GM bankrupt?

[Guest]

I thought this was an interesting article....

GM Bankruptcy Fears Rising on Wall Street

 

[Colleen Thomas]

I thought this was an interesting article....

GM Bankruptcy Fears Rising on Wall Street

You're seeing this a lot. Large, apparently siolid companies going to bankruptcy court for chapter 11 protection. Delta is there now. In many cases, unionized labor has won concessions in their CBA's that are simply killing the company. This is especially true in healthcare and pension. People are living longer and medical costs for the elderly are skyrocketing. I know several self funded groups have gone under, though I think IAEA is still up.

I think Delta is asking for 392 Million to be cut from their pilot's CBA alone. the pilots are threatening a strike if the Judge rules for Delta. But delta characterizes that as a homicide/suicide scenario. Basically, if they strike they will kill us as a company and then be out of work.

Gm is probably suffering too from the high gas prices. Chevy's forte is trucks. Gmc's forte is trucks. Caddy, olds, pontiac, etc. are luuxury cars. than ther's hummer.

Only saturn and maybe Saab make economy cars.

 

[cantdog]

And all the hybrids...

 

[china-doll]

As Colly pointed out, GM is facing two major problems.

The first is a staggering amount of money that is being put into health costs of both current employees and more so for retirees. As healthcare costs continue to rise this problem for large corporations is only going to get worse.

The second is a less than desireable product line. SUVs and light trucks accouted for probablly 60% of GMs sales and probablly 75% of their profit. As a rule, trucks generate a much higher profit than cars do. I forget the exact numbers but something on the order of $5000 profit for a well optioned truck/SUV vs. $200-$500 for a mid sized car. For a while GM was actually selling many cars at a loss just to keep their market share. Mostly people see american cars as less reliable and the engineering inferior to Jap and German cars. All you have to do is look at the resale value of a Honda Accord vs. a Chevy Lumina to see this. A $20k Chevy looses $5-6k just rolling off the lot. The Honda probablly looses $1500. THe reason the American cars sell is the discounts and rebates. When was the last time you actually paid full price for an American car. (Leaving asside a specialty car such as the Corvette or the new Solstice)

GM and also Ford banked very heavilly on SUVs and Trucks. A market which was already slowing signifiganlty even before the arrival of $3.00 a gallon gasoline. THey spent very little money, relativly speaking, on new designs for cars. Now suddenly the market changes and these companies have no really desirable products to market. Even now they are still comming out with brand new large SUVs that they have spent years and billions developing. The time for a new car to go from drawing board to the dealership is 5-7 years. Not exactly overnight. GM now has to deal with staggering debt and a product line that is in essence, all going the wrong way. Going to be a long hard turnaround.

 

[R. Richard]

For some of you who have never worked for a large company, you may wonder how GM got themselves in the fix they are in.

If you are a GM executive and you are head of a group that is making a vehicle that is making a lot of profit, you are king! If you are a GM executive and you are head of a group that is making a vehicle that is not making a lot of profit or, horror of horrors, losing money, you are boy. The king gets a golden crown. Boy gets [maybe] scraps from the table. If you are boy and you point out that, sooner or later, GM will need your product, the king merely smirks and points to his golden crown, then cuffs boy aside.

What about personnel costs, fringe benefits, retirement costs, etc.? "Don't bother me with the small shit boy, I am king!"

Sooner or later the bill for the golden crown comes due.

 

[Guest]

And the real losers here will be the guy who worked on the line for 45 years and naively expected the company to keep to its agreements they freely entered into with the labor force.

 

[Colleen Thomas]

And the real losers here will be the guy who worked on the line for 45 years and naively expected the company to keep to its agreements they freely entered into with the labor force.

There are a lot of loosers.

The thousands of small investors who put money into Gm and can't afford to insure themself against the default nor sell their shares for anything close to what they bought them for. If you picked gm as your blue chip, the "safe" part of your investment portfolio, you could stand to loose a great deal. Since most small incestors tend to be less risk tolerant, a lot of them ar going to be hurt.

Gm's current workforce, since they will be the ones taking it in the head if the company has to cut costs in a restructuring.

Americans in general, since there are always repercussions to the economy when an industry giant falls on hard times.

the list of casualties will be legion.

 

[Guest]

the list of casualties will be legion.

True. The reason I singled out the retired workers, is imagine having your entire retirement income set to zero, after you have retired and too old to start over.

They may get pennies on the dollar, but from us, the taxpayers.

As R.Richard pointed out, we do tend to be willing to avoid small problems in the current quarter by pushing them off to the future where they will be large problems, but someone elses's problem.

 

[Colleen Thomas]

True. The reason I singled out the retired workers, is imagine having your entire retirement income set to zero, after you have retired and too old to start over.

They may get pennies on the dollar, but from us, the taxpayers.

As R.Richard pointed out, we do tend to be willing to avoid small problems in the current quarter by pushing them off to the future where they will be large problems, but someone elses's problem.

Unless you get an Ennron situation, the retires should be all right. Most companies run their pension funds via a thrid party administrator. That usually means the pension part is pretty safe. In most cases, it becomes self funding. You only really get in trouble with the pension part, when management starts pilfering from there to pay for other benefits.

My home state's pension fund is so strong that state legislators have tried to get their hands on it three times. Twice they were forced to back off by a backlash that was so strong it threatened all their jobs and once by a federal court.

I don't know for sure, but I can't imagine Gm's isn't run by a third party. And it's probably fairly strong. Where ex workers are probably going to get hurt is in their healtcare benefits.

Current workers stand to loose the most, especially those getting close to being vested in the pension program. When layoffs come, they will be the ones the company is most anxious to get rid of.

 

[Lord DragonsWing]

Unfortunately, I feel GM is just the start of the bankruptcies that are about to happen. I invest in the market and GM is one that I play only on a short term basis.
Most corporations will see a rise in healthcare cost as the article says. Unfortunately, GM shows a cash balance of 19 billion versuses a debt of 31 billion. And, with lack of sales and a union asking for more, GM will lose.
If Unions and Corporations wish to surive and be profitable, they need to lobby against healthcare cost. Think of it, hospitals can buy new equipment and pay for them in just a few months from the high charges. Prescription drugs are more in the U.S. than anywhere in the world. The nurses and CNA's have no union in most of the country so they work for pay much lower than an autoworker does. But I know the company I work for charges double for my hours of taking care of patient. And none of us has had a raise in over two years, even though the cost to the patient went up.
GM is not a safe investment for any long term investor. With the country having high gas cost and everyone crimping their dollars, no automaker is. My investments now are in healthcare. The profit margin is too much and the lobbyist are too strong.
Basically, the government doesn't care if a hospital charges 1500 for an MRI and they do 100 MRI's a day. The machine will be paid for in a few months and after that, it's all profit. And the investor knows they'll keep that machine for 10 or 15 years.
Corporate America and the Unions will have to unite to stop the rising healthcare cost. But right now I don't see it. They're all too busy fighting among themselves. If they'd just ban together, profits would rise and so would negotiations for salarys.
In the meantime, invest in healthcare. WeG

 

[Colleen Thomas]

Unfortunately, I feel GM is just the start of the bankruptcies that are about to happen. I invest in the market and GM is one that I play only on a short term basis.
Most corporations will see a rise in healthcare cost as the article says. Unfortunately, GM shows a cash balance of 19 billion versuses a debt of 31 billion. And, with lack of sales and a union asking for more, GM will lose.
If Unions and Corporations wish to surive and be profitable, they need to lobby against healthcare cost. Think of it, hospitals can buy new equipment and pay for them in just a few months from the high charges. Prescription drugs are more in the U.S. than anywhere in the world. The nurses and CNA's have no union in most of the country so they work for pay much lower than an autoworker does. But I know the company I work for charges double for my hours of taking care of patient. And none of us has had a raise in over two years, even though the cost to the patient went up.
GM is not a safe investment for any long term investor. With the country having high gas cost and everyone crimping their dollars, no automaker is. My investments now are in healthcare. The profit margin is too much and the lobbyist are too strong.
Basically, the government doesn't care if a hospital charges 1500 for an MRI and they do 100 MRI's a day. The machine will be paid for in a few months and after that, it's all profit. And the investor knows they'll keep that machine for 10 or 15 years.
Corporate America and the Unions will have to unite to stop the rising healthcare cost. But right now I don't see it. They're all too busy fighting among themselves. If they'd just ban together, profits would rise and so would negotiations for salarys.
In the meantime, invest in healthcare. WeG

No company is going to do anything with it's union. Unions exist with the single goal of fucking over the company. Most companies that have unions wish they did not and the stronger ones periodically attempt to break their unions.

I have, in my working life, stood on both sides of the union/management divide. I was in management when a large, southern company I worked for faced the prospect of their warehouse and delivery workers in a big city unionizing. How much did that company hate unions? Well, I was one of the ones who helped draft the plans if they voted to unionize. And the plan was simple, fire them all and go to contract delivery. Now, the city in question was a big cost center and turned a very healthy profit, but if we had gone the contract route, it would have become a cripple. In essense we would have taken a wash or loss on it.

We knew that, so the contracts were written for two years. Basically, the company was willing to take two years in the red at a major profit center to prevent it's workers from unionizing. My boss went up there, to explain to the men a vote for a union was a vote for losing their job. And they sent me up there to begin coordinating with the contract guys, to make sure the point was made. The workers voted not to unionize and saved their jobs, because the VP in charge of firing them was already there on a "visit" and I already had the specifications for the contract relations worked out and ready to implement. Despite the promises of those trying to organize them, the company was ready, fully prepared, to enter into a scicilain knife-fight to keep unions out.

Conversely, when I worked in Telco, I was a member of one of the stronget unions in the nation. And I watched them prepare for a contract batle when GTE bought out the old owners and planned to break the union's stranglehold. GTE failed, in part because the laws up here favor unions, where they favored management down south.

In each case though, the relationship has been mutually anatagonistic. It stands to reason. They operate under diametrically opposed philosophical reasoning. To a union, any profit a company makes should go to their members, they do the actual work. To ownership, profits should go to them, as they are the ones who have risked to make it. Expecting them to unite on any issue presupposes the issue threatens them both to about the same degree. Few issues do.

 

[rgraham666]

Sigh.

The best book I ever read on how to run a business made it quite clear that you deal openly and fairly with your employees whether unionised or not. The authour made it quite clear that your employees are not stupid and will do what they can to help the company if they feel invested in it.

And we shouldn't be surprised that management fucks up. Delusionals have a lot of problems dealing with the real world. And most upper management are severely delusional.

They believe they're capitalists when they're actually employees just like every one else.

Shrugs. Humans need myths to give themselves hope. But myths can become a hindrance.

 

[sweetnpetite]

GM can NOT go bankrupt. (Oh yes, I realize that they can )

Here in the Lansing Erea (Michigan) there are 3 main industries- Higher Education (MSU, Cooley Law...), Government (State Capital) and GM. Of course, they might cut out the Lansing Plant(s) to save themselves, which would be just as bad for us. It would pretty much devistate the area- well the working class anyway, who are not going to become professors and lobiests, by and large. My guess is that that large of an unemployment rate is going to have a negative impact on the rest of us, weather we work there or not. [I don't]

so for the sake of your friend sweet, hope, pray or whatever it is you do, that GM pulls themselves up by their bootstraps.

ps- if giant companies such as GM can't 'pull themselves up by there bootstraps' how do we expect individuals with no resourses to do so? [political question for the 'self sufficency' advocates or whatever]

 

[CopyCarver]

GM=Generally Mismanaged?

Perhaps the best indicator of GM’s financial picture is the recent report that the entire corporation’s market capitalization is roughly 10% of Google’s.

Nothing surprising about it, really. Brock Yates explained the reasons about 30 years before the fact in a Car & Driver article titled “The Grosse Pointe Myopians.” Although this “expose” of auto executive mentality applied to Ford, Chrysler, and (then) American Motors as well, GM has traditionally been both the biggest and the dumbest kid in the remedial-ed class.

Their blunders range from the obvious and well-documented: (combining cast iron cylinder heads with aluminum engine blocks with no concern about the inherently different thermal expansion rates of the two materials, or trying to retro gasoline engines into diesels, or the infamous 8-6-4 Cadillac engine, or the Vega sheet-metal that literally rusted inside the dealer’s showroom) to their far more damaging management theories: (emphasize advertising and p.r. over engineering; sell the sizzle instead of the steak; customers don’t know what they want until we tell them; and—worst of all—lateral transfer of dissatisfaction.)

I’m convinced that the late, great Jean Shepherd got it right when he suggested the only mystery about GM’s future would be how long it took the corporation to bleed to death after shooting themselves in the foot 162 times.