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Ford made a profit earlier this year. They're losing much less than GM right now, and are asking for a line of credit rather than an out and out bailout. This thread is about GM, don't try to bring Ford down with you. :shades:
It's a fair statement about how they'll pay these things back...I think that's why buying an equity state is preferable to a loan. I don't think GM stands a chance of paying their loan back...honestly, same with Ford, which is why I'm hoping they DON'T tap the credit line.
Oh, you're forgetting Chrysler, which would have to pay back part of the $6 billion too. But then again, everyone always forgets Chrysler, as they should, :P
No, capacity. The big 3 have shut down and are shutting down plants to reduce capacity. And sales mean vehicle sales which is correlated to capacity. If capacity goes down they build fewer vehicles. If plant closings keep going down and corresponding new plants are not built then sooner or later there is a crossover and the country will have under capacity. Of course since we dropped to 10,000,000 sales a year there is a lot of over capacity today. BUT once sales go back to 15,000,000 or even less than that there will be undercapacity.
Right now, they are shutting down plants to reduce capacity but they still have to pay the workers and suppliers. And you are selling fewer cars than forecast. And you have to have a $2000-$6000 rebate to move the product. It's no wonder they are losing money hand over fist.
They need to break this business model to have any chance to make a profit. And the only was they can do this is bankruptcy.
You're right. There are more off lease cars available. You can get a used SUV for a song right now.... I think your situation is becoming more typical. Do i really need that new car smell or can I get by with a not so new car but be able to take the family to dinner at Chili's or Red Lobster on Friday or Saturday night?
No, the majority of experts have said the opposite. I have posted link after link as such. The only people I've heard who have this view have something to gain from the $25B (Big3, suppliers, UAW, and some investors - like Cerberus), or those who are uneducated "pretty faces" of the media. Go to CBS Marketwatch, CNN Money, or the Wall Street Journal and see what I mean.
You're confusing 2 things as one. Capacity is how many vehicles your plants can make. If you have Plant A that can make 100,000 Malibus, but the market is only buying 75,000 Malibus, then the plant has to adjust to make 75,000 Malibus, and it thus is being utilized 75%. If they are selling 60,000 Malibus then the plant slows down and they make 60,000 Malibus and the plant is utilized 60%. It is idle 40%, or it is running slower than optimum.
If you close Plant A then yes you have cut capacity. You would cut capacity 100,000 Malibus. If you reduce how many cars Plant A is making, then you have reduced utilization. 2 different things; try some of the following:
http://www.newyorkfed.org/research/quarterly_review/1976v1/v1n1article2.pdf
When demand goes down, utilization goes down, thus resulting in a higher cost/unit, thus reducing profit (or increasing loss per unit).
(I'm a Mfg. Engr. and have an MS in Business Management.)
If plant closings keep going down and corresponding new plants are not built then sooner or later there is a crossover and the country will have under capacity.
"Mothballing"; are you familiar with that? Or the good manufacturers can deal with the good and bad times. I hate to use this example but what is Toyota doing during this slowdown, that's also affecting them? They are training people in new skills, and doing extra maintenance; while they still may idle for a week here and there. They can run at 50% utilization for the next 6 months if need be, and then if GM goes under run at 100%. A good manufacturer has long-term planning, and is a marathoner not a sprinter. Most manufacturers will simply ride out this "storm", and take advantage of the turnaround.
Standard business terms are anywhere from Net 30 - Net 60. Almost any sale between companies gets paid 30 to 60 days after delivery. Customers do this partly to insure that the delivered goods are of acceptable quality, and partly to hold onto cash as long as they can, to minimize the cash they themselves need to borrow. My company also figures in its plans that about 3% will never get paid.
This delay in getting paid is why companies need liquidity. That is why you hear that GM needs a certain amount of cash (something >$10B) to stay in business. Any business needs to initially raise their startup funds + have enough $ to pay their expenses for 60+ days.
this is the paper on what happens if we lose the big 3 or one of them. Not sure who the other experts are but this group is very informed.
http://www.cargroup.org/documents/FINALDetroitThreeContractionImpact_3__001.pdf
Edmunds.com has forecast 850,000 sales for November, the third straight month below 1 million. Before the current stretch, industry volume hadn't been that low in more than 15 years. September's 26.6 percent decline was followed by a 31.9 percent fall in October.
The year-to-year decline in November sales would mark the 13th consecutive monthly drop in U.S. auto sales, extending a slump expected to run well into 2009.
The market will bottom out in the first quarter of next year, Tom Libby, an analyst at J.D. Power and Associates, said in an interview with the newscast Automotive News Today. After that, he said, sales gradually will strengthen.
Said Libby: "We do see 2010 definitely being a recovery year." "
http://car.osu.edu/drupal/index.php?q=node/46
The director of the Center for Automotive Research has and will be funded by, and I quote from my OSU link "His research has been funded by, among others, General Motors, Ford, DaimlerChrysler, Delphi , Visteon, Dana, ArvinMeritor, Fiat, Honda, Lamborghini, Magneti Marelli, Oshkosh Truck, Cummins, ..."
So this is like a drug company hiring a former and possible future consultant to verify their new drug is safe and effective. It's BIASED. You need to go outside the cozy circle of the auto world, to get as far from the $ influence.
OK, what is this guys track record regarding forecasts. I mean last year did he predict this year right? Because in order to know how many vehicles will be sold next year requires a good understanding of macroeconomics. Is this guy a PhD in economics? Not even the best minds on Wall Street or in Washington have a good handle on what's going to happen next month. The situation we're in economically is far more serious then what we're in now. The quote from the other day is that we're in the 1st inning of the next real estate crisis - commercial real estate. And then we have a trillion $ mess with credit card balances that will be hitting soon. And if we have any sort of terrorist attack that wrecks more havoc with trade.
If you want proof of the mess we're in, consider that after all the blood that's been shed in the stock market so far, and all that the Treasyury is doing to prop up the financial system including multiple interest rate cuts, financial stocks fell an average of 17% today.
On the eve of Detroit’s day of reckoning with the United States government, House Majority Whip Jim Clyburn, a South Carolina Democrat, said that the future of the auto industry was up to him, the CEOs of Chrysler LLC, Ford Motor Company and General Motors would be fired.
“If I had my way, all three of those guys would be in the unemployment line and I think that ought to be one of the conditions for us doing this,” Clyburn told reporters at a press conference earlier today. “They need to be giving up their jobs, not just their packages.”
“We need to have new leadership. That’s what we would do if we had this kind of failure on a football field. We would be getting a new coach — sometimes a new athletic director,” he said. “We need to clean house with these guys and bring in new people.”
Clyburn will be responsible for actually rounding up the votes needed for an automaker rescue plan. He has stated that he wants the $25 billion the automakers are requesting to come from the $700 billion previously set aside to help out Wall Street and banks.
All three CEOs - Chrysler’s Bob Nardelli, Ford’s Alan Mulally and GM’s Rick Wagoner - met today in Detroit to finalize the plan they will present to Congress beginning tomorrow.
Perhaps Friday they will all get their severance packages!
Regards,
OW
We should listen to someone outside the auto world to get data on the auto world? These guys know the automotive world inside and out. Yes, perhaps they could be biased but they know their stuff. But hopefully we will never have to figure out if they were incorrect.
"His research has been funded by, among others, General Motors, Ford, DaimlerChrysler, Delphi , Visteon, Dana, ArvinMeritor, Fiat, Honda, Lamborghini, Magneti Marelli, Oshkosh Truck, Cummins, IBM, Motorola, Allied Signal, the National Science Foundation, NASA, the U.S. Department of Energy, the U.S. Army TACOM, the National Renewable Energy Laboratory, and DARPA."
They also have done this before and I do not recall anyone disputing their findings.
These studies include: The Center for Automotive Research. Contribution of the Motor Vehicle Supplier Sector
to the Economies of the United States and its 50 States. Prepared for the Motor & Equipment Manufacturers
Association, Ann Arbor, January, 2007. The Center for Automotive Research. Contribution of Toyota to the
Economies of Fourteen States and the United States in 2003. Prepared for Toyota Motor North America, Inc.,
Ann Arbor, June, 2005. Institute of Labor and Industrial Relations, University of Michigan and the Center for
Automotive Research. Contribution of the U.S. Motor Vehicle Industry to the Economies of the United States,
California, New York, and New Jersey in 2003. Prepared for the Alliance of Automobile Manufacturers, Inc., Ann
Arbor, May, 2004. Institute of Labor and Industrial Relations and the Office for the Study of Automotive
Transportation, University of Michigan and the Center for Automotive Research. Contribution of the Automotive
Industry to the U.S. Economy in 1998: The Nation and Its Fifty States. A Study Prepared for the Alliance of
Automobile Manufacturers, Inc. and the Association of International Automobile Manufacturers, Inc. Ann Arbor,
Winter 2001. The Office for the Study of Automotive Transportation, Transportation Research Institute, and the
Institute of Labor and Industrial Relations, University of Michigan. The Contribution of the International Auto
Sector to the U.S. Economy. A study prepared for the Association of International Automobile Manufacturers, Inc.,
Ann Arbor, March, 1998. McAlinden, Sean P., et. al., Economic Contribution of the Automotive Industry to the
U.S. Economy – An Update – A Study Prepared for the Alliance of Automobile Manufacturers, Center for
Automotive Research. Ann Arbor, Fall 2003. Office for the Study of Automotive Transportation, Competitive
Survival: Private Initiatives, Public Policy and the North American Automotive Industry – Prepared for the
U.S.-Canada Automotive Select Panel. University of Michigan Transportation Research Institute, Ann Arbor, June,
1992. The research staff of the Center for Automotive Research performed a number of these studies when located
at the University of Michigan’s Office for the Study of Automotive Transportation.
Smart guy. Nardelli has been there less than one year and Mullaly two years. Yep, they come in with a losing team and things get worse due to issues beyond their control. Yep fire them and bring someone else in.
Regards,
OW
You make a good point. That's why IMHO Wagoner is the only one who should be fired. He's clearly been in charge long enough and is not the right person to turn this around.
Gotta agree. But CAR is not just made up of economists. They are a group of professors and engineers steeped in the car business and how it works. They know more about the auto business than anyone outside the companies themselves.
Now that makes sense. While I think that Wagoner did about all he could he is the only one that should be asked to leave. Most of those Congress who made comments are idiots on what is going on and grandstanding and have no idea what they are talking about. Truly disgusting point in our countries history. But if they are truly representing the thoughts of their constituents then so be it.
Hearings been delayed til Thursday.
Wall Streetor in Washington"Best minds in Washington." That's a great oxymoron. And it's going to get worse Jan 20.
>Is this guy a PhD in economics?
Actually all the PhDs don't seem to have served well in economics, have they.
2014 Malibu 2LT, 2015 Cruze 2LT,
That's the truth. The "hearings" (political speeches) should have been led by facilitators such as the fellow discussed in the few previous posts with knowledge of the auto industry instead of politicians. I said that in previous posts. We'd be a lot further along in re what we could do and should do to save our auto industry from further damage from the imports.
2014 Malibu 2LT, 2015 Cruze 2LT,
I will say I am impressed with the diversity of the folks he has been picking. Not that I agree with all of them but they actually are not just his close friends. I am so hoping he can do a good job and does like every politician, not keep his promises. Except in this case I hope he does the right thing for our country (not just auto related).
Collecting or getting data, is different from analyzing data. You can sometimes trust people in a biased organization - and by that I mean one that has friendly and/or financial ties, to collect data. But when it comes to analyzing the data, we have learned to use as neutral of people as we can to write an unbiased report. $ is too corrupting to allow people who are employed or otherwise benefit from the analysis, from writing the analysis.
That is why we don't let power companies hire a consulting agency to come in and inspect their nuclear plants, or for drug companies to hire consultants to come in and review the testing, or for the home football team to hire the referees.
But you don't even need any high-powered analysts to do this. Look at the history of companies that have fallen. It has never been the case that a single company failure brought down an entire industry, when customers still exist. When U.S. steel went under, other stell companies prospered. When DEC and Wang went others, Dell and HP grew. When General Dynamics and other defense contractors laif off hundreds of thousands in 1990, others prospered and the workers got other jobs.
If you think the failure of GM is going to bring down the economy, then give some examples of failures that have done so. It just doesn't happen, as the world works on an equilibrium. If 12M vehicles are in demand here in the U.S. 12M will be bought and sold, no matter who's nameplate is on it. The market is very efficient in that respect.
"CAR has tried to quantify that case. An automaker-commissioned study found 3 million U.S. jobs would be lost in the first year if the Detroit 3 go under."
What a surprise on the conclusion!
"Ford Chairman Bill Ford told National Public Radio that the company is negotiating with CEO Alan Mulally on a cut in pay and perks. In two years, Ford has paid CEO Alan Mulally nearly $50 million and allowed $752,000 worth of personal and family use of company planes. "We're talking to Alan about it," said Ford, who's taken no salary for four years. "We are very sensitive to public opinion."
GM CEO Rick Wagoner has not publicly agreed to a pay cut, although he took cuts in 2006 and 2007. His base pay returned to $2.2 million this year. His total take for 2007 was $14.4 million."
All executive/salaried/UAW bonuses should be returned to the corporations for the last several years, unless that company made $; should be a stipulation of any aid! This is money that we otherwise would not have had to loan them! :mad:
I could see Ford wanting a higher-priced sports car; and would pick up the Corvette plant. I could also see Ford buying Jeep.
Automaker bailouts a global problem (Straightline)
VW, Toyota, Nissan, Porsche, Audi, Mercedes, Subaru, and many other makes are doing okay, because they didn't go into this "financial storm" in bad-shape, and they understand that economies fluctuate and they need to plan for good and bad times. For instance many Toyota plants look at a slow-down as an opportunity for everyone to learn new skills, and to analyze and improve the whole plant's processes thru Kaizen events.
If I recall correctly, it was Ford that was first of Big 3 that looked at and started to adopt some of Japan's quality/process improvement methods. They had a slogan of, "Quality is Job One".
Believe that American manufacturers took notice of Japanese quality and techniques in late 80's. But, what is amazing about the culture of GM and its leadership is that they condoned and agreed to things like jobs banks instead of viewing downturns in sales as an opportunity to train/retrain/update skills.
http://www.assemblymag.com/Articles/Blog/BNP_GUID_9-5-2006_A_1000000000000045712- 5
This magazine - Assembly, is fairly good if you're into manufacturing methods and continuous improvement, like I am. They do run positive articles on many American companies, but it is mainly based on technology, and not methods. I believe most American manufacturers union agreements keep them from innovating like the non-union factories can. A non-union workplace, can change and improve faster than a union workplace, and thus has a distinct "agility" advantage.
Within last couple of weeks, saw a network tv news program where a guest showed the host the UAW contract agreement with GM - a 2,200 page document and it looked like the pages were 8.5x11. What nonsense. This would have been funny stuff on a Monty Python episode.
First and mid-level manager and engineers need to have flexibility and lattitude in designing, updating, implementing processes (through technology and methods) without encumbrances of union work rules. Assembly line and other workers of course should always be part of and have representation with engineering groups/teams responsible for the various processes. Wonder how this happens at GM vs Toyota.
Big question will be about reprogramming of UAW workers if GM goes down. Perhaps younger workers might be more open to a Toyota/Honda non-union way of doing things. Have any former hard-core UAW workers been hired by non-union Honda/Toyota plants and how are they doing.
But, process improvement can only go so far to help corporation bottom line if high management decides to build something that very few want such as Aztek, SSR, etc. or wages/benefits too high relative to competition.
Congress did the right thing last time, like it or not.
Regards,
OW
">Most of those Congress who made comments are idiots on what is going on and grandstanding and have no idea what they are talking about.
"That's the truth. The "hearings" (political speeches) should have been led by facilitators such as the fellow discussed in the few previous posts with knowledge of the auto industry instead of politicians. I said that in previous posts. We'd be a lot further along in re what we could do and should do to save our auto industry from further damage from the imports"
2014 Malibu 2LT, 2015 Cruze 2LT,
What's that TV show - Are You as Smart as a 3rd Grader?" ? Well the CEO's weren't even smart enough to say "the dog ate it!" Maybe they should have sent car-show babes in their slinky dresses, if all they were going to do was beg? I know a few Congressmen who would have given them the $.
Anyway I guess they learned to showup with a plan. But a plan in itself is no major accomplishment, as we could write a plan if we put together some of the last few hundred posts.
I myself don't see how GM can make money unless you assume sales are going back to 16M units anytime soon. The $25B will not last even a year; Ford wants $9B, leaving $16B for GM and Chrysler. What's GM losing per month $2B? $2.5B maybe in Nov. with a 41% drop in sales?
So given that the clock is ticking, who thinks GM can make all the changes necessary in 6-8 months, to make a profit before using all the money they're asking for?
My opinion from my math calculations, is that $25B would be needed every 6 months, at least for 2 years, even if GM presents a good plan, and the economy improves to 2007 levels by 2010.
But then again why does Chrysler need money when their "parents" Cerberus has money, or could sell them to someone who has money? BTW how many of you have seen that Chrysler is suing Mercedes over the sale. Apparently Cerberus didn't do their homework back when considering to buy Chrysler, and now they want the courts to bail them out of their bad decision.
Save our auto industry??
The damage is self-inflicted. Do you really believe people have shunned the Detroit 3 because they are unpatriotic or immoral??
Bad Business Model...bad decisions...greed and high costs.
Regards,
OW
Hopefully, the government can set up a new Board of Directors to oversee the spend.
Regards,
OW
No! The Big3 went to Congress to beg for $. Congress is politicians. If the Big3 CEO's wanted to discuss business-strategy with auto-industry consultants, then they could have done that in Detroit amongst themselves!
Congress's job is not to figure out how to save various companies from failure. It is reluctantly doing that with banks and brokerages, as the repercusions could be extreme. Congress is not here to figure out how GE, IBM, McDonald's, or GM can make $. There are banks, and stock brokerages to fund and loan to decent companies; the federal government should definitely not be involved!
Whether it is corporate or family the lesson needs to be that if you screwup continually, you fail! This is not a case of unfair foreign competition. The Big3 made these decisions with the unions on wages and retirement benefits, all on their own. They setup their dealer networks. They designed and built some lousy vehicles OVER DECADES. They are the ones who are still collecting millions in pay and flying corporate jets (they still would be if it wasn't pointed out to them!!) while begging for $.
On a bailout or loan or whatever you call it, what you're doing is asking taxpayers - the majority who don't make what a UAW member makes, nor has his pension and retirement benefits, and the millions of Americans who don't have health insurance, to put THEIR money to supporting someone else's BETTER lifestyle. You want the government to take taxes from everyone to support a FAILED system of better-paid people! :mad:
This is totally unfair to many people who struggle to make $20/hr, maybe have no vacation and health insurance, and no pension besides a small 401K or Roth that has been decimated; and they are supposed to provide for UAW workers making $70/hr total, or workers who retire at 55 with good $ and health benefits! :mad:
I'm going to write my Congressmen and tell them to stop wasting their time with these auto bums, and let them go back to Detroit and figure out with their consultants what they're going to do to solve their finances, or sell off the business.
Yes, and you know it'll take a few weeks to get the list together and then the notices out, and then they'll pay each worker a lump sum (and is this built into UAW contracts)? Menawhile with closing plants and divisions, sales will be down but the pensioners will still need to be paid THE SAME OR MORE - so this adds cost per car produced.
So downsizing actually makes the likelihood of any of the Big3 ever earning a profit WORSE. I don't see how they make a profit, as long as they have all these contracts and commitments.
All I can see GM doing with this money is: the current people taking 1 last gulp at the trough. They'll use it to pay off everyone in their organization, while preparing themselves personally to bail.
While you're writing them about their job description, suggest they stop setting up failures in the financial system by mandating loans to failure like Dodd, Frank, Waters, et al did with Fannie and Freddie in the 199Xs and then pitching a fit when warnings surfaced and changed were attempted in 2005 and 2006. That's the cause of the current low sales for auto makers. And I don't recall any real plan needed for granting money to AIG--or did that plan include using the bailout money to go on retreats et cetera? I don't think so. And the current monies being given to banks to use for loans is being loaned back to the Fed for treasury notes and bills instead of lending. Lack of a plan there. Remind your congress people what they should be doing _consistently_ instead of trying to grandstand with the US brand automakers.
We have to agree on th need for a plan.
2014 Malibu 2LT, 2015 Cruze 2LT,
I agree, I'm not picking favorites. It's a bad idea when government gets involved in business, or who banks have to loan to.
That's the cause of the current low sales for auto makers.
Yes it's a main (but not sole) cause for many businesses hurting. The other main cause is that people around the country spent themselves into more and more debt year after year, which is unsustainable. People are so far in debt, that they can't see a good reason to go spend $25K on a new car that's worth (trade-in) about 50% in 2-3 years. Also contributing to the auto-sales-slowdown is that for a number of years, auto sales were very high, and maybe 16M-17M isn't sustainable given that vehicles tend to last longer.
House sales will be a mess thanks to the politicians (without party-bipartisan blame) who played with the reality market of who can afford a house. If it weren't for the weekly sheriff's listings section the local rag would probably have folded last year. The listing of foreclosures is larger than the whole paper is some days of the week.
That's going to take quite a while to work through especially with the economy in Ohio and Michigan which some hope to make worse, if possible.
2014 Malibu 2LT, 2015 Cruze 2LT,
Pontiac is a different case, say several sources in the company. GM has been shrinking its role for years, cajoling Pontiac dealers to sell to Buick-GMC dealers to form one channel. That plan has succeeded, in that there now are fewer than 30 stand-alone Pontiac dealers who would need to be bought out or merged in with a Buick-GMC dealer. Right now, about 80% of Pontiac's sales are made by dealers who also sell Buick and GMC.
GM has even been winding down Pontiac's product line. Next year, it will launch the GMC Terrain small SUV; that vehicle was originally supposed to be a Pontiac but was given to GMC instead. More than half of Pontiac's volume comes from the G6 midsize car. But a freshened model has been delayed and may not be built.
GMC and Buick could end up getting most of the higher-volume cars sold in the combined showrooms, while Pontiac would sell just a couple of performance cars. At the Detroit Auto Show in January, GM will show a new Buick LaCrosse, which will be built using the same basic platform as the Chevy Malibu, Saturn Aura, and Pontiac G6. Internally, GM product planners are questioning whether they need two midsize cars selling in the same showroom under the Buick and Pontiac names. That's one reason that GM has delayed developing an all-new G6.
If GM does get rid of any of its brands, it will be a long, drawn-out process. There may not be any specifics on union concessions this week, either. One high-level GM executive said that anything with the union will have to be negotiated after the meeting in Washington. But options include a wage cut and getting rid of the union JOBS bank, which pays workers 75% of their wages while laid off. The UAW already agreed to cut pay from $28 an hour to $24 an hour at a Mitsubishi plant in Normal, Ill., says Sean McAlinden, chief economist at CAR.