Sobering word by the AUTOEXTREMIST.
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You know, I've every bit as curious as to how the American automakers are going to pull off this magic trick of paying back the "loan" if/when they get it?
How does a company pay down a loan when they're losing money? I mean, it seems pretty simple to me. Either (A) Generate more revenue, (B) Cut costs (C) Both A and B.
So let's address this.
(A) Generate more revenue.
Lots of luck with that, unless you pull all the employee's teeth and sell them to the tooth fairy for 10 bucks a pop. All joking aside, counting on an increase in revenue anytime in the near future would be completely stupid.
(B) Cut costs.
OK, these UAW concessions are great and wonderful, and will probably help substantially, but that doesn't kick in until January 1, 2010. So I'd really like to know what can/will be done in the meantime to reduce costs (besides the aformentioned toothless employees who will no longer need dental coverage, saving $1000/employee)?
As I see it, the best case scenario for the upcoming year is maybe the automakers are able to slow the rate at which they're losing money. That's the problem, they'll still be losing money - except it will be the taxpayer's money instead of their money. It would be just as productive if every taxpayer in the country took out $1000 and set it on fire.
That is, unless somehow the automakers figure out how to actually make A greater than B, and suddenly start to operate in the black instead of the red like the past 4 years.
How does a company pay down a loan when they're losing money? I mean, it seems pretty simple to me. Either (A) Generate more revenue, (B) Cut costs (C) Both A and B.
So let's address this.
(A) Generate more revenue.
Lots of luck with that, unless you pull all the employee's teeth and sell them to the tooth fairy for 10 bucks a pop. All joking aside, counting on an increase in revenue anytime in the near future would be completely stupid.
(B) Cut costs.
OK, these UAW concessions are great and wonderful, and will probably help substantially, but that doesn't kick in until January 1, 2010. So I'd really like to know what can/will be done in the meantime to reduce costs (besides the aformentioned toothless employees who will no longer need dental coverage, saving $1000/employee)?
As I see it, the best case scenario for the upcoming year is maybe the automakers are able to slow the rate at which they're losing money. That's the problem, they'll still be losing money - except it will be the taxpayer's money instead of their money. It would be just as productive if every taxpayer in the country took out $1000 and set it on fire.
That is, unless somehow the automakers figure out how to actually make A greater than B, and suddenly start to operate in the black instead of the red like the past 4 years.
No matter how much GM might restructure itself and/or how much costs it cuts out; it needs to generate enough revenue to sustain itself, fund future projects and pay back the loan...that means it has to sell cars and trucks.
That's a tough goal to reach.
Credit will eventually ease and people will start buying cars again but how soon? The predictions I'm seeing don't seem to think 2009 will look much better than 2008 has been so far and if that turns out to be accurate, I really don't see how GM can hold on with or without loans.
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Joined: Jul 2001
Posts: 3,132
From: Santa Clara, CA
Well, as long as you and others like you keep spewing your anti-union rhetoric, I will continue to battle.
You see, I am an American auto industry employee. I'm also a proud member of the UAW. While I don't work in a production capacity, my job requires American vehicles being produced. What you & others are suggesting would put me out of a job. And all I hear from folks like you is anger and disdain. Why I have no idea. I don't know what I ever did to you people to have you hate me and people like me.
With that said, I like my job and need to keep it and will fight like hell to keep it.
You see, I am an American auto industry employee. I'm also a proud member of the UAW. While I don't work in a production capacity, my job requires American vehicles being produced. What you & others are suggesting would put me out of a job. And all I hear from folks like you is anger and disdain. Why I have no idea. I don't know what I ever did to you people to have you hate me and people like me.
With that said, I like my job and need to keep it and will fight like hell to keep it.
Many UAW jobs were paid well above the equivalent at Nissan/Toyota/Honda, when you include overtime, pensions, and health care. That's a large part of GM's current troubles.
The concessions from the UAW last year came too late, because of the financial crisis that hit this year, coming as it did right after the oil price shocks. A nasty one-two punch finds GM unable to cope.
I hope that you keep your job and that GM survives. I suspect a thick skin will be useful over the next few weeks while GM has it's hat in hand, and everyone debates whether to fill it or not.
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Joined: Mar 2001
Posts: 954
From: Shelton, WA
Dingdingdingding.....we have a winner!
However it needs to happen, those UAW concessions that could save the American automakers, need to start RIGHT NOW! Either that, the American auto industry and the UAW will be no more.
However it needs to happen, those UAW concessions that could save the American automakers, need to start RIGHT NOW! Either that, the American auto industry and the UAW will be no more.
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Joined: Nov 2000
Posts: 16,176
From: Chicagoland IL
Just some random thoughts.....
Once we reach the conclusion that GM simply cannot survive without government help, one has to consider how much poison there is in this medicine for GM. The government intends on getting a sharehold position in any auto company which gets aid. The government intends to tell any auto company which gets aid, how to run it's business. If you thought the GM Board of Directors were the crackhead Keystone Cops - you ain't seen nuthin yet. You'll have some beaurocrat telling GM what cars to build, where to build them, and what color they should be. As the saying goes.....there is no free lunch.
Additionally:
Anyone who thinks that the US auto industry can be saved - under it's current structure - with a $25 billion loan, is nuts. GM alone has burned though $ SEVENTYTHREEBILLION since 2005. Even if GM got the whole $25B already authorized by the DoE and the other $25B being considered - it would only forestall the inevitable.
As painful as it might be, * right now*, the only way I can see GM being able to restructure itself sufficiently to thrive, is to declare bankruptcy.
Once we reach the conclusion that GM simply cannot survive without government help, one has to consider how much poison there is in this medicine for GM. The government intends on getting a sharehold position in any auto company which gets aid. The government intends to tell any auto company which gets aid, how to run it's business. If you thought the GM Board of Directors were the crackhead Keystone Cops - you ain't seen nuthin yet. You'll have some beaurocrat telling GM what cars to build, where to build them, and what color they should be. As the saying goes.....there is no free lunch.
Additionally:
Anyone who thinks that the US auto industry can be saved - under it's current structure - with a $25 billion loan, is nuts. GM alone has burned though $ SEVENTYTHREEBILLION since 2005. Even if GM got the whole $25B already authorized by the DoE and the other $25B being considered - it would only forestall the inevitable.
As painful as it might be, * right now*, the only way I can see GM being able to restructure itself sufficiently to thrive, is to declare bankruptcy.
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Joined: Aug 2007
Posts: 801
From: New York
Additionally:
Anyone who thinks that the US auto industry can be saved - under it's current structure - with a $25 billion loan, is nuts. GM alone has burned though $ SEVENTYTHREEBILLION since 2005. Even if GM got the whole $25B already authorized by the DoE and the other $25B being considered - it would only forestall the inevitable.
Of that $73 bil. you mentioned, wasn't 43 billion of it an accounting issue as in: "paper only"? I was under the assumption it wasn't 'real', per say. And I believe another chunk of it was a one-time payment to the new healthcare program.
Forgetting the healthcare money (cause I'm not sure of it) That would leave approx. 30billion...which over 2 years (about the time they were having their asses handed to them via housing market, truck sales dumping due to gas, and now the economy imploding) = roughly 1.25 billion a month...not a new number to those who've been following.
Then you've got VEBA through the UAW which takes the healthcare weight of 3/4 a million workers/retirees off their shoulders in 2010; Large cuts in white-collar jobs, and closed or slowed plants across the continent. If this small amount of money (compared to what it would take under a Chapter 11 restructuring or total anhilation) held them over untill 2010 and a moderately better economy...you don't think they'd be successful and profitable?
Assuming they could make it through with out collapsing completely during the process.
Last edited by Dragoneye; Nov 15, 2008 at 08:10 PM.
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From: Chicagoland IL
Would it? (let me preface this by saying I'm no finance major; and don't run the books at GM)
Of that $73 bil. you mentioned, wasn't 43 billion of it an accounting issue as in: "paper only"? I was under the assumption it wasn't 'real', per say. And I believe another chunk of it was a one-time payment to the new healthcare program.
Forgetting the healthcare money (cause I'm not sure of it) That would leave approx. 30billion...which over 2 years (about the time they were having their asses handed to them via housing market, truck sales dumping due to gas, and now the economy imploding) = roughly 1.25 billion a month...not a new number to those who've been following.
Then you've got VEBA through the UAW which takes the healthcare weight of 3/4 a million workers/retirees off their shoulders in 2010; Large cuts in white-collar jobs, and closed or slowed plants across the continent. If this small amount of money (compared to what it would take under a Chapter 11 restructuring or total anhilation) held them over untill 2010 and a moderately better economy...you don't think they'd be successful and profitable?
Assuming they could make it through with out collapsing completely during the process.
Of that $73 bil. you mentioned, wasn't 43 billion of it an accounting issue as in: "paper only"? I was under the assumption it wasn't 'real', per say. And I believe another chunk of it was a one-time payment to the new healthcare program.
Forgetting the healthcare money (cause I'm not sure of it) That would leave approx. 30billion...which over 2 years (about the time they were having their asses handed to them via housing market, truck sales dumping due to gas, and now the economy imploding) = roughly 1.25 billion a month...not a new number to those who've been following.
Then you've got VEBA through the UAW which takes the healthcare weight of 3/4 a million workers/retirees off their shoulders in 2010; Large cuts in white-collar jobs, and closed or slowed plants across the continent. If this small amount of money (compared to what it would take under a Chapter 11 restructuring or total anhilation) held them over untill 2010 and a moderately better economy...you don't think they'd be successful and profitable?
Assuming they could make it through with out collapsing completely during the process.
A government backed Chapter 11 is the only outcome which I can see giving GM one more final chance.
Last edited by Z284ever; Nov 15, 2008 at 08:31 PM.
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Profit/loss/revenue/cash on hand are all related but separate items.
One time accounting entries may or may not reflect any real cash flow.
Unless GM has said it and I missed it, we don't really have a clue about how much actual cash on hand they really have nor how much they really need just to fund operations and/or ongoing projects.
What we do know is that their net income has been a net loss for quite a while now and that is depleting their cash on hand, whatever figure that actually is.
One time accounting entries may or may not reflect any real cash flow.
Unless GM has said it and I missed it, we don't really have a clue about how much actual cash on hand they really have nor how much they really need just to fund operations and/or ongoing projects.
What we do know is that their net income has been a net loss for quite a while now and that is depleting their cash on hand, whatever figure that actually is.
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From: New York
Still, know that I also agree with you. Bankruptcy COULD give them that second chance...to "rise from the ashes", as it were...
The problem...the one that will hopefully be answered Monday...is which option: Chapter 11, or a federal loan + strings carries the most risk? Which option gives them the best chance to stand back up?
On another note; how deep in debt is Ford? I heard somewhere like $160 billion?
Last edited by Dragoneye; Nov 15, 2008 at 10:07 PM.
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Time. And that then hinges on having a good business plan toward profitability. They've only been loosing money for 3 years (2005-2008 have been in the red)...yeah, that's a long time -- but it neatly coinsides with a massive consumer-shift away from their profitable products, and a total economic meltdown while they were just hanging on. I guess I just can't believe that had this not happened, GM wouldn't be profitable right now.
Still, know that I also agree with you. Bankruptcy COULD give them that second chance...to "rise from the ashes", as it were...
The problem...the one that will hopefully be answered Monday...is which option: Chapter 11, or a federal loan + strings carries the most risk? Which option gives them the best chance to stand back up?
On another note; how deep in debt is Ford? I heard somewhere like $160 billion?
Still, know that I also agree with you. Bankruptcy COULD give them that second chance...to "rise from the ashes", as it were...
The problem...the one that will hopefully be answered Monday...is which option: Chapter 11, or a federal loan + strings carries the most risk? Which option gives them the best chance to stand back up?
On another note; how deep in debt is Ford? I heard somewhere like $160 billion?
I've been through two Chapter 11s, one, at the time, was the largest ever fild...the other a few years later with one of the oldest companies in America and one of the most recognized corporate names in the world...Chapter 11 can work but only in the right circumstances. Unfortunately, that isn't where GM is right now.
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From: Chicagoland IL
ALMIGHTY MEMBER
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From: Detroit, MI USA
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Posts: 2,298
From: Detroit, MI USA
mmmmmmmm..........don't recall him saying that.
Go read my posts about the changes we made --
Are you telling me that anyone on this site - or any site for that matter, could have predicted the banking mess, the housing meltdown, and $4 gas all at once?
Don't think so!
Didn't look at the timestamp on your post.........but the John McElroy article that you posted says a lot about the changes made.
I'm here to tell you that in 31 years with GM, I've seen massive changes over the past 5 years -- and most of them in the past 3.........the past 6 months have been incredible.
OH well -- nice to know that the Big Three's implosion will be 'entertainment' for some...................
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From: New York
As opposed to the old "cut corners to save as much money as possible". The general theme seems to be "build a better product and the money will follow". And they've been doing just that. Nearly every new release has earned some sort of award or serious recognition. Unfortunately...none of that matters, because it depends on people buying said improved products...which they're not. At least not in normal, or expected amounts...thanks to the economy.
Then there's the outrageous job cuts (both white, and blue collar) they've gone through including closing multiple plants across the continent.
They've renegotiated their contract with the union...to the point that this last one was hailed as "groundbreaking", and "revolutionary" by both sides. It included a clause that would take all the healthcare costs out of GM's checkbook for some 80 years (to kick in in 2010), and a 50% pay decrease for new hires.
Altogether, GM looked poised for some real improvement in this and the coming years....but got sideswiped by a train, instead.
Those, too. (some I may have repeated above, though)
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From: Santa Clara, CA
GM has been in the red, big time, for a long time. So let's say Uncle Sam hands GM 10 or 20 billion, how exactly does GM EVER pay that back? And with interest? How do you go from losing 1.25 billion dollars per month, to paying back a multi-billion dollar loan?
A government backed Chapter 11 is the only outcome which I can see giving GM one more final chance.
A government backed Chapter 11 is the only outcome which I can see giving GM one more final chance.
Sure, you could discharge some liabilities, but I think bankruptcy would have a huge downside in sales. A liquidation bankruptcy would be much more likely, as happened with Daewoo in Korea a few years ago. Has there ever been a successful chapter 11 / reorganization bankruptcy for an automaker?
I think there's value in having domestic automakers, and that part of the reason GM is in this position is due to silly government regulations like the dual fleet CAFE rule. Sure, there have been management mistakes (show me an organization that's been around as long as GM that never made a mistake), and the UAW waited too long to address labor cost issues. To those who suggest that GM should have taken the UAW on earlier, I just don't think a pitched battle would have worked for GM. GM did not have the same ability that Caterpillar did to break a strike.
Congress and the Executive branch will need to ask hard questions and get satisfactory answers. And this needs to be sold to the taxpayers (at least a basic majority). Let's see what happens when they go before Congress (Tuesday?). I'll be listening.
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From: Chicagoland IL
mmmmmmmm..........don't recall him saying that.
Go read my posts about the changes we made --
Are you telling me that anyone on this site - or any site for that matter, could have predicted the banking mess, the housing meltdown, and $4 gas all at once?
Don't think so!
Didn't look at the timestamp on your post.........but the John McElroy article that you posted says a lot about the changes made.
I'm here to tell you that in 31 years with GM, I've seen massive changes over the past 5 years -- and most of them in the past 3.........the past 6 months have been incredible.
OH well -- nice to know that the Big Three's implosion will be 'entertainment' for some...................
Go read my posts about the changes we made --
Are you telling me that anyone on this site - or any site for that matter, could have predicted the banking mess, the housing meltdown, and $4 gas all at once?
Don't think so!
Didn't look at the timestamp on your post.........but the John McElroy article that you posted says a lot about the changes made.
I'm here to tell you that in 31 years with GM, I've seen massive changes over the past 5 years -- and most of them in the past 3.........the past 6 months have been incredible.
OH well -- nice to know that the Big Three's implosion will be 'entertainment' for some...................
Here's the quote fron AN:
Even with government aid, Wagoner said, GM will have to do "significantly more restructuring" if industry sales stay this low. But if annual industry sales return to 15 million units in a few years, Wagoner said, "We'd be doing pretty good."
No arguments about the perfect storm of bad stuff happening all at once. But people have been talking about the banking mess for over a year now, and the housing meltdown for over 3 years. I'm not smart enough to predict how or when all of these things could have converged like they did - but I figured those at the top of GM would have gotten some good advice from very smart people. Advice like, some bad stuff is coming, let's protect GMAC because it's a strategic asset. I mean, this day has been coming for GM for over 20 years - it's only been in the last couple of years that anything of any substance has been done about it.
I do realize that there have been some big changes at GM lately. I just hope they were enough and it didn't come too late, and I also hope McElroy ends up being right.
Last edited by Z284ever; Nov 16, 2008 at 10:51 AM.