Oracle of Delphi

How Long Can GM Stay Alive?

35 posts in this topic

DETROIT--General Motors Chief Executive G. Richard Wagoner, in Washington to plead his case for more government financing, brought fresh evidence Thursday of GM's desperate situation--a $9.6 billion loss in the final three months of 2008.

The Presidential Task Force on Autos had summoned Wagoner and several other senior executives to Washington to answer questions about the company's request for up to $16.6 billion more in taxpayer aid, on top of the $13.4 billion it has already received from the U.S. Treasury since Dec. 31.

The task force, led by Treasury Secretary Timothy Geithner and White House Economic Advisor Lawrence Summers, wanted a better understanding of GM's (nyse: GM - news - people ) massive restructuring plan submitted to the government on Feb. 17, GM officials said.

"It's about rolling up your sleeves and diving into the viability plan," said GM spokesman Greg Martin. A Treasury department spokesman declined to comment.

Thursday's dismal fourth-quarter results no doubt underscored the seriousness of GM's plight. The automaker burned through $5.2 billion in cash during the quarter--$19.2 billion during the course of the year--as car sales collapsed around the world. GM ended the year with $14 billion in cash, barely enough to fund day-to-day operations.

GM's crisis, once concentrated mostly in North America, has now spread to the rest of the world. GM lost money in all of its operating regions: $2.1 billion in North America, $956 million in Europe, $154 million in Latin America and $879 million in Asia.

As the contagion spread, GM was forced to cut production even in once-booming markets like Korea, which hurt cash flow in December, according to GM Chief Financial Officer Ray Young. When the plants were idled, revenue stopped flowing, but GM still owed parts suppliers for previous months' production. Total worldwide production was down 31%, compared with the fourth quarter of last year.

GM's net loss for the year was $30.9 billion, as revenues fell 17% to $149 billion. In a statement, Wagoner said, "2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half. These conditions created a very challenging environment for GM and other automakers, and led us to take further aggressive and difficult measures to restructure our business."

GM said it would delay filing its 10K annual report to the Securities and Exchange Commission. It also said that without additional government financing, its auditors will probably determine there is substantial doubt about GM's ability to continue as a going concern.

"GM requires this funding in 2009 to continue operations until global automotive sales recover and its restructuring actions generate benefits, resulting in the company being able to fund its own operating requirements," the company said.

Link: http://www.forbes.com/2009/02/26/autos-gm-...mobiles_gm.html

Edited by Pontiac Custom-S
0

Share this post


Link to post
Share on other sites
GM's crisis, once concentrated mostly in North America, has now spread to the rest of the world. GM lost money in all of its operating regions: $2.1 billion in North America, $956 million in Europe, $154 million in Latin America and $879 million in Asia.

The entire world is struggling with no money so this statement should be viewed in that context not as a premise for cutting and amputating GM.

0

Share this post


Link to post
Share on other sites
The entire world is struggling with no money so this statement should be viewed in that context not as a premise for cutting and amputating GM.

As sad as it is, you've struck upon the exact reason why GM (& other companies in similar straits) may need to be euthanized...there's a challenge for well-run, cutting edge companies who deserve help---propping up hopeless cases is a luxury that we may not be able to afford.

It is awful, but there's a "sophie's Choice" that needs to be made.

0

Share this post


Link to post
Share on other sites

But we've got EXCITING!!!!!!!!!!! products like a FWD Cadillac large car, a G3, and G6 with a new nose to look forward to! Those are sure fire winners right there!

0

Share this post


Link to post
Share on other sites

Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

0

Share this post


Link to post
Share on other sites

It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

0

Share this post


Link to post
Share on other sites
But we've got EXCITING!!!!!!!!!!! products like a FWD Cadillac large car, a G3, and G6 with a new nose to look forward to! Those are sure fire winners right there!

You know it would be fine with me if they did a revamp of the G-Body and made a nice new DTS on it... but the prospect of an effing EPSILON DTS has me fuming.

Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

Isn't the jury still out on whether it was Nearer My God to Thee or that popular time-period piece called "Autumn" that they played?

0

Share this post


Link to post
Share on other sites

My question to all of us is this:

What is the difference between bailing out GM with a "loan" and all the people working for GM going on Unemployment?

Not a whole lot. . .

0

Share this post


Link to post
Share on other sites
It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

That sucking sound you hear in Detriot sinking into a giant pothole.....while GM burns...

Welcome to MY world...... :mind-blowing:

0

Share this post


Link to post
Share on other sites
Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

Maybe for all those soon to be cut models......

0

Share this post


Link to post
Share on other sites

I hope this just goes to Chapt. 11.......... let's just purge the system and get it over with.

It should've went Chapt. 11 the first time around.

0

Share this post


Link to post
Share on other sites

I remember hearing that the bailout would be "enough money to polish the windows on the titanic as it sinks".

I can't say I disagree at this point.

0

Share this post


Link to post
Share on other sites

This is what happens when the economy flies off a cliff when you are paying off debts and spending big on a product renaissance.

GM will survive and will be in its best global and domestic position since the 1930s.

I expect that GM will regain and secure the top spot globally by 2020.

0

Share this post


Link to post
Share on other sites

This will be an interesting 50/50 death/survival watch.

:deathwatch:

0

Share this post


Link to post
Share on other sites

If the economy stays down long enough GM is not the onky one in trouble.

Even Toyot.s money reserves have limits and they are in the best shape.

0

Share this post


Link to post
Share on other sites
If the economy stays down long enough GM is not the onky one in trouble.

Even Toyot.s money reserves have limits and they are in the best shape.

If we see no economic up tick at all this year, then this depression we are in will be truly bigger than our first one and you are correct even Toyota will end up being hurt by this.

It is going to be interesting as we will probably see a whole new model of auto companies. Maybe one or two that have been financially conservative to not over extend themselves will survive as is, but I think all companies are going to be changed no matter what.

0

Share this post


Link to post
Share on other sites

It's funny you say depression....because it just may start looking like that later this year...

And if things really start heading downhill, well, let's just say there will be no big three at all.

0

Share this post


Link to post
Share on other sites

I wonder if they had filed Chapter 11 a year ago before burning through most of that $19 billion in cash, if they could have reorganized. Now they are so deep in the hole, it may be too late.

0

Share this post


Link to post
Share on other sites
If we see no economic up tick at all this year, then this depression we are in will be truly bigger than our first one and you are correct even Toyota will end up being hurt by this.

It is going to be interesting as we will probably see a whole new model of auto companies. Maybe one or two that have been financially conservative to not over extend themselves will survive as is, but I think all companies are going to be changed no matter what.

Things are not great here and [not a politcal statment] but ther moves made here do not make me thing they will help. But when I see other countries and how things are there they are in even worse shape.

Japan relys on MFG and they are closing plants left and right. They have not seen things like this since WW2.

I just fear the economic moves here are not going to inspire many to invest in buisnesses and this will slow things evenmore.

I just get tired of the hate the rich idea as I work for a verey wealthy person that does very much for me and my co workers. He is not the only one that is good. You just hear about the bad. But if they tax him to death he will have to make changes as that is money he puts back into our company for growth. I would rather see him put money into employing people at our company vs supporting goverment programs.

0

Share this post


Link to post
Share on other sites
It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

More like the USA as a whole doing down the drain. :(

0

Share this post


Link to post
Share on other sites

I have thought about this situation long and hard and I would make the case for helping salvage GM if two things happened:

1. The UAW was purged from GM completely. No unions workers employed by GM. Done. Over. Bye bye.

2. The Company was brought private. It is a ridiculous scenario under which those dirtbags in congress tied the continuation of loan support by requiring a business plan. This shows just how stupid and clueless about business those idiots are. Give us a business plan that makes you viable and of course your competitors can all see it. Red Ink Rick needs to grow a pair and give Dodd and the rest of the motley crew in congress the big FU if that's what they wanted. Just walk away and let those idiots deal with it.

If these two things happened, GM would have a shot of survival. Otherwise, "stick a fork in 'em honey. They're done."

0

Share this post


Link to post
Share on other sites

How does shrinking a company keep it alive? When you reduce models, you limit variety and drive off customers. DId killing oldsmobile increase sales, market share or profitability? Why will killing Pontiac and Saturn be any more successful?

GM suffers from bad PR. Some of it not their fault. Some of it their fault such as some bad products that were poorly planned and executed...Aztek, GM's many minivans, etc.

GM needed some swagger. The company needs to get its head up. Shrinking things won't help. Cutting dealers only hurts sales in the small towns.

They need to cut the cost per vehicle and increase the profit per vehicle. Whether you have 10 or 50 models, you need to increase the sales and the profit. GM owned the market when the offered variety. Now there is little choice and consumers are going elsewhere.

The coolant leaks/intake gasket problem in the 97-03 Malibus and GM's refusal to fix them free of charge soured some customers and they won't buy a GM car. GM would have made more money by replacing intake gaskets free. A thousand dollar repair bill to fix the coolant leaks don't set well. Just one example.

Respect the customer. Go the extra mile to keep happy customers. I rest my case.

0

Share this post


Link to post
Share on other sites

If they gave congress a big FU then they would be in bankruptcy already. The only thing keeping them afloat right now is the $13.4 billion that Congress gave them.

The decline of GM is part legacy cost and part uncompetitive product. The legacy costs have become unsustainable at almost any level of sales. They lost market share over the years because the product wasn't good enough. If they had by far and away the best midsize sedan they could sell 500,000 a year and get sticker price. But in 03-2007 they had the Malibu, G6, Regal, LaCrosse, Grand Prix, etc and those are just average cars that needed $3500 cash back deals to sell.

If they cut brands, and make the remaining brands twice as good they can gain market share. Now if they cut brands and leave the remaining 4 as they are, they are in trouble.

0

Share this post


Link to post
Share on other sites

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   You have pasted content with formatting.   Remove formatting

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor