Disney's Magic Kingdom has nothing on GM, the new Happiest Place on Earth. Why, things are so good there that CFO Ray Young told Bloomberg they may be able to reap a larger chunk of their projected $10b savings this year, instead of waiting for next year. Speaking at at the Traverse City auto management lovefest yesterday, Young said The General may have "as much as $17 billion" cash to get them through next year. And it's all because they're "accelerating all of [the] stuff" in Rick Wagoner's July 15 magical "Cut Your Way to Prosperity" plan. Of course, their model mix is still out of kilter for the market. And they have to look at "how strategic" GMAC will be as they enter "another stage" of their relationship with the floundering finance company (read: find some sucker to buy their share of that turkey). Oh, and they may have to "reconsider" their "contractual obligation… with the UAW" on retiree health care even before they make the first payment into the union-run superfund. And they'll do all this while "reinventing the automobile and GM," according to Young's slideshow. GM Deathwatch later today.
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Reading this I get the feeling I can hear a funeral dirge playing the back ground. All the while GM’s mismanagement is blasting “shiny happy people” to hide the real music while they pretend GM is on cloud 9 (of course it’s not a cloud but pea soup thick smog – and they are not sitting on a could but dumpsters and rotten cars that are hidden by the smog).
Frank, it is amazing that this charade has lasted this long. The housing bubble was over in five years. Let me get this in my head, if you keep reducing your size you will outrun your expenses and thus turn profitable, and then put the capacity back in that you just shed. Or do you get lean and mean and stay that way? As in life, there are some mistakes that are so fundamental and deeply ingrained into the fabric that they can’t be washed away. The years of: keeping old plants, bad labor contracts, squeezing parts suppliers white, delayed product change cycles, abandoned brands and models, promised miracle technology that is always almost here, in fact promising that the can we just kicked down the road for the 29th time is the last time we need to do it. But most importantly a mind set at the top that thinks this is just a bad stretch and if they hunker down, smile for the cameras, god and nature will surely give us a rebirth. It is now too late for Wagoner and company to go, the carcus is too weak and financing now impossible to start over. “Requisat in Pace GM.”
I can hear a funeral dirge playing the back ground
And so can they (GM execs), hence this latest fantasy to forestall getting the hook for a few more months or even weeks so they can rake in the last few undeserved paychecks. I noticed one of the ‘savings’ they announced in the latest turnaround plan (wish) was freeing up cash by reducing inventories. What inventories? I thought just in time brought work in process inventories to the minimum consistent with efficient production. If they’re talking about inventories of finished product, I guess fatter rebates will be their method except that affects cash in a negative way. It’s that rock and hard place situation again. I feel sorry for the workers, suppliers and dealer people.
Perhaps GM will be profitable when they’ve cut themselves down to the size of Tesla?
“Young said The General may have “as much as $17 billion” cash to get them through next year.”
Has anyone else noticed that when (mainly) GM executives talk about their cash hoard it’s always “We have X amount to see us through to 2009” NOT “We have X amount to invest into R&D, marketing, engineering etc”.
It’s almost like they’re saying “We have X amount to lose through to 2009!” as if that’s something to be proud of!
Let’s run with the hypothesis that GM’s M.O was to file for bankruptcy, I don’t think they thought it through. Many people say how GM will emerge leaner and fitter. I beg to differ. If GM try to cut the UAW loose, does anyone REALLY think that the UAW will take it lying down? The UAW will fight like dogs for their right to work (quite rightly). Meaning that GM will still have an almighty problem on their hands, even in chapter 11. They might as well file chapter 7 for all the good it’ll do.
Just goes to show you, you can’t cut your way to prosperity. If only they sold cars people wanted…..
If the UAW will not waiver in bankruptcy the Court has the right to void all their contracts leaving GM off the hook and free to hire new workers at wages they dictate (and not the other way around).
It also allows GM to pay off massive debt and buy out dealers for substantially less than they could do outside of bankruptcy. The point of our US bankruptcy law under CH11 is a fresh start – that leaves very little that cannot be rearranged (sans super priorities such as attorney fees and Uncle Sam’s back taxes!).
I’ll bet a nickel we are looking at Chapter 7 sales of the assets at a nickel on the dollar rather than chapter 11.
Jaje what you say about Ch. 11 bankruptcy is all true in theory.
But look at the reality of Delphi.
Game over for GM soon. Ch. 7.
“Young said The General may have “as much as $17 billion” cash to get them through next year. After that we will be filing for Chapter 7 bankruptcy because we would have sold any and every possible asset we had to keep the lights on and have burned through every dollar to keep the lights on and our bonuses coming during that year. We told you big things would happen in the magic year 2010.”
Nothing can save them at this point, especially since the people and culture that caused this mess are still running the show and not addressing any of the real problems they have, the management and culture being the problem.
Oh and Ch. 11 wont help them either, maybe a year ago but I think at this point it’s too late. There is no guarantee they will come out of Ch. 11 without being forced into Ch. 7, Delphi is a good example I would also suggest you guys reading up on the last few years of Pan Am’s death. Even thier history has a lot of parallels.
How do you ad links in the editing window?
Pan Am
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Highlight the text you want to link it to, then click the icon right above the text box that looks like an arrow pointing to the northeast. Paste your link in there and click OK.
God, I hate Powerpoint. Too bad we do not live in the fomer Soviet Union, so we could simply execute the inventor (or better yet, forced labor camp).
GM is a behemoth, but I do not think anyone really wants to see it go under. To be fair, GM has some truly great products out there and in the pipeline (however, it may not seem so to ADD auto enthusiasts, who get sick of a brand new product within a month of its announcement). Anyone see that Opel Insignia Wagon announced today?
GM’s current predicament reminds me of Asimov’s Foundation series. A large intergalactic empire, long past its height, being eaten away at the corners by ambitious and determined outsiders. Leaving aside the Koreans (who are ambitious but really not there yet), GM’s only true foreign competition is the Japanese, who exist in an extremely sheltered and export-driven home market — where foreign competition is stifled, and folks are a bit more nationalistic about car purchases. For the Japanese makers, to some extent, the North American market is key to their survival.
GM is going to have a 50% problem, if it does not already. The same thing happened with the US electronics industry. For a good chunk of Americans, buying an American car is important. But the more market share US manufacturers lose, the more people are going to think, “What the hell, all of my neighbors have Japanese cars, so it doesn’t matter anymore.”
The pitfalls of Empire.
Frank I meant the edit window after you have posted a comment, it doesn’t have that button to add the link and you can’t copy clip it in or it traps you in the spam dungeon, like it did to me.
Wait a minute.. The quote says GM “may have as much as $17 billion cash”, I thought recently they said they had over $20 billion in cash. And what does “may have as much as ” mean? You mean they don’t know for sure? Isn’t that like saying “up to” in ads, meaning it could from zero to whatever number being touted? Also let’s say GM has $17 billion in cash, and they are going through a billion or so a month, and TTAC has indicated in the past that GM has to have at least $10 billion just to keep the doors open, does that give them about seven months of operations remaining? (Compare this to what I have read that Toyota has over $100 billion in cash). Any insights anyone?
When they reported their losses last time, they said they have about 26 billion in cash & credit.
Deduct the 10 bill or so they will need to maintain ops, you get around 17 billion. So he might mean they have 17billion between them and chapter 7.
detroit1701, at this point, I’d love to see GM go bankrupt – as long as my uncle could find other work. They sorely deserve it for what they’ve done to this country by seeking preferential treatment for SUVs and pickups (as do Chrysler and Ford; but Ford at least never outright loathed people who wanted to buy small cars, so I kinda hope they’re the last one standing).
So there’s one. I’ll bet there’s others here.
Your rewriting of history is ludicrous – any protection the Japanese got at home is irrelevant given the size of their market; and a drop in the bucket compared to the subsidies and regulatory assistance the Big 3 got for the monster trucks that made us all less safe, less secure, and more polluted.
There was only ever one car that I think the Big 3 could have sold to the Japanese – everything else was ludicrously uncompetitive. That car, of course, was the original Saturn (I bought and liked one); but the regular GM guys couldn’t wait to kill it on the theory that if they went back to making awful small cars, they could convince the buyers to go bigger.
M1EK, you sound just like a guy I know from MotorTrend and just wants GM and other domestics to go down with out realizing it will hurt many other companies to. But it is highly unlikely GM and others will go bankrumpt, and many people dont want to see that either.
And we all know GM is having trouble financially but still, they do have more money in researve to work out better contracts, more into R&D, and anything else going on. Besides, GM should be okay through 2009 and get better in 2010 and on from there.
Needforspeed, GM sure might survive, but I firmly believe they don’t deserve to survive.
Although GM is far from what it was back in the 80s and 90s run by Smith. Wagoner and them have done what GM needs, and they have focused more on economy, reliability, and quality. GMs condition may not be the best, but Wagoner and Luts are moving GM along and things will only go up in a few years.
One question though dude, what makes you think they dont deserve to survive?
M1EK: They sorely deserve it for what they’ve done to this country by seeking preferential treatment for SUVs and pickups (as do Chrysler and Ford; but Ford at least never outright loathed people who wanted to buy small cars, so I kinda hope they’re the last one standing).
The exemption was put in because at the time CAFE was passed, trucks were largely used by farmers, small tradesmen and contractors. They needed the capabilities of those trucks, and the technology did not exist to greatly improve their mileage without compromising their capabilities.
CAFE basically forced Detroit to end the production of full-size cars with large V-8 engines. Those customers therefore migrated to trucks and full-size SUVs, which were the closest thing to the old full-size and mid-size rear-wheel-drive cars available. The Ford F-150 was already the best-selling vehicle in the early 1980s. Some people want large vehicles. They like the way they drive, and are willing to accept the trade-offs that come with size.
Closing the CAFE loophole for mileage would have basically spelled the end of CAFE. It’s the same as those who wail about people exceeding the speed limit on the interstates and demand “strict enforcement” and “zero tolerance” for speeding. Which, if enacted, would have most drivers up in arms, and result in either the limit being raised, or scrapped.
Take away the light-truck exemption, and CAFE would have been scrapped.
M1EK: and a drop in the bucket compared to the subsidies and regulatory assistance the Big 3 got for the monster trucks that made us all less safe, less secure, and more polluted.
Given that air quality across the country has improved dramatically over the past 20+ years, I’m trying to figure out how pickups have increased pollution. You do realize, for example, that a 2002 Ford Explorer emitted fewer emissions RUNNING than a 1969 Ford Galaxie did while standing still, with the engine turned off? ALL cars and light trucks sold within the last 15 years have been remarkably clean from an emissions standpoint.
I’d also like to know how trucks are making us less safe, considering that the fatality rate per 100 million vehicle miles traveled is at a record low figure, even with more light trucks on the road than ever before. And the biggest threat to small car drivers, judging by actual fatalities, is…other cars and stationary objects.
M1EK: That car, of course, was the original Saturn (I bought and liked one); but the regular GM guys couldn’t wait to kill it on the theory that if they went back to making awful small cars, they could convince the buyers to go bigger.
The original Saturn wasn’t any better or even more reliable than a 1990s Escort. It was a mediocre car with one main advantage – a customer-friendly retail experience. That no-haggle philosophy was outmoded by the rise of the internet (which made it easier for people to figure out invoice price, trade-in values, etc.). Other manufacturers began to upgrade their dealer networks, too. Saturn’s main advantage didn’t last too long.
The reason GM didn’t develop Saturn further was because it had too many divisions, almost went bankrupt in 1992, and Saturn was diverting money from the other divisions. Saturn has been profitable for exactly ONE YEAR since it was formed. Hardly a great record that encourages further investment.
GM failed to put money into Saturn because it didn’t have that much money, and it didn’t make sense to invest it in a money-losing division, not because it wanted to encourage people to buy bigger cars.
If you want to blame GM for anything, blame it for sticking with its old-line divisions for too long, but the formation of Saturn, if anything, only exacerbated this core problem. Even in the late 1980s, the LAST thing GM needed was another division.
Thank you geeber.
That was the truth I was looking for and it should explain what others have been misinformed about.
But I also think in one of M1EK statements there about trucks. He might not be aware, but Toyota, Honda and other manufactures build them to. But they are less effienct than what the Big 3 have out now. I guess he gives Toyta and Honda a blind pass for doing the same thing and blaming the Big 3 for making that move to.
Either way, the domenstics will make it. They just got to get past their old perception and the lame doom and gloom the media feeds us.
If pick-up trucks are “monsters” what are dump trucks and 18-wheelers?
geeber, you are dead wrong:
1. Fuel taxes, instead of CAFE, and then those who needed the big trucks could have had them. No CAFE loopholes would have worked fine, too, since the big automakers would have made damn sure not to try to promote SUVs as passenger vehicles or it would ruin the overall fleet average.
2. The parts of this country that have been growing (Sunbelt) rather than shrinking (Detroit) have indeed seen a dramatic increase in pollutants from automobiles – in most cases for those cities, overwhelming the decrease in industrial pollution. And today’s SUV is far dirtier than today’s car – and there’s a hell of a lot more of both being driven a hell of a lot more miles, so the comparison to the 1970s car is irrelevant.
3. The Saturn was far more reliable than the Escort, and was the only US compact car that CR ever thought competitive with the Corolla/Civic on that metric.