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‘Already Bankrupt’ GM Won’t Be Rescued by U.S. Loan

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Dramatic, perhaps, but not entirely untrue...unfortunately.

Yup

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Talk about a smear piece...

Looks like the media will work hard to convince the consumer that GM and Chrysler are already bankrupt (In order to put them into bankruptcy.

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The Detroit-based automaker, leaking $67 million a day -- enough to buy a fleet of 1,800 Cadillac CTS coupes -- may soon be sucked into the vortex.

Ohhh... Dramatic....

To GM’s critics, worries about cash are three years too late. The financial crisis wasn’t the culprit that brought the company to the brink of insolvency, as Wagoner told Congress last month. It was just the final straw in a succession of unresolved or unaddressed issues.

:bs:

Since 2005,

When the media tirade against GM peaked.

GM has lost a cumulative $72.4 billion, had its debt downgraded to junk, watched its share of U.S. auto sales shrink by almost 1 million vehicles and shed 90 percent of its market value. It introduced gas-guzzling vehicles as fuel prices rose, failed to slim down its product offerings and dealer networks quickly enough and wasn’t able to cap its labor costs in time to stem the bleeding. In September 2007, the company won the right to hire new workers at lower wages starting in 2010 -- too far down the road to avoid the consequences of a recession and a credit crunch that engulf it now.

80% of that was, of course, out of the control of current management. GM is still paying for it's past mistakes (Thanks to assholes like this guy)

Wagoner, 55, who has been CEO since 2000 and declined to be interviewed for this article, was also slow to see the impact of the credit crisis. On Sept. 16, the day after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in U.S. history, he told reporters at a party at Detroit’s Renaissance Center marking the company’s 100th birthday that he saw “no big impact” on consumers. The next month GM’s auto sales in the U.S. plunged 45 percent.

1) This makes it out to sound like Wagoner and Co. were just "partying the night away" like the AIG execs. 2) I doubt very seriously that Lehman Brothers had sh*t to do with GM's sales tanking in the first place. The over all crisis? Yes. Lehman Brothers? f*ck no.

After 77 years as the world’s largest automaker, GM and its executives were unable to embrace change. The company continued to plow resources into sport-utility vehicles and make bad alternative-fuel bets, even after consumer buying habits shifted.

Good thing I wore my boots, 'cause the sh*ts gettin' deep in here.

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It rejected an offer from Carlos Ghosn, CEO of Renault SA and Nissan Motor Co., to form a global alliance.

Didn't this guy just chastise GM for having too much overhead and bureaucracy? yet he supported a 'Nissan makes GM it's bitch' merger and thinks that might SIMPLIFY things?!?! Was this author drunk?

And it dismissed calls for radical restructuring from former board member Jerome York and other critics.

Oh, you mean the investment sharks that wanted to make a quick profit off of GM instead of see it succeed.

York, 70, a former Chrysler Corp. finance chief,

Again, GM was supposed to take advice from this guy?!?!

GM ignored York’s advice to reduce its number of models, including getting rid of the Hummer and Saab brands,

NEWS FLASH! They're both or sale... Can't 'get rid' of a brand if no one is buying.

and to cut both management and labor costs in what he called an “equality of sacrifice.” He resigned nine months later, in October 2006, frustrated by the board’s unwillingness to take action. Only after York left did GM decide to sell Hummer. Now it’s talking about getting rid of Saab and Saturn, as well as Pontiac.

Why the hell does everyone keep saying this? Did these people even read the report? GM stated that 5 divisions would stay.

Although York’s prediction was prescient -- GM has told Congress it will run out of cash by the end of the year if it doesn’t get relief -- what no one could foresee then were two developments that sealed GM’s fate: a run-up in gasoline prices and a credit-market freeze that followed Lehman’s collapse.

Both caused by greedy motherf**kers on Wall Street.

The frozen credit markets signaled the end of an era of easy money that delayed GM’s day of reckoning.

By selling cars, GM was "delaying it's day of reckoning"?

In a parallel to the housing bubble, GM and its Big Three brethren enjoyed a decade of artificially inflated sales.

How so? If so, did the import companies not share this same bubble?

Finance companies did a booming business in subprime auto loans, a rarity in 2000, which accounted for 18 percent of new-car financing by 2005, according to CNW Market Research in Bandon, Oregon.

18% is still pretty rare, since that leaves 82% as normal loans.

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That did nothing to stem GM’s steady loss of market share in the U.S., from 30 percent in 2000 to 22 percent today.

GM's market share was NO WHERE NEAR 30% in 2000. Best I recall, they were struggling to maintain 28%.

It did help keep the industry’s annual U.S. sales at or near record levels, topping 17 million vehicles.

And just like with the "SUV BOOM" the domestics are SOLELY responsible for this, right?!?! HOT DAMN!!!! GM and Ford must have EXCELLENT marketing and EXCELLENT REPUTATIONS to STRONG ARM the market and consumer taste so much. :rolleyes:

GM gave the bubble a boost with a zero percent “Keep America Rolling” financing campaign started eight days after the Sept. 11 terrorist attacks. Sales jumped 42 percent in October. The program got the company even more hooked on incentives than it had been in the 1980s.

So, instead of being a noble effort to keep the economy from taking sh*t, you know the one it PROLONGED until 2008 (Much like GM apparently prolonged bankruptcy) this is going to be spun as a bad business move? That figures... I would expect nothing less for our fine media. GM should've just let this country fall and rot back then. Never fear though, hopefully it'll do so now.

“It was a great initiative to prop up the market, but it’s a trap they fell into,” said Chotai, who estimates that annual U.S. auto sales would have fallen to 13 million to 14 million without incentives. “Nobody believes list price anymore, so you’ve destroyed your pricing power and you’ve diluted your brand.”

I do agree with that... This has especially crippled the middle divisions (Buick, Pontiac & GMC)

“These are not stupid people, but they had created an alternate universe,” said James Womack, co-author of “The Machine That Changed the World,” a book about the Toyota Motor Corp. production system that bested Detroit’s.

Oh, you mean the production system that they stole from us, improved upon and then claimed was theirs? You know, like they do with all of their 'innovations'

To John Shook, a former Toyota manager who worked at a joint-venture plant run by the Japanese company and GM in Fremont, California, that explains why the two automakers are in such different shape today. When it comes to engineering and manufacturing, Shook says, Toyota and GM are about equal. Where they differ is in their corporate cultures.

Agreed 100% THIS IS GOSPEL

Exciting as a Saturn,

Apparently this asshole hasn't seen a Saturn in 3-4 years?!?!?!

quotable as an owner’s manual, the one-time Duke University basketball player exuded quiet confidence about GM’s future.

Isn't that what the stockholders wanted?!?! Did all of you want a leader that said; "Well guys... Looks like we'll be even more SCREWED in 3 years... And then in 5 years, we can just call it quits!"

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“I know that things will turn around,” he told Fortune magazine in February 2006, after problems erupted at the automaker.

And they were..... Until the greedy bastards on 'the street' NUKED the economy.

While Smith’s mantra was “run common, run lean,” he never achieved the goal of creating shared platforms and standards that might have slashed operating costs. GM has long been penalized, compared with its Japanese rivals, by its capital costs. It develops scores of chassis to meet different consumer preferences around the world. Yet it wasn’t until this year, after more than a decade of reorganization, that the company introduced its first common chassis for use worldwide. It will serve a mid-size Opel Insignia in Europe and a new Buick LaCrosse to be built in the U.S. next year.

Okay 1) That's pure bull$h!... GM, like other companies has had common chassis for at least 1-2 generations of product now. The fact that the common chassis was modified based on continent and/or product is COMMON across all automakers. 2) MOST automakers are just now going to a GLOBAL chassis system because the GLOBAL market is finally starting to align.

On May 4, Kerkorian, 91, who had reaped $3 billion on a 10 percent stake in Chrysler that he sold in 1998,

Yeah, and you see how that ended up.

Wagoner unveiled a “turnaround plan” in November 2005. It called for closing nine plants, eliminating 30,000 jobs, boosting employee contributions to GM’s health-care plan, increasing investment in its best-selling models such as the Hummer and revamping marketing efforts.

Never once did I read of INCREASED INVESTMENT in Hummer circa 2005.

Wagoner found the crisis talk overblown. He dismissed a flurry of Chapter 11 questions by saying there was “no plan, strategy or intention for GM to file for bankruptcy.”

Ya know... Let's pause right here for a second.

Back in 2005, I remember reading NUMEROUS articles that had Wagoner OUTLINING the collapse of GM, if the UAW and costs were not brought under control. I specifically remember one article that quoted Wagoner as saying "I don't know what the answer is" To paint Wagoner as some whimsical idiot is just plain unfair IMO. Did he make mistakes? Absolutely. But the man inherited a sh*t storm of controversy. Not to mention, it seems that even the GODS want GM and Detroit to fail since the companies haven't been able to catch a break for 5 years now.

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He and Kerkorian began to pursue Ghosn, 54, who had pulled Nissan back from the brink of bankruptcy. In May, Kerkorian met with Ghosn in Nashville, Tennessee, and asked him to consider an alliance. Renault and Nissan would each take a 10 percent stake in GM, share resources and collaborate as a way of cutting costs and spurring change. Ghosn was interested, according to York, and said he’d want a seat on the GM board. That would give him influence over the company’s strategy and perhaps position him to succeed Wagoner.

Nissan and GM are like apples and oranges. Nissan is a company that has 2 division with roughly 5 platforms. Like Ford, they would be easy to turn around with some cash. And, in fact, they benefit from the media and japanese image which makes things even easier.

Then gasoline prices began climbing, topping out at an average price of $4.11 a gallon in July 2008, ending America’s love affair with SUVs and pickup trucks -- the very categories that Wagoner had staked the company’s future on in his 2005 turnaround plan.

Like anyone could've predicted this years gas spike. Not to mention, the prices were GROSSLY inflated and the PRICES caused a lot of the economic turmoil that we're seeing today.

The problem was that GM so skewed its model lineup away from sedans that it was out of position when the market turned. To make matters worse, at the moment many Americans became concerned with getting better gas mileage and going “green,” GM was years behind on developing alternative-energy cars.

Not really. Need I remind you that GM developed and produced the first electric car?

Toyota and Honda Motor Co. each introduced gas-electric hybrid cars in 1997 -- the Prius and Insight, respectively. GM engineers scoffed at both. These were small, odd-looking and costly to produce. Why would people buy a car whose price outweighed the gas savings? GM executives told reporters the hybrids were public-relations gimmicks.

And they WERE and still ARE... EVERYONE scoffed at the first hybrids. In 1998, gas was .98/gallon here. Had GM invested in a project such as this, Wall Street would have cooked the company.

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GM discontinued its one alternative-energy vehicle -- the battery-powered EV1 -- in 2003, after spending more than $1 billion on a car with limited range that flopped with consumers.

You note this 'flop' yet at the same time chastise GM for not investing in hybrids?!?! What's the difference?

Company engineers believed that cars powered by hydrogen fuel cells were the real future in this field.

And they still are. Too bad GM gets criticized for their hydrogen program while Honda and it's late-to-the-game FCV gets all the media slurping it can take.

“They knew the home run was 20 years away, and they weren’t willing to settle for singles and doubles in the meantime,” said Shook, the former Toyota manager. “At Toyota, they said, ‘We don’t know the future; let’s try something we can do right now.’”

Easy to do when the GOVERNMENT of your country funds it. You can be as creative as you want with THEIR money.

Today, with Prius a hit with consumers,

ORLY? Sales were down 45% last month.

GM is scrambling to catch up. It has several hybrid models of its own and, with Congress badgering him to produce more alternative-energy cars, Wagoner has made their development a major part of the restructuring program for which he’s seeking $10 billion.

It had nothing to do with Congress. The alternative energy cars were already on the table.

GM Apologizes

And the media capitalizes on GM's new ad campaign (Like I told all of you they would)

The confession may have come too late. As did an ad GM placed on Dec. 8 in the Automotive News, an industry publication, acknowledging it had “disappointed” Americans in recent years with its quality, design and reliance on trucks.

Merry Christmas, Virginia... TOLD YOU SO!

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FoG...

I appreciate your passion, but the truth is that much of this piece is true...

RW had the boys wearing '30' pins early in his tenure...indicating that their market share was going to grow (IIRC from 28 to 30+)....obviously, it didn't.

GM was losing money before the bottom dropped out---one of the reasons GM has lost control of its captive finance arm (GMAC) was because GM itself was dragging its credit rating into the toilet with Q after Q of poor results...and since GMAC got sidetracked giving out mortgages to everyone with a pulse thru its ResCap division, even sharks like Cerberus are about to go down. (Note: Ford never allowed its finance arm to dabble in Mortgages---they've got money to lend now, when it's needed most.)

The point of this article is that RW hasn't been able (either through inertia or ignorance) to bring GM far enough through the change necessary to survive this brutal timeperiod...I think that the result has been a disaster, regardless of whether you directly blame RW or not--he's the captain, it's his ship. Sometimes in life, you need to accept responsibility, instead of qualifying every statement with a 'but' or 'if' or 'maybe'.

RW has proven to be an ineffective leader that couldn't accomplish what was needed to be done before the sh!t hit the fan...one can quibble around the edges, but GM clearly hasn't been able to do enough to change its fate---there's a reckoning that must follow---hopefully it isn't the worst case scenario.

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FoG...

I appreciate your passion, but the truth is that much of this piece is true...

(Sadly) I know... :unsure:

The problem is, I don't know if it was all unavoidable.

RW had the boys wearing '30' pins early in his tenure...indicating that their market share was going to grow (IIRC from 28 to 30+)....obviously, it didn't.

I remember the 29 pins, but not 30 pins.

GM was losing money before the bottom dropped out---one of the reasons GM has lost control of its captive finance arm (GMAC) was because GM itself was dragging its credit rating into the toilet with Q after Q of poor results...and since GMAC got sidetracked giving out mortgages to everyone with a pulse thru its ResCap division, even sharks like Cerberus are about to go down. (Note: Ford never allowed its finance arm to dabble in Mortgages---they've got money to lend now, when it's needed most.)

I remember thinking to myself (during the credit downgrades and then during the GMAC sell off -- That's actually when I worked in the financial industry) 'this certainly will not bode well for the future.'

Edited by FUTURE_OF_GM
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FoG...

I appreciate your passion, but the truth is that much of this piece is true...

RW had the boys wearing '30' pins early in his tenure...indicating that their market share was going to grow (IIRC from 28 to 30+)....obviously, it didn't.

GM was losing money before the bottom dropped out---one of the reasons GM has lost control of its captive finance arm (GMAC) was because GM itself was dragging its credit rating into the toilet with Q after Q of poor results...and since GMAC got sidetracked giving out mortgages to everyone with a pulse thru its ResCap division, even sharks like Cerberus are about to go down. (Note: Ford never allowed its finance arm to dabble in Mortgages---they've got money to lend now, when it's needed most.)

The point of this article is that RW hasn't been able (either through inertia or ignorance) to bring GM far enough through the change necessary to survive this brutal timeperiod...I think that the result has been a disaster, regardless of whether you directly blame RW or not--he's the captain, it's his ship. Sometimes in life, you need to accept responsibility, instead of qualifying every statement with a 'but' or 'if' or 'maybe'.

RW has proven to be an ineffective leader that couldn't accomplish what was needed to be done before the sh!t hit the fan...one can quibble around the edges, but GM clearly hasn't been able to do enough to change its fate---there's a reckoning that must follow---hopefully it isn't the worst case scenario.

Amen!

I remember the 29 pins, but not 30 pins.

Most folks had on 29 pins there was one executive who was wearing a 30% pin. I can't remember for sure, but I believe it was Mark LaNeve.

Edited by network engineer
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They are toast. In 2006 they had to take action to prevent this, Saab, Hummer and another brand should have been killed then. GMT900 was rushed to market when gas was $3 a gallon, then Lambda full size SUVs were next to market. Meanwhile Delta II, Epsilon II and Zeta got delayed. For years GM hasn't been able to do both trucks and cars at the same time, it is always one or the other. Or help Cadillac while Buick dies, help Saturn, while Pontiac dies, etc. If the government loans them money, they'll still go bankrupt, just file now and get it over with.

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They are toast. In 2006 they had to take action to prevent this, Saab, Hummer and another brand should have been killed then. GMT900 was rushed to market when gas was $3 a gallon, then Lambda full size SUVs were next to market. Meanwhile Delta II, Epsilon II and Zeta got delayed. For years GM hasn't been able to do both trucks and cars at the same time, it is always one or the other. Or help Cadillac while Buick dies, help Saturn, while Pontiac dies, etc. If the government loans them money, they'll still go bankrupt, just file now and get it over with.

We all know GM has been fighting a mult-front war and losing many of the battles; however, let's lay to bed a few of these myths:

I am quoting from mid-2008 total registrations in the U.S.

In the very imporant large P/U market (1,137,782 registrations in SIX MONTHS), GM commands 34% of the market. Toyota = 8%. This is the most profitable and most loyal market. WOULD YOU SUGGEST THAT GM JUST LAID DOWN AND PLAYED DEAD IN 2005 WHEN THE MARKET WAS MUCH LARGER? Remember, $4 a gallon came long after the money and resources were allocated for the '07 GMT-900 program.

In the very profitable large SUV market (207,827 units in 6 months) GM commands 2/3 of the market! THAT IS TWO THIRDS IN ENGLISH.

In the volatile mid-size SUV market (also very profitable), GM commands 25% of 307k units sold in 6 months.

In the CUV market (reputed to be the fastest growing), GM has 19% of 416k registrations.

The mid-sized SUVs, GM has 17% of 562k registrations.

In the covetted luxury SUV market, GM commands 18.4% of 311k registrations.

These are all important and profitable products. Toyota, Nissan, Ford and even Chrysler have launched full frontal assaults on those individual markets in the past few years. (Remember the 15 year product cycles of the pickups in the '60s, '70s, '80s?)

Now, let's look at the unprofitable but very important entry level market (1.086m registrations in 6 months), GM has 15% of that market, AS AGAINST 15 OTHER BRANDS (not models) BRANDS!

If all 15 brands competed equally, then GM would have only 6.67% of the small car market, yet it has more than double that. I HARDLY CALL THAT A FAILURE.

Yet, these peons go on and on about how GM builds nothing competitive and has ignored the small car market while plowing money into trucks.

BIG F'ING DEAL, I SAY. That is where the money is, and if the hyprocrites in Washington and in Hollywood can't see that, then they should keep their f'ing mouthes shut.

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GM getting market share in the SUV segment is all well and good, but market share does not equal profit. GM is out of cash and needs a government loan (because no bank will lend to them) and Toyota made $17 billion in profit last year. One of those companies had a good plan, one of them didn't.

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... and one company has 2 workers for every 5 retirees; one company is the largest health insurance provider in the U.S.; one company has older factories that don't get a DIME from their local states; one company has a transparent, open system to contend with.... and I could go on.

GM's failures TODAY have little to do with its business decisions of the past 5-10 years and more to do with what happened before that.

In the National Post today, their editorial (although it was, over all, quite balanced) basically said the CAW needs to 'give up' its benefits so GM and Ford can compete.

Now I like a good anti-union joke like the rest of us, but is that what all this Globalization $h! is about? Middle class people must 'give up' wages and benefits so our companies can compete with people who will work for food in other countries?

Is that progress? This is a serious question: IS THIS PROGRESS?

I see companies falling left and right that had the audacity to pay their employees what they were worth - and now those companies are folding.

Eaton's was Canada's largest department store for 100 years. They paid their employees, on average, about double the going rate for retail service. GONE. What does Wal-Mart pay?

This is not progress. This is avarice and sloth.

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"It introduced gas-guzzling vehicles as fuel prices rose, failed to slim down its product offerings and dealer networks quickly enough and wasn’t able to cap its labor costs in time to stem the bleeding. "

1. So did Toyota and Nissan, and the Honda Pilot is no fuel sipper.

2. Can't just close down a dealer like a garage sale.

3. So, Blue Collar people have to give up $, but bankers on Wall St 'deserve' high pay with bail out cash???

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toyota as a business entity is worthy. however, look at all of their products and none of them is class leading.

toyota's bubble is coming. i see way too many blue hairs in toyotas nowadays. way too many. they are the next buick.

seriously, none of toyota's products are the best choices in their class.

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The days of fanatics saying 'only Honda and Toyota make good cars' are long over.

Honda is in trouble since they get 80% of their income from the USA.

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The days of fanatics saying 'only Honda and Toyota make good cars' are long over.

Honda is in trouble since they get 80% of their income from the USA.

let's hope they can get enough profit from fits.

the new accord sucks and the new pilot goes beyond sucking. the new pilot is up there with my aztek in terms of ugly.

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The days of fanatics saying 'only Honda and Toyota make good cars' are long over.

Honda is in trouble since they get 80% of their income from the USA.

They already pulled out Formula One

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There's plenty of blame to go around regarding GM's present situation.

I would agree that many of the problems inherently part of GM's downfall are old history---UAW contracts, dealers, legacy costs, et al...no debate there.

But here's the hard truth: Current management has known about the inherent structural weaknesses---but did little about it.

GM could have sold brands like Hummer or Saab years ago...better yet, what's the deal with killing Olds only to create Hummer?

The Saturn experiment could have been handled differently...the 2 assets Saturn had Spring Hill and its quality dealers also could have been sold off---better yet, why didn't they consider hitting up Renault, Fiat (Alfa, Lancia, Maserati) or somebody else---a great group of dealers and a modern plant with a progressive workforce wasn't attractive?

Where were the GM masters oversight when it came to GMAC--just across town, Ford had avoided mortgage lending to concentrate on Vehicle Lending...shouldn't GM have nurtured that cash cow, not allowed it to wander into oncoming traffic (Cerberus, ahem)---or at least not sell it to sharks who now own a rival?

Why couldn't global resources be harnessed to produce all types of vehicles? GME has nice small product---Australia had RWD expertise---S. America made cheap pick-ups---multiple Japanese tie-ups could have done more, no?

So, while I agree that the situation was difficult, there was so much more that SHOULD have been done---and if RW knew they were a few bad quarters away from bankruptcy, why wasn't the business prepared for the worst? Did 9/11 teach them nothing? Where was the leadership? The corporate vision? The outside innovation?

I deal with GM frequently---and the attitude has always been positively allergic to NIH---this day of reckoning may have been sped up by Macroeconomic forces, but I cannot allow the current management a pity party---they are paid millions precisely to avoid the potholes, not drive GM into 'em.

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