Some analysts think latest cuts are too little, too late and are changing their stock recommendations from hold to sell. Latest issue of Fortune has an aricle titled "The tragedy of General Motors" which claims GMs troubles are so severe, that it wouldnt take much to force GM into bankruptcy.

 

no it's not too late. But the miracle it needs will not happen because if Wagoner is replaced, it will be with the wrong person.

No quick fix is going to turn GM around. THey need to rethink everything.

 

Don't worry, GM is not gonna go under, its not even close to that right now.

 

oh trust me I know, it will stay afloat for quite a while.

 

Its losing billions and cutbacks are saving millions. UAW is refusing to renegotiate Delphi contract and GM cant keep paying workers $27/hour plus bennies to make spark plugs. Feb 17th is the date that Delphi can ask bankruptcy judge to null and void union contract. A UAW strike at Delphi will close GM down in 2 days. UAW strike fund has $900 million in it. GMs $15 billion cash on hand could be gone in 3 months. Yes, GM could be in very serious trouble in the near future.

 

Few items to consider there TA Jack.

GM is sitting on top of 20 something billion dollars. That means if GM continues to lose money at the current level with no changes , GM has enough in cash to last them about 7 years.

Next, GM has even more than that in assets. Not sure of the exact numbers, but it's well over $100 billion in property and holdings. All which can be sold off for cash.

Finally, even though it's viewed as small steps by some, GM is already on a path that all but gaurantees it won't go under within the next decade without an economic crash. It takes fewer people fewer hours to assemble these new vehicles GM is bringing out which offsets whatever wages they are paying the senior guys.


I brought this up in another thread some time ago. It takes a lone time to bring down an automaker. Studebaker took over 15 years. Puny AMC took about as long. It takes a series of missteps, and a long drawn out series of selling assets to pay existing bills without the ability to fund new products. Lose the ability to fund new products, and it's the same as a death warrant.


As for a possible strike at Delphi, Delphi is dead anyway. One way or another. Delphi is ground zero for whatever change is going to happen in the industry. It's an extreme case because it simply can't continue. It's in bankruptcy. That changes the rules...big time.

The UAW leadership is a little smarter than we tend to give them credit for, and they are perfectly aware of what's at stake at Delphi. Once the court orders their contract voided, game's over for them. They have to renegotiate, and though it'll be higher than Delphi is offering, it's going to be dramatically lower.

If there's a problem, they can ask for mediators who will act as a go between. Because of Delphi's financial condition, the company seems to have the upper hand.

If the UAW strike, it'll probally wind up ruled illegal, and the UAW is going to get fined.... ALOT. High fines in addition to paying workers during the strike is going to deplete that UAW warchest quicker than GM's.

Whether shut down completely, bought by GM or an outside investment firm, or run with fewer lower paid workers, Delphi as it was is dead.

 

Thanks guionM for chiming in with your usual level-headed response... and adding some perspective for laymen such as myself.

 

I dont see GM going under, but bankruptcy is becoming a real possibility. They will be able to emerge from bankruptcy with a new UAW contract and a fraction of their current legacy costs.

 

Please the government won't allow that to happen.
They'll just bail them out like United and everyone else.

 

Bush couldnt care less about GM, and since he is king for another 3 years, dont look for a government bailout.

 

Nice post guionM.

GM still makes me angry at times...but considering they've been able to get me to pop for 2 new '06's and basically commit to an '09, they've got to be doing something right product wise.

I'm hanging on to my GM stock for the long haul because I'm confident they'll turn it around.

 

great points guion,

most people do not know that GM as a whole made a profit last year, with the outside US sales profits eclipsing the US sales losses.

They also do not take into consideration GM's assets, I never do. If they decided to sell all their properties, it would turn the commercial real estate industry on it's ear.

But they do outrightly own a lot of property.

Delphi has been dead for a long long time. It is no longer financially responsible to build auto parts in the US for any large auto maker.

Over seas suppliers can produce competitive products for 1/2 the price or even less. GM has had engines built in Mexico for years. So what is the difference? Oh yeah, they could still consider that north America when they put the parts content sticker on the window.

Seriously, if they linked up with the right suppliers globally, they could save so much money it's not even funny. Plus it would be little different than having a company in Mexico build their engines.

US labor would still be used for final assembly, but the cost of parts would be so much lower.

 

I think the best thing that could happen to GM would be for Wall Street to just forget about it for a year. It seems almost EVERYDAY there is another GM is going bankrupt article streaming out of someone's mouth and to tell you the truth it got old a long time ago.

Seriously Wall Street and 'analysts' just wait and see what happens instead of spreading gloom and doom around like **** stars at Vikings party.

 

Gettelfinger and Shoemaker have to show leadership. Gettelfinger also needs to get re-elected. If there is a shakeup at the top of the UAW, it is possible the work at GM and DPH could come to a screeching hault. Then what?

Shoemaker also needs to tone down his rhetoric over DPH and threats of strike. He need not instigate and provoke the situation.

For one thing, if the situation goes nuclear on Feb. 17th, the whole things comes crashing down. GM can not survive a prolonged strike and the 8 billion dollar losses this past year might appear puny in comparison. The 20 billion in the bank can be eaten up real fast.

And is the DPH UAW willing to take down their brothers at GM. How much will DPH's other customer be affected. This would not only affect current business but future growth opportunities as well for DPH.

If you are following what is happening globably, VW, Fiat, DCX Europe, Renault are all in the process of restructuring. The business model of the 1950, this industry was based upon for labor is being updated.

Gettelfinger and Shoemaker most certainly know this. The question is how do they convey that to their member that elected them? How do they explain that there is no option and the system is dysfuntional? How do they explain, it is over?

 

As if the closure of plants and loss of 30,000 jobs (some whitecollar) isn't enough to make UAW members understand the reality of the future they face. Surely, they won't be that stubborn, not this time?

The options are simple. Accept the new contracts or GM faces bankruptcy... then there will be no more choice. To open the wound would not be in their best interest, particularly from a public perception viewpoint. It could make unions altogether irrelevant, depending on their stand.