GM Inside News Forum banner
1 - 20 of 56 Posts

·
Registered
Joined
·
3,557 Posts
Discussion Starter · #1 · (Edited)


Can GM Make It?
General Motors is staggering and in desperate need of cash. What levers can the auto giant pull to save itself from bankruptcy?
by David Kiley

At the close of business on Oct. 9, General Motors' (GM) market cap stood below what it was in 1929 and down more than 94% from its 2000 peak of $52.4 billion.

At its low in Thursday's trading, GM's market capitalization stood at $2.6 billion. The automaker's market cap was about $4 billion (about $48 billion in today's dollars) when the stock market crashed in 1929. GM closed at 4.76 on the New York Stock Exchange. Over the last 52 weeks, GM's high was 43.20.

Balance Sheet Issues
The automakers' shares are being hammered because their balance sheets and cash burn were already a problem before the investment calamity that forced the U.S. government to approve a controversial $800 billion bailout.

GM, its dealers, and would-be car buyers are all suffering from lack of access to credit. "Action to establish some normalcy to credit markets is important to our industry, period," said GM President Frederick Henderson.

Rating agency Standard & Poor's said Thursday it was reviewing GM and Ford for further downgrades based on grim forecasts by firms like J.D. Power & Associates that the industry will sell 2 million fewer vehicles to consumers in 2008 than last year (BusinessWeek.com, 10/8/08), and that the cratering of demand for new vehicles will last through next year. The ratings being reviewed by S&P include the B- long-term corporate credit ratings for both Ford and GM, along with the B- long-term counterparty credit ratings for the two companies' respective financing arms, GMAC and Ford Motor Credit. The ratings already indicate the companies' debt is below investment grade. "While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Jeff Schuster, J.D. Power's executive director of automotive forecasting.

S&P said it believes both automakers have enough cash for at least the rest of 2008, but rapidly worsening industry conditions will make things tough for them in 2009. Fitch Ratings said this week that it believed Ford could be down to $8 billion to $10 billion in cash by the second half of 2009, which is the minimum a car company the size of Ford needs to fund day-to-day activities.

No Help from Financing Arm
GM lost a stunning $15.5 billion in the second quarter, and its cash stood at $24 billion. At that time, it was burning $1 billion a month of its reserves, but the rate of burn is thought to have increased in the recent Wall Street meltdown. The next 60 days will be critical, said GM's Henderson, who is watching to see if the credit markets loosen up after the U.S. government rescue package starts taking effect and European government actions kick in.

The automaker is beating the equivalent of corporate couch cushions for cash. It is, for example, trying to borrow between $250 million and $500 million from Detroit city pension funds using its corporate headquarters building as collateral. That amount of money is not enough to fund even one vehicle program.

Besides falling demand for cars and trucks, GM does not have the backstop of its GMAC finance arm, which for years earned huge money from auto and home loans. To raise money, GM sold a controlling stake in the finance subsidiary to Cerberus Capital Management, and the credit arm has been hit by the subprime loan problem that has rocked Wall Street and world markets.

To raise additional cash, GM has floated the idea of selling the public stock in its European operations, which could be spun off. But the success of that strategy is now in question given the spread of U.S. economic problems to Europe and Asia.

Much more here: http://www.businessweek.com/print/lifestyle/content/oct2008/bw2008109_718575.htm
 

·
Registered
Joined
·
1,891 Posts
Just keeps getting worse, I couldn't believe yesterdays drop.

They'll make it, but it wont be easy.
 

·
Registered
Joined
·
5,014 Posts
GMs biggest problem is access for cash, heck Ford had the right timing when they made the loan because they have access to those credit lines but GM is in a tougher spot because no one wants to loan them money and even with the 25 billion goverment loan if 2009 its going to be as scary as they say even those 25 billion could not be much
 

·
Registered
Joined
·
8,904 Posts
If the economy was good 70/30 Yes
They way the economy is now 70/30 No..

Like WaMu, Like Leman, Like J.P. Morgan ...
They need to find a buyer to save them now.
 

·
Registered
Joined
·
667 Posts
No, in a word.

I just don't see how they can fund their prodigious rate of cash-burn, and nor do the credit rating agencies or the stock investors.

The grave beckons for the General Motors Corporation of Detroit, Michigan, which will die, aged either 100 or 101.

What sort of company will emerge from its collapse is anyone's guess, but I, for one, think the chances of survival as an independent firm, or in any recognisable form, are now gone.

I have been - like, I suspect, most on this board - in bouts of outright denial, interspersed with bouts of (fairly ludicrous) optimism, but the time has come to face the appalling truth.

I feel sick to my stomach.
 

·
Registered
Joined
·
2,715 Posts
I think they'll survive as an independent firm after going through Chapter 11. But I don't think they can avoid bankruptcy, and the company that emerges will be much smaller.

I don't think senior management is to blame any more than any other typical team of senior managers would have been. GM needed a thorough overhaul in its structure and culture a decade ago, and few execs would have had the guts and ability to pull that off.

I also feel sick to my stomach.
 

·
Registered
Joined
·
8,904 Posts
I don't think senior management is to blame any more than any other typical team of senior managers would have been. GM needed a thorough overhaul in its structure and culture a decade ago, and few execs would have had the guts and ability to pull that off.
First off Rick was in charge a decade ago... Swing and a miss!
Second Senior management is too blame...
That is THE definition of senior management...
When things go well they get the kudos...
When things go badly they get the blame...
Right now things are VERY very bad.
 

·
Registered
Joined
·
627 Posts
Wonder how the job banks are doing these days................
I have been waiting for the union bashing to begin. What a fool,this market mess has absolutely nohing to do with how a factory is run(be it the union or management). This was caused by greedy CEOs and board members across every type of business. Can GM survive? I think yes they will,but at what price to everyone.
 

·
Registered
Joined
·
278 Posts
I have been waiting for the union bashing to begin. What a fool,this market mess has absolutely nohing to do with how a factory is run(be it the union or management). This was caused by greedy CEOs and board members across every type of business. Can GM survive? I think yes they will,but at what price to everyone.
You wrong and right. If you are a lineworker for GM, then your all in the same boat that needs to be righted and instead of focusing blame on one area, you all need to work together to make it work, but that will never happen. For too long they've been drilling more holes in the boat to let the water out, and now it's sinking fast. It's true upper-management gave the orders to drill those holes, but in order for them to be drilled, the workers demanded more and more until they were priced way above then what they ever should have been. The water/debt/perception/competition/economy continues to flood the ship at an alarming rate and everything has already been tossed overboard to try to save it. The U.S.S. GM will go under, but that doesn't mean that will be the end of her. GM might be like one of the Battleships in Battleship row in Pearl Harbor, it's loss was needed to fuel the will to fight, and like those ships, pump the water out and get them repaired as fast as possible and put back into action fighting a similiar war all over again.
 

·
Registered
Joined
·
8,869 Posts
I think they'll survive as an independent firm after going through Chapter 11. But I don't think they can avoid bankruptcy, and the company that emerges will be much smaller.

I don't think senior management is to blame any more than any other typical team of senior managers would have been. GM needed a thorough overhaul in its structure and culture a decade ago, and few execs would have had the guts and ability to pull that off.

I also feel sick to my stomach.
So, even though Rick and his Team have been at the helm for 6+ years, they escape culpability? If that's the case, why have a president and CEO? You're suggesting that this would have happened anyway, so why not save the multi-millions spent on him and let the spots go vacant?

mkaresh, I've read too many of your posts for me to believe that you actually believe what you just wrote. Only a fool believes Wagoner's completely at the mercy of outside forces and that he casts no shadow over the company's fortunes.
 

·
Registered
Joined
·
667 Posts
Some questions:

Firstly, just how long has Rick Wagoner been at the helm? Was it 1999 or 2000? I just can't recall.

Secondly, if he and his team had launched a radical restructuring program shortly after he assumed the reins of power, would we now be looking at a much stronger GM, one which would have been well-placed to weather the storm?

Or was the company's fate already sealed by the time he got the top job?
 

·
Registered
Joined
·
2,393 Posts
I have been waiting for the union bashing to begin. What a fool,this market mess has absolutely nohing to do with how a factory is run(be it the union or management). This was caused by greedy CEOs and board members across every type of business. Can GM survive? I think yes they will,but at what price to everyone.
I agree everyone is in this mess - including unions. Will be interesting to see
what everyone is willing to do to get back on track - or not face the reality.
 

·
Registered
Joined
·
397 Posts
Thanks RICK! get rid of him

You really think this is his fault??? I may not like the guy, but I don't for one minute believe that ANYBODY could have stopped this train. The problems that are sinking GM began in 1970, accelerated through the 80's, and were only briefly masked in the 90's by SUV profits. Consider the following:

- Market share has been decreasing for 40 years
- Model line profitability (with the exception of SUVs in the 90s and the Vette) has been falling for the last 30+ years
- the UAW has cost GM tens of BILLIONS over the same period through either work stoppages or one-sided agreements that were gained at gunpoint via strikes
- Horrible quality ratings from 1970-2005, especially on mid-size cars (see JD Power, Consumer Reports, et al)
- Inefficient manufacturing practices/facilities from 1970-1995. Only in the last decade has GM woken up, gone hard-core on six-sigma and lean principles, and really focused on the manufacturing process as a way to cure defects. Unfortunately, it takes 5+ years for those results to show, and at this point is like trying to pump the water out of the titanic with a nasal aspirator.
- Denial on the part of executive management from 1970-1996 regarding Americans shifting tastes from "land yachts" to smaller, sportier, more efficient cars. The only exception to this has been trucks and SUVs, but again, it was a mask - and the proof is in the rise of Toyota, Honda, and Nissan.
- Executive apathy from 1996-2004 about what to do in regards to America's shifting tastes in the mid-size sedan market (what do Americans really want in a sedan??? - Oh yeah, let's start designing a good one, release it in late 2007, and call it the Malibu even though it really looks nothing like the POS that bore the name previously.....)
- The creation of the "incentive mindset" in America by offering sales, rebates, incentives, discounts, etc. This trend started in the 90s and has gotten completely out of control. Now, nobody believes the MSRP on a new vehicle and consumers hold off until there is a "sale". Since all of the consumers are waiting on the sidelines, GM is forced to offer the incentive in order to move metal.

Note: ALL of these things started long before "Slick Rick" took over as CEO. I (grudgingly) give him credit for: bringing in Bob Lutz, investing in China (which is saving Buick), leveraging global purchasing and branding, investing in the Malibu, Lambda vehicles, the C6 Corvette, and the new Camaro, and revitalizing Cadillac. I still blame him for: the downfall of Pontiac and Buick, the death of Oldsmobile, capitulating to the UAW on 2 straight contracts without getting anything of value in return (prior to the current contract), selling 50% of GMAC rather than just spinning off and selling the home loans portion, not "culling the herd" of middle management at GM which is the home of the "old GM" mentality that is killing GM, and last but not least - allowing the SS moniker to become completely devalued by slapping it on cars like the Cobalt, Malibu, HHR, etc.
 

·
Registered
Joined
·
1,250 Posts
"Or was the company's fate already sealed by the time he got the top job?" It was sealed in the 70s with the ludicrous pension and health care promises - mostly to unions but there are also a lot of corp retirees as well.
 

·
Registered
Joined
·
3,089 Posts
They can if they file for bankruptcy and smartly reorganize the company into a smaller, leaner, fast reacting and smartly managed organization.

But what are the chances of that happenning? This is GM we're talking about.
 
1 - 20 of 56 Posts
Top