GM CEO Fritz Henderson has filed a deposition with the federal bankruptcy court [download here] pleading for a 363 motion that would create the “new” zombie GM from the corpse of old debt-ridden GM. “In the face of the global meltdown of the financial markets, and a liquidity crisis unprecedented in GM’s 100 year history, there is only one way to maximize the value and permit the survival of GM’s business and save hundreds of thousands of jobs associated with not only GM, but also its vast supplier and dealer networks: these chapter 11 cases and the prompt approval of the 363 Transaction.” While I don’t expect Fritz to say “GM has entered this crisis due to epic mismanagement of which I am a fundamental part,” it strikes me as odd that this blame avoidance arrives on page three. Isn’t it a bit early to say “it’s not our fault?” Apparently, early and often is the strategy here.
On page 5, again with the “it wuzzn’t me”:
Recent events, however — including both international competitive forces and the worldwide recession that has resulted in an economic contraction and dislocation not seen since the 1930s — have led to the dramatic financial distress of the world’s largest automotive company.
And again on page 6:
Most recently, GM’s sales have been materially affected by the overall decline in domestic automobile sales, which continued unabated given the deteriorating economy and financial markets. The Seasonally Adjusted Annual Rate (“SAAR”) of automobile sales for the United States industry declined from 15.6 million units in January 2008 to 9.8 million units in January 2009, which is the lowest level since 1982. This affected all domestic OEMs, but GM in particular.
And again on the bottom of page 6:
As a result of the economic crisis, in November 2008, the Company was compelled to seek financial assistance from the Federal Government.
And again on page 16:
While foreign OEMs enjoyed, among other advantages, lower wages and far lower annual healthcare and benefit costs, the Company’s obligation to support pension benefits and provide healthcare and life insurance benefits (OPEB) for its former employees increased exponentially, even as its revenues eroded because of a drop in market share and the downturn in the national and global economy.
And again on page 18:
Notwithstanding significant progress in cost reduction and increased efficiency, competitive pressure on GM was exacerbated by (i) substantial increases in the price of crude oil to nearly $150 per barrel during 2008, which precipitated a sharp downturn in driving and sales in the large vehicle segments in which GM was dominant and most profitable and (ii) a sharp decline in the global economy, including substantial increases in unemployment and a freeze-up of consumer and business lending. The resulting drop in new vehicle sales led to a steep erosion in GM revenues and, in turn, significant operating losses.
And again on page 19:
Even as fuel prices stabilized and moderated to some degree during the fall of 2008, the Company faced sharply deteriorating economic conditions during the second half of 2008 and the first quarter of 2009, which can only be characterized as the worst economic downturn and credit market environment since the Great Depression. Significant failures occurred in America’s financial sector — including the forced sale or liquidation of two of America’s five largest investment banks, the crippling of the nation’s largest insurance company, the conservatorships of both Freddie Mac and Fannie Mae, and the financial distress of two of the nation’s ten largest banks. The financial market crisis not only affected large institutions, but also affected consumers, as both income and financing for buyers and lessees of automobiles evaporated.
And again on page 21:
Thus, the combination of the sharp run-up of gasoline prices with its direct impact on the Company’s most profitable vehicle segments, rapid declines in the housing/mortgage/credit sectors, the freeze-up of equity and debt capital markets, and the lowest levels of consumer confidence in nearly thirty years, had an unprecedented effect on the automotive industry generally and GM in particular.
This is the same page that contains the money shot:
Under these extraordinary conditions, the Company’s liquidity rapidly eroded to a level below what was necessary to operate the business. Consequently, GM had no choice but to reach out to the U.S. Government for financial assistance.
And again on page 36:
As discussed below, the deepening economic crisis has affected not only GM, but also the thousands of direct and indirect suppliers and vendors that provide components, products, and material to the Company. In light of the credit crisis and the rapid decline in automobile sales, many of the Company’s suppliers are unable to access credit and are facing growing and serious uncertainty about the prospects for their businesses.
I don’t think this is spin. The zombie now known as Government Motors doesn’t even know why it died. Henderson and his minions continue to believe they’re victims of circumstance. Even worse, I’m not sure GM’s First Step in its $100 billion recovery program is important anymore—and not in the way that Motown’s zombie cheerleaders might imagine.
If I was “the judge”, I’d ask “And the profits from SUV’s and Pickups went where?”
Mr. Henderson, like the majority of the GM “management” team appears best at recordkeeping. One can only hope the recordkeepers will now step aside to let whatever talent GM has in the automaking and engineering sector take a leadership position, where they should have been in the first place.
GM management will never admit failure on their part, and yet they are going to be allowed to stay intact. This is why they will fail again, only this time they’re going to do it on our dime. On behalf of my generation’s grandchildren, thank you President Obama for all of the debt.
Hmm, Fritz, ever wonder why Ford isn’t in this position? (Besides mortaging everything including the office carpeting).
He should explain the “… GM in particular” phrase. There are manifold reasons, Mr. Henderson, why “GM in particular” is in the tank.
And yes, GM DID have a choice to NOT seek government taxpayer-funded assistance. The choice GM made was the gutless one.
By the way, UAW members: Your organization doesn’t stand for your rights against management; it stands for your rights against labor. Those jobs that were saved came at the expense of… other UAW jobs. The UAW’s victories are simply cannibalistic at this point.
I smell another GM bankruptcy in 2013, at which point there will still be some new 2009 cars sitting on dealer lots.
GM USA became a social services institution with the primary goal providing pensions and benefits to the UAW.
For a detailed view, I recommend:
While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis
by Roger Lowenstein
Recent events, however — including both international competitive forces and the worldwide recession that has resulted in an economic contraction and dislocation not seen since the 1930s — have led to the dramatic financial distress of the world’s largest automotive company.
GM never lost money during the great depression. And GM emerged from the last major contraction (1979-82) with a market share of around 45% and made a profit the entire time. GM’s freefall has been going on since 1982. So Fritz, let me rephrase the question . . . .
Much as I would like GM’s management to admit to it’s massive strategic blunders, there’s no way any of them could do so without triggering an ‘Ah-HAH! So that’s who we need to sue!” from share- and stakeholders.
This is about as good as it’s going to get for culpability.
What would be nice, though, would be some semblance of a plan to do better.
Farago:
On page 3 Fritz states “…a liquidity crisis unprecedented in GM’s 100 year history….” That’s not exactly denying responsibility. I’d say he’s admitting to the company’s financial mismangement. You can’t have a liquidity crisis unless you didn’t manage well.
Or is there another comment you were referring to?
supperbadd75 is right. No way that Fritz and his minions will admit fault and cut themselves off from the government teet. They’ll make the same wrong assumptions again, make the same stupid mistakes that got them into this mess more than 20 years ago, and lose tons of money again. And and this time it will be our money going down the rat hole.
Why should anyone be optimistic about GM’s future when their leadership is in denial and acting on orders from the best and brightest in the federal government?
NPR had Henderson on All Things Considered yesterday. I’ll give Robert Seigel a little credit on this one; he at least made Fritz evade the same questions 2-3 times, instead of just moving on. The bit about Volt pricing is just plain hilarious, as is his defense of how working at GM for 25 years has given him a broad world view.
http://www.npr.org/templates/player/mediaPlayer.html?action=1&t=1&islist=false&id=104819022&m=104841446
Why, why, WHY in the hell these guys are still running (shoulde I say ruining?) GM?. Why? is there any logical explanation?
FUCK, they’re BANKRUPT now, just one step of being finished, acabado, muerto, shot, dead, caput. Coño de la madre, ¿porque carajo hacen eso?
¿Hasta cuando esa paja de “es culpa de los demás”?.
If they don’t have the sheer cojones to recognize their mistakes, run that thing and at least try to get it back on shape, they should GTFO there.
Those bitches are a lame EPIC FAIL.
Dammit.
So, let’s get this straight.
GM was building hyper-expensive Cadillac Escalade Stupid Utility Vehicles to people
-based on 1950’s frame-body, low-cost, truck technology well and truly cost-amortized
-with Chevrolet V8’s based on 1950’s technology well and truly cost-amortized
-in Mexico with what, 60 cent an hour labor?
Then, instead of taking those probably near-obscene profits and using them to develop cars such as Toyota did with the Prius (hint: we taxpayers paid a ton of money to have GM, Ford and Chrysler develop hybrids during the Clinton administration – WHERE ARE THEY?) – these profits are exactly WHERE in the books?
Then to top it off we taxpayers get to bail out these imbeciles?
Little wonder 67% of the American public doesn’t believe GM or Chrysler should be bailed out.
We the people obviously have a lot more common sense than our Lordsoverus in Washington, District of Corruption…
“I swear the axe chopped the tree down all on its own. I didn’t touch it. Cross my heart!”
Ah, the first episode of the zombie watch. Gotta leave my mark here.
“Ah, the first episode of the zombie watch. Gotta leave my mark here.”
@wsn: Your cynical approach is the most telling insight of all. You know as well as I, that this shit is never gonna end. The buck got shot down, but it didn’t stop. Propped up with government supplied medical treatment, the zombie carcass is walking down the street like a headless chicken.
But yes, better leave a mark. Who knows what will happen in the next four years….
Henderson and his minions continue to believe they’re victims of circumstance.
Hence, there’s no reason to rethink our 1920s branding strategy and get rid of Buick and GMC — we just got unlucky. Those are still profitable brands…now. See these spreadsheets?…
If you’re waiting for someone at General Motors to step forward and assume any blame for the fiasco GM finds itself in, good luck. Hell will freeze over first.But then C.F. “Boss” Kettering reportedly made the famous remark “It isn’t that we are such lousy car builders, but rather that they are such lousy car customers.”
Fritz is a spreadsheet guy, I’ve got a constrained optimization problem for him to “maximize the value.”
Let x be our independent variable: the portion of GM to continue operating, somewhere within the range 0<=x<=1.
Let y be the value added by current GM operations. As we are well aware, y<<0 and it’s poised to remain as such in basically every scenario.
It doesn’t take an MBA to see that the maximum value of x*y is for x=0. What does take an MBA and a lifetime of working for GM is twisting a conceptually simple problem into something that appears much more complicated. Oh, and giving y a little political bias towards “jobs jobs jobs” breakeven. Ignore the cognitive dissonance about the tens of thousands in workforce reduction…
Curley, Moe, Larry.
(Sorry. I apologize to the REAL Three Stooges.)
http://www.generalwatch.com/quotes.cfm
“Executive vice president, F. Alan Smith, who followed Reuss, outlined a gloomy picture. From 1980 through 1985, he told the group, GM spent $45 billion in capital investment, yet increased its worldwide market share by only 1 percentage point, to 22 percent. Until mid-1986, the capital-spending plan called for an additional $35 billion through 1989, but that had been reduced.
“For the same amount of money,” he told the GM managers, “we could buy Toyota and Nissan outright,” instantly increasing the market share to 40 percent.”
–“Rude Awakening” by Maryann Keller
Would GM’s upper management really benefit from a giant Livejournal “I’m sooo soooo sorry” crying bitch fest?
Besides, coming out and saying “We build total ass and have no clue what we’re doing” may be charitable or moral in nature but would not really accomplish much (perhaps removal of the upper management maybe). Also, if GM specified a profitability target and missed it holy shit would there be hell to pay!
Who’s to blame. One source of blame who the media has been avoiding is the US government. When Toyota and Honda set their assembly plants in the US, nobody gave the thought of how the domestics could survive long term when the domestic car makers were strung with about one million retirees. Toyota and Honda didn’t have to pay a penny for health benefits or pension and to this day, still don’t have that burden. This should have never been allowed especially when Japan has a functionally closed the doors for foreign car makers.
That’s why I always buy only American cars. If we don’t buy American when the choice is there, we will not survive as a super power.