GM in trouble

[AtomicCEO]

Industrial organization is not one of my fields and I haven't given this this much thought at all, but how about something like this.

 

f' em and let them go bankrupt: Let all current equity holders get nothing. Fire the CEO's, Board of Directors, and other people in charge and let them walk away with nothing either.

 

Convert long-term debt into equity.

 

Convert short-term debt into long-term debt.

 

Government then "bails out" the firms by obtaining new "super-senior equity holdings" that will be paid back even before debt-holders are paid back. (Could also put in some restrictive covenants to force the auto industry to do things that the government wants for it to do.)

 

That's exactly what I was thinking.

 

Actually I was thinking that GM still holds some value, and that if it tanks, someone would purchase it's assets and either expand an existing car company or start a new one, and that the job loss and national impact would not be as severe as if it just disappeared in a puff a green smoke.

 

But that equity thing sounds good too.

[Ursa Majoris]

I'm relatively certain the government would absorb these costs.

Some but not all, IIRC. The government agency that acts as a safety net for defaulting corporations (damn government welfare ) assumes some percentage of the pension.

[H8tank]

UAW spent their millions on the election, now it is time for payback, they ask for $50Billion, and that's the amount they are getting.

 

SIck.

[Clubfoothead]

Industrial organization is not one of my fields and I haven't given this this much thought at all, but how about something like this.

 

f' em and let them go bankrupt: Let all current equity holders get nothing. Fire the CEO's, Board of Directors, and other people in charge and let them walk away with nothing either.

 

Convert long-term debt into equity.

 

Convert short-term debt into long-term debt.

 

Government then "bails out" the firms by obtaining new "super-senior equity holdings" that will be paid back even before debt-holders are paid back. (Could also put in some restrictive covenants to force the auto industry to do things that the government wants for it to do.)

 

Isn't that what they are doing with the banks?

[Rovers]

If Detrit fails, this economy will crash and burn. Then, the money you are so worried about won't be a problem. You won't have any money to worry about. Yes, it suucks, but I'd rather bail them out than be homeless some day.

[AtomicCEO]

If Detrit fails, this economy will crash and burn. Then, the money you are so worried about won't be a problem. You won't have any money to worry about. Yes, it suucks, but I'd rather bail them out than be homeless some day.

 

If they are so large that their failure would tank the economy, and they are so poorly run that they need a bailout every 5 years, then the government should intervene and break them up into smaller pieces for the health of the nation.

 

No free rides. There is a solution to this problem.

[Cunning Runt]

Ford and GM have to be saved, pretty much at any cost. Japan has always subsidized their "private" companies, from the steel to the auto industry, and that backing has helped put the US competitors in trouble. With that infusion of government cash, Japan has been able to dump steel here, almost killing out steel companies, and now it's the autp manufacturers.

 

All of the US auto makers have been poorly run... and it isn't all on the auto workers either. They have been over paid for decades... so what has changed? There is enough blame to spread around. The inflated salaries of auto workers didn't cause this crisis... so blaming it all on them is not an intelligent opinion, IMO. This has to do with the US economy, and the oil prices that the Bush administration did nothing about, since they are in bed with the energy companies already.

 

The rest or the world (ROW for the marketing types) have been paying 4 tp 5 bucks a gallon for a decade now. They were ready with fuel efficient autos, while "Detroit" repeated the mistakes of the 70's, when gas went sky high. They were not ready to respond to the very volatile gasoline market. They were fat and happy selling SUV's.

 

I'd like to see Washington bail them out, but watchdog them as a price tag, not to run them..... I mean the feds do such a great job running the postal service... imagine what they would do to an auto maker?

 

 

Along these lines, I was reading an article that discussed the manufacturing plants themselves of Honda vs. GM. It said that the Honda lines are built so they can make a completely different kind of car on the same line in like 24hrs or something like that whereas it said a GM line would take like 18 months before they could make a different kind of vehicle on the same line. That's called foresight, adaptability, and flexibility. Just goes to show some of the "smarter" ways the Japanese do business.

 

So when SUV sales went down due to gas prices, they were able to make a more fuel efficient vehicle on that same line in a matter of days (assuming the right parts were there).

Edited November 9, 2008 by Cunning Runt

[H8tank]

No free rides. There is a solution to this problem, keep giving them more money until the country goes under.

 

Democrat Platform.

[I Like Soup]

This has already been in the works people.

[Chavez]

All of the US auto makers have been poorly run... and it isn't all on the auto workers either. They have been over paid for decades... so what has changed? There is enough blame to spread around. The inflated salaries of auto workers didn't cause this crisis... so blaming it all on them is not an intelligent opinion, IMO.

IIRC Toyota pays its worker very similar to what GM pays. It isn't the salaries of autoworkers.

[Jimmy Neutron]

IIRC Toyota pays its worker very similar to what GM pays. It isn't the salaries of autoworkers.

 

From the first Google hit:

 

Two decades ago, GM factories suffered from a sizable gap compared with similar Toyota factories, as measured in the number of hours it takes workers to build a vehicle. Recent Harbour surveys show that this gap has narrowed substantially. But GM's productivity gains are offset by higher hourly labor costs and the burden it carries for benefits owed to retirees.

In Arlington, GM pays union-scale wages of $26.50 to $30.50 an hour to its 2,800 hourly workers there. On average, GM pays $81.18 an hour in wages and benefits to U.S. hourly workers, including pension and retiree medical costs. At that rate, labor costs per vehicle at Arlington are about $1,800, based on the Harbour Consulting estimate of labor hours per vehicle.

 

In San Antonio, Toyota will use non-union labor and will start its 1,600 hourly workers at $15.50 to $20.33 per hour, which will grow after three years to $21 to $25. Harbour Consulting President Ron Harbour estimates Toyota's total hourly U.S. labor costs, with benefits, at about $35 an hour -- less than half of GM's rates. The brand-new plant won't have any direct retiree costs for many years. So if the San Antonio factory does no better than match the Arlington plant in productivity, it could still enjoy a labor cost advantage of about $1,000 per vehicle, a substantial sum in industry terms. That's money Toyota could translate into extra standard features -- such as stability control -- that could make its trucks more appealing.

 

I have no idea how accurate this is, but it falls in line with other comparisons I have read. Union-driven labor costs are a hugh part of the problem.

 

There is confllicting data out there, but here's a non-blog USA Today piece that's indicative of high labor costs at the Big Three:

 

Ford, according to its annual report, paid $70.51 per hour in wages and benefits to workers last year. GM's annual report says its labor costs average $73.26 per hour, while Chrysler's costs average $75.86 -- all well above the average $48 hourly cost incurred by Toyota, Honda and Nissan.

 

Edited November 9, 2008 by Jimmy Neutron

[dmarc117]

what needs to be fixed is this country's sense of entitlement. factory workers are overpaid, bottomline. the business needs to be revamped. u can not pay someone 45/hr to tighten a bolt and expect to compete with the foreign auto industry.

[Ursa Majoris]

factory workers are overpaid, bottomline.

So are CEOs and other executives, to a grotesque degree.

[AtomicCEO]

So are CEOs and other executives, to a grotesque degree.

 

troof.

[Puddy]

So are CEOs and other executives, to a grotesque degree.

True. However, nobody is forcing these companies to pay these amounts so apparently that is what the 'market' is dictating (if not, why the hell are they 'earning' that much money). I don't think the market would dictate the hourly wage being paid to the assembly line workers in this day and age (that's my guess).

[Ursa Majoris]

True. However, nobody is forcing these companies to pay these amounts so apparently that is what the 'market' is dictating (if not, why the hell are they 'earning' that much money). I don't think the market would dictate the hourly wage being paid to the assembly line workers in this day and age (that's my guess).

The "market" dictates it because the "market" is made up of remuneration committees that amount to a gigantic circle jerk. Why don't major shareholders complain about it, you say? Because the major shareholders are other major firms, also part of the circle jerk.

[Egret]

what needs to be fixed is this country's sense of entitlement. factory workers are overpaid, bottomline. the business needs to be revamped. u can not pay someone 45/hr to tighten a bolt and expect to compete with the foreign auto industry.

The factory mindset is amazing at times.

[AtomicCEO]

GM 2007 executive compensation total

38,954,972

That's for 5 guys.

 

5 guys make as much as 614 of their factory workers, which is about 22% of their labor workforce. I'm positive they earned it though, because right now they are looking for a major government bailout to keep the country from collapsing apparently.

 

I have an idea on how they could save money and increase productivity.

Edited November 10, 2008 by AtomicCEO

[TimC]

When the bankruptcy judge kills the pension (and he probably will like they did with the airlines), GM employees will feel the pain.

[dmarc117]

So are CEOs and other executives, to a grotesque degree.

 

 

i agree with this too. everyone needs to take a pay cut and come back down to earth.

[TimC]

The factory mindset is amazing at times.

 

I take the tour of the Corvette plant in Bowling Green, KY every year. Some of our friends have done it since they moved there over 25 years ago and it's amazing to watch. It's the slowest moving line of almost any car. Most of it is still done by hand and you've got the same guy bolting on the tires for the same 20 years. Most have specially designed tools to help with carpal and such as required by the union.

 

Anyways, here's the routine...guy is reading magazine during his 10:13-10:38 negotiated break every 58 minutes and 38 seconds. Line starts up at 10:38, he gets up and takes his tool that bolts all the lugnuts at once (because doing them separately would kill him in a week), then sits down and reads more magazine for a few minutes, then stands up and bolts on another tire, rinse and repeat. I'm sure it's all done for the low, low wage of about $75.00 an hour plus crazy benefits no one receives anymore. People kill each other for a job there.

 

Yes, the executives should absolutely take a severe cut in salaries as well.

[dmarc117]

(Reuters) - General Motors Corp (NYSE:GM - News) will likely fall below its minimum cash needs of $11 billion to $14 billion in the first quarter of 2009 if the troubled automaker does not receive additional funding, said an analyst at Barclays Capital, and GM shares fell as much as 31 percent in morning trade.

 

Barclays' analyst Brian Johnson downgraded GM to "underweight" from "equal weight." Deutsche Bank also cut GM to "sell" from "hold," and saw an equity value of $0 for the stock, according to a report on theflyonthewall.com. Reuters could not immediately verify the report.

 

"While further government assistance would decrease the likelihood of a GM bankruptcy, we believe any government assistance would likely significantly dilute GM's equity," Barclays' Johnson wrote in a note to clients.

 

Johnson cut his price target on the stock to $1 from $4.

 

"Of the four broad options for government assistance for GM, we believe that political pressure to protect taxpayers may lead to a solution similar to the 1979 Chrysler bailout, which was accompanied by concessions from debt holders, labor, suppliers and management," Johnson said.

[Azazello1313]

who says we can't live without our crappy auto manufacturers? the car business is in a rough spot right now, but in general, the companies that make good cars aren't in danger of going out of business. the companies that have utterly failed to generate a product that can compete in the marketplace are on the verge of going banko. businesses that suck go out of business. THAT is capitalism, and it is efficient. it doesn't really matter if it's the unions' fault, or the executives' fault, or matt millen's fault. who cares? all that matters is they can't make a good enough product at a good enough price.

 

I can see bailing out the airline industry after 9/11...because if all those airlines go out of business because of one unforseen event, suddenly people cannot travel and the economy grinds to a halt. I can see bailing out the credit industry because without some liquidity the banks were going to send the whole economy into vapor lock. this is totally different. if GM goes out of business, there will still be plenty of companies out there to sell us cars. hell, maybe some new ones will finally spring up here. and GM is not going out of business because of one little recession, they have been on the brink for years. because they run a schitty business. why should the government keep pumping money into a schitty business, or, even worse, purchase it?

Edited November 10, 2008 by Azazello1313

[wirehairman]

 

I may have to go purchase my next Silverado sooner than planned.

[Puddy]

it doesn't really matter if it's the unions' fault, or the executives' fault, or matt millen's fault.