Why Not Bankruptcy?
By Tom Wilkinson
Director, GM News Relations
The March 2 Wall Street Journal column by Harvard law professor Mark J. Roe, Would a GM Bankruptcy Crash Its Suppliers?, is the latest call from the Journal for GM to solve its problems by reorganizing under Chapter 11 of the Bankruptcy Code. We addressed the question of bankruptcy in stark detail in Appendix L of our viability plan. Apparently, professor Roe either didn’t read our plan or doesn’t agree with our analysis. Given the continued promotion of bankruptcy by so many pundits, it’s worth briefly reexamining this issue.
Bankruptcy advocates have a number of reasons for favoring Chapter 11. Some are simply frustrated with the expense and complexity of current government-supported restructurings. (We, too, wish there were quick, easy solutions to the credit crisis and economic meltdown.) Some specifically seek to punish unions, bond holders, corporate leaders, suppliers or other stakeholders. Some believe that bankruptcy will enable GM to “clear the decks” and start afresh.
Let me briefly review why we think a tough out-of-court reorganization is best for GM, the taxpayers, and other stakeholders.
Bankruptcy reorganization takes cash – lots of it. For a company like General Motors to operate in Chapter 11, it would need massive debtor-in-possession loans. With credit markets frozen, there is realistically only one source of such loans – the federal government. We estimate loans needed to reorganize GM in Chapter 11 could top $100 billion, far more than the out-of-court fix envisioned in our restructuring plan.
One reason this figure is so large is that GM’s revenues would plunge in bankruptcy. I ask: “Would professor Roe and his Harvard colleagues buy a car or truck from a company in bankruptcy, when there are similar products available at another dealership right down the block?” I expect that if they were honest, they would answer “Probably not.” So why do they expect other shoppers to behave differently? The GM viability plan includes a detailed analysis of this revenue risk (Appendix L, Exhibit 3), an analysis bankruptcy advocates seem eager to dismiss or ignore.
Finally, while “clearing the decks” sounds refreshing, the reality would be anything but. The bankruptcy process would bring financial hardship to millions who rely on GM – and upon whom GM relies. GM suppliers, already pushed to the edge by the recession and credit crisis, would in many cases follow GM into bankruptcy, jeopardizing the flow of parts GM needs to produce vehicles – and generate revenue. Fewer health care dollars would have a real impact on employees and retirees, as well as on local health care providers. Should GM’s pension plans be turned over to the federal government, the result would be reduced benefits for some retirees and greater expense for the taxpayers. The deck in question turns out to be one that millions of ordinary Americans stand on.
There is no question that GM needs to restructure its operations and its balance sheet. The detailed plan we submitted to the U.S. Treasury on February 17 does precisely that. We consulted some of the leading experts in corporate restructuring when we developed this plan, and we challenge bankruptcy advocates to study the plan – all 117 pages of it. We think it makes a solid case for our belief that an out-of-court reorganization offers the best course for right-sizing GM’s liabilities while preserving as much of the company’s value as possible.
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I agree that Bankruptcy is not a solution for GM, but it is difficult to understand that a global car company like GM can end-up where GM finds itself in today.
Heres an attempt on how GM could possibly avoid bankruptcy if they act fast….
Thats excellent that your finally letting the public in on your intentions for the company as a whole, after you decide what your doing with saturn,hummer, and saab, your entire company should focus on a massive consolidation/globalization of product portfolio. GM has been somewhat successful at importing cars from their international divisons and selling them under the saturn and pontiac brand name.
Saturn basically will be bought for their dealer-network there is really no value or meaning to the saturn name or hideous logo that would turn many would-be buyers completely and totally off.
a major reason why GM is suffering while other automakers excel is because it can not/does not match the lease offers made by Nissan and other international automakers that provide $199.00 a month leases on their popular Nissan Rogue and Nissan Altima, so anyone looking for reliably affordability with minimal commitment completely bypasses any GM brands in favor of Nissan, Honda, Toyota, the list goes on.
There should absolutely be a trimming of product portfolio in the U.S. brands, slow or low selling vehicles that are costing the company money must be axed immediately, and the sooner the brand sales of Saturn,Saab, and Hummer come the better. those are three brands that are not only weighing the company down but are costing the company more than they are actually worth.
As I have said before and hopefully someone within GM is listening, GMC and Chevrolet must be combined since they sell the exact same product though similar dealership networks to the same exact type of customer! Chevrolet should be the surviving brand with GM able to reduce duplicative management, advertising, and other overlapping staff.
Opel and Vauxhall should become Opel there is no need for the same brand yet again to be selling duplicative products in similar markets. no need for thirty brand strategy any longer, the longer these brands remain the longer the company will be unprofitable.
As I have said before Pontiac should and could stay but with a name change, lets combine Daewoo, Pontiac, and Holden that all sell similar products and fold them into the holden brand and logo dramatically reducing duplicative management, overhead, advertising, and other costs that are severely bringing the company down.
Buick currently is fine with some success in china until recently due to the entire corporations financial woes. I would say Buick could potentially remain in its current form, its entire line up had been whittled down to three core products that have recieved substaintial investment over the past few years, I think when the company is in better financial shape it can consider making Buick an international brand, if things still do not work out and Buick becomes a drag their can either sell the brand or shutter the entire brand.
Hopefully cash from the asset/brand sales of Saturn, Hummer, and Saab will be able to fuel other parts of the consolidation/realignment of the GM business model.
i do think it is important for GM to invite the public to sound off on their plans and allow not only comment but the incorporation of average customers viewpoints and ideas into their way forward planning.
More must be done from the company other than selling three brands, hopefully management knows far more brand consolidation is needed to make GM viable again.
I would further suggest a strategic alliance with a quality car manufacturer of another country other than the U.S.A. to potentially allow GM to import at a low cost vehicles that sell well overseas. allowing both partners to make money, while substaintially reinvigorating the product portfolio at GM.
Here are some Ideas:
Daewoo/Holden/Pontiac- merge into Holden.
GMC/Chevrolet- Merge into Chevrolet
Buick- Remains with enhanced line up.
Vauxhall/Opel- Merge into Opel brand.
Hummer/Saab/Saturn- sold off
Buick ( add 3 vehicles to brand) 6 Total vehicles
Modified CTS
Modified STS
Modified XLR
Cadillac
Discontinue both Escalade and Escalade ESV
Chevrolet
Discontinue both Suburban and Trailblazer
Sell rebadged Holden Ute as Chevrolet El Camino
Holden U.S.A. ( Formerly Pontiac) (8 vehicle line up)
Add International Holden vehicles to U.S. Line up
- Ute, Colorado, Barina, Sport Wagon
Discontinue:
Pontiac Torrent, and G6 Sedan
Bring to U.S. Market:
- Opel Insignia, Agila, Corsa, Tigra, Astra Twin-Top, Zafira, Vectra, VXR
Management of GM, please listen to the ideas and insight of members of the U.S. blogging community, there have been many great plans and ideas put forward through these blogs, now put that insight and planning to good use. Hopefully your company will be around for a few more years.
Same circumstances that force a company like Toyota to ask for billions in government loans from THEIR own government. To coin an old phrase: “it’s the economy……”
Let’s see:
GM lost $9.6 billion in the fourth quarter of CY 2008 burning through $6.2 billion in cash, and lost $30.9 billion for the entire year.
GM know expects a cash burn of $14 billion for CY 2009, and who knows what the loss will be.
It seems you must be getting close to the point where bankruptcy is the only tourniquet that can stop the bleeding.
GM really should have been quicker to import the stylish/fuel efficient/small cars that are made by Opel in Europe. Not only would they sell well during the economic crisis with rising costs and fuel cots. (even though fuel is temporarily cheap) these stylish cars would have reinvigorated any of their U.S. Mainstay line ups. there are over ten excellent vehicles including the Zafira Convertible that could be imported inexpensively and sold through one or more of their stable of brands.
the problem here is leveraging GM’S assets. the corporation has been extremely slow to globalize their operations. Why cant you import/rebadge opel or holden vehicles for sale in the united states? if GM was quicker to realize the benefits of such a move they would have been better equipped to handle the market challenges that all automakers are currently facing today.
If they had been importing these small, stylish and fuel efficient cars 3-5 years ago and their lineup wasnt solely SUV’S, and large trucks they would have been significantly diversified and been a stronger company because of it.
As I have said before if their complete strategy is just to sell 3 niche brands that dont do much for GM and never have, but cost huge amounts of money to sustain those brands. it is a smart move that should have been done six years ago, but that alone mixed with employee buyouts will not save the company.
after the sales/winding down of Saturn/Saab/Hummer the company will be left still with 9 brands far outpacing Ford that currently has 4 name plates and had made tough decisions to divest itself from its noncore portfolio of brands over 4 years ago, and is now mulling options for volvo. this will bring Fords focus down to 3 brands, while GM would still have the inefficiencies associated with having 9 brands.
An international import tie up between GM and a chinese or indian automotive manufacturer, or other emerging automaker would be a severe shot in the arm to GM’s product portfolio as it can immediately begin selling popular costs with no upfront development costs. this is the best solution to a company that is financially strapped and handling the worst crisis of its entire history as a corporation.
Hopefully my previous suggestions of brand consolidation to bring the current 12 brand portfolio of niche brands to 5 core brands will be realized and implemented by the company.
The company should move with stealth speed to immediately sell saab,hummer, and saturn as they are severe drags to the company and are taking the companies focus off of other more profitable and relevant brands. if there are no buyers for these brands GM must shutter the entire brands, which would actually be a benefit to an already overly crowded U.S. automarket.
GM must move towards an international brand structure where it can grow core brands to be relevant in many markets. Pontiac is a brand uniquely to america which makes it extremely hard to find economies of scale or efficiencies. Buick at least operates in China now but is still almost uniquely american. That must change.
Gm should have long ago realized the value and potential of creating international brands out of Buick and Pontiac now both divisons are suffering due to years of underinvestment and a market that is almost uniquely located within the united states.
If GM took my consolidation steps of taking their 12 brands and merging them into five power houses, then signing an import agreement with an emerging automaker that has no u.s. presence but sells and manufactures quality and stylish vehicles they can almost certainly cut billions from R and D, duplicative staff and management, excessive single brand advertising, and attempt to right-size their entire corporation based upon market realities.
For future growth GM must move towards a power-brand strategy where their brands are internationally recognized and respected, fragmented regional branding and advertising no longer works in todays world. to consolidate would enable to company to better expand international operations,offer better products, and expand their market share as well as enter new international territories.
GM MUST make these neccesary changes to ensure their company survives.
I would like to know how you’re going to get the following done outside of bankruptcy since it wasn’t really detailed in the plan:
1. Close over 2000 dealerships in total by 2011
2. Convince bondholders to forgive debt (part of US Govt loan terms, still not done)
3. Permanently revise UAW work rules for flexibility and permanently retire the jobs bank. At this point, the UAW has said that the demise of the jobs bank is a temporary measure.
4. Dispose of 3 brands (Hummer, Saab, Saturn) that nobody seems to want in a market where credit is non-existent.
5. Spin-off Opel when investors are running away from the automotive sector
6. Re-align operations for a reality of 9.5-11 million new vehicle sales per year. That rate gives GM an excess capacity (assuming market share is stable) of roughly 1 million vehicles a year BY ITSELF.
I’m sure that many of these things are underway, but details have been few and far between and it hasn’t appeared that a cohesive strategy is in effect.
It is obvious that GM (and the the other American Auto companies) need help.
Bankruptcy is out of the question. This only hurts other businesses and creates more of a downword sprial effect.
Loans for short term to keep alive is fine. But not a solution.
What if I told you I have formulated a plan that would save the American auto industry and turn this mess around right now. It would put millions back to work and have plants working at full speed and over time. Generate money for new development and research. Money to retool and build new vehicles.
And it wouldn’t cost the American Tax payer billions of dollars.
Would you hire me? Would you give me any vehicle I want?
Well I have done just that.
I have written a plan that the government needs to act on and have the support from the Big 3 Auto makers and push the idea to the government.
In studying the whole situation the best solution to the problem is a Program sponsered by the Federal Government or even state governments if the feds won’t do it.
A Government Guarantee Auto loan program.
Each Govoner of each State would order their DMV to compile a list of all registered vehicles that are 10 years or older.
That list and them owners would be able to enter the program to get them in a new or newer American made Vehicle.
The top guaranteed loan amount would be $25,000 dollars.
The dealerships would do all the paperwork. Sales teams would be trained in how to do and process the paper work.
Much like a student loan is done at colleges.
Loans would be made on a sliding scale of means to the buyer.
If the buyer flips burgers for a living and grosses $12,000 a year that buyers means are going to be lower than someone grossing $75,000 a year. The auto industry and banks need to start thinking outside the box.
A sliding scale of means instead of a credit score system would help move new vehicles.
If a person can only afford $50 bucks a month than that is better than not having that $50 a month.
And sitting on a new vehicle in a dealership lot.
Business needs to change on how business is done. It has to re-invent itself. GM can re-invent the wheel in how it does Business.
Maybe a deal with banks can be done if the government won’t help.
But the tag of a Guaranteed loan program carries more weight to Bank investors. Banks need something new now the housing market is a bust. This could be that new vehicle that they need.
The sheer ripple effect of such a program would create millions of jobs.
All factories would be running again. Steel would be running again. Stocks would jump. Tech sectors in the country would be running again. It is vital to the American Economy.
I see out side the box. I see a problem and I find a solution. That is what winners do.
My name is Richard Tellier
I am from Wisconsin
and I will be here all week.
Tip your waitress staff.
You can contact me for more detailed information of my plan and why it would work and how.
at Rserp1@Gmail.com
as Paul Harvey would say
“Good Day”
I’m not sure where this economy is going, but from the looks of it we are likely in for a nasty ride that could very well result in the unthinkable.But putting an optimistic spin on your company’s situation, I think you all might want to reinforce and extensively promote your goals of developing green technology to the US government. The reason I say this is that anyone watching Obama speak can tell that he feels most strongly about developing alternative energy. So yes- in some ways what I’m suggesting is to bend to the whims of the current administration. Its not like you all haven’t been going in that direction anyway. But perhaps now is the time to suggest drastic plans.
I’m not qualified to make informed theories regarding future product development, but if I were to place my idea on the table it would be to invest in developing affordable alternative propulsion vehicles for the masses. In essence what American needs is another model T. What form that car comes in is a shot in the dark. But if I were to develop such a product that has the backing of the US government, I’d suggest it would be along the lines of the Volt, but drastically cut back in terms of features, cost, and complexity. Develop a bare-bones commuter car that is either electric or hybrid. Focus on cost above all else. Let’s say the price could miraculously be set at no more than $12,000, which I realize is impossible given the cost of newer technology ( Volt battery said to be $10,000 alone) But given the demand such a price would create as well as the real implications of attaining the current administration’s desire to wean ourselves from imported energy, perhaps such a project would win financial backing from the US government.
Don’t get me wrong. I’m not in favor of nationalizing the US auto industry. But the way I see it, such a route is about your only means of survival at this point. Looking at it another way, most Korean companies were heavily involved with the government under a sort of state capitalism system that exists much to this day. But GM needs a home run and in order to do so given the state of the economy and the state of GM, I see no other means other than to develop vehicles that are aimed at spurring demand via price as well as giving consumers access to game changing technology.
Ziggy,
Good question. Please see the Financial Projections starting on page 89 of the plan. It’s all in there.
Our assumption is that the market will start to improve a little next year. Also note that we are spending a lot of money short-term to lower our break-even point to a U.S. market volume of 11.5 to 12 m total units (page 25). As a slowly improving market volume passes our new, lower break-even point, cash flow becomes more favorable.
Hope that helps explain it.
I think no matter how GM comes out of this crisis, either with the help of the bankruptcy court or a solvent going concern, GM is going to be substantially smaller than it is today. It is not GM’s responsibility to fix our economy after eight years of fiscal stupidity; it is GM’s responsibility to design and build products that consumers want to buy, period. Unfortunately, most people don’t buy cars with cash, but need some form of financing to buy them. It’s the financial companys’ bailout funds that need to provide the money to potential car buyers, and not to give these funds to their upper-level mgt. as bonuses and other incentives. Why not bankruptcy? Who benefits the most from bankruptcy are the blood-sucking attorneys, not the taxpayers, and certainly not GM and its employees.
Maybe GM should simplify things by shedding most things international and concentrate on its US and, possibly, its Chinese operations. Chevrolet, Buick, and especially Cadillac should remain, though I never could figure out GMC’s role as badge-engineered (”swapped” would be a better term) trucks and SUVs with the same products from Chevrolet. But this arrangement apparently has worked for decades, and probably will continue to work for the forseeable future, as long as the “secret” doesn’t get out.
As far as products go, update (with better powertrains) and keep the “cash cows” such as DTS, Escalade, Lucerne and Impala. GM shouldn’t dilute its market and its profit per unit by giving a cheaper version of everything Cadillac and Buick produces to Chevrolet. If the Chinese Buick division will be continued, products produced for the Chinese market should be adapted to the American market and imported here. Would the Buick Park Avenue be welcomed by US consumers? What about Holden (the maker of the Park Avenue)? What about Opel? These are the issues that GM needs to look at, along with possibly bringing most sub-contracted jobs back in house. Not only to provide jobs, but to prevent a major bankruptcy of a sub-contractor from crippling GM’s car, truck, and SUV production.
Hot Car Nut —
The plan lays out the strategy. We will provide updates as various parts move ahead (i.e. the announcements in Europe today regarding Saab and Opel). You will see a lot happen in the next few months.
We are not kidding ourselves. None of this will be easy or painless. And because a lot of it involves negotiations with key stakeholders like the UAW and bondholders, much of the detail will be worked out behind closed doors.
The critical thing to remember is that a Chapter 11 reorg doesn’t make any of this go away. In fact, throwing these kinds of difficult negotiations into court can make them more difficult still.
Alex D,
I was with you up to the point where you said to discontinue the Escalade and Suburban. The sale of each of those makes a huge profit for the company, and there are people out there to need/want those vehicles. Just ask Toyota who just redesigned the Sequoia or Nissan who came out with the Armada (both of which get worse fuel economy than the Suburban). People either need the people hauling space, or the cargo room, and a van cannot and will not always provide that. Not to mention the family that has a boat or camper to tow.
I completely support what GM is doing to avoid bankruptcy and be well-positioned for when the econmy eventually turns back around (we hope!) It’s pretty clear that the “pundits” mentioned by Tom in his blog are really out for blood, hoping to kill GM once and for all, for whatever their personal and financial reasons might be. I really would hope most people “on the street” see through that, only any perusal of the internet commentary reveals that a large percentage of Americans are joining the lynch mob. Sad.
Anyway, I don’t presume like most others to tell you how to “fix” GM, or run this very complex business. I will, however, say one thing: GM marketing has been horrible, pretty much all across the board. You have a bad perception gap, and a largly negative image with public and press alike. Yes, the press should do their homework and know better, but they don’t. IT’S UP TO GM TO GET ITS MESSAGE OUT MORE EFFECTIVELY. I hate to say it, but Toyota’s marketing and ads are brilliant. Whoever their ad agency is, I suggest hiring them! GM’s advertisting needs to be a bit different than Toyota’s, because you have an image problem to fix and they don’t. I also would suggest taking a multi-tactic approach to your ads, targeting a few key mindsets with each. This is sort of what GEICO does, with several well known ad styles (cave men, gecko, money with eyes…) I would suggest: sexy (show GM styling studios and history, and lots of pretty pictures), informative (have a documentary type style that shows your research, awards, environmental initiatives, etc.), patriotic (where GM’s role in various points in American history are highlighted), price-oriented (show deals and emphasize monthly payments), and competition-oriented (showing where GM cars give an advantage over key competitors.) I realize ad budgets are being trimmed, but you still need to address the fact that GM advertising for too many years has essentially failed utterly to drive sales. Fine tune your messages, always focus on how to reach particular customers and get them in the showroom, and make the style and voiceovers sound “trustable”, not slick.
Good luck!
TW: GM’s revenues would plunge in bankruptcy.
You are overstating the impact on revenues. 80% of car buyers already do not buy GM. Bankrupcy would not change the preferences of the Chevy loyalists. The buyers who you attract with cash-back and low-interest-rate deals aren’t buying reputation anyway. A bankrupt GM would do much better than Chrysler is doing now with their uncompetitive product offerings.
Bankrupcy would at least mean the end of GM’s long, slow death spiral of cuts followed by more cuts. The baby steps and incremental improvements of the last few years just look like rearranging deck chairs on the Titanic. If GM “leadership” would bite the bullet and take meaningful action to address GM’s problems, buyers might actually view bankrupcy as a positive sign. Bankrupcy could even improve GM’s image and increase sales.
I don’t forsee GM succeeding with their current management, board, and leadership personel in place. At the rate the company currently hemorages cash, any loan will be used up in no time, and none of the cash going where it should. GM will go deeper in debt, and the govt. may be forced to recall the loan.
Jon —
If you read the revenue analysis in Appendix L, I think you will find it an eye-opener. Also, I’d hardly call the plan we laid out December 2 and updated on February 17 “incremental.” That said, there is no question that GM was trying to complete its restructuring without resorting to such aggressive actions, and had the economy not fallen into a hole, we probably would have succeeded. But we have to deal with the world as it is, hence the acceleration of our restructuring.
Thanks for the comments, everyone.
I cannot contribute any ideas for your re-structuring, but I can ask this. Why should we trust you?
You have run a totally selfish corporation for a long, long time without regard to our repair costs for your vehicles, our costs for driving energy INEFFICIENT vehicles and also global warming. You had a deadline to meet for emission standards and you got it pushed way ahead by the Bush administration. People have been in awe of your lobbying power in D.C. You just kept bleeding your corporation dry without planning ahead. Now in the face of economic disaster, you’re asking for help. I hope you get it for the employees that work for you and the companies that depend on you. The domino effect would be a tsunami.
Have you enlisted the help of people who have fresh, honest and new ideas, not only for financially restructuring, but who also can steer the company into alternative energy ideas or are you still the same group of “good old boys” ?
When you go back and appear before congress, an honest apology to the American people would be appreciated. You need to re-gain our trust. The majority of us want to buy good quality American made cars. We want to see you survive and once again, respect the name of General Motors.
Respectfully submitted
I have to agree with Jon that GM’s restructuring and changes are too little, too late. Imagine if you ran the company like a common household. What would you do if faced with a sudden loss of income (i.e. profits from sales)? You would cut out the fluff (cable tv, magazine subscriptions, cell phone enhanced plans, pizza and takeout, etc…) and buy only the basics (bread, milk, gas & electric, etc…). I still see too much fluff in your plans and in the proposed changes with the UAW. You really need to cut back to “bare bones basics” or the cash burn will continue causing the flame goes out.
Tom Wilkinson,
Everything you mentioned in this blog post is a reason bankruptcy makes sense. GM is already operating on borrowed time. It needs to die and be reborn for a variety of reasons. One of which is a change in the market for cars…..
Oh well we’ll see how GM does I suppose.
Alex D,
I’d rather the Saturn Logo then the Ugly Chevy Bow Tie any day.
HotCarNut,
Why would GM spin off Opel? Its one of the keys to their future.
kgm777,
Maybe the fact that so many people buy with credit is what allowed GM to get this large and sell so many cars. Maybe what they need to do is cut to 1/3 of production for a while and sell every car they make and gradually increase. Sell only to people cash initially. Then as the credit market comes back offer cars on credit.
Pat –
If you have the interest in reading further, I recommend William Holstein’s new book, “Why GM Matters: Inside the Race to Transform an American Icon.” It details many of the changes GM has made to improve its products (leading to award winners like the Chevy Malibu and Cadillac CTS) and develop new technologies like the Chevy Volt. It also dispells the myth that GM is an old boy’s network. As Bill notes, many of our best people are neither old nor boys.
I also recommend Warren Brown’s column from Sunday’s Washington Post.
Pat Potash’s comments above are the perfect illustration of ignorance about GM among average Americans. Do they get all their news from Tom Friedman and Michael Moore? A) there is no evidence that GM repair costs are higher than the competition on average, and compared to many are often much lower; try repairing a Mercedes lately? B) Within any given class of vehicle, GM cars, trucks and SUV’s are approximately as fuel-efficient as any competition, sometimes slightly higher (and best, for example 4-cyl. Malibu vs. similar Accord or Camry), and usually about the same. Virtually all competitors jumped into the large SUV fray, see Toyota Sequoia, Nissan Armada, Lexus LX570, Infiniti QX, etc. GM’s are usually rated a bit better for gas mileage, however; C) GM has done as much or more in alternative fuels research as any other car company and is a recognized leader in E85 vehicles offered for sale, Hydrogen Fuel Cell technology, and more; D) the concept of “Global Warming” is a relatively new one, particularly as related to CO2 emmissions as a possible contributor, and “taking the automobile out of the debate” is part of what led to GM’s decision to build the Volt architecture coming in about a year. It’s useful to note, however, that the automobile is a very minor contributor to overall man-made CO2 emissions.
Finally, whatever gave you the idea that GM has a successful lobbying effort in Washington? If you really follow the industry and government, it’s quite clear that the relationship between Washington and Detroit is best described as “adversarial”, with policies that have consistently opened the doors to imports with wide open arms, and done pretty much everything possible to make life difficult for the Big 3.
GM doesn’t owe America an apology. The U.S. Govt. and the financial industry on the other hand…
I will start off by saying that I am a GM fan. I have owned a hand-me-down Buick from the early 80’s which I loved. I now own a Saturn, which has proven to be a great value; I love the car, and on it’s value as an automobile, I would certainly buy another. In fact, as my family grows, I was looking toward buying a Saturn Vue when it became necessary. I think the Saturn Sky is one of the best looking cars on the road and I would love to own one. I started reading this blog because I love the Camaro. Every time I see a Corvette I want one. I am a huge fan of a large portion of your product line up.
With that said, to answer the question you pose, I would not hesitate to buy a car from a company in bankruptcy if it were the right car. Bankruptcy indicates that a company needs a major overhaul and that it is pursuing it with the help of the courts. The company can then exit as a much more nimble company, able to better face the competition. Your $100 billion figure assumes that I am in a small minority.
To answer a question that you didn’t ask, if GM asks for government money without going into bankruptcy, will people still buy a GM product. This is, of course, what has already taken place, and appears to be the status quo for some time to come. I, for one, answer a resounding “NO.” It undermines the very principles that have made the country great.
In the last four years, GM has lost an average of $56 million a day. Had it not been for a brilliant investment by a previous CEO in satellite television, death would have come much sooner. To blame this on the global crisis is neither responsible nor accurate; that was just the straw that broke the camel’s back.
Ironically, of the two paths, the path that GM has chosen will likely lead to a continued decline in the public’s perception of GM. There will be more loans required to stay afloat, and every time it gets harder for the government to walk away because it has too much invested already, and every time involving less and less flattering headlines.
I will say that GM’s propaganda (http://www.youtube.com/watch?v=72cHfOKoA1c) is working to scare me. Unfortunately, what scares me are the consequences of GM’s survival and continued influence, not its demise.
All this to say that GM’s insistence that “bankruptcy is not an option” has had one clear effect. This is one former GM customer that is going to need a whole lot more than a good car to win him back.
Tim,
Thanks for the reply to my post, The reason i mentioned to ax those particular cars is because they really need a massive overhaul and can be replaced by any number of newly introduced 7 and 8 passenger crossover vehicles. Chevy Traverse or the Buick Enclave can easily replace the suburban or trailblazer with better fuel economy and creature comforts. If those vehicles do stay in the lineup they would need a massive redesign in the near future to remain competitive and desireable.
GM has seen a massive decrease in popularity of the Suburban and escalade as crossovers and higher gas prices have become a reality. many individuals who buy the escalade or suburban were not neccesarily hauling huge items around, although some were. so many people are either switching to other brands that can satisfy the large seating capacity with better fuel economy and function.
If the mamoth vehicles like the suburban were to stay the company would have to most likely only sell the hybrid versions of the vehicle. the reality is that even though gas prices have temporarily shot down to levels not seen since pre-2001, the reality of 5.00/gallon and up is right around the corner with HUGE surges in global demand from highly populated countries like china and India who combined hold almost half the worlds population. increasingly they are buying cars and incorporating the use of fossil fuels into their culture.
GM can most likely replace both the suburban and trailblazer and tailor it to the same market with the newly launched chevrolet traverse which is a really beautiful car based off the buick enclave platform.
GM must reinvent itself a bit and take a play from the playbook of other automakers, although as a whole the entire industry is down, the steps noted in my previous posts could really stop the bleeding.
Maybe GM could replace its aging large SUV line up with an imported successful car from another automaker so it does not have to pay the huge development costs of introducing a completely new vehicle which takes up to two years and over $1 billion dollars per car introduced.
Overall the comments I make are jus suggestions and isnt as if GM is listening anyway.
The economy is in shambles, with no consumer confidence, it is impacting everyone, except Rush Limbuagh. LOL Anyway in the spirit of restructuring to get a stable economy of growth back, government must first think of restucturing itself. The burden of living in the United States is getting out of control. We are so over regulated and taxed at every level , especally local and state levels, it strangles the very core of growth. The numbers of retired Americans chosing to leave the US to become expatriots in Mexico , Central and South America is a signal , that the burden of living in America is to high.
I read today that GM marketing is looking to sweeten incentives. If they work that would go a long way in helping GM push vehicles out the door and avoid the threat of bankrupcy. But traditional incentives are bland and boring, everyone has a rebate. Why doesn’t GM liven up their incentives? If I saw a commercial advertising a new Siveraldo for sale with a $2500 rebate I would pay little attention to it…seen a thousand times before. But if the commercial said that if I buy a new 2009 Silveraldo that I would get a 3 day 2 night with airfare and $500 cash Las Vegas vacation I would take notice (that would cost about $2500 for 3day2/nite). Why not offer a vacation package rebate, if not Vegas then Disneyworld or a cruise. All these businesses are hurting to and would give deep discounts to be paired as a incentive. Get varity in your incentives, a vacation, dining room set, cruise.
The professors article offers no good reasons and no compelling arguments. Let’s hope the Wall Street Journal changes their view on this topic.
GM’s restructuring has produced results with billions in cost reductions. Let’s suppose GM goes forward with agreement from bond holders to take 50 cents on the dollar in exchange for common shares and the UAW accepts a 50 percent reduction in cash. That’s fantastic. Why all the delay? Take the deal. GM has strong product plans and GM stock is going to rise. Bond holders can be asked to accept more reductions later, indeed they may want to take more reductions in exchange for stock as they see the economy recover. If I were a bond holder I would take 100% reduction in exchange for stock because its a winning proposal. In a stronger economy GM’s stock could go to $100 with all the current restructurings in place.
GM should go ahead with the deal and take the bond holders offer of 50 percent. The bond holders should have confidence. GM products are great and people are excited about the market – they just want the economy to get better soon. Perhaps the bond holders will agree to more later.
To answer the professor’s piece in the Journal. Major manufacturers have fixed costs and need credit. A manufacturer looks to forward months and recoups investment from the finished product down the road. The auto industry is a major industry, a highly important asset to the nation, it would irresponsible under the circumstances to ask it to bear the brunt of the credit crunch. A court process would unnecessarily delay, waste time, and money, and could reduce revenues. Its a dumb idea. GM customers don’t want it.
GM’s management is excellent. Their restructing plans are working. We’re behind GM. We back them 100 percent.
We’re tired of the ideological wrangling on this, its not applicable in this case, especially by hostile Senate Republicans. The GOP lost clout with American people in the swing states over the issue of American jobs. Its not the American worker or American managment, its the War and the economy. It was most irresponsible of the GOP to drag the auto companies before a hostile Senate Banking committee when the President Bush had the authority all along to issue the credit from the TARP which he should have saved enough to issue the amount of credit needed to the auto industry. President Bush was asked at press conferences to explain why he would support banks but not American enterprise during an economic crisis. Bush’s answers were unsatisfactory. The Federal Reserve is not doing its job either. The Fed has emergency powers to lend and it has failed to use them when necessary and appropriate during this economic problem.
Economic downturns caused by wars wreak havoc on American business. The Vietnam war did untold damage to the U.S. economy. Even now new information technology companies like Microsoft, Google, and others are incurring rising debts by the billions.
Jon:
Do not kid yourself into thinking Chapter 11 wouldnt scare off customers. GM is already paying a price for all the chatter about the possibility of Chapter 11. In fact, I believe some media types are keeping that story going hoping to help force GM into Chapter 11. The report states that surveys have shown that the majority of potential customers would hesitate to buy a car from a bankrupt automaker. In addition to that, you and others continue to ignore the critical point Tom has made about DIP financing. I NEVER hear any Chap. 11 advocates mention this issue. If chap. 11 fans are in favor of saving taxpayer money I fail to see how that route is preferable to the route GM is pursuing. The crazy thing is that the government’s slow pace is only making things worse for GM. If the government made its intentions clear and said GM would definitely survives SOME customer traffic will return. The longer this drags out the more of a negative affect its going to have on GM’s sales. If the government wants GM to be viable ASAP they need to act aggressively and decisively and make it 100% clear that GM Is not going anywhere in the near term.
Tim:
You are in the minority. You are saying you wouldn’t buy from GM if they remain out of Bankruptcy Court based on your principles. That is nice, but that is the direct opposite of how most consumers think. Unlike you, most people who are pushing for GM to go bankrupt could care less about the company or the products and would most certainly not be visiting a GM dealership if they enter chapter 11. You make the process sound like a walk in the park where a judge waves a wand and the company emerges without a care in the world. I don’t think its quite that simple nor do I think that its guaranteed that GM would emerge from Chapter 11. To my knowledge no company as complex as GM has ever emerged from chapter 11. A few airlines have done it but their operations are not as complex as those of an auto company. Many retailers enter bankruptcy and end up in liquidation so lets not act like its a sure thing for GM to exit chapter 11 healthy and vibrant. If you take time to read the reports they have submitted you will find much of what needs to be done is already underway. The financial crisis killed GM’s revenue stream while they were trying to fund this restructuring and thus they ended up where they are today. When you consider the layoffs and losses mounting industrywide its a little silly to say that the global financial crisis was the “straw” that broke the camel’s back. It was more like a boulder that broke GM’s back. When supposedly healthy companies like Toyota are going from a $16B profit to a $4B loss in ONE fiscal year you know we have a serious crisis on our hands. I don’t share your view that all of this was inevitable and the credit crisis merely sped up the day of reckoning for GM. To my knowledge the company has never turned to the government for help during prior crisis periods and my guess is they never thought things would have gotten to that point a year ago.
GM needs less hearings and less front page coverage about their loans. The government needs to step up (as they have for AIG to the tune of well over $150B) and put the uncertainty to rest for the next year or so. If that happens GM can focus on its products and survival and not explaining why it needs loans. The piecemeal approach that has been adopted so far is definitely not helping GM.
BTW, I am curious as to why so many business analysts only seem to want GM to declare bankruptcy but not any of the banks or AIG. I have heard no talk about the need for those organizations to seek the protection of court while they reorganize to survive. All I hear is that they are too big to fail and we have to give them whatever amount of tax dollars necessary for them to survive this downturn. GM has gotten $13B and many people are outraged and are demanding bankruptcy. Makes no sense. We have a lot more banks in this country than automakers so I would like for someone to explain how we cant replace a failed bank with smaller, stronger banks and we can supposedly easily fill the void left by the collapse of our auto industry.
Aloha Mr. Wilkinson and thanks for your blog entries.
I think you and the rest of the ‘gang’ have drastically and totally underestimated how much enmity and incredible dislike that much of the population hold toward GM and the other car companies. People actually want you to fail and while they may underestimate the overall impact on their own lives I believe they just do not care anymore.
I probably do not need to repeat the same old tired refrain but GM has not built the quality that many of us want in a car. None of the American car makes have in my opinion and I love cars. You came close with the Saturn, at least for me. The poor excuses about mileage are a joke. GM has run out of excuses.
Despite the impact on the planet you kept on building giant cars and yes, we all know that we, the American Consumer demanded Giant cars and did not give a damn about mileage or how much we polluted as we drove.
GM and the rest of the manufacturers are going to fail and to wax dramatic . . . will be lucky to survive and for something better to come out of the flames. Sure, we can all point the fingers at the Manufacturers but really, the issue is the overall consumption based lifestyle of the Americans. One third of the population using 33% of the worlds resources is unsustainable and many have known about this coming conflagration for years. We need only to look in the mirror to see who is at fault. I know I am as are all of us.
On a personal note I want to wish you, your family and all other employees good luck with the transition. I hope the Volt saves you but don’t think it will when you are having to lose so much on each vehicle produced.
Kind Regards,
David McCullough
Wow, this blog is getting fired up. People really like to tell GM what they think or what they think GM should do. I would say that GM knows what it needs to do and needs a GD break! Even the mighty Toyota has now asked for money from their government due to the economy. Their reasons are the exact opposite of GM’s as they got caught growing too quick where as GM is trying to fix legacy costs for being so big for so long. Sure they made mistakes, but GM is a company run by humans that want to do good. Read “Why GM Matters” like I have and you will understand the challenges a company this size has been dealing with over the last 10 or more years. They have always worked for the best solutions to ease the restructuring costs for the people involved. They have been fair to all sides and this was before the credit market plunged them into the latest rounds of change that every single automaker is now being forced to deal with. It is not a GM problem, it is a world wide problem of over capacity, lack of credit, and unemployment. GM is actually ahead of the curve because it has been dealing with these very issues for a long time. They had it sorted out until Wall St really screwed things up. Give GM a chance as they more than anyone know what they are dealing with and where they want to go.
In addition to what has already been posted, here are some more points.
Where’s the vision at GM? In 2005, I remember Bob Lutz lambasting hybrids at the Detroit Auto Show. This was the same time when customers around the country were waiting in line (several months in some places) to buy a Prius. Huh? Consumers wanted hybrids and GM had none.
Now GM’s been touting the Volt. From all I’ve read about it, it promises to be a niche vehicle, and an expensive one to boot. Per GM officials, it isn’t going to make any difference to the top or bottom lines for quite a while to come.
What about GM’s hybrids? From all the reports I’ve read, the hybrid program has been a dismal failure. There isn’t much to be gained by buying a GM hybrid over it’s regular, gas-only cousin.
Remember those tax breaks for buying hybrids? They were limited to 60,000 per automaker. That was another sweetheart deal for GM. Absent that limitation, GM would have been in worse trouble by losing even more sales to Toyota and Honda.
What really happened in those discussions with Renault-Nissan? Per the reports I’ve read, GM management was too hard headed and as a result, Carlos Ghosn walked away.
How many years was GM funding the UAW job bank? Which other industries/companies fund those kind of deals? Why does the UAW own a luxury golf resort? Will federal bailout dollars pay for the upkeep on that as well?
You’re concerned that consumers won’t buy cars from cos. in Ch. 11? Going by the Feb. 2009 results, GM doesn’t have to worry too much on that count. Consumers are leaving GM in droves.
Bottom line is that GM has landed themselves in this situation. Now you want the federal govt. (i.e. the taxpayers) to hand billions upon billions of dollars to the very same management team that led GM into this mess?
GM’s executive (mis)management team has not inspired confidence in consumers nor investors for a while. Given that, I am firmly against GM getting any more handouts from taxpayers monies. If the alternative is Ch. 11, so be it!
As a concerned American, I support General Motors and the decisions current management makes. The leadership at GM has all the tools necessary to analyze this situation and make the best possible decisions.
GM’s economic and societal contributions to America are unmeasurable. If General Motors were pushed into Bankruptcy, for whatever reason, it will be a very sad day in America. It would be a sad day that paves way to a per person decline in GDP of 10% or more, which fits the definition of a depression.
To all the pundits, be careful what you wish for.
I believe that the auto companies and the economy problems are the result of outsourcing the 5 million plus jobs out of the country. It’s just now catching up to the. Short-sightedness with greed thrown in. With unemployment and low-paying jobs, buying a new car is out of the question. With a $14.00 and hour job,a family, house payment, insurances, food, clothing, utilities, college funds, do you really think a person in this situation is concerned with buying a hybrid or another 4-5 miles per gallon? I don’t think so. I think those in charge are either out-of-touch with the rest of the country, or theyre in denial. If you want to sell cars or any other major items, they’re going to have to bring the manufacturing back to America. Each job is a customer. Remember that.
If bankruptcy is not an option for GM how will GM deal with bankrupt mega suppliers?
How will Visteon, Lear, Delphi and American Axle survive with out price increases from GM? GM cannnot build without them nor can GM afford to pay them higher prices to support the lower volumes. Doesn’t something have to break in the supply chain with these giant suppliers…???
Nate,
Credit is the primary reason GM became larger than Ford many decades ago. GM offered credit and Ford was a cash only enterprise. A cash only model would doom the economy. Let’s see, how long would it take for 99% of the people to save $200k for a house, or even $50k for a Cadillac? Talk about throwing a wrench in the economy. . . .
I want to get a new 09 DTS, but I’m waiting for some good incentives from Cadillac. My salesman (07 DTS) is also aware that I’m looking, but there’s little he can do with the latest March 3rd incentives. Unfortunately, without excellent incentives, including reasonable lease rates (not at today’s outrageous 25% lease residual value; which means your $50k DTS is worth only $12.5 after three years and you’re paying the difference), Cadillac sales will languish. It seems the only Cadillac with a reasonable lease rate is the CTS, but that car, as nicely redone as it is, is too small for me. I figure when the dealers get hungry enough and inventories reach unsustainable levels, I’ll get a great deal on a new DTS. I am getting impatient, and may lease or buy a new MB E350. Though the Mercedes is not as large as the DTS, it is a much more reasonable investment than the Cadillac is now.
It seems that while you were very detailed about the future you forgot to address the now. What are your plans for the products you have overflowing dealerships and storage facilities across the country? You need to do something to reassure potential customers now. A fully transferable 10 year 150,000 mile bumper to bumper warranty would be a good start. Desperate times require desperate measures The time for action is now. . You can’t afford to do it the old GM way, study the plan of action for months or perhaps years then take action when it is too late. That has been GM’S MO for too many years. That more so than the economy has gotten you into the position you are in now.
Alex D.
The Opel Zafira is a mini-van (more like a micro – mini in US terms). I don’t think they make a convertible version of it.
In GM’s viability plan the baseline industry sales scenario was 10.5 million units – now they’re staring down the barrel of 9.1 million units given yesterday’s announcement. That’s even worse than the “worst case scenario” (9.5 million) in the GM viability plan.
Furthermore, GM’s analysis showed sales bottoming out in 1Q of 2009. That is wholly realistic given the current economic environment. Does anyone honestly believe sales are going to systematically increase over the next 3 quarters?
GM started from a number that would make them viable and worked backwards to generate a list of starting assumptions they could use to convince the treasury that they are viable. It’s unrealistic and frankly I’m surprised they’re still peddling it after yesterday’s sales numbers.
HOW GM COULD HELP SALES,
DEALERSHIPS NEED TO CLEAN UP AND PUT ON A FRESH FACE. LANDSCAPE, PUT CARS IN ORGANIZED ROWS, ETC….
ON SLOW DAYS AT DEALERSHIPS SALES PEOPLE COULD DRIVE A COUPLE OF CARS TO SHOPPING CENTER OR GROCERY STORE OR MALL TO SHOW OFF CARS MAYBE GIVE RIDES IN NEW CARS TO SHOW FEATURES. VERY LITTLE INVESTMENT
GM NEEDS TO BETTER COMMUNICATE ITS SALE PRICES ON IT’S CARS. EXAMPLE RED TAG EVENT WHEN PRICES ARE ON THE WINDOW.
GM NEEDS TO LOWER IT’S STICKER PRICES- A 29,000 CHEVY MALIBU IS UNREASONABLE TO EXPECT PEOPLE TO PAY, EVEN WITH REBATES
YOUR CARS ARE GETTING TOO EXPENSIVE
TV ADVERTISING JUST SHOW THE CAR IT WILL SELL ITSELF ON BEAUTY.
Alex D – your suggestions have been posted a million times in a myriad of different formats by dozens of GM fans and wannabe managers.
One problem with your suggestion? Everyone wants certain brands to stay and other, not-so-favoured brans to leave. Why should even Buick stay? Apart from “Old White Women” – (the Oww crowd) – who wants a Buick? Or even be seen dead in one?
Fact is, that when bean counters handle the show, they almost always get car companies into a mess because MBA types simply don’t ‘get it’ . If GM allows engineers or car guys to lead like Honda and Toyota until recently, then it wouldn’t have problems.
I’m frankly sad that Bob Lutz is leaving – he’s the classic example of what I’m talking about (car guys leading car companies) – the G8, the CTS-V, the C6, Z06 and ZR1 trio, the Cobalt SS, upcoming Cruze – all car guys’ cars and how! These are the cars that make a reputation more than even softies like the very good Malibu. Because car guys popularise cars TODAY that then allow for sister models within the brand to sell to the mainstream 5 years HENCE.
Tim – Obviously you’re talking out of your ass. To say that investment in Satellites by a previous CEO is what has kept GM up for so long. Good God – Roger Smith was the guy who single handedly brought down the house that Sloan built – even his own family shouldn’t give any credit to him for whatever he did. Saturn was another of his bastards as were expensive robotized malfunctions like Hamtrammck.
Amol K – If you knew the first thing about being “green”, then even you would know that Lutz was 100% correct in lambasting hybrids. Just because Toyota has pulled off a marketing masterpiece, does not mean that ignorance will prevail – the Chevy VOLT is indeed the way to go. Lutz has already answered your delayed argument in his blogs before – google the following to educate yourself about Hybrids:
(1) BBC documentary on the Myth about Global Warming
(2) Top Gears episode of a full-fledged test between an BMW M3 and a Toyota Prius
(3) The Sunday Times long-range drive test between a BMW 530d (diesel) vs Toyota Prius (hybrid)
Then do research on the battery making process (and non-existent disposal process) that is so environmentally exhausting before you get your oh-so-goody-4-wheels Prius.
Quite frankly – if you’re a car company – hug corners, not trees !
V@z!R……………
I agree that bankruptcy isn’t the best course, but some drastic downsizing is necessary. Overproduction has to be addressed, the number of competing models needs to be trimmed (I’ve suggested ending “platform sharing” across brands and eliminating “badge engineering” altogether), and you seriously need to cut overhead costs.
The bottom line has to be that GM needs to make more money per unit from a smaller number of less-expensive vehicles. For the next several years, customers are going to be looking for value above all else: inexpensive to buy, inexpensive to operate, sturdy, reliable, and versatile transportation.
Your advertising needs to focus on those aspects. As I’ve suggested before, a 30- to 60- minute “infomercial” could help bring the message across. They sell cheap knives and kitchen gadgets that way, surely it’ll work for economy cars?
Personally I can’t stomach the thought of a car company getting one nickel of my taxpayer dollars if the government isn’t absolutely assured 100% that it will get every nickel back and in a reasonable time frame. Come to think of it, I can’t stand the thought of any private company being bailed out to the tune of billions, with no guarantees on the money being paid back, with or without interest.
It almost seems as if GM got so big and underproductive on purpose, just so they caould say “eh, who cares if we go broke, the taxpayer will have no choice but to bail us out, because they CAN’T get by without us”.
That my friends, with the help of the handlers in the unions and their affiliated democrat counterparts in congress, is exactly what’s happening. We’re told we can’t do without you.
I’m here to tell you – WE certainly CAN get by without you. Fix it without money that myself, my neighbors, my kids, my grandkids and everyone else has to pay back, or go flat bust. I DO NOT CARE. The human race has endured far worse than a car company failing. I seem to remember 2 world wars occurring in the last 100 years. Bankruptcy or no bankruptcy, the damage is done. GM’s reputation is now garbage anyway to all but the hardest core GM fans.
Sheth,
First I will respond to a comment that you made to Jon. It sounds like what you are suggesting is that the US Government guarantee GM’s survival. I would like you to expound upon your thoughts on that and how that would be carried out. Does the government continue with more loans as needed for an indefinite period of time? Does the government buy common stock in the company? What does the government do if GM is not able to return to profitability and pay off its loans? Do we keep sending GM a welfare check every quarter? Saying that GM won’t be allowed to fail is a very bold statement, and I would like more insight into your thoughts on that.
I may be in the minority about buying a car from a bankrupt car company. I am sure that GM has done lots of impartial research on the subject. With that logic, we should lend money to all of the homebuilders in the country; buying a home from a bankrupt homebuilder is a far bigger risk than buying a car from a bankrupt car manufacturer. When do we stop? The financial crisis may be a boulder, as you say, but the patient was already trying to recover from back surgery. You say that GM has never asked for money from the government before; that is because GM has managed to solve its cash flow problems without the government before. If the GM had become insolvent apart from a global crisis, would it have accepted bankruptcy?
You claim that GM is too complex to go through bankruptcy and emerge as a functional company. First, my question would be why is it too complex. Then I would ask, if part of the plans is to reduce the complexity and size to a level where it can, should the need again arise, go through bankruptcy in the future. It seems that if the company were much smaller, it would be impossible for such complexity to exist. Maybe each of the brands should be spun off as independent companies? Maybe the solution is something similar to what was done to Bell Telephone? I am not sure what the solution would be, but part of the plan needs to be how the company will bring itself back to a manageable complexity and size so that it can function under the same rules as other companies without the systemic risk it asserts is a reason bankruptcy is not an option. If it isn’t an option now, than I want to see what is being done to make sure that in the future, it is an option.
As for GM being in the news, I calculate that before committing to any more loans, GM owes me about $50 as the wage earner for a family of four. Although I oppose the loans and can seemingly do nothing to stop my money from being involved, I certainly want to know what is being done with my $50 and how GM is ensuring that it is going to be paid back, with interest. As now even more money is being sought to keep GM solvent, it seems the stakes keep getting higher and I should pay more attention, therefore justifying even more media coverage.
Finally, as this is not a blog about banking or the financial markets, I had not made mention of either. Because you have chosen to bring it up, however, I feel that it deserves a response. First off, let me address your assertion that the government needs to give money to GM in the same fashion as AIG. I vehemently oppose this, far more than what is being done with GM. Even so, the idea was to sell off portions of AIG’s business to repay the government loans and that it would not be allowed to get big enough to be a systemic risk. As I have touched on this above, I will not reiterate it, but I will ask, is GM willing to reduce its size and complexity so that it no longer considers itself a systemic risk?
As for the banks in general, I am one American who believes the free market should be allowed to function, in good times and bad. This includes with the banks. Propping up these institutions is only going to prolong the pain. Letting them fail will certainly send shock waves through the system. In the short term, it will certainly mean more pain, but we will return to prosperity much more quickly than by funneling money into a black hole. There is no indication there is even light at the end of the tunnel. There is the perception that government has bottomless pockets, but those pockets are our pockets. The liabilities we are taking on as a nation are enough to sink the ship; who is going to bail out the government? The path we are choosing is one of either government default or of hyperinflation. Neither of these is good for the economy, GM, or the American people.
I would like to thank GM for allowing such a candid discussion to take place on its blog. This, at least, is something that I can agree is in line with the fundamental belief’s of this great nation.
amol:
I am not quite sure what your point is supposed to be but apparently you are posting here to revel in GM’s demise. Unsurprisingly you engage in a little revisionist history to make your point and to perpetuate the myth that only GM has made any mistakes over the past few years. Here are a few points:
1. Nissan-Renault has their own problems and announced a projected loss and mass layoffs recently. Ghosn is well known for his lack of enthusiasm about hybrids and Nissan is lagging FAR behind GM and Ford when it comes to hybrid development. Their only current hybrid is using Toyota’s system under license. Nissan’s first in house hybrid is supposedly due in 2010- years after Ford and GM hit the market with hybrids.
2. The limitation on rebates for hybrids has nothing to do with GM. The government does that because they want to encourage early adopters to buy hybrids even though they are pricier than gas only cars. The governments rationale is that after hybrids become more mainstream costs will come down and manufacturers will recoup their initial investment and thus rebates wont really be necessary.
3. Much of what Gm’s current management has been doing is undoing the bad decisions of the past. Really the problems that GM has been trying to reverse in recent years come from the company’s slow pace of change in the 70s through the 90s. The current team has a great understanding of their competitor’s operational advantages and has been working hard to get GM to that level. A lot of progress has been made. No management team can be brought into GM and reverse the sales slide that is occuring right now. Instead of taking the easy route and joining the masses of ignorant people demanding change at the top you should list some concrete changes that you would like to see made by the management team. I often find Keyboard CEOs like yourself are quick to demand a resignation but slow to offer any real suggestions for improvement.
4. The only hybrid model that has been hugely successful is the Prius. The Civic hybrid has been somewhat successful as has the Escape hybrid. Most other hybrids (including Lexus hybrids and the failed Accord hybrid) have failed to sell in significant volumes. I can guarantee you GM sells more hybrids than Hyundai or Chrysler or BMW or MB or VW. Also, in case you missed it one reason why US built hybrids havent sold in huge numbers is that the US does not have the battery supply chain of Japan. The US does not have the capability to build any hybrids in Prius type numbers right now because so little has been done here to develop a supplier base. Japan has been working on this stuff for quite some time and thats why almost all Toyota hybrids are built there.
5. You deride the Volt for being an expensive, niche vehicle. The same could be said about all three of Lexus’ hybrids, the Highlander hybrid, the Tesla roadster as well as upcoming hybrids from Mercedes and BMW.
Beaugrand:
Every manufacturer engages in platform sharing and its not going to stop anytime soon. I helps automakers save money an amortize development costs. I am not sure why you continue to harp on this point. Platform sharing is largely a good thing. You suggest “drastic” downsizing as if GM hasn’t been engaged in that for the last 5-10 years or so. I believe they have cut their US workforce in half over the past 5 years or so. Check GMfactandfiction for more details on that. GM has also been closing plants which reduces capacity. None of this is really new to GM or any of the US automakers.
To Vazir:
First of all, please use some common manners while responding and avoid personal attacks. I can easily take you apart when it comes to personal attacks. However, my parents raised me better than that.
Lutz was flatly wrong to lambast hybrids. Not everyone buys a hybrid for “green” reasons. Ergo, your premise is baseless and hence your argument is without merit.
To stay in business, you better have what the customer wants. Else, you don’t have a business. GM is an excellent example of the latter. Toyota is an example of the former. To use your own words, if you knew the first thing about running a business, you would know Lutz made a fool of himself on that issue. BTW, history tells us GM reversed that position over the next 18 months!
I didn’t buy the Prius for “green” reasons. I bought it because it was very close to Camry in terms of internal dimensions, offered much better fuel economy and came with two tax breaks (federal and state).
As far as the hybrid batteries are concerned, please educate yourself about Toyota’s recycling program before making further comments on the subject.
TruckMan,
Thanks, I did not mean Zafira convertible. I meant the stylish Astra Twin-Top convertible.
And to reply to another comment, The suggestions for restructuring that I had worked on had not been submitted a dozen times by different individuals, each person that has gotten involved has their own position on how to move forward, but GM has never been in a crisis as large as the one it is currently experiencing. the suggestions for globalization and brand combinations fell on deaf ears because they had not been fighting for their shear survival.
It seems as though GM car enthusiasts that post on this blog or say theyll only ever buy a GM brand are not even saving the company. The company must widen its appeal. They firstly need to move towards a more flexible and fuel efficient offering of vehicles but it also seems as though many people feel as though the best years of gm were 1950-1969. Time to bring back the styling cues, design features, and even name plates of yesteryear. there is much loyalty to the GTO, Camaro, and other GM muscle cars that have long faded out to make way for names lik G8.
GM submitted plans to shut down or sell Saturn,Hummer and Saab. this action alone does not go far enough. they are finally leveraging their global vehicle architecture to their advantage and taking high selling vehicles from their international nameplates and importing them under their uniquely U.S. brand stores.
Dramatic steps to reduce dealership foot print with a focus on their core brands would do them well.
If GM refuses to get rid of the Pontiac name plate, which might be an inevitable outcome it can still combine its international name plates under the pontiac name instead of the Holden Name. Although holden internationally has been successful at producing stylish vehicles and has a strong following. GM is in a tough situation where it might have to introduce to the american public a completely new nameplate and way of doing business.
Pontiacs new slogan is “Pontiac is Car” what does that mean and who would see that and think they should buy a car? why not a slogan like ” Built for Americans, By Americans” or even simpler “Pride, Honor, and Distinction…its a Pontiac” Im no marketing major but Pontiac is Car, is an extremely lame attempt at reinventing and remarketing the brand.
Does anyone other than the intelligent management at GM know why GMC and chevrolet Co-Exist when they share similar distribution channels and sell the same exact vehicles? what sense does it make to have to spend double the marketing, management, and labor dollars to produce both brands vehicles? GMC is viewed as a commercial brand that is shyed away from by many residential customers, while Chevrolet caters to both residential and commercial customers and is high on the list for first time buyers as well as loyal GM fans. So why wouldnt we merge these operations?
Buick can remain as said before, but maybe GM should unite their brands around a common theme or slogan so people know which products are uniquely GM and what the company actually stands for.
To shut down saturn additionally would probably be a large expense for GM, why not test out Opel small car european division as a replacement product for saturn dealers. Just a suggestion but again it is not integral to GMs survival if opel is brought to the U.S. or not. It might be easier for the company to unwind saturn and hummer as they are and take the loss.
Cadillac of course is a crown jewel much as Chevrolet. those are the two volume brands that basically rescue GM from what have become niche brands inside their organization.
Whether your a loyal GM fan or a fan of one of their divisions it is important to realize that the business model in the U.S. and the world for automakers has changed immensely since 1951 and the strategy of supporting 15 or more brands is no longer feasible or viable. it does not make sense to have 15 brands that each sell four products. it is more profitable to have a full-line auto-brand that is a one stop shop for all vehicle needs. Toyota has been extremely successful with that format and so will Ford once they realign their business to their multibrand strategy of Ford/Lincoln/Mercury.
Ford has been much quicker to cut brands, jobs, and unprofitable business units and this is a major reason they are seeking no funds from the U.S. government to continue operating. So it should be plain to see that the smaller amount of brands and the smaller and more intense the focus is, the better the company will be, and the better the chance of survival.
GM can keep its regional brands, under invest, and continue down a horrible path due to nostalgia for the GM glory days filled with brands like oldsmobile, pontiac, buick, but sooner or later the company needs to realize the business has changed and will never be the same, or risk complete dissapearance and viability as a company.
I wish that GM would run some PR to show how much the Company has contributed to local, state and federal taxes over the years – this might help to bring some different perspective to the current request for temporary aid funding and would also serve to illustrate another way in which GM makes an important contribution to both the American and Canadian economies.
Amol,
you asked “How many years was GM funding the UAW job bank? Which other industries/companies fund those kind of deals?” When Toyota shut down their brand new Tundra plant in Texas due to lack of sales and high recalls. They did that a similar thing. Only they paid their workers full wage, not the reduced wage GM paid, to have employees receive training, volunteer in local communities etc. Toyota was praised for “taking care of their employees”. While this was not called a JOBS bank, it is just like one. The hybrids have already been addressed. As for me I will take a GM that J. D. Power is rating as high as or higher than most imports. Also GM is about a 78% American made product, more than double the best import. Unfortunatelythe news is not always accurate
Zack4 – Apparently you know that there were 2 world wars, but who built the planes, tanks, and bombs that won the second world war? Two words for you – General Motors. Who was the lead in coordinating the manufacturing of the entire arsenal across the USA? General Motors.
Do you think that will be possible if we do not have our own manufacturing base with design, engineering, and manufacturing? Not a chance.
Some argue that we could just take over the import factories and use them to manufacture the items needed. I say BS as manufacturing is only the end result of design and engineering. Losing those two components are very grave to any economy. Welcome to the 3rd world if we walk away from it all.
Hang in there GM. There are 100’s of 1000’s of us that support you. If they pass the nationalized health care bill in congress that will eliminate one of your major cash flow problems. In my opinion, it will dramatically put you back on the road to recovery. I am a UAW member and am willing to sacrifice along with accepting national health care to keep “our” 100 yr. old company alive.
It’s the economy people!!!!! Get a clue!!!!! Go blame Bush’s further deregulation of Wall St. and the Banks, high risk mortgage practices and trillions of dollars on an unjust, lie of a war in Iraq!!! That’s where the blame lies……
The news today is very bad – stock trading at $1.80 and if there is not a quick, large infusion of cash to the company by the end of the month, apparently GM will have to begin halting vital departments of the company’s operations. One GM auditor has raised “serious concerns” about GM’s viability in the near future.
Mr. Wilkinson, I understand GM pays you to spin stories like a politician (although I’d make sure your payroll check cashes allright), but the company, Mr. Wagoner, and the board of directors must realize and admit now there is no other sensible recourse other than to file for chapter 11 bankruptcy.
There are no longer any solid, feasable, logical explanations or reasons to avoid it.
Sad, but very true.
More objections to the professor.
The Japanese are giving loans to their auto companies during this economic downturn.
Just saying the suppliers can be paid during a Chapter 11 doesn’t negate its unnecessary negative impact on sales and revenue and ultimately the supply chain.
GM has proposed a more excellent way. Chapter 11 is an unnecessary waste of time and money simply to satisfy some ideological egos. Let’s do the right thing and back GM and Chrysler.
A Union Contract cannot be nullified in a Chapter 11 bankruptcy. GM and the UAW are capable of negotiating on their own and have achieved the necessary concessions going forward. The ability to get credit in a chaper 11 is also a factor. Consumer concerns about Chapter 11 are also a factor against it.
The negatives of Chapter 11 for the auto industry far outweigh any points made by the professor.
Currently it appears that it a delay in credit factors like Term Asset-Backed Securities Loan Facility (TALF) and tight credit markets that are mostly causing slow auto sales.
Backing the auto industry with credit will give confidence to bond holders to accept future agreements to accept common shares of equity in place of debt. Manufacturers have fixed costs and the U.S should back manufacturing in order to help the economy recovery.
GM management is among the most talented in the world, they are best suited to manage GM during these economic problems. It is simply irresponsible and wrong to allege otherwise.
The economic downturn is responsible for what the auditors are claiming on the going concern issue – bond market defaults are projected to triple this year unless the government acts does its jobs:
http://online.wsj.com/article/SB123446235205578373.html?mod=rss_whats_news_us
Some people are probably delaying purchases, waiting for the government to do the right thing and back GM and Chrysler.
Hey guys, wake up… the fat lady is singing. Are you serious about people being less likely to purchase a vehicle from a bankrupt GM than they are now? Right now the situation with General Motors is so unsettled consumers aren’t buying your products because we can all see the buzzards circling. Do something other than waste the government (taxpayer) money you have already been given and take the real and painful steps needed to rebuild your company. But then again, GM has long since lost the ability to see the forest through the trees. Sad indeed.
~ The news today is very bad – stock trading at $1.80 ~
Wow, do you mean I could buy two shares of GM for less than a double-shot mocha grande latte costs at Starbucks?
Joe D —
We agree that there is no alternative to an aggressive restructuring of GM. We just believe that doing this out-of-court — as outlined in our viability plan — will be cheaper and easier for both GM and the taxpayers. (Again, I refer you to Appendix L of the plan.)
Today’s news should not have been a shock to anyone who read our December 2 submission to Congress or our February 17 viability plan. Auditors are legally required to assess whether there is substantial doubt about an entity’s ability to continue as a going concern over the next year. That opinion is dependent on a number of factors including our ability to execute our viability plan, compliance with our U.S. Treasury loans, volume recovery of the industry, and access to additional funding from the U.S. and certain other governments. None of these issues were new today, and none of them can be resolved overnight.
The auditor’s opinion has no direct impact on the aggressive actions we are taking to restructure our business for long-term viability.
What a bunch of FUD and hogwash by GM. There is absolutely no difference in customers’ appetite to buy from a company in Ch11 financed by the US Gov and the same company on the news day after day after day with speculation of it going into bankruptcy.
As a matter of fact, one can argue that filing for CH11 with the gov backing is better. It will remove the uncertainty and quickly prove to customers that things (warranty, etc) go on as usual in CH 11.
Other than the above factor, GM can provide any other reason not to go into CH11.
And YES – pensions will be cut and employees will be laid off and plants will close and executives will be kicked out. Get used to it. There is no other way.
File CH 11 and move on.
The big, ugly, gas guzzling cars that have been coming out of Detroit are no longer marketable. The Big 3 are not going to generate any revenue from these fat, wasteful brands, and it is time to trim off the dead wood and let new branches grow.
Their viability as manufacturers cannot be based on a bailout. But it could be based on the the small, inexpensive, fuel-efficient cars that the GMs, Fords and Chryslers have been manufacturing in Europe for years now.
While it would be ironic for American companies to import European cars into the US Market, my guess it would be profitable, and give them a real measure of what kind of cars (that they are already making!) are going to resonate with the American consumer.
Alex,
There too many way out opinions about brands. GM builds great vehicles, they are the world’s best. We like GM brands and we think they have fantastic product plans. We like and respect GM management and have the utmost confidence in them. They are the among the best in the world and the best equipped to handle problems, especially now.
All the car companies are having troubles in this economy.
The economy, the war, and excessive regulations are the main reasons for the problems. During the 1990s the American auto companies gained market share and had strong profits.
American auto companies have done fine during periods of peace time economic growth and stability – Eisenhower, JFK, Reagan, and the 1990s when Gringrich balanced the budget. Nearly every other time during the last half century, wars and the recessions that follow them have taken a severe toll on American companies and caused a spike in debt levels. The Vietnam war did untold damage to the American economy and its companies.
America’s current debts are unbelievable:
$10 Trillion federal debt
$10 Trillion in mortgage debt
$10 Trillion in nonbank corporate debt
$12 Trillion in bank debt
Two-thirds of the America’s GDP is consumption spending.
U.S. savings rates fell to their lowest levels since 1933 following September 11, 2001.
American manufacturers did not cause the recessions over time – the attacks – the wars – the debt -it was government’s doing. the likes of Billy Graham, Mother Theresa, and Bill Cosby could do more to solve the world’s problems than the elitist policy wonks who’ve gotten America tangled up in these war-recessionary messes. Eisenhower, JFK, and Reagan kept American out of long term wars with a policy of Peace Through Strength. Its time to dust off that play book.
Time to correct the elitist media: The American worker is not a slogan ‘legacy cost’ and American management is not to blame for the problems caused by these war debt recession spikes. The war-recession-debt cycle is the government’s doing. Companies have to continue to fund pension and health benefits even in a recession and during a war. Companies take on increased debt. The FDA sets the stardard of care that helps increase health care costs.
Further, excessive regulation is the government’s doing.
Excessive regulation increases vehicle costs, reduces profits, and thereby slows innovation.
THE CASE AGAINST EXCESSIVE REGULATION:
CAFE is a failed policy, its original authors even say so. The conflicting regulatory scheme of CAFE/Emissions together is excessive and wrong. Excessive regulation destroys innovation by reducing profits and increasing vehicle cost. Excessive and conflicting CAFE/Emissions rules may in fact have slowed the development of more fuel efficient vehicles by reducing industry profits.
Incentives are fine, but mandates are not, especially unfunded mandates. The auto industry has led on innovation from its inception.
The Malibu gets better fuel economy than the Camry or Accord. Its not CAFE or even gas prices that did it, its free market competition that did it. Fuel economy and looks are a selling features of the Malibu. Consumers just like more fuel efficient vehicles by vehicle class on their own without government mandates. Consumers do like the information on the window stickers. Let’s repeal or strike down the conflicting regulatory scheme of CAFE/Emissions and have a voluntary rating system. Its fine to have a EPA displays of fuel economy and emissions on the window sticker for customers to have the freedom to choose. Providing Information is a good regulation. Have confidence. The consumers will choose for themselves. Take the shackles of excessive CAFE/Emissions off and let the auto industy innovate – it will happen much faster with more profits. The top of the market generates profits that helps to fund the innovation.
The auto industry would be better with goals, EPA ratings with posted consumer information, instead of excessive conflicting reguatlory schemes of CAFE/Emissions. Let the consumers choose. GM regularly builds vehicles that exceed federal safety standards for example. Thats free market competition that does it, not the reguation. A key selling feature are five star crash safety ratings, for example, and not the regulations themselves.
Let’s repeal or back off CAFE/Emissions for while and let see how consumers act on their own instead of imposing gargantuan excessive reguations that will take away money from innovation and create market distortions.
About 20 percent of vehicles sold are new, 80 percent used. If reducing excessive regulation increased new vehicle sales to 30 percent of the total, all car companies would benefit, and consumers would have more of the latest, newest, technology on the road faster. Therefore, excessive regulation slows down the flow of new technology to the market place.
Let’s give American manufacturing a chance for a change.
AmolK:
A world to the wise- an opinion cannot be wrong. You say Lutz was flat out wrong for noting that hybrids dont make much sense financially and yet you don’t provide any rationale to support that statement. Lutz never said that GM was never going to invest in hybrids so your claim that GM “reversed course” after Lutz’s statements are incorrect. Lutz has said numerous times that GM failed to invest in hybrids because they wouldnt be profitable but that turned out to be a mistake because hybrids gives you political cover to make gas guzzlers like the Tundra and Sequoia. I never hear Prius fans even acknowledge that Toyota makes those vehicles.
Carlos Ghosn as well as numerous European auto execs have OPENLY expressed skepticism about hybrids. They question whether or not hybrids are the cheapest way to gain efficiency and they question how many customers are willing to pay a premium for hybrids if gas is affordable. Only 2.5% of vehicles sold last year were hybrids so they are not mainstream even if the Toyota loving press likes to pretend that the Prius is the best selling vehicles in the country. Its apparent that your problems with GM have little to do with their actual products or quality. You are one of many who have decided to cheer on the company’s demise because you don’t like a few statements that one of their executives made. Toyota’s business model isnt looking too hot right about now when you consider they are asking the central bank in Japan for money and preparing to announced a $4B annual loss after making over $15B in the last fiscal year. Toyota made billions from high profit vehicles like SUVS, pickups, luxury cars and crossovers. They did not soar to record profits on the backs of money losing hybrids like the Prius. Their profits from expensive vehicles allow them to make cars like the Prius for little to no profit. You say Toyota is an example of a company building vehicles that people want to buy and yet their sales have been the worst amongst the Asian automakers for at least the last year. They just posted a 40% decline last month so it appears offering more hybrids than anyone else is not saving them. Hyundai offers ZERO hybrids and has been outperforming Toyota lately.
B. Real:
What is sad is that you seem totally unaware of the market as a whole, GM is doing poorly, but only SLIGHTLY worse than companies that arent facing constant negative press. Ford’s sales were down 48% and Toyota’s were down almost 40%. No one is doing well in this market and to suggest that GMs sales troubles are primarily based on the fact that America has lost faith in the company is drastic oversimplification. If what you are saying is true why are people not buying from Ford, Toyota and Honda?
|Do something other than waste the government (taxpayer) money you have already been given and take the real and painful steps needed to rebuild your company. But then again, GM has long since lost the ability to see the forest through the trees. Sad indeed.”
BReal:
Just to let you know: Chapter 11 will cost the taxpayers money. Read GM’s submission to Congress. If no private lenders can fund GM during the Chapter 11 process one has to assume the Federal government would have to provide the necessary capital. In addition, the pensions would be assumed by a quasi governmental agency that is currently underfunded and would need an infusion of taxpayer cash to remain solvent. You are very off base if you think bankruptcy takes taxpayers off the hook.
For all the reasons Mr Wilkinson brings forth in his blog, if GM is forced into bankruptcy, economists’ theories aside, there will be economic hell to pay in the midwest.
Another way to turn around is to retrofit the current car with the engine from BYD. As we all know that currently BYD lacks in crash test of the cars and all the necessary safety features. GM however lacks in the engine as well as affordable product.
If GM is willing to collaborate with BYD, retrofit GM safety features and body with BYD engine and at the same time set aside funds for R&D, they can churn out cars fast enough to capture the next wave of plug in market ……
If GM goes, so goes the nation. The 1933 Bank Holiday started in Detroit, and there will be repurcussions throughout the U.S. if GM claims bankruptcy in 2009.
Sheth:
Your posts contain a number of assumptions which are flat out incorrect.
“I am not quite sure what your point is supposed to be but apparently you are posting here to revel in GM’s demise.”
Incorrect. I have long been critical of GM’s mgmt decisions. I have NEVER claimed only GM made mistakes. However, they made enough to be on the brink of disaster. I am NOT in favor of handing the same mgmt team huge amounts of taxpayer monies. That is the point.
“1. Nissan-Renault has their own problems..”
That venture may have given GM a chance to get a better foothold in the small, more fuel efficient cars. It didn’t necessarily have to do with hybrids. GM was resistant to the management and operational changes Ghosn wanted to make the venture profitable. Note that N-R is not on the brink of demise, GM is.
“2. The limitation on rebates for hybrids has nothing to do with GM.”
I fully understand the business side. The point here was that the limitation favored domestic automakers who (save the Ford Escape hybrid) had no offerings when that legislation was passed. Had it not been for the cap, you would have seen even more consumers move away from the domestic automakers towards hybrids.
“3. Much of what Gm’s current management has been doing is undoing the bad decisions of the past.”
Wagoner has been at the helm for 8 yrs. now. Please watch your language. I refer to your use of the offensive phrase “Keyboard CEOs”. FYI, I do have management as well as investment experience. GM should have been offering a product mix more geared towards the demands of the marketplace years ago. Badge engineering does not count. The marketplace has been telling GM that for years. Many years of declining sales were sending that message, loud and clear. From your post, it appears you have little or no understanding of business and investment matters. In business, if you don’t have what the consumer wants, you’ll be losing business like GM has. Continue that for a while and you’ll be out of business. How many more years does Wagoner and co. need? It is a pity that poor leadership has led GM into this morass.
“4. The only hybrid model that has been hugely successful is the Prius…”
Please acquaint yourself with the facts and not PR excuses. The Accord hybrid was positioned as a performance enhanced vehicle, rather than a gas miser. That was the mistake. GM’s hybrids are very slow to move off dealers’ lots, because they’re mostly SUVs which offer little improvement in fuel economy compared to their gasoline-only cousins. That has nothing to do with the battery supply. All in all, GM’s hybrid program has not been a stunning success.
“5. You deride the Volt for being an expensive, niche vehicle. The same could be said about all three of Lexus’ hybrids, the Highlander hybrid, the Tesla roadster as well as upcoming hybrids from Mercedes and BMW.”
Tesla, yet. The Lexus hybrids have sold quite well in the segment that does shop for luxury vehicles. As for the Higlander, the local dealers sold them as soon as they arrived. The Highlander is not a niche vehicle by any stretch of the imagination. The Volt, otoh, is a niche vehicle. How many consumers will be willing to shell out over $40K (from GM’s own releases) for a mostly commuter vehicle that seats only four, hasn’t a whole lot of luggage room and is based on an unproven technology, esp. in these times? GM has said that they don’t expect it to be profitable for many years to come. At this point in time, GM needs vehicles that will contribute well to the bottom line.
“A world to the wise- an opinion cannot be wrong.”
Any seasoned investor will tell you that statement holds no water whatsoever.
“You say Lutz was flat out wrong for noting that hybrids dont make much sense financially and yet you don’t provide any rationale to support that statement.”
Actually, I did provide the rationale. You ought to have read my post more carefully. As I said before, if you don’t have what the customers want, you’ll be losing business fast. Secondly, when Lutz made that statement, consumers were waiting several months, money in hand, to buy a Prius. Third, Lutz did state GM wasn’t going to be building hybrids. So, GM did reverse course. Ergo, Lutz was flat out wrong and misjudged the market badly.
“Lutz has said numerous times that GM failed to invest in hybrids because they wouldnt be profitable but that turned out to be a mistake because hybrids gives you political cover to make gas guzzlers like the Tundra and Sequoia. I never hear Prius fans even acknowledge that Toyota makes those vehicles.”
You are confusing yourself here. The reason the Prius was wildly successful was that it already had an excellent reputation (growing by the day), offered practically the same room as a Camry, much more luggage space than the Camry, a much better fuel economy and was priced in the same range (considering same options on both). I’ve owned a Prius sice July 2005, have almost 60K miles on it, get 55-58 mpg in mixed mode driving and the car has been absolutely reliable and utterly trouble-free. I am a Prius fan because of first hand experience. Tundra and Sequoia have nothing to do with that at all. They serve a market that wants those kind of vehicles. You’re repeated Lutz’s excuses to explain away the lack of vision on part of GM’s mgmt.
Ford was smart. They built the Escape using Toyota’s technology. The new Fusion hybrid, however, is based on new technology developed at Ford. That’s smart thinking. You notice Ford isn’t teetering on the brink of disaster like GM.
Here’s a thought. Consider how long it takes to bring a new car, based on a brand new technology, to market. Gen 1 Prius was introduced in Japan in the early 90s. Ergo, someone at Toyota had the vision and the courage to pursue that concept years ago. That’s when gas was under $1/gal. That’s called vision!
Sheth, by any chance, do you work for GM, any related affiliates, etc.? BTW, I am still (regrettably) a GM shareholder, disgusted that slow moving mgmt has decimated shareholder value. The bondholders will shortly take a royal bath too, from the looks of it.
Bottom line: I am not in favor of more taxpayer funds going to GM, into the hands of the very same mgmt team.
Amol K.,
Foreign automakers including the Japan’s automakers are receiving loans from their governments during this economic downturn. Maybe they need some advice on what their doing wrong.
Car sales are down a percentage because consumers are unable to get credit to make the purchase right now. Dealers are also having difficulty flooring inventory with their credit.
American companies have been the victims of wars and the recessions that follow them for the last half century. Think of Vietnam and the phony gas crisis of 1973. How much money did that add to the liabilities side of the balance sheets during the stagflation of the 1970s. Maybe you remember the first gulf war and the severe recession and massive layoffs of the early 1990s. Maybe you’ve forgetton that the twin towers collapsed and that American corporate debt rose 34 percent following 9/11/01. Or maybe you need a reminder that half of the companies in the United States had were given junk bond ratings in the years following 9/11/01. Maybe you missed the airlines troubles and that Las Vegas is becoming an destinination with empty hotels. Or maybe you missed that Disney’s profits are down 30 pecent. Maybe you missed that commercial mortgages are also in trouble now. Even now newer information technology companies are racking up debt just as American companies did during the Vietnam debt recession. Same pattern. The Wall Street Journal reported that bond market defaults are expected to triple in 2009.
Or maybe you just believe the media elites who thump their message that hard working Americans are a legacy cost.
Well here is the real legacy cost of the elitist war debt: U.S current debts are unbelievable:
$10 Trillion federal debt
$10 Trillion in mortgage debt
$10 Trillion in nonbank corporate debt
$12 Trillion in bank debt
Two-thirds of the America’s GDP is consumption spending.
U.S. savings rates fell to their lowest levels since 1933 following September 11, 2001.
And that doesn’t count the future unfunded liability for medicare of $35 Trillion or the $12 Trillion in unfunded liability for Social Security.
You say you don’t want more tax dollars (credit) going to American business like GM and Chrysler? Hum. Well I feel sorry for you.
The right thing to do is for the government to back GM, Ford, and Chrysler 100 percent with any credit they need. Be confident.
There management are great leaders and American heros who helped pull America’s economy out of recession following 9/11/01 with the keep America Rolling campaign of zero percent financing.
GM gave credit to America in its hour of need. Let’s return the favor.
Otherwise, the question may be, who will lend to America itself? What will happen when other nations say they cannot buy American government debt?
Maybe you can afford to buy bonds to bail out your state when the aid to the states runs out?
Pessimists and cynics are always ready to throw everyone under the bus.
The anti-American drum beat from the media elite will soon be silenced as the media find themselves looking for another line of work.
The far left text book writers may be dissappointed when the schools and universities inform them there is no more money for their new edition of anti-American slop.
Are there soup lines in your state yet?
Did you hear the unemployment numbers for the United States today? Over 12 million unemployed are seeking work? Do you have a job for them?
Maybe you think they should go work in Asia somewhere?
Hut sweet hut? Is that it?
You see, when the Big three suffer America crators at the foundations. Did you buy a foreign car. Is foreign car guilt the reason for your post?
American auto companies have the best technologies and among the most talented management and workforces in the world. There are none better.
Manufacturing by nature requires large sums of credit.
We are standing behind GM, Ford, and Chrysler 100 pecent, and we will not back down or run away.
Sheth,
I find your comments most interesting. Your assumption that you are the only one with the knowledge and insight to solve all that is wrong with our economy (at least as related to the auto industry) makes me sorry that someone such as yourself has not presented themselves sooner. In fact the ability to hear no one’s voice but their own is exactly how GM got to where it is today and must be the point you are trying to make. At least one would hope.
And just when did I say we taxpayers would be off the hook? Are Toyota and Ford in danger of imploding as GM has? Let me say I would not hesitate to buy a new Toyota, Lexus, Ford, or Lincoln. I would very much like to say the same about a GM product but at this juncture I cannot. GM has failed to present a real plan, at least a plan the American public can feel confident in. I do not want GM to fail, not at all. If bankruptcy is the path to resurrection, by all means that is the path that must be taken. GM needs to take its strengths (and there are plenty) and concentrate on them. Chevy, Cadillac, Chevy Truck. That’s it. It won’t be easy, cheap, or painless but the GM we have known (and loved) is no more. They need to rebuild and they need to do it now.
To all the folks who suggest selling S/H/S……
just exactly who is going to buy Saturn/Hummer/Saab?? three moribund brands that have zero relevant products in the marketplace.
“I am not sure why you continue to harp on this point. Platform sharing is largely a good thing.”
I can tell you exactly why it’s not a good thing- it cheapens the brands having several competing models based on the same platform. Some have argued that GM has too many brands, but the biggest problem is that they have far too many competing models across those too many brands. Keeping the brand names and limiting them to one platform per brand makes the brands unique, and eliminates the competition between GM brands, while retaining those customers who still have “brand loyalty.” Traditionally, all the GM brands had a big car, a medium-size car, and a small(ish) car- differing very little between brands except in superficial detail. Maybe that worked in the 1950s, it isn’t working today.
Otherwise, GM needs only 4 brands- Cadillac for “luxury” cars, Buick (or Pontiac, doesn’t matter which) for “sporty” cars, Chevrolet for “economy” cars, GMC for light trucks/SUVs, and cut out the rest (better yet, cut GMC, label all trucks as Chevys and merge the “sporty” and “economy” brands- leaving GM with only 3 brands).
I think my plan is cheaper to do, because they wouldn’t have to buy out all those canceled-brand dealerships.
Evidently I’m wrong; disregard my last. Thank you.
Dear GM,
To be quite honest I’m sick of hearing about your company in the news. I find it absolutely astounding that the government is even considering providing your company with more of my tax dollars. I think its great that you are showing off your halo cars to the press and officials in Washington but lets be honest, your cars haven’t been up to snuff. What happens when a company makes products that no one wants? Well they go under. Instead you have been begging our government for funds to keep your dying company afloat. You guys just don’t seem to get it. Its not all about mpg’s and smaller engines. While those are some great ideas, you can’t make vehicles that are miserable to drive, and well to be honest thats mostly what you create. Take for instance the Chevy Cobalt. My mother had purchased a new Cobalt in 2005 (against my advisement) and well it drove like cheap car and felt like a cheap car on the inside. My favorite part was how about a year after she had it the cheap nail-polish type paint your company used on the door handels started peeling off in sharp pieces. To make a long story short, last year after her car started to come apart from the seams I took her to some proper car company dealerships and she finally fell in love with the Nissan Sentra. I’m not saying thats a perfect car, but shes driven American cars all her life and the first thing she said when she drove the Sentra is “Wow this feels like a luxury car.” I think that really should speak to your company, the Nissan Sentra is not a luxury car, its a model up from their base small car the Versa. Yet the car drives like it is alot more expensive than it is, and the fit and finish is years ahead of where your company currently is. I keep hearing all of this talk of American cars being on-par with foreign automakers in terms of quality, and having been around American cars all of my life, I can say without a doubt its simply not true. They are not on-par. So please GM do what every other company that can’t support themselves in this harsh economy does, go under. Come back as a smaller, leaner, and hopefully more focused company and try again. (PS stop using the bank bailout as an excuse, the money had to be loaned to those companies in order for American’s to be able to recieve loans to buy houses, cars, college educations, etc… Loaning to your company doesn’t help me, infact it hurts me.)
In summation, grow up and take responsibility. William Durant would be disgusted with what your excutives have thrown at consumers in terms of products.
I have a solution to all of GM’s problems. There was one thing that Adolf Hitler did right, he made a car for PEOPLE. Remember the VOLKSWAGEN ( peoples car). If GM had the guts they could get all the PEOPLE that they laid off and put them back to work making a peoples car. Something in the price range of five to seven thousand dollars. Your CEO’s would’nt make the billion dollar salaries but they sure in hell would make a lot of sales, who knows they still might reach their salary goals. I ‘ve been looking for a car with just radio,heater,and air conditioner,none of your fancy accessaries. but hav’nt been able to find one, and my brother-in-law worked for GM. With this kind of economy vehicle, your factory cost would be low but your retail cost could be high depending on how greedy you want to be. My advice would be;- to do what the Japanese did when they initionally got into the motocycle business, they sold below cost untill they drove almost everyone out of business, then when they had little or no compitition, they raised prices, now they own the biggest profit share in the industry. This advice is given free of charge, hope it keeps you out of bankruptcy, my brother-in -law needs his health care plan.
Dan
Richlandtown, PA.
DanL:
Why dont you provide some specifics to back up your claims that American vehicles aren’t on par with imports? If you have tangible evidence with regards to fuel economy, performance, build quality, warranty protection, etc. you should let us know instead of making vague statements. Its interesting that you are suggesting that the Cobalt is such a low quality car when CR actually lists the car as average in reliabiality. The Cobalt has some hard surfaces inside as do all compact cars. In fact, I have not been in a compact car yet that doesnt have hard plastics and some “cheap” materials. This is par for the course with economy cars. Considering the Cobalt’s ride quality has been universally praised I find it interesting that you claim the Sentra feels like a luxury car compared to the Cobalt. The car is old now and has been surpassed. That said, its still a decent car with several attributes. In the car business the older models are usually near the bottom of the class. That’s how the game is played and that’s why the Cobalt is going to be replaced by the Cruze.
“In summation, grow up and take responsibility. William Durant would be disgusted with what your excutives have thrown at consumers in terms of products.”
Somehow I doubt that. GM has been winning more accolades from the press than at any time in my memory. In 2008 they had 3 vehicles on C&D 10BEST and for two years straight the Malibu has made Automobile All Stars. GM models have also done well in Edmunds Consumers Most Wanted lists.
AmokL;
1. I would like you to document in detail the decisions made by CURRENT Gm management that are DIRECTLY responsible for this crisis. Keep in mind that the benefits current retirees enjoy were negotiated many years ago. Stop being general and start offering details to support your statements about managment failures. I guarantee you “Why GM Matters” would open your eyes quite a bit. You have no clue how close GM is to Toyota’s production methods and organizational struture. This management team is largely responsible for bringing GM so close to Toyota.
2. GM did not merge with Nissan because there was little in it for GM. GM already knows how to make small cars. They made successful small cars in Europe as we speak. Until now it really wasnt possible to sell those superior small cars here for a profit. That seems to be changing. They do not need Nissan to build competitive small cars. Nissan’s small cars aren’t even seen as benchmarks in the US market. N-R is about to post a multi billion dollar loss and Ghosn has said he thinks most automakers will need government assistance before this crisis ends. France has lined up support for its automakers. Just so you know.
3. GM must be offering some of that the customer wants because they are #1 in the US market. Your simplistic view that marketshare loss equals bad management is flawed. GM (and Ford and Chrysler) have lost share because the amount of competition has exploded in the US. Now luxury manufacturers are going downmarket, the Asian automakers have gone after SUV and truck profits and lower end brands (Hyundai) are going upmarket. Product definitely plays a part but marketshare loss was INEVITABLE when we opened our markets to foreign brands. This is how the market is divided in Europe but no one says VW is a failure for having 20% share in Europe. Only in America do we say companies with 48% of the market make vehicles no one wants. That statement is so absurd that it’s hard to believe it is repeated so often.
4. The regular Vue gets 19/26 and the hybrid gets 25/32. That is a significant improvement in my book. The normal Tahoe gets 14mpg in the city and the hybrid gets 20mpg in the city. That is significant to me. GM’s hybrids have not sold well because a) several of them are expensive, b) gas prices dropped c)lack of general public awareness d)some people believe that any vehicle that doesnt return 40mpg+ shouldnt count as a hybrid. You totally dimissed by points about GM being ahead of Hyunda, Nissan and others in hybrid technology. Its going to take a while for sales to reach a critical level but at least GM is in the game. America’s battery supply issues are well documented. We do not have significant battery supply infrastructure in place. All of the hybrids you are praising are assembled and sourced IN JAPAN, not the US. If GM was based in Japan perhaps they could get more batteries. At this stage in the market nothing is selling well so this isnt really a great time to evaluate the success of GM’s hybrids.
5. Your criticsim of the Volt exposes your hyprocirsy. On one hand you are saying GM’s management is to be faulted for not being as savvy and effective as Toyota management. You then come back to say the Volt is a waste of time because it will not be profitable in the short terms. Most experts feel that Toyota’s hybrids were not profitable at first and even now are barely profitable. Toyota took a gamble to show its technological leadership and you are saying GM should not do the same. Your positions are at odds with one another which shows that your bottom line is that EVERYTHING GM does is going to be wrong to you. BTW, I have not seen Volt pricing. Have you? You are mentioning $40k as if its set in stone and you also neglect to mention the $7500 tax rebate. If the Volt comes in at $35k customers will essentially be paying $27,500 which is affordable to many Americans. Funny how looking at all the facts changes things dramatically. BTW, Lexus hybrids are niche vehicles and the HS and LS have not sold well at all. Highlander hybrid sales are about 10% of total Highlander sales, barely more than a niche success.
6. Pruis sales were on the decline for most of 2008 and fell by about 50% by the end of the year. I disagree that its fan base is growing by the day. The prius is impressive but hybrid fans are committed to the myth than most Americans want hybrids. They do not. The Prius is a vehicle that appeals to a certain demographic and to people in that group its the perfect car. To many others its a mediocre car with great mileage that interests them little. The sales fall in 2008 showed that there are indeed limitation to the appeal of the Pruis.,
7. Unless you can provide a quote from Lutz I suggest you stop claiming that he said GM was against hybrids. I am aware of no such statement and GM has been working on hybrids for buses for years. I would think development of such systems goes back to the beginning of Lutz’s tenure at GM. BTW, you also ignore the fact that Lutz was the Volt’s biggets advocate and pushed the idea through the GM bureaucracy. Most in the industry thought hybrids had limited potential and thus only Toyota and Honda made early investments. If Gm is stupid than the same can be said about Nissan, Hyundai, BMW, MB, Mazda, Chrysler, etc.
8. As with many Toyota fans you are under the misconception that Ford uses Toyota’s hybrid system- they do not. The licensed two pieces of technology from Toyota to use with their system. Ford’s hybrid system in the Escape was developed by Ford. When they realized some of their technology was very similar to Toyota’s they licensed the patented tech from Toyota to avoid any delays or lawsuits. Ford’s 1st and 2nd generation systems were developed by Ford. Nissan is using Synergy Drive in the Altima. It would be foolish to assume that Ford’s current situation is related to hybrids. If you have any understanding of business you would know that low volume, low profit vehicles are not the answer to a coimpany’s financial success. Ford makes money (theoretically) on trucks, crossovers, luxury cars and large cars, not Escape hybrids. The Escape hybrid is not a sales success on par with the Prius anyway. Battery supply is a factor.
9. I do not work for GM but I do actually take the time to know the subject matter at hand. The internet has allowed anyone with access to proclaim themselves an authority on ANY matter. The fact that one has an opinion does not mean that opinion is based on good information or any research. You are basically repeating all the tired myths spouted by most people who believe that GM should fail because they don’t make a Prius competitor. Its silly to let your views on environmental issues cloud your judgement of what GM has done. Hybrids are not the answer to profitability issues. This is a fact that was hard for many to grasp until it became clear than the “greenest” car company in the world is about to lose billions of dollars. This proves once and for all that selling hybrids is not a guarantee of success.
beaugrand:
GM, nor the rest of the industry will abandon platform sharing. It makes sense and its the industry standard at this point. Your rants about platform sharing don’t even make sense. Customers don’t make a decision about a particular car based on its platform. Most customers don’t even know what other cars share a platform with their car. You say GM has too many models- that is probably why they are shedding brands and downsizing brands. Have you not noticed the news coming from them over the past few weeks?
Breal:
People arent buying much of anything these days. Its not just GM. Ford is not in the same shape, but Ford is not doing well. They borrowed billions before the credit market froze up and have access to capital that GM lacks. Ford is still losing money and will have major problems if GM goes under and takes suppliers along for the ride. Some are saying Ford is 6 months behind GM on the downward curve so I would not act like they are out of the woods. Same with Toyota. They are about to post their first annual loss in many decades and are doing worse than anyone could have expected 6 months ago. Remember, back in the fall many “experts” thought Toyota could ride this out on the backs of its hybrid vehicles and now they are doing worse than any of the other foreign automakers. That is quite a turn for the worst. In addition, you are flat out wrong in claiming GM has not presented a plan- in fact they have presented two of them. Perhaps you should read them before making false assumptions. You may not like whats in the plan but to claim they have no plan is disingenuous to say the least. You have invested time here to rant without regard for the facts but don’t seem to have time to review GM’s plan which is available for free online.
sheth:
From your post, it is quite obvious you don’t understand business matters. However, I shall try and explain.
“1. I would like you to document in detail the decisions…”
You would like me to? Perhaps you ought to learn how to request properly. FYI, I am not your flunky. Learn to do your own research. Here’s a little nugget. A look at the latest S&P research report indicates that since 2003, GM’s revenues have declined from $185 B down to $148 B in 2008, with a couple of upward blips. EPS has also declined in the same period, and has been -ve since 2005. Try reading GM’s annual reports for the last several years. Have someone explain those to you if you don’t understand them. GM has been heavily dependent on truck/SUV sales, since they sported greater margins. However, the consumer shift to smaller cars started accelerating over the last few years, notable after Katrina hit NOLA and GM was poorly positioned to compete in that market. Try doing some real research, rather than merely swallowing GM’s PR output.
2.”GM did not merge with Nissan because there was little in it for GM..”
As I noted earlier, any kind of collaboration with N-R went out of the window because GM mgmt was obdurate. For the same reason, Kerkorian walked away from GM and sold his entire stake (when the share price was in the 30s).
“3. GM must be offering some of that the customer wants because they are #1 in the US market..”
It’s painfully obvious you don’t understand business at all. Declining revenues and earnings over the last several years running does indicate poor management. I’ve heard your absurd excuses several times from GM apologists, who haven’t been able to explain away the poor results of last several years.
“4. The regular Vue gets 19/26 and the hybrid gets 25/32. That is a significant improvement in my book….”
The problem with you and GM mgmt is that a large segment of the car buying public doesn’t read your book. GM made a mistake by being late to the hybrid party. They then proceeded to compound that mistake by offering hybrid versions of some of their expensive and thirsty SUV/trucks. The Chevy Silverado was one of the first. The difference between the regular & hybrid versions was a scant 1 mpg. In other cases, eg. Escalade, Yukon, etc. the consumer in that market segment was not going to be swayed by the difference of a few mpg.
“some people believe that any vehicle that doesnt return 40mpg+ shouldnt count as a hybrid.”
You’re the first one I’ve heard make that statement, ever.
“You totally dimissed by points about GM being ahead of Hyunda, Nissan and others in hybrid technology.”
Huh? English, please.
“If GM was based in Japan perhaps they could get more batteries.”
Nope, since they were late to the party and battery makers had already committed to other customers.
“At this stage in the market nothing is selling well so this isnt really a great time to evaluate the success of GM’s hybrids.”
GM hybrids have never sold well. Try reading some of the sales reports GM has released over the last 2-3 years.
“5. Your criticsim of the Volt exposes your hyprocirsy.”
That statement proves a significant lack of manners and comprehension on your part. That’s your problem, not mine.
“On one hand you are saying GM’s management is to be faulted for not being as savvy and effective as Toyota management.”
Read my posts carefully. Have someone explain the contents to you, if need be. I have long said GM mgmt has lacked vision for quite a while. The hybrid issue illustrates that very well.
“You then come back to say the Volt is a waste of time because it will not be profitable in the short terms.”
GM themselves has said that the Volt will not be profitable for the next several years. At this stage, GM cannot afford a loss maker, without additional hefty handouts from the feds, pure and simple. At this stage, mgmt should have focused on improving the mpg of existing cars and/or introducing new fuel efficient models, (like the Cruze), as quickly as they could.
“Your positions are at odds with one another….”
Actually, my positions are quite in keeping with each other. The problem here is your lack of comprehension.
“BTW, I have not seen Volt pricing. Have you?”
Yep! That number comes from several GM press releases. Try doing some research.
“You are mentioning $40k as if its set in stone and you also neglect to mention the $7500 tax rebate.”
Actually, GM has mentioned that the price tag is expected to be NORTH of $40K. Ergo, your $35K number is pie in the sky. That federal credit is another taxpayer funded attempt at steering more sales towards GM.
“Funny how looking at all the facts changes things dramatically.”
True. You ought to try looking at all the facts sometimes. I did that about a year ago when I was considering GM as a possible investment/trading candidate.
“BTW, Lexus hybrids are niche vehicles and the HS and LS have not sold well at all.”
All luxury vehicles can be regarded as niche vehicles. How about you provide the actual sales numbers? Also, can you tell us how many Lexus hybrids were built in the first place?
“Highlander hybrid sales are about 10% of total Highlander sales, barely more than a niche success.”
Once again, Toyota hasn’t build the HH in large volumes. Until Q4 of last year, our local Toyota dealers couldn’t keep ANY Toyota hybrid in stock, including the HH. In July ‘08, they had sold out their hybrid quotes 2-3 mos. in advance. GM has never had that particular “problem”.
“6. Pruis sales were on the decline for most of 2008 and fell by about 50% by the end of the year. I disagree that its fan base is growing by the day. The prius is impressive but hybrid fans are committed to the myth than most Americans want hybrids. They do not.”
First of all, you’re trying to pass off your opinion as a fact. Secondly, there is no single vehicle that fits the needs of the entire car buying market. I’ve never met one single hybrid “fan” who thought everyone wanted a hybrid. OTOH, I’ve met quite a few people who wish they could own one (esp. the Prius), those who chose something else and then regretted not opting for the Prius, etc.
“The sales fall in 2008 showed that there are indeed limitation to the appeal of the Pruis.,”
Name one car that hasn’t seen a sales slowdown. That’s a reflection of the economic climate and has absolutely nothing to do with the perceived appeal (or lack thereof) of the Prius.
“7. Unless you can provide a quote from Lutz I suggest you stop claiming that he said GM was against hybrids.”
I suggest you learn to do your own research and stop telling others what they should/should not do. Since your posts indicated a weakness on your part when it comes to doing research, here are a couple of links.
http://www.hybridcars.com/carmakers/general-motors.html
Excerpt from the above:
“In 2003, Robert Lutz, G.M.’s vice-chairman of product development, said, “It just doesn’t make environmental or economic sense to try to put an expensive dual-power train system into less expensive cars which already get good mileage.” He argued that the focus should be placed only upon the biggest vehicles, such as buses, full-size pickups, and large SUVs.”
Here’s another one:
http://www.thecarconnection.com/autoshownews/1006727_2005-detroit-auto-show-part-vi
Excerpt from the above:
“GM Playing Catch-Up on Hybrids
“We know we’re late,” acknowledged General Motors product chief and vice chairman Bob Lutz, when asked about the automaker’s slow launch of hybrid vehicles. But he insisted that’s simply because “We play our own game,” and have wanted to make sure there’s a real business case to make for the high-mileage technology. GM’s initial take was that the added cost and complexity of hybrids, “was not going to be worthwhile,” said Lutz”
“I am aware of no such statement”
As the links above illustrate, lack of awareness on your part does not change the facts.
“GM has been working on hybrids for buses for years.”
Had it not been for myopic mgmt, GM could have had a large head start in the hybrid cars arena. However, they chose to squander their advantage.
“BTW, you also ignore the fact that Lutz was the Volt’s biggets advocate and pushed the idea through the GM bureaucracy.”
I didn’t ignore that at all. You fail to realize Lutz was trying to play catch up with Toyota and Honda, and trying to make up for his earlier misstep (see links above).
“Most in the industry thought hybrids had limited potential…”
That’s where vision comes in. You still haven’t figured that out.
“If Gm is stupid than the same can be said about Nissan, Hyundai, …”
As you yourself noted, GM had hybrid technology for buses, etc. They could have leveraged that expertise ahead of anyone, if mgmt had the vision. They didn’t. Now they’re playing catch up.
“8. As with many Toyota fans you are under the misconception that Ford uses Toyota’s hybrid system- they do not.”
The first generation of the Escape hybrid used Toyota’s Synergy Drive.
“If you have any understanding of business you would know that low volume, low profit vehicles are not the answer to a coimpany’s financial success.”
Look, your posts amply illustrate you have little understanding of business matters. Your endorsement doesn’t mean anything to me. However, your several attempts at belittling me say a lot about your and your lack of comprehension.
“9. I do not work for GM but I do actually take the time to know the subject matter at hand.”
Your posts prove otherwise.
“The internet has allowed anyone with access to proclaim themselves an authority on ANY matter.”
Looking at your posts, I agree.
“You are basically repeating all the tired myths spouted by most people who believe that GM should fail because they don’t make a Prius competitor.”
That is one of the most asinine statements I’ve read in a while. You’re trying to explain away the failures of GM’s mgmt team, and that too unsuccessfully.
“Its silly to let your views on environmental issues cloud your judgement of what GM has done.”
Show me where I’ve talked about environmental issues. Making that unfounded statement, once again, illustrates a lack of comprehension on your part. Actually, I’ve clearly said that the environmental issue had nothing to do with my decision to buy a Prius almost four years ago.
“Hybrids are not the answer to profitability issues. This is a fact that was hard for many to grasp”
I have never seen anyone claim that, in the first place. It certainly looks as though you’re trying to pass off your opinion as a fact yet once again.
If you believe in GM’s mgmt team so strongly, would you be willing to invest a significant portion of your portfolio (including retirement accts), say 10%, into GM stock? If not, why not? In other words, are you willing to put your money where your mouth is?
Amolk:
Your ignorance is only matched by your arrogance. First of all when gas prices shifted GM had many cars to offer, just like their key competitors. What many people like yourself try to argue is that because GM didn’t have a Prius competitor available they were totally reliant on SUVs. That is crap plain and simple. The CTS came out in 2003. The G6 came out in 2004 as did the Cobalt and Lacrosse. The Impala came out in 2005 as did the Solstice. GM was constantly bringing cars onto the market and most of them were competitive in fuel economy. US consumers favored GM SUVs over their cars when gas was cheap, but this was not proof that GM did not offer cars to interested customers. The Aveo was on the market before the Versa or Fit and you are telling me that GM was not interested in anything bug SUVs until recently. Please stop making poorly supported claims.
If you are a business expert than you understand that companies would rather sell high profit vehicles than low profit vehicles. Up until 2-3 years ago there was very little interest in subcompact cars in the US. Only recently have GM, Honda, Nissan and others started to import these cars here. Even now these cars are not huge sellers or profit generators. Toyota would rather sell an RX350 than a Yaris for the same reasons GM would rather sell an Escalade than a Cobalt. GM defended its SUV and pickup turf because thats where the profits were. It only makes sense. That said, GM did not abandon the car market at all.
“GM made a mistake by being late to the hybrid party.”
The entire industry save Toyota and Honda was late to the party. I made that very clear earlier and you never addressed the point. Its irrelevant if you are concerned about profits because hybrids are not that profitable. Especially when gas is $2 a gallon. There are incentives on virtually every hybrid on the market now. In addition, your assertion that hybrid technology on large vehicles is stupid is questionable at best. With upcoming CAFE standards all automakers are going to have to make their trucks far more efficient or stop making them. MB and BMW will be adapting hybrid technology to large sedans and heavy crossovers in the near future. Just because Toyota doesnt do it doesn’t mean its a bad idea.
BTW, your Lutz quote does not support your initial claim that he stated GM would not do hybrids. The quote merely states that spending a lot of money to make an efficient vehicle more efficient doesn’t make financial sense. Many other auto execs agree. Including your hero Carlos Ghosn.
“Declining revenues and earnings over the last several years running does indicate poor management. I’ve heard your absurd excuses several times from GM apologists, who haven’t been able to explain away the poor results of last several years.”
Revenues were down across the board. In case you missed it the US market was down 18% last year and incentives were at record highs. Toyota, GM and others will record decreased revenues in 2008. Use common sense. The more you post the more I realize you are clueless about the state of the industry. Does Toyota have a failed management team since losses are up and revenues are down?
“GM hybrids have never sold well. Try reading some of the sales reports GM has released over the last 2-3 years.”
GM does not have th supplier network required to build hybrids in huge numbers. GM’s hybrids are made in the US. Toyota and Honda build theirs in Japan where batteries and other components are available in huge numbers. It will be years before the US catches up. This is a US problem, not a GM only problem. Once again I will state that at least GM has hybrids. I am still waiting for that list of hybrids from Hyundai, Suburu, Mazda and Nissan.
“Read my posts carefully. Have someone explain the contents to you, if need be. I have long said GM mgmt has lacked vision for quite a while. The hybrid issue illustrates that very well.”
Again, you have not explained the contradictions in your earlier posts. On one hand you are saying GM should have gambled on hybrids. Then you go on to say the Volt is a waste because it wont be profitable and GM needs to focus on mainstream models. GM took that approach years ago when they could have been developing hybrids and many now criticize them for worrying about “the numbers” instead of leadership. People have priased Toyota for taking losses on hybrids just to get them to the market. YOu cannot have it both ways and your criticism of the Volt proves that you cannot be objective here.
“Yep! That number comes from several GM press releases. Try doing some research.”
Provide one link to a GM press release stating the MSRP of the Volt. Just one. The price has not been determined. Most of the speculation about the price comes from Lutz’s comments and analysts speculation. GM has not priced the car. Period. We have heard ranges from $30k to $45k from various sources.
“All luxury vehicles can be regarded as niche vehicles. How about you provide the actual sales numbers? Also, can you tell us how many Lexus hybrids were built in the first place?”
Cars such as the Es350, 3 series, CTS, 5 series, etc. are not niche vehicles. In some years the 3 series exceeds 100k units per year in the US. The GS and LS hybrids have not sold well. Lexus moves a few hundred of them per month. The RX has done better.
“First of all, you’re trying to pass off your opinion as a fact. Secondly, there is no single vehicle that fits the needs of the entire car buying market. I’ve never met one single hybrid “fan” who thought everyone wanted a hybrid. OTOH, I’ve met quite a few people who wish they could own one (esp. the Prius), those who chose something else and then regretted not opting for the Prius, etc.”
The facts are Toyota’s hybrid sales fell more than their overall sales in the last quarter of 2008. it was a combination of low gas prices and people looking for the best deals- which were found on gas only models. When the Big 3 went to Congress many keyboard CEOs and long time foes of Detroit were preaching that the lack of hybrids and small cars was the PRIMARY reason for the dire situation. Never mind that such an assumption flies in the face of the facts. You are suggesting that offering more hybrids would be the key to GM’s survival but reality shows us that Toyota is the global leader in hybrids and is about to post a $4b-$5B loss. In short, there is absolutely NO proof that selling hybrids or small cars is the key to surviving this global recession. In addition, there is NO proof that Gm’s revenues and profits would have been better if they had cut back on SUV offerings and tried to peddle more $15k compacts instead.
“Name one car that hasn’t seen a sales slowdown. That’s a reflection of the economic climate and has absolutely nothing to do with the perceived appeal (or lack thereof) of the Prius.”
Malibu sales were up 39% last year. Saturn Aura sales were down about 1%. Mini sales were up. Prius was down double digits in 2008 in spite of having incentives that were unavailable in previous years.
“As the links above illustrate, lack of awareness on your part does not change the facts.”
No, actually they demonstrate that Lutzs statements are what I described earlier. GM has said numerous times that they were late to hybrids because they didn’t see any profitability there. This is not news. You inferred earlier than Lutz indicated that GM would NEVER do hybrids and then suddenly changed course. Lutz has been consistent in saying a)hybrids dont make sense from a business perspective and b) they are not going to be the only solution to increasing efficiency.
“Had it not been for myopic mgmt, GM could have had a large head start in the hybrid cars arena. However, they chose to squander their advantage.”
Wrong again. The system they used in buses became the starting point for the two mode system in their current SUVs and pickups. Its also the system that will be adapted for use in MB and BMW products. Get a clue. Toyota has not debuted any hybrid system that works on large SUVs or pickups yet. GM did not “squander” their research and development because they were the first to market with a hybrid system for large trucks. Ford and Toyota have no comparable system.
“The first generation of the Escape hybrid used Toyota’s Synergy Drive. ”
This is a lie. Ford patented some control software from Toyota. Ford developed their own system and has 100+ patents for the system. It is NOT Synergy Drive and I dare you to offer a link saying otherwise. Ford and Toyota did not work together on the Escape Hybrid and Ford did not purchase a complete hybrid system from Toyota.
“If you believe in GM’s mgmt team so strongly, would you be willing to invest a significant portion of your portfolio (including retirement accts), say 10%, into GM stock? If not, why not? In other words, are you willing to put your money where your mouth is?”
If I thought there was ANY prospect of the auto market returning to near normal levels in the next year or so I would buy some GM stock. With the economy cratering and Toyota losing billions this is a bad time to be a car company. What you are too naive to recognize is that no change in management at GM is going to make up for a 30% loss in volume in the US market. You can hand pick the GM team and they will not be able to make the company profitable unless the US market returns to 12M-13M units. Period. This is a revenue problem, not a management problem. You have offered no concrete examples of the immediate changes your management Dream Team would make to quickly bring about profitability. Until you do that your criticisms are worthless.
Sheth:
“Your ignorance is only matched by your arrogance.”
In your case, your ignorance and lack of understanding when it comes to business, financial and common sense, is perfectly matched by your lack of common manners and the ability to comprehend simple English. You’d make a perfect addition to the GM executive mgmt team.
“First of all when gas prices shifted GM had many cars to offer, just like their key competitors.”
Relative to their competition, GM cars had poor reliability ratings and resale values.
“What many people like yourself try to argue is that because GM didn’t have a Prius competitor available they were totally reliant on SUVs.”
If you actually understood simple English, you would have understood I’ve never said that. As a matter of fact, I’ve clarified that before. Please have someone who actually understands English explain my prior posts before you embarrass yourself once again.
“That is crap plain and simple.”
That describes your posts perfectly.
” you are telling me that GM was not interested in anything bug SUVs until recently. Please stop making poorly supported claims.”
It is very obvious you are unable to comprehend simple English. That isn’t what I said. A large chunk of GM’s revenues depended on gas guzzlers. After Katrina, we all got a preview of what might happen as gas prices rise about certain levels. That was the time GM should have started changing their revenue mix and reducing their brands through consolidation, spin offs or sales. Now they have Hummer on the block (and have had it for a while). If they do manage to unload Hummer, it will be at fire sale prices. They aren’t going to get premium pricing for Saab or any other brand they try to sell. Once again, mgmt’s lack of vision is starkly apparent here.
“If you are a business expert than you understand that companies would rather sell high profit vehicles than low profit vehicles.”
Obviously, you haven’t got the first clue about how business is run. Ideally, companies like to sell high profit vehicles. However, there are situations which warrant selling a higher volume of lower margin products. Then there are “loss leader” situations.
“I made that very clear earlier and you never addressed the point.”
Actually, I did. Your statement is further proof of your weak comprehension. GM had the infrastructure to be a leader in that arena. Lack of vision has left them playing catch up.
“Its irrelevant if you are concerned about profits because hybrids are not that profitable.”
That is a typical short term view. You’re correct in the short term. Over the longer term, your statement itself is irrelevant.
“Especially when gas is $2 a gallon.”
You’ll fit in well with GM’s myopic mgmt team. Simple logic tells us Toyota must have begun the design and development of their hybrid systems sometime in the mid 80s. That’s when gas was under $1/gal. That’s called vision.
“There are incentives on virtually every hybrid on the market now.”
There are incentives on every vehicle on the US market right now. That’s the effect of the current economic landscape. In my area, the local GMC/Hummer dealer is offering a chance to win $25K, in return for taking a test drive. Do let me know when you see those kind of gimmicks employed to sell hybrids with good track records.
” In addition, your assertion that hybrid technology on large vehicles is stupid is questionable at best.”
Here’s one more piece of evidence that your comprehension is terribly weak. I shall attempt to explain yet once again. GM attempted to sell hybrid versions of it’s gas guzzlers. That was a glaring mistake. Someone who’s looking to buy something like a Tahoe or a Yukon, isn’t concerned about a few (and I mean few) mpg. Now, if they wanted to make an environmental statement (there’s irony for you), wanted the tax breaks and/or were planning to use it in a business context, that’s a different story. That’s the reason GM’s hybrid sales have been anemic, at best.
“Just because Toyota doesnt do it doesn’t mean its a bad idea.”
FYI, Toyota’s goal is to have the hybrid equivalent of every vehicle in their line up, in the next few years. That tidbit comes from the service personnel at our local dealerships.
“BTW, your Lutz quote does not support your initial claim that he stated GM would not do hybrids.”
Once again, you’re offering proof that your English comprehension is weaker than a newborn kitten. Read my post of 03/04/09. As I stated therein, Lutz was busy lambasting hybrids as late as 2005. About 18 mos. later GM started talking about hybrids. That was a reversal and was noted by the financial media as well as the investment community.
” Including your hero Carlos Ghosn.”
Now, please do point out where I’ve said Ghosn is my hero. If you are unable to do so, that makes you a silly liar.
“Declining revenues and earnings over the last several years running does indicate poor management. I’ve heard your absurd excuses several times from GM apologists, who haven’t been able to explain away the poor results of last several years.”
“Revenues were down across the board. In case you missed it the US market was down 18% last year”
Once again, there’s your lack of English comprehension. Do work on it, old boy. You’re embarrassing yourself over and over again. Read my statement again. I referred to declining revenues and earnings over the last SEVERAL YEARS at GM. You’re offering up the current economic climate as an excuse? Get real.
“Use common sense.”
Take your own advice first. You desperately need it.
“The more you post the more I realize you are clueless about the state of the industry.”
The more I read your posts, including the ones where you’ve responded to other posters here, I realize that you haven’t got the first clue when it comes to running a business. By any chance, are you a member of the GM executive team? You’d fit in perfectly with them.
“Does Toyota have a failed management team since losses are up and revenues are down?”
Take a look at the revenues and earnings for the last five years and then tell me what numbers you see.
“GM does not have th supplier network required to build hybrids in huge numbers.”
There’s one more clueless statement from you. Last year, when Toyota dealers couldn’t keep a single hybrid in stock (Prius, Camry and Highlander), GM dealers were having a hard time moving the hybrids on their lots. What’s the point of GM building hybrids in huge volumes when they couldn’t sell what they had built, at the same time their competitor’s hybrids barely sat on dealers’ lot for a couple of days?
“Again, you have not explained the contradictions in your earlier posts.”
Actually, the problem is with your lack of comprehension. My points have been consistent.
“On one hand you are saying GM should have gambled on hybrids.”
There’s a vast difference between gambling and investing. Those who don’t have a clue about the latter, always confuse the two. Your statement is an excellent example of that.
“Then you go on to say the Volt is a waste because it wont be profitable and GM needs to focus on mainstream models.”
That lack of comprehension is certainly your Achilles’ heel. Launching a care like the Volt is going to take some serious cash. GM’s already burned through a mountain of cash with the Volt. At this point in time, the smarter course would have been to promote their smaller cars more aggressively and/or bring models like the Cruze quicker to the US market.
“GM took that approach years ago when they could have been developing hybrids and many now criticize them for worrying about “the numbers” instead of leadership.”
There’s no effective leadership without vision.
“People have priased Toyota for taking losses on hybrids just to get them to the market. YOu cannot have it both ways and your criticism of the Volt proves that you cannot be objective here.”
Your statement offers yet more proof your comprehension is poor. Oh yes, very obviously, you don’t understand what it means to have vision.
“Provide one link to a GM press release stating the MSRP of the Volt.”
Here’s Bob Lutz stating that the Volt will retail for $40K.
http://gm-volt.com/2008/06/18/lutz-40000-is-breakeven-price-for-the-chevy-volt-and-first-generation-will-not-make-money-for-gm/
“All luxury vehicles can be regarded as niche vehicles. How about you provide the actual sales numbers? Also, can you tell us how many Lexus hybrids were built in the first place?”
“The GS and LS hybrids have not sold well. Lexus moves a few hundred of them per month. The RX has done better.”
Hmm! I notice you aren’t able to back up your statements with actual numbers. How many were built and how many were sold? You see, it isn’t possible to sell more than are actually built.
” When the Big 3 went to Congress many keyboard CEOs and long time foes of Detroit were preaching that the lack of hybrids and small cars was the PRIMARY reason for the dire situation.”
Really? I’ ve never seen anyone make those claims. Considering you’re making these claims and your history of misunderstanding an misquoting, pardon me for not believing you.
“Never mind that such an assumption flies in the face of the facts. You are suggesting that offering more hybrids would be the key to GM’s survival”
As I’ve stated multiple times, I have never suggested that. Your erroneous statement stems for the poor comprehension you have habitually displayed.
“In addition, there is NO proof that Gm’s revenues and profits would have been better if they had cut back on SUV offerings and tried to peddle more $15k compacts instead.”
That’s a daft argument.
“Malibu sales were up 39% last year. Saturn Aura sales were down about 1%. Mini sales were up.”
How about you provide y-o-y numbers to back up your claims?
“No, actually they demonstrate that Lutzs statements are what I described earlier. GM has said numerous times that they were late to hybrids because they didn’t see any profitability there. This is not news.”
That illustrates the myopic nature of GM’s mgmt team quite well.
“You inferred earlier than Lutz indicated that GM would NEVER do hybrids”
I’ve addressed this earlier. YOUR inference is incorrect.
“and then suddenly changed course.”
Yep! About 18 mos or so after Lutz’s rants at the Detroit Auto Show.
“Had it not been for myopic mgmt, GM could have had a large head start in the hybrid cars arena. However, they chose to squander their advantage.”
“Wrong again. The system they used in buses became the starting point for the two mode system in their current SUVs and pickups. Its also the system that will be adapted for use in MB and BMW products. Get a clue. Toyota has not debuted any hybrid system that works on large SUVs or pickups yet. GM did not “squander” their research and development because they were the first to market with a hybrid system for large trucks. Ford and Toyota have no comparable system.”
Sheth, you’re the one that’s wrong. GM failed to take their expertise and apply it to passenger cars, small trucks, small/midsize SUVs, etc. They handed the lead to their competitors on a silver platter.
“If I thought there was ANY prospect of the auto market returning to near normal levels in the next year or so I would buy some GM stock.”
In short, you’re NOT willing to put your money where your mouth is. Hardly surprising!
“What you are too naive to recognize is that no change in management at GM is going to make up for a 30% loss in volume in the US market.”
Very obviously, in addition to the fact that you don’t have a clue when it comes to running a business, you’re also clueless about effective mgmt. Here’s a clue for you – a mgmt team that leads a co. to several years of declining revenues and earnings, not to mention shareholder value destruction, isn’t worth a hill of beans.
“You can hand pick the GM team and they will not be able to make the company profitable unless the US market returns to 12M-13M units.”
This mgmt team led GM to declining revenues and earnings when the US market was that size.
“This is a revenue problem, not a management problem.”
You’re wrong. That clearly show your lack of experience in this area.
“You have offered no concrete examples of the immediate changes your management Dream Team would make to quickly bring about profitability. Until you do that your criticisms are worthless.”
The adjective “worthless” describes your posts thus far (including your responses to other posters). Now, with the fire raging, any mgmt team is first going to work on putting out the flames. The point I was making (and that which you didn’t comprehend) was that a competent mgmt team would have avoided the perilous situation is GM finds itself now.
Sheth, thus far, your posts have been weak attempts at providing excuses for GM’s lame mgmt. Kerkorian, a very well-known billionaire investor, walked away from GM, taking a loss on his investment, because GM’s mgmt was hard headed. You’re perfectly suited for the CEM (Chief Excuse Maker) role at GM. They do need your talent that area.
All in all, you’ve successfully demonstrated you don’t understand business, investing or mgmt, along with an appalling lack of manners and English comprehension. Do remedy these first, before you embarrass yourself yet once again.
Why has no one mentioned the HARD COST of bankruptcy? I haven’t read your full plan yet but I’m sure it includes the legal costs of Chapter 11. The only group who would benefit from a GM bankrupcty are bankruptcy attorneys. GM needs to get this argument front and center to the pundits and the general public.
Sherrie M,
That isn’t correct in my opinion. GM’s customers and the American people would benefit from a Chapter 11 (assuming GM hasn’t skewed the books to make things look worse then they are).
GM needs to create competitive products both in design and cost. They may be well on their way ith design but costs are still killing them. Additionally There is some question as to the effectiveness of the management. All these things are addressed with Chapter 11…. additionally and probably most importantly America can’t reinforce bad behavior (by executives) for making foolish and bad decisions that result in their businesses failing and then have the government there to keep these companies from failing. Failing needs to be a real possibility so that companies have incentives to do things in such a way that minimizes failures and maximizes the efficiency of their resources.
Aside from that cold harsh reality I almost agree with what you say. Many of us strongly feel that GM would be a better company in the long run as a result of a Chapter 11….. However only time will tell what ends up happening. And ultimately what GM’s success will be.
im on phone with broker now at 11pm sun to drop it…at what its worth before it becomes a penny stock in a belly up company. or comepletly worthless.
For many years I have supported buying vehicles from American companies. It just made good sense to purchase products from U. S. companies and, in many case, produced by U. S. citizens.
Under no circumstances will I now purchase a GM product. In essence it is now a government controlled company. Neither will I purchase from Chrysler which will either be bankrupt, government controlled or foreign owned. I will purchase from Ford Motor Company, the only current sound U. S. manufacture of automobiles.
Ford did just offer to make payments for a certain length of time if you lose your job. Then GM announced the same. That is dumb! GM is broke and using taxpayer money to operate. So, why as a taxpayer should I be supporting any company that is using government money to help someone that purchased a car and cannot pay for it.
It seems that GM is going to have to file for bankruptcy. That is the legal and proper way for a company to rectify it’s problem. I would be more likely to purchase a car with them in bankruptcy than I would with them continuing to receive bailout money and operated by the government.
GM management must shoulder much of the blame for their condition. They kept on making to many products. But, much of the problem is the economy. All auto manufactures, domestic and foreign are seeing significantly lower sales.
It does appear that AIG and the banks got preferential government treatment. In addition to not purchasing from GM or Chrysler I will never again purchase any product from AIG or bank with any bank that has received TARP money.
David,
First off, I agree with you in the case that I would only buy a car from an American company. I just want to point out that if their are other people that agree with you and won’t buy a car from a company that has recieved gov’t money, then they shouldn’t buy Toyota’s, or Hyndai’s and possibly other automakers either because they recieved plenty of tax breaks (basically free money) from states where they set up assembly plants.
Secondly, if you voted for Obama, then you kind of brought on the government controlled GM yourself. Sorry, but that’s Obama’s way. He feels the government is better at running businesses than private people. Yet, last time I checked the US is about 9 trillion in debt, and the only way they (we) are surviving is because China continues to loan our government money – and yet the government feels they can lecture GM about being irresponsible? For the government to take over a private company makes me sick.
Lastly, you say the guarantee of payments from the automakers if you lose your job is dumb. While that’s debatable, if you want GM to get off of tax payers dollars they need to sell cars. Unfortunately in this economy where people are fearful of losing their jobs, they won’t make major purchases like a new car. Therefore GM is trying to offer them some assurance that will make people more likely to buy a car. Bottom line is, nothing else matter unless GM starts selling cars, and this is one way to do it.
Tom,
I am not sure I fully understand something. If the bondholders are being asked to take concessions by partial conversion to common stock, is that in addition to the current common stock holders? Other than the spiral loss in stock value and lack of dividends, would you say that common stock holders will prevail in the long term?
Would a surgical restructure still protect the existing common stock holders?
Thanks.
Tim,
Let me assure you that I did not vote for Obama!
You are correct that Toyota and others received various tax breaks from states. I have never owned anything other than a Chrysler, Ford or GM product and have absolutely no intention of owning any foreign auto. I consider that the selling out of America.
You are also correct that the U. S. Government has no reason to lecture any company about being irresponsible. Also they have no business dictating to GM that the Chairman should resign. Congress could have done something about the auto situation in December, but did not. What they are doing now is very similar to what Senator Corker proposed. Instead they elected to waste billions and still there is no solution. Chapter 11 bankruptcy still seems a very viable option and, perhaps, they will come out a better and stronger company.
My next vehicle will be from Ford Motor Company.
The Obama Admnistration has given GM until June 01, 2009 to come up with a meaningful and far reaching viability plan. Essentially this would mean a plan for reorganizing and rationalizing production, with a focus on fuel efficiency, safety, re-engineering. and a refocussed marketing thrudst. This is also undoubtedly going to demand concessions from bond holders and trade unions and possibly even pensioners. Question is does GM have enough time in say 49 days to do this plan. Since such a plan to be effective and sustainable would need to be a strategic paradigm change. If GM does not meet the requirements of the Administration, will the Administration allow GM to fail, with its attendant far reaching, negative social, economic and psychological repercussions?
I think not !!. GM will be given more time and possibly more money, untl it comes up with an acceptable plan. But that said how long would it take for the effects of the new plan to kick in? What will be the short term effects on employment and corporate sales ? Is GM and also Chrysler doomed to fail sooner or later? Where will Ford stand when the smoke clears ?
The foreign based manufacturers have a big head start.