The S&P ratings agency has put both GM and its GMAC financing arm on its lowest possible rating: “creditwatch,” with negative implications. CNBC reports that “The ratings agency said the move reflected the rapid weakening of most of the world’s auto markets. It added that capital conditions in the sector would remain challenging for the ‘foreseeable future.'” The move follows hard on the heels of tumbling GM’s share price, pushed downwards by a weak overall market and the removal of a federal ban on “short selling” the automakers stock. The fact that Citigroup cut GM (and Ford) to “sell” ratings yesterday didn’t exactly help investor confidence, either. The next step– as predicted by TTAC’s Ken Elias— GM will be removed from the Dow Jones Industrial Average. From there it’s a relatively short trip to bankruptcy court. You know things are bad when CNNMoney/Fortune’s Alex Taylor III uses TTAC terminology. “The stock selloff effectively puts GM and Ford on death watch, and it’s easy to see why.” As it has been for many, many years.
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Damn! That must vindicate Mr. Farago. After Death watch, credit watch?! In those troubled times, credit is worse than death.
We could see the delisting of Ford and GM.
Good! Remove them! Stop letting them stink up the indexes with their failed business.
Is there any sign of concern from the Board of Directors yet?
I guess you gotta fall all the way down before you can really start to get up. This is sad stuff, really, but I still think there’s a bright future for GM and Ford if they can just get a workable business plan together. I’m still pulling hard for Ford, Mulally is much more well-equipped to bring Ford back from the brink than GM’s asinine boy’s club.
It’s a sad day for American manufacturing when it’s possible that our major car manufacturers are delisted from the Dow Jones Industrial Average!
Less than $5 a share looks pretty tempting….but I learned my lesson from Delphi ($0.05)
CNBC has been reporting all day that GM is now worth less than it was in March of 1929. RW (Wrong Way Rick?) has presided over the loss of what, about $50 billion in shareholder value?
I can’t believe they haven’t been removed from the DOW 30 already. Their market CAP is 2.7 billion. Their stock is basically a lottery ticket that they won’t go bankrupt. Many if not most of the DOW 30 companies are worth hundreds of billions.
Honeywell and Altria were removed from the DOW 30 and have market caps in the 30 Billion range.
Why don’t GM fanboys see the writing on the wall?
TTAC has been spot on regarding GM, I have been wondering for some time: where are all the so callled financial journalists who weren’t on top of this. I was watching CNBC this morning and their reporter was talking about GM, and never got to the major points: credit downgrade; selling off all their assets; outsdate product line; too many dealerships etc.
Can anyone, anyone really say GM will not be in bankruptcy very soon, and possibly Ford shortly thereafter?
What a sad, sad time, I grew up in the muscle car era, my first car was a Mustang. The Board of Directors of these companies should be treated as criminals.
Interesting pearls of wisdom from Rick Wagoner in the NY Times, circa March 11, 2005:
Company executives, while acknowledging that G.M. faces serious problems, say they are confident they can weather any storm. “We’ve been ahead for 73 years in a row,” Rick Wagoner, G.M.’s chief executive, said in response to a question at a January news conference about Toyota’s looming presence. “I think the betting is we’ll be ahead for the next 73 years.”
“Is it a birthright?” he added. “Absolutely not. Could we blow it next year? I doubt it. Could we blow it in 10 years? For sure. We could do anything in 10 years.”
You’ve got to give it to Rick for the depth of his confidence in his ability to “blow it.” He even beat his own 10-year timeline by seven whole years!
But GM’s not takin’ no stinkin federal bailout money, no-how:
One thing Mr. Wagoner is not betting on is a government bailout, given that steel companies and airlines have been left to fend for themselves. “That has not gone unnoticed by me and therefore motivated us to think about, well, maybe we shouldn’t just wait for somebody else to fix this problem for us,” he said.
Well, on second thought…
Cicero,
I’m sure the Board of Bystanders will issue another press release saying they have complete confidence in Rick Wagoner.
When GM goes bankrupt, I expect everybody to sue their auditor, Deloitte and Touche. They at least have pockets.
Why don’t GM fanboys see the writing on the wall?
They do. They just don’t want to.
Ford could benefit from the demise of GM. There is still a segment of the market that favors the domestics.
If you have a big cloud of FUD over GM from a Ch.11 (or will they go straight for 7?) many those buyers will move on the General.
If any of the D2.5 will survive it will be Ford. Once they see their “brothers” at GM and Chrysler get kicked to the curb in Bankruptcy they will be more inclined to make some concessions.
Fords trading at $2 a share.
I was reasonably optimistic about Fords future, but damn, recent events might as well have been designed to kill off the weak and sickly members of the auto industry. I don’t know if a domestic loyalty bounce will do much besides blip sales for a month or two. People have to watch their own asses now, and the number of FICO 700+ that are going to do a sympathy buy will be low.
This might not be good news for GM fanboys, but it could be good news for Chevy fanboys. Under the reorg the G8 and G8 ST will likely become the Impala and El Camino.
GM will definitely Chapter 11, not 7, which will put Ford and probably Chysler under as well while GM dumps cars at rock bottom prices.
On one had I’m really looking forward to a great deal on a base Camaro (with the heritage steelies), but on the other I’m a bit leary of buying a car built by someone whose union contract is being re-written by a bankruptcy court.
It is getting very late. GM must file, and do so in an orderly fashion. They need to have Congress on board, they need to go during the election cycle, and while the government is still solvent. Fear is their chief ally, but panic is the point of no return.
How about I walk into the RenCen, offer to loan Rick Wagoner some money, and the moment he takes it try forcing GM into Chapter 11.
What is a workable business plan when the government has decided to build a playing field that so favors the imports.
Imports do not have to pay a living wage, do not have to worry about EPA crud, R/D supported by the government, health care government and benefits are if you work you will receive a non-living wage.
So, As the politicians have stated the great US worker will out compete anybody. Well there goes the ball game. Are you all happy????? How is your 401/IRA doing lately? Will it support you with the help of SS that’s trust fund was stolen by your own government by law??? Congress stated we couldn’t stop them from taking the money???
What? GM Fail? Ford Fail? Chrysler Fail? Detroit Fail? Michigan Fail?
What your house worth in Michigan with no business future??
blindfaith: What your house worth in Michigan with no business future??
$1.75 if you live in Saginaw, apparently.
blindfaith: “Imports do not have to pay a living wage, do not have to worry about EPA crud, R/D supported by the government, health care government and benefits are if you work you will receive a non-living wage.”
You got pretty much all of that wrong, you know.
Barack H.O., SanFran Nan, and Dingy Harry will ride to the rescue, guaranteed. The stockholders will get wiped out but the UAW won’t.
After card check passes, the transplants will all be UAW within 2 years also which will greatly deteriorate their cost positions.
I think this is it, boy & girls…the death throes have begun. They simply cannot last with things this bad.
blindfaith
everyone has to compete in the american market. Everyone operates under the same market regulations. Just about every “import” manufacturer builds their machines in the states or canada. I belive your statements are blatantly biased and utterly incorrect.
It was reported here awhile back that it was costing GM 4.6 million to borrow 10 million. Any idea what that is at today?
I figured before this credit crunch, with the simple slowdown in sales that the odds were tilted towards GM going down, but with the credit crunch and the market for autos dropping from a mere slowdown to an absolute precipitously dive from a record of 17 million to todays 13.6 million that it’s got to be coming quite soon. I can’t see a rosy short term which could save GM from bankruptcy. I believe that they will enter protection next spring, perhaps May, if there is a lacklustre start to the summer buying season.
The only option for salvation lies with the government. If the government coughs up cash all bets are off.
indi500fan :
October 9th, 2008 at 7:38 pm
After card check passes, the transplants will all be UAW within 2 years also which will greatly deteriorate their cost positions.
I wouldn’t bet on it. Even stunningly stupid people can see what happens when the UAW is involved. Within a year we will hear about the UAW leadership siphoning money from the health care fund and the union itself filing for bankruptcy. Bye, bye health care benefits. If I were inclined to join a union (not), any organization that operated like the UAW I would avoid like the plague.
When are 3rd quarter statements due?
If you are a betting person, you can get 45% interest on Ford preferred stock (Ford Trust Preferred II @ 50 face value@6.25%, trades for about $7.50 right now). Of course, if Ford files you get nothing.
I’m going to put about 1/2 of 1 percent of my money in there. I’m willing to take that option.
You’d have to be a goddamn moron to vote to unionize now.
An import worker gets a good wage, good benefits, and has the real job security of working for a company that makes money. There’s a reason why unions are dying, and its not a lack of card checking or whatever; they managed to throttle their respective golden gooses, and people kind of understand that real job security is working for a company that makes money, and that unionization means plant closures and broken pensions.
There’s a reason why organized labor has dropped to a very small percentage of the total labor force.
As I’ve stated before, this is indeed sad. The Moraine assembly plant will be ending production on December 23, 2008. Nobody is buying Trailblazers.
If you look at every industry in the US that is heavily unionized, none of them are anywhere near the size they once were. First it was the steel industry, then the airlines. Now, it is the auto industry. All of these industries were dominated by American companies after WWII. Workers enjoyed pay and bennies that were the envy of the world. These industries also helped to create the middle class. The unions got greedy, but the companies went along. They figured there wasn’t any competition, so they could afford to make the promises they did. Things are WAY different now. Foreign competition and the global market have changed the way the game is played, and Detroit isn’t sure how to play along.
The union bosses want card check so that they can send their organizers out to prey on ignorant workers (many of whom won’t even realize that they’re signing up to join the union, and the organizer is going to lie through his / her teeth and not tell them what that signature on the card really means) …
And for those who aren’t ignorant, to be able to harass and/or intimidate them into signing, since the union will know who has / hasn’t yet signed, and so can target them.
No secret ballot to protect the targeted worker from union organizer thugs.
And the union only has to get a bare majority of signatures (50% +1) to force unionization (and collect dues) from 100% of the workers.
And the union bosses call this the “Employee Free Choice Act.” Somewhere George Orwell is having a good laugh.
@Bill Wade:
It’s a great deal of money not to be audited by an outside agency.
Does anyone know if there are any safeguards and guidelines on the administration of the cash?
Imports do not have to pay a living wage, do not have to worry about EPA crud, R/D supported by the government, health care government and benefits are if you work you will receive a non-living wage.
Whoa. I want some of that.
GM started down this road 30+ years ago, when they kept serving up shit for product. I wish I was a bettin’ man back in ’77 when I told my Monte Carlo/Trans Am-driving college friends that the then-new Accord was the future.
GM has had every warning to change their ways. They even tried the ‘mea culpa’ crap a few years ago. But the problem is that the generation who provides their most sympathetic ear is, sadly, slowly dying off.
indi500fan
the funniest thing about our friend from the bay is that she got an award from one union for being so prounion however her families restaurant chain is not unionised, an oversight perhaps
and Obama…
which not to say johnny boy is electable either
the recent decision by the fed to lend directly to ‘Troubled’ companies will prop the 2.8 up for a while.
indi500fan:
After card check passes, the transplants will all be UAW within 2 years also which will greatly deteriorate their cost positions.
As someone familiar with non-union manufacturing, that law has horrible potential. Abuse and fraud (especially in blue states) will be common…
KixStart :
October 9th, 2008 at 7:30 pm
blindfaith: “Imports do not have to pay a living wage, do not have to worry about EPA crud, R/D supported by the government, health care government and benefits are if you work you will receive a non-living wage.”
You got pretty much all of that wrong, you know.
Go to China (fathers from China and I have visited that filthy place), Japan, Mexico, India and Korea. This is where many of the capital expentures are made to create the transplant factories. If you are thinking that the transplants factories are the only capital investment that is needed to make those plants you are misguided.
The public education system alone that may extent through doctorate level studies. The social structure is work, simply work. That will beat you to death.
India is currently investing in a startup infrasture for a car that works on pressureized air. Fillup your car with compressed air in 2 minutes and drive 100 miles for $1. How can the US complete with this when everybody pushes for more gas (ethanol may be to dirty) and lives 50 miles from work. We lose $700 billion in burned gas (money that should be used on capital build up for our nations education and infrastructure)
“You’d have to be a goddamn moron to vote to unionize now.”
That is the whole point of card check. All you have to do is bully a few guys in the locker room, there is no vote.
In 2001 the UAW managed to collect over 70% of cards from Nissan’s Smyrna plant in favor of unionization. In the secret ballot workers voted against it 3103 to 1486.
in 2000 when Red Ink Rick took over, we were worth $66 Billion. today it’s $2.6 Billion and dropping. that’s a loss of 94%. the guy makes Millen look like Lombardi and Kwame look like LaGuardia.
no_slushbox is right. I don’t want to buy a car from an automaker that filed for C11. It’s psychological. I really, really want a Camaro badly, but will GM survive this decade? I’ve been looking at the 2010 Mustang, because I’m confident that Ford will survive. I’m also hopeful that GM will survive, but we’ll see.
I guess Detroit’s problems could be analogous to the PlayStation 3. I’d explain, but it could take a while…
I’d see a hard sell for the UAW in a non-union car shop. If you vote to bring them in, then can’t the UAW replace you with an ex-GM union member who has more seniority and just got laid off from a shuttered GM plant? You would be voting yourself out of a job by the union itself!
Yankinwaoz it doesn’t work that way. A large union like the UAW is actually comprised of hundreds of small local unions. Each small local union typically represents a single factory or is confined to a small geographic area usually representing employees of one specific company.
Senior members represented by another local union or working for another company would have no rights of seniority or to transfer etc. In addition any such rights would have to be negotiated (agreed to) by the employer.
You don’t see senior GM employees bumping out junior Ford employees just because they are both represented by the UAW.
A “workable business plan?” Heck, they’ve had a hundred years to develop one, haven’t they? And have they yet? Apparently not. I just thought that was humorous, though probably unintentionally!! No offense intended!
I’m sorry GM… serves you right.
Here’s some help: Make decent products that people want that you can make a few bucks off of, stop screwing your suppliers, figure out how to be more efficient about labor, materials, and more flexible production plants, and stop advertising vehicles that don’t come out for another 2-3 years. Oh, and maybe speed up the production of the Cruze… that might help. And add a few extra years to your warranty. People might take notice to that.
Still don’t want your products though. Volt… maybe. But I’m also quite interested in the next Taurus.
>>”If you look at every industry in the US that is heavily unionized, none of them are anywhere near the size they once were. ”
Disagree. Look at government workers- federal, state, municipal, educational. Highly unionized, large in number, and growing much larger all the time.
They said that all they need’t was time. Well GM. Ford, & chrysler got years to clean up the act. but time for everyone finally passes us by. What is the difference between, toyota, mercedes, nissan, and honda and the Detroit three? Money….These other builders have cash reserves and limited debt to weather most financial storms. Toyota is talking about less profits for 2009, and if that doesn’t work they can take break even or losses for a long time. When you have eaten all your seed corn, you have become a riverboat gambler with all your chips in on the next hand. No one wins all hands not even toyota. They did open a new billion dollar truck plant in Texas last year didn’t they? But, they can retool it if necessary for motorized tricycles if that’s what it will take to weather this storm. They got the cash to go into semi hibernation and come out the strongest of the few World car builders that will be left. So no more about well even toyota makes mistakes. This is not a game of perfection but rather balance. The team that leaves the field when the whistle blows with the most points wins. Did I just hear a whistle in the distance?
GMs best hope is not C11…its a private sale. wasnt it said yesterday they are worth about $3.5B. that seems do-able for alot of companies. Just imagine if Porsche started buying up GM stock instead of VW
Ronin: well, we were talking about unions that can’t put you in jail if you don’t pay them.
Disagree. Look at government workers- federal, state, municipal, educational. Highly unionized, large in number, and growing much larger all the time.
They depend on tax revenue, we’ll see how much of THAT flows into the coffers next year.