CNN Money’s Chris Isidore writes that if all the stars aligned, the Big Three could return to profitability by 2010. He qualifies his comments often, with phrases like “if they make it to 2010,” but the bigger issue is the specious nature of his explanations for how the companies would return to profitability. Isidore’s claims are essentially underpinned by the philosophy of “cutting your way to profitability” — as such, he highlights the Big Three’s smaller workforces, supposedly reduced pension obligations, and cuts in overcapacity. The only actual increase in income Isidore speculates about is increased new car sales, an argument barely more sophisticated than “they’re really bad now, so obviously they have to get a lot better.” This kind of journalism is dangerous, not just because it’s overly optimistic (in spite of its own acknowledgements to the contrary), but because it’s wrong. There is no reason to believe sales will be up to 14 million units in the US by 2010; there’s even less reason to believe that GM’s share of those 14 million units would be the same percent that it was in 2007. Isidore’s math on the potential savings from cost cutting is calling the glass 1/8 full at best, by assuming the UAW will allow GM to just defer its contribution to the pooled-benefit VEBA account to another year. That might work in accounting ledgers, but the bottom line is that this is the kind of nonsense that contributed to GM’s collapse in the first place.
I “could” become a multi millionaire in 2010 by selling Amway.
OK, lets say things do get better by 2010. One problem nobody is addressing, domestics are now looked at as the discount brands. Americans now expects large rebates, almost fire sale discounts on the domestics before they will buy. They dug themselves this hole and I don’t see how they will get out of it anytime soon.
Let’s follow the Money with CNN Money. CNN is part of Time Warner, which owns, among other media companies: AOL, New Line Cinema, Time Inc., Time Warner Cable, HBO, Turner Broadcasting System, The CW Television Network, Warner Bros. Entertainment, CNN, TBS, Turner Network Television, Cartoon Network, Adult Swim, TruTV and Turner Classic Movies.
I bet GM spends some advertising money with the above companies.
If GM had any realistic possibility of returning to profitability in 2010 they could rely on the private market to make it there.
Hell, they could do a stock offering except that the only thing propping up their stock is the betting that the government will provide enough welfare that even the shareholders get bailed-out.
GM is at ~$5 today, which means the market thinks your representatives will bail out GM enough to pay off the UAW, the dealers, the ~$50 Billion in debt and still leave the stock holders with >$5 a share in government money.
GM knows that there is only one entity left that might be gullible and irresponsible with money enough to invest in them.
Sounds like a Franklin Mint commercial. Of course there’s no guarantee your coins will increase in value, but others have.
I also could start grow hair on my head instead of my ass by 2010.
“I bet GM spends some advertising money with the above companies”
Excellent deduction!
Is this the six degrees of seperation?
Bridge2far:
No. One degree of separation. At best.
CNN should go on TheEngineofKleptocracyDemocracy.com and share its story about how GM ad spending impacts its ad revenue.
CNN should not pretend to do unbiased reporting on this issue.
And pigs could learn how to fly.
Glad to see that CNN is drinking the cool aid.
If Americans would quit buying foreign cars, GM would definitely return to profitability. Where’s
American patriotism. Why give your money to foreign companies and making them richer while making America poorer. Japan is the second richest country in the world. And we Americans made them that way. They are sucking us dry. Buy American ( Ford, Chevy, and Chrysler). Keep our money in America.
Glad to see that CNN drank the cool aid>
So the CNN Money guy predicts 14million units in 2010. You think it will be less. What do you think it will be and can you explain why?
“If GM had any realistic possibility of returning to profitability in 2010 they could rely on the private market to make it there.”
Exactly! They should avoid advertising on any major network or media publication. You know, they are all in cohoots. Fox is owned by Tribune, which owns the Chicago Cubs, whose bullpen catcher drives a Chevy pick-up….
If Americans would quit buying foreign cars, GM would definitely return to profitability. Where’s
American patriotism. Why give your money to foreign companies and making them richer while making America poorer. Japan is the second richest country in the world. And we Americans made them that way. They are sucking us dry. Buy American ( Ford, Chevy, and Chrysler). Keep our money in America.
You know, I agree with you to a point….but,
1. The big 3 did this to themselves. Had they been building good and competitive cars all along they wouldn’t be in this position. They built crap for too long while Japan improved their cars. It will take a long time for people to trust them again if ever. I wouldn’t expect someone that was burnt by Detroit a few times to take another chance with their money. We also have a generation that is/was influenced by what they saw their parents deal with.
2. Where is Detroit’s patriotism? Why give money to American companies so they can pay foreign workers while making themselves richer while making America poorer? They have no problem sending American jobs to Mexico and overseas. This isn’t a one way street.
3. What is a foreign car? A Honda built in Ohio, a Ford built in Mexico, a Pontiac built jointly with Toyota, or built in Australia. Maybe a Chevy built in Korea or a Toyota built in Kentucky.
I’m with you, I want to keep my money here. I have been buying American cars for over 25 years and my only problem has been with the lousy dealership warranty work, or lack of. But I have seen many people screwed by Detroit and I fully understand why they will never go back.
“If Americans would quit buying foreign cars,”
That ship has sailed and will never come back. The majority of americans have spoken. We like “foreign” brands. Speaking for myself, when people start talking about how I should buy an American brand out of patriotism it just makes me want to buy a foreign brand so much more. The idea that I should buy something I don’t like or need because it’s supposedly made by americans makes me angry, and I want nothing to do with the companies or people who promote that philosophy. These people are not my friends, and I don’t feel any closer to them than I do a random person in Germany or Japan. I care about everyone in the world, not just americans.
“If GM had any realistic possibility of returning to profitability in 2010 they could rely on the private market to make it there.”
Unless of course there were a global recession right in the middle of the recovery plan, the North American market shrunk by 30% and the credit markets all dried up. That might be a problem.
Of course you’re right that the free market could figure all this out. In 2 years when demand goes up it will be met by companies that had the cash reserves to last out the storm. Or companies that go bailouts from other governments.
What do you figure the cost will be for the transient increase in unemployment and underemployment?
I think it’s overly generous to call this stuff journalism.
Bridge2far:
“Exactly! They should avoid advertising on any major network or media publication. You know, they are all in cohoots. Fox is owned by Tribune, which owns the Chicago Cubs, whose bullpen catcher drives a Chevy pick-up….”
Fox is owned by News Corporation, not the Tribune, but bailout supporters don’t tend to be bothered by facts.
joe:
“Unless of course there were a global recession right in the middle of the recovery plan, the North American market shrunk by 30% and the credit markets all dried up. That might be a problem.”
GM has been in the middle of a recovery plan since the early 1980s. If GM was actually structured so that it could be profitable by 2010 they would be able to sell additional shares of stock to fund the bridge the gap. The problem is that they have too many brands, too much debt (~$50 Billion) and too many union employees to ever be profitable in the future. Unless they do a Chapter 11 reorganization they’ll be on the government dole until they become fully nationalized.
The fact Toyota, BMW, or Honda builds cars here in this country shows how competitive the American worker and American industry is when it comes to cranking out advanced industrial products.
It is unfortunate that the corporate structure and culture (both management and labor) of domestic car companies removes that value and instead makes it a lead shoe or an albatross around their necks – a liability instead of an asset. It takes a real losing organization to make American workers seem less efficient, overpaid, lazy, or incompetent compared to the likes of the 32-hour workweek Germans for instance. Takes some talent in reverse to pull that off it seems to me.
That culture and structure – and the resulting problems – will never change until those companies have evolved into something compatible with the 21st century or die. They have had close to forty plus years to evolve and have not, so death is the option that awaits at this point. Unless of course Uncle Obama shows up with the Chinese Loan Defibrillator…metaphorically cheat death for one more week of Terry Schiavo-like “life” in the scheme of things. Pointless.
2010? My ass…
2010? I suppose the Lions win the 2010 super bowl and the shoreline of Zug Island makes the Conde Nast list of top ten beaches.
DEATH SENTENCE!
THE HEALTH CARE BETRAYAL AND SELL-OUT OF AMERICA’S DEFENSLESS AUTO RETIRES?
Today’s dependant struggling auto retirees who spent their entire lives working to support this nation are now being condemned daily by the callous media, corporations and government who call them expendable.
Even their own union officials have been silent in their defense and have called them “legacy costs”. These union officials have recently used legal means to raid and meaningfully slice their pensions. These are the same union officials who refused to vest their vital health care benefits or keep pension buying power up with inflation.
Health care is clearly not affordable to older auto pensioners on their meager pensions and stealing their health care will be repaying their lifetime of contributions with a death sentence.
UAW OFFICIALS BETRAY AUTO WORKERS [2007]…
http://unionreview.com/insights-analysis-uaw-betrays-autoworkers
VICTOR REUTHER SPEECH 50TH ANNIVERSARY OF THE UAW FLINT RALLY [1987]…
http://westfallmike.tripod.com/Page12.htm
MIKE WESTFALL SPEECH 50TH ANNIVERSARY OF THE UAW FLINT RALLY [1987]…
http://westfallmike.tripod.com/Page11.htm
HISTORIC UAW LEADER SPEAKS OUT FOR RETIREES AND WORKERS [2007]…
http://www.intellectualconservative.com/2007/08/11/interview-with-whitey-hale/
EASTERN ECONOMIC MANUFACTURING SPEECH [1985] …
http://westfallmike.tripod.com/Page14.htm
ROGER & ME –FLINT CONTROVERSY [1990]…
http://westfallmike.tripod.com/Page10.htm
ARCHIVES AND ADDITIONAL INFORMATION [1976-2008]…
http://www.umflint.edu/library/archives/westfall.htm
http://michaelwestfall.tripod.com/id50.html
http://westfallmike.tripod.com/
http://www.monroelabor.org/links.html
If the Jets win the 2009 Super Bowl the Lions can win in 2010.
I say 14 million in 2010 is easy.
18 million in 2012. possibly 20 million
Demand will be high, immigration is increasing, people are having lots of kids. Look around, there’s a baby boom going on
Minivans and large crossovers for everyone.
Your cars you bought from 2000-2007 (big years) will be old by then.
No patriotism is possible, cars are made everywhere.
Parts are made everywhere,
If you can buy products made in your country of residence by a company based in your country of residence than go for it, if you can’t you can’t.
(Try to find USA made clothing at the local store, it’s fairly difficult)
I’m always a bit confused by the order of my buying habits
#1 buy American made, American owned
#2 buy American made foreign owned
#3 buy foreign made, American owned
2 and 3 I could switch
#4 buy foreign made and foreign owned
#3 and #4 can be split into
a. made in a country with decent labor laws and standard of living
(UK, Germany, Belgium, Sweden, Canada, Korea, Japan)
b. made in a country with a poor standard of living
(China, Mexico)
GM Retiree,
You sound angry, and I don’t blame you for being that way. Not one bit. I am curious though, what path you now think you should have taken in life, work wise, that would have avoided your current situation. Would you still take a union job? Do you still think the labor laws in your state did you a favor? How do you think we should avoid the next generation of people ending up in your shoes?
You realize of course that your pension will go to the PBGC and that you will still get government healthcare. It may not be what you agreed on, but that happens to people everyday in our country. We all make agreements with people who don’t keep them, and we suffer for it. I have made a few bad deals myself, and it’s gonna mean extra years working on top of all the ones this economy just handed me. I may never retire at this rate.
I wish you and your family better fortune in the future.