don't control them. If you want to compete in the 21st century, the standards of the early 20th century need to be cast aside.