Why GM is doomed
Forward this to your congressional reps ASAP.
Excerpt:
As for the meat and potatoes of the actual proposed restructuring, GM gives a good effort. It projects the U.S. auto industry supporting 12 million new cars in 2009 and 13.5 million in 2010. Not unreasonable. And GM makes the right noises about cost reductions with “wages and benefits fully competitive with Toyota by 2012.”
But the restructuring plan comes up short on the most fundamental question. Will this company actually make money?
…And nowhere in the document does GM lay out, year by year, its own projected market share. This is perhaps the most critical part of any business plan. The kind of thing you learn in the first day of business school.
Turn to Exhibit B-1 — and you find something interesting. It is only in an appendix entry — and not stated explicitly. GM appears to have changed its market share assumption for 2009 GM U.S. volume from 20.6% a year ago to 22.5% today.
In this environment, it seems strange that GM is actually increasing its market share assumptions. And car business is all about volumes.
That points to the real flaw in the GM restructuring plan. The U.S. car industry has been a credit junkie that now has to go cold turkey.
In 2007, GMAC financed about half of GM’s retail car sales, many to customers with weak credit. Today GMAC can’t finance to customers with credit scores under 700. In fact, today GMAC funds only 6% of GM’s retail car sales. No wonder GM sales have fallen off a cliff.
Will that change over the next year?
Ask yourself how long it will take housing to hit a bottom and you’ll understand why the GM restructuring plan ain’t gonna cut it.
Oh, it will work in Washington this week. But by next year, the U.S. taxpayer will be left holding the bag.
See what others have said
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- How to Lose an Auto Company in 15 Days | BobMaistros.com
- Hot Air » Blog Archive » Business plan or propaganda?
- GM’s Doomed, and Misery Loves Company « Jane Q. Republican
- Bailouts Galore « 36 Chambers - The Legendary Journeys: Execution to the max!
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never been a doubt in my mind. We get the government we deserve.
And it will still be bushes fault
Does this mean they’re getting rid of UAW?
They should have had to bring in 3 business plans not just 1 and one of them being a banruptcy plan outlining it’s pros and cons.
And HuffPo is promoting the idea of nationalizing GM.
http://www.huffingtonpost.com/robert-weissman/nationalize-gm—-or-at-l_b_147744.html
Maybe that Florida TV interview that challenged Biden on Marxism was really on the mark.
Collin
http://evangelicalperspective.blogspot.com
We gotst the Escalade we can’t affode in the garage we can’t affode.
I hope GM can figure out a way to keep themselves afloat. I’d hate see any of the big three go under, as I’d like to have the option of buying their products. The unenviable position the US automakers are in now are why I have always been opposed to unions.
I don’t see why the Big 3 just don’t revert to older style management, kick the union out on its ass, close up alot of the robots and throw em and the over paid tech lackies on there ass, and switch back to human labor. Oh it’ll mean less cars coming out but for once it’ll also mean they’ll sell what they build and not operate at a loss.
Bankruptcy…
Reorganize…
Prosper.
Declare bankruptcy, destroy the UAW and various other thug organizations, move to the South, and if a plant even tries to unionize close it. Ding, ding, ding…winner.
When they break the union, that will be the bottom and everything will be up from there. Until then..same ol, same ol.
Curiously, I haven’t heard a single Democrat whine about “corporate welfare” or “crony capitalism” lately.
If GM dies, other car companies will absorb thier market share (the real share, not their phoney estimates).
If GM dies, the chances improve that Ford and/or Chrysler will survive.
Why can’t the politicians figure out simple things like this?
Let GM die.
Thanks, collinb, for the link to the nationalization piece on HuffPo. Scary that some are actually contemplating this idea–and know so little about our Constitution.
Chapter 11–reorganization–is going to be painful, but will produce the best results.
WHy is it the president of the UAW isn’t being made to crawl to DC with a plan? Oh, yeah. I forgot. The Dims are the majority. Nevermind.
Worked for the airline industry.
These guys along with most of your retailers have built their buinesses around consumers taking on more and more debt rather than relying on profit from the sale of goods.
It’s a house of cards destined to come crashing down as people realize they can’t take on more debt and can’t make new purchases because all of their income is tied up paying back their debt.
Me thinketh something stinketh in Detroit.
What does the UAW have on the Big 3 exec’s that makes them not want to go through Chapter 11?
I wish one (supposedly) representative would ask the Big 3 (losers) why should the American taxpayers pay for their employees sweet healthcare deals and pensions when some taxpayers themselves don’t have or do have crummy healthcare (HSA’s) or pensions?
The problem is, Pelosi won’t let GM die.
When Chancellor Pelosi bails out GM maybe she’ll make them manufacture a small, economical car. A people’s car. A car for the folks. They could call it a Folks Wagon.
Only because of the UAW connection. Otherwise, she wouldn’t give a rip.
Let’s see now, GM pretends to have a plan for the future, Congress pretends to be the tough customers, GM pretends to go back and work hard on a better plan after getting a good pretend scolding from the pretend tough customers of Congress, the Sec. of Treasury pretends to have an actual job while he rubber stamps every request for bailout funds and Congress pretends that it is really steering the economy away from the iceberg of disaster while, in reality, the economy is being steered like the Titanic steadily through the fog of B.S. towards its inevitable doom while the great Congressional pretenders backslap each other and offer toasts to their great wisdom. Such is life in the Narnian make-believe world of Washington D.C. In reality, you might as well get a coal shovel and shovel the cash into a furnace. At least you would get some heat out of it.
GM and Chrysler, maybe Ford, need to take a broad ax to costs, legacy costs included, work rules and their Relationship with the UAW. They need to sell cars Americans want to buy. If Congress will let them I do not know. If they can not do it they need to die.
It is not an issue of good or bad or what we want–it is a case of 1 + 1 = 2 and not whatever someone needs it be be.
Or we could drive that Folks Wagon with the sails.
What killed off the Big 3?
1. Management
2. UAW
3. Government CAFE Fuel economy standards.
4. Unreliable sources of foreign oil.
Each of these issues needs to be addressed simultaneously. The piecemeal approach will only prolong the inevitable.
We all know how this will be handled, those with clout will win big. The rest of us will get the shaft.
southsideironworks #24
You left out one killer. . .
5. Skyrocketing health care costs, which have added tremendously to the overhead for these companies.
I’m with Paul Revere in #10:
“Declare bankruptcy, destroy the UAW and various other thug organizations, move to the South, and if a plant even tries to unionize close it. Ding, ding, ding…winner.”
Does anyone remember the recent attempt by Kirk Kerkorian to rescue GM.
The entrenched style of management, and the steady mainline drip of lifeblood to the union has doomed this company.
No one is willing to do what it takes to turn this comapny around.
Kerkorian threw Billions at GM, owning as much as +/- 9 percent or so. Neither management or labor would back his proposals. That was around 2006. Now they are at the alter of congress, begging for alms.
Whether these were bad plays by Kerkorian or not is debatable. The facts will play out and the results can be debated by historians. What is not in question is that GM turned Kerkorian’s plan down. Could it have saved GM? I think it could have given them an opportunity for survival. However even my optimistic consideration must be tempered by the reality that management/labor had no real interest in his plan even if given the chance.
Seems they were not interested in CHANGE in 2006.
A part that never really gets discussed in relation to the auto manufacturers is the impact of the taxes paiod to the local politicians in michigan.
Does anyone remember the recent attempt by Kirk Kerkorian to rescue GM.
The entrenched style of management, and the steady mainline drip of lifeblood to the union has doomed this company.
No one is willing to do what it takes to turn this comapny around.
Kerkorian threw Billions at GM, owning as much as +/- 9 percent or so. Neither management or labor would back his proposals. That was around 2006. Now they are at the alter of congress, begging for alms.
Whether these were bad plays by Kerkorian or not is debatable. The facts will play out and the results can be debated by historians. What is not in question is that GM turned Kerkorian’s plan down. Could it have saved GM? I think it could have given them an opportunity for survival. However even my optimistic consideration must be tempered by the reality that management/labor had no real interest in his plan even if given the chance.
Seems they were not interested in CHANGE in 2006.
A part that never really gets discussed in relation to the auto manufacturers is the impact of the taxes paiod to the local politicians in michigan.
That’s it!!@ I learned my lesson.
From now on I will type into a word document then post in the comment section.
I have double posted for my last time.
SouthWest Airlines is Unionized and generally profitable. They fly planes to places where people want to go. What a plan! It has been my first choice airline for quite a few years.
They know what their business needs to be profitable and stick to that. The Big 3 are still doing penance for their labor Sins-real or imagined- of the Depression. The UAW is still operation under the Reuther Brothers Marxist model of employer as the enemy.
That is the attitude that did such damage to the Steel Industry. The Big 3 and UAW need to realize those days are dead. You can only bleed a dead man so long. But if BroBama does imposed his promised restrictions on coal it will not matter. Wind mills and solar will not smelt steel and run plants.
You Go Yugo? Schwinn Bicycles?
The bailout is nothing more than a way to force the building of roller skate cars.
GM and the big three have been riding this bogus credit gravy train for decades, using it to sell poor quality over-priced Detroit sleds. It’s over, it’s been over, and even they have to know it now. They’re in the tar pit and it’s about to cover their grills. Very sad.
There is no Constitutional basis for permitting Federal intervention into the economy, especially when the bureaucrats are not competent to even address the very problem they created. Get away from the fire, kids.
The further false Government promise of “bailout” to GM and the others is a pathetic gesture and must be repudiated by all thinking people.
There is a shortage of thinking people these days, hence the daily debacle we call Washington. No way thinking people keep electing that menagerie.
The reason the government will finally give these companies the money is the taxes they pay.
These shysters playing as legislators cannot imagine not receiving the bundles of cash from the revenues generated from these companies.
They could not care less about the worker, the stakeholders, or the products.
They care about the taxes.
And the fact that the tax received is falling does not matter.
They are still coming, for a little longer.
Watch what happens when they miss a tax payment.
Oh come now, it is twice as interesting!
Oh come now, it is twice as interesting!
If only I had spent that time in typing class learning to type better. Instead of staring at the teacher. She was the hottest teacher in our school. And something of a ……oh never mind.
See that’s why my typing still sucks even today.
It is all her fault.
Ah, but the Dems do care about the dues that the UAW send them in the form of campaign contrubutions that helps win them elections and keeps them in office. In that sense, they do indeed care for the worker.
I really believe that, if the Pig 3 gets this joke of a bailout, that at least one of them will cease to exist within 24 months. They’re not being forced to trim the fat in any way that matters, and their market share projections (at least the one’s I’ve seen) do not take into account the likely consumer backlash if these clowns end up with fists full of taxpayer money.
As janger stated above…
ArizonaN:
You Go Yugo?
Yugo built their final car last month…sorry.
Schwinn Bicycles?
Can I get that with sissy bars and a banana seat?
If only the Big Three could cut expenses by firing the UAW…
Somewhere I thought I read they need to produce 14-16 million cars to break even. I’ll have to look that up, since this plan is below that.
Note to GM, make the Corvette, Suburban and one other car of your choice - dump the rest.
And here I was going to trade in the Town Car for one. Oh well. Gremlins still going?
Corvair.
Yeah, where’s Nader now?
AN:
“And here I was going to trade in the Town Car for one.”
That’s funny, I thought the Town Car came with a Yugo in the trunk instead of a spare tire…have you checked your trunk?
And yet nowhere in there does it mention where they will be making cars that don’t fall apart or have endless electrical gremlins.
Aloha Guy, you are very close to the solution.
In my opinion there is no need to make as many models as the auto manufacturesers do make.
I like the new challenger, and know some folks like the hemi trucks. And so on. But I see no future for Chrysler. Prove me wrong.
That said.
GM should plan on being a smaller company.
Making as you said the Corvette. Shoot me I’m baised by the fact that I own 2. Also keep the Cadillac Line. As long as it is viable
Next the Suburban, both an economical 2 wheel drive and a 4 wheel drive version.
Next the pick-up line. This is the broadest line they should concentrate on.
Lastly the car line. Here I would merge the Pontiac division and the Chevrolet line. Make a small economical entry level car. Electric or whatever. I do not care. Make the Grand Prix. The Impala. The Camaro.
Anything above those basic choices is too much.
It dilutes the brand and drains resources.
Drop the legacy costs through bankruptcy.
If this is not viable, cut till it is or call the auctioneer.
Sink or Swim.
Otherwise I am buying Nissan, Toyota, or some other foreign label.
If GM, Ford and Chrysler are “too big to fail,” then that’s what Chapter 11 was meant for.
There’s no way out of the hole until the UAW is busted. Chapter 11 will allow that. Until then, all these stupid bailout hearings can be summed up by one of those IBM television commercials, the one in which a consultant to King Arthur proposes building a catapult to slay a dragon with huge bags of coins:
Arthur: “Are you suggesting we throw money at the problem?!?”
Consultant: “Precisely!”
with the price of these stocks nearing the penny stock range, let the uaw buy the company. let them put their money where their mouth is. you believe you make a sellable vehicle, put up or shut up. otherwise, as an investor i’m telling these companies to chapter 11, and build new plants in singapore etc. so the products are reliable, cheap, and imported. seems americans have chosen imports over domestic.
Personally, I see no future for Ford. They should just shut down.
As for GM, here’s what they should be doing:
Discontinue the Saturn line, and sell off foreign companies they own like Opel and Vauxhall. And they should also stop making any sedan that guzzles too much gas, and just keep those that take decent amounts.
Until then, let’s hope that Peugeot, Citroen, Fiat, Alfa Romeo and Lancia, come back to the US, and that Iveco will follow with their trucks and buses.
Another thing that must be corrected in the auto industry.
I have bought several cars in my life. In several different states.
There is little more in life more detestable than the treatment a person gets at most dealerships. Cadillac aside, in my experience, the majority of the salespeople and finance people I have dealt with were the lowest of the low.
I know this may not sound nice, but the corporations must take an active role in policing the goings on at the dealerships that sell their cars.
How many times have you not bought an automobile because of the salespeople? Or someone else at a particular dealership?
I know these are franchise dealerships, but that may also be a part of the problem.
They need to take responsibility of the entire process. The manufacture, the representations, the sales and the service.
Ownership and responsibility.
One problem with so many lines is that there are rivalries between them. Chevy makes a great engine, but the careerists didn’t want to work for Chevy, so it was the cheap and nasty division. Great engine in a plastic-feeling car, parts falling off, no power windows for like 20 years after every Japanese car had them….that sort of thing. For over a generation GM cars sucked compared to foreign cars, so no one under 40 even wants one now.
As sales volumes decrease, the legacy costs per vehicle sky rocket. So the solution also requires that they build a vehicle that people want to buy. A 33 percent decline in volume equals a 50 percent increase in legacy costs per vehicle
I REALLY love my Jeep.
Goes anywhere, does anything, pulls Hummers out of the mud, real bang for the buck.
I really don’t see Jeep needing a bailout.
The REST of them can fail, but this country needs more Jeeps…
to head for the hills when the truth-squads show up.
I love Ford, GM And Chevy… I never bought a Japanese or Foreign velichle ever. Proud owner of a ‘02 Ford Taurus SES.
I do feel however that The US Automakers need to go it alone. The Founding Fathers would never approve of a bailout or The US Government being as big as it is today.
You dug yourself the hole… you need to get out yourself.
As an artist my passion is to paint old cars. Restored, junked, pieces, just love the beauty of how they reflect the time in which they were built. Just occured to me last night as I was painting a Studebaker and a Packard that car companies come and go and maybe it is time for the “big three” to say good-bye, consolidate, get bought out or go bankrupt. The world didn’t stop when the Hudson stopped being produced.
Plus I find it REAL hard to believe that all THREE are in the same situation–somebody is lying…….
You painted a Studebaker and Packard last night? Wow that’s a lot of sanding and masking.
Oh wait, not that kind of painting.
There is an easy solution to this problem: BOYCOTT GM. Force them out of business. These jokers don’t deserve your business. They don’t deserve your continued subsidies of their bloated lifestyles.
I’m under 40… Almost under 30. I’ll never buy a GM car, or a Ford, or even a Chrysler. I’ll admit that every GM car I’ve driven since the 90s when my older parents stopped buying American and went Japanese (tired of reliability/maintenance issues) was a rental car, but every single one of them has sucked. Every single one without exception.
GM could produce the next Honda Accord next year after this bailout (right) and I wouldn’t buy it, now. They are coming to us saying they have to steal our money to remain viable? NO - they need to make good products to remain viable. That’s not very likely to happen under the current regime now is it?
There is a clear solution: stop buying. Starve the incompetent, make way for the competent to take over.