Dire Times for the Auto Industry
- Thread starter AtomicGT
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tpraceman
THEE GT OWNER
David, You are pretty smart for your age.:thumbsup
Some of your Dad must have rubbed off on you:wink
Hopefully nobody can argue that the cars and trucks we build today are among the best you can buy and great value.
(we hot rod nuts all rave about our GT's Mustangs, Vipers Charger Vette and so on).
Kia/Hyundai and the others are UNION and have nasty strikes every year.
All foreign companies are hurting as bad or worse. (Toyota gross profit down 74%)
The help that is needed now.
11 years ago the Asian Financial melt down was exactly what we have experienced this year.
Car builders are Americans too...not some....leper colonie in Michigan!
Some of your Dad must have rubbed off on you:wink
Hopefully nobody can argue that the cars and trucks we build today are among the best you can buy and great value.
(we hot rod nuts all rave about our GT's Mustangs, Vipers Charger Vette and so on).
Kia/Hyundai and the others are UNION and have nasty strikes every year.
All foreign companies are hurting as bad or worse. (Toyota gross profit down 74%)
The help that is needed now.
- Cash flow to weather the storm.
- Government, Obama & G.W.B. need to urge USA buyers to support USA companies.
- Universities to focus all resources of the engineering talent and studies to help USA auto industries.
- Lower % for USA car buyers.
- All government USA agencies must buy only (USA company) made vehicles.
- All car allowance fed employees are good only for USA vehicles.
11 years ago the Asian Financial melt down was exactly what we have experienced this year.
- Banks failed
- Stock market failed
- Auto companies failed Kia bankrupt Hyundai forced to buy them/ Daewoo bailed out by GM and so on.
Car builders are Americans too...not some....leper colonie in Michigan!
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I don't think anything is required beyond immediate funding to make sure they make it to the VEBA transfer.
Clearly, GM has to either kill several brands or merge with Chrysler and kill them. There are too many brands fighting for the same slice of the pie. As competitors, fine. But when you're cannibalizing sales from yourself it makes no sense. They just can't afford to do either now because of the tremendous costs associated. Unless someone feels like relaxing dealer franchise laws, it's going to cost billions of dollars to compensate these people for their investment (because believe me, there are lawyers lined up out the door waiting for a shot to sue).
Ford has already streamlined the business and matched their foreign competitors in terms of quality and fuel efficiency, and as of 2010, if you ask me, in virtually every category minus reputation.
It would just be nice if everything American wasn't a dirty word. It's pathetic what a bunch of self-loathers this country is. It has nothing to do with quality. It's been proven that if you take two cars and cover the badges, people who prefer a Ford over a Toyota in California will switch their opinions when told which is which. How vomitous is that?
Ultimately, while I'm philosophically opposed to giving away money, you have to get real about the fact that millions of workers, retirees, and people who can't rely on a great education and the ability to do paperwork will soon be crushed under the weight of a depression brought on by recklessness at every level of government and commerce.
Clearly, GM has to either kill several brands or merge with Chrysler and kill them. There are too many brands fighting for the same slice of the pie. As competitors, fine. But when you're cannibalizing sales from yourself it makes no sense. They just can't afford to do either now because of the tremendous costs associated. Unless someone feels like relaxing dealer franchise laws, it's going to cost billions of dollars to compensate these people for their investment (because believe me, there are lawyers lined up out the door waiting for a shot to sue).
Ford has already streamlined the business and matched their foreign competitors in terms of quality and fuel efficiency, and as of 2010, if you ask me, in virtually every category minus reputation.
It would just be nice if everything American wasn't a dirty word. It's pathetic what a bunch of self-loathers this country is. It has nothing to do with quality. It's been proven that if you take two cars and cover the badges, people who prefer a Ford over a Toyota in California will switch their opinions when told which is which. How vomitous is that?
Ultimately, while I'm philosophically opposed to giving away money, you have to get real about the fact that millions of workers, retirees, and people who can't rely on a great education and the ability to do paperwork will soon be crushed under the weight of a depression brought on by recklessness at every level of government and commerce.
I think what disappoints, saddens and disheartens me the most is that is my generation, my peers, who have created a lot of this turmiol in the financial world, which is affecting virtually every industry in America. My generation, the sons and daughters of parents who weathered the collapse of the economy in '29, who struggled through the great depression, who fought on two fronts to champion freedom throughout the world, who rebuilt Europe, Japan and a lot of Asia. Did we not learn anything from these individuals who brought peace and prosperity to a young growing nation? The rugged individuals that led the corporations that built the aerospace industry and sent men to the moon 40 years ago. What happened to fair play and honesty that they tried to instill in us? How did this cheating, lying and greed displace the values that we grew up with? I'm not just talking about today's problems - it became apparent a few years ago with Enron and the other companies who were falsifying and cooking their account books, disillusioning the workforce and the stockholders. A lot of us have tried to maintain the values that we were taught, but too many have turned to the easy road - and are truly legal criminals.
And, what are we teaching the generations that follow us? I'm saddened!
And, what are we teaching the generations that follow us? I'm saddened!
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Empty Pockets
ex-GT Owner
"You're telling me that Ford, with quality admittedly on par with Toyota and Honda, is not investing in quality products? Or GM and Ford both having more hybrid vehicles than any Asian counterpart is not investing in "innovative technologies — especially fuel-saving designs"? Or Ford having 3 hybrid cars that getter fuel efficiency than the comparable Toyota, but even the versions that are gasoline powered still being better by at least 5 mpg?"
Nope. Your points pretty much cover why I said, "for the most part". Without going point by point, I was referring things like mgmt far too often "caving in" to the unions, 'short term focus on qtrly returns, 'the $1,500 to $2,000 'handicap hole' per car Detroit has to start from which needs to be removed (which gets back to those years of "caving in"), 'sanity in compensations (wages, salaries & perks), and the like.
Though he didn't say this (either specifically or indirectly), the car industry also needs to knock off the multi-brand-under-the same-tent setup once and for all. EG: why are Buick, Chevy, and Pontiac all chasing the same sedan buyer? Or Chevy & GMC chasing the same truck buyer? And why are Pontiac & Saturn competing with their Solstice and Sky? They're the same car.
The only stmt you made that I'd disagree with is, "Reality does not meet perception here, and people completely ignore it." I mean this in the sense that perception in fact IS reality as far as "Joe Sixpack" is concerned. (And that principle applies to much more than the general public's view of the car industry, unfortunately.
"And that's all I have to say about that." - F. Gump
Empty Pockets
ex-GT Owner
Cobrar
GT Owner
I re-re-read Mitt's comments. It is funny, he directly mentions a 'managed' bankruptcy and then later inferred a 'bail-out' by virtue of reducing pension costs. I assume he is indicating that the government will shoulder the residual for the pensions ~ as a 'bail-out'?
I agree, cocktails are in order.
I agree, cocktails are in order.
Well, here's the thing, Ford isn't anywhere near a bankruptcy situation today. The issue is that if GM goes bankrupt, and that could happen inside 30 days as conditions deteriorate, you're looking at a situation where dozens of common suppliers fall like dominos. We're talking within days, not weeks or months. That would force Ford to call in the remaining $10 billion in credit lines they have on top of the $17 billion they have on hand, but there is with banks running for the hills as is, I'd be prepared for immediate legal action as they attempt to avoid contractual obligation. This is why Ford is fighting for a GM loan as hard as GM is.
Ford could concievably make it through 09 anyways with a GM bankruptcy, but with the ripple effects of the hundreds of thousands of job losses that would occur, further economic deterioration might bring everyone down. If somehow things magically get better or stay otherwise as is, and I'm not counting on it, they'd be fine. But a buddy of mine had a hard time getting a $30k loan on his Range Rover when he put 40k down and he had a 795 credit score. The credit markets are still very nearly frozen. There is no reason to think, or at least plan, that it will get easier.
This is legit. It's not about the auto industry. We're talking taking an already very serious recession (we don't even know the full effect the Wall Street bailout is going to have) and potentially sinking it into Great Depression 2. I can't even forecast what a bankruptcy of all three would entail. The rise in jobless numbers has been significant. If you take another 500k-1.5 mil out of the system, good luck to everyone.
This is why they don't want to discuss bankruptcy as an option.
Thanks for the response DBK. I'm thinking that we are in for a protracted recession that will last for 2-3 years if not longer. If that ends up being the case do you still think we keep financing the Big 3?
We are going to have millions of unemployed people collecting unemployment benefits that aren't quite as nice as the UAW folks would be getting. Tax payers may not think that is right.
When do the car companies think the demand will return? How long will the 25 billion they're seeking last?
Thanks again for the education.
We are going to have millions of unemployed people collecting unemployment benefits that aren't quite as nice as the UAW folks would be getting. Tax payers may not think that is right.
When do the car companies think the demand will return? How long will the 25 billion they're seeking last?
Thanks again for the education.
BlackICE
GT Owner
As you said, fat chance of Ford getting to actually draw on the $10 billion credit line!
If a guy with more 50% down and a 795 credit score barely got a loan. The car market is essentially DEAD! Sales volumes will continue to decline until the credit market improves which is not soon. The auto CEO estimated a 11 to 12 million run rate when the economy improves. What happens if sales levels are less than 9 million for 12 month? I believe the big 3 cannot adjust labor costs by closing plants because of labor contracts. Therefore what would funds would be needed to hold the big 3 afloat for 1 year at sales of less than 9 million per year? My bet is a much more than 25 billion. Essentially the bailout plan will be a platinum unemployment insurance for the UAW as well as fully funding the VEBA plans. That seemed like a laudable goal of Chris Dodd's.
As an important side note, I believe market share will be shifting to foreign makes due to the fear of impending bankruptcies of the big 3, compounding the problems.
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AlohaGT
GT Owner
Some significant developments: BK is now being considered as an option and the board has once again, publicly, disagreed with Wagoner.
From today's WSJ.
NOVEMBER 22, 2008
Bankruptcy Is Option to GM Board
By JOHN D. STOLL
DETROIT -- Members of General Motors Corp.'s board of directors are willing to consider "all options" for the ailing auto maker, including an eventual filing for bankruptcy protection, a stance that puts them in rare disagreement with Chairman and Chief Executive Rick Wagoner, people familiar with the matter said.
As part of his push to win a federal bailout for the company, Mr. Wagoner told Congress this week that GM management believes bankruptcy protection is not a viable option for the company. Instead, GM is focusing on persuading lawmakers to provide financial help, Mr. Wagoner said.
Skidding Auto Makers
The board, which in the past has publicly offered Mr. Wagoner its strong support, agrees that seeking government funding is the company's top priority. But it isn't willing to dismiss the possibility of a bankruptcy filing, say people familiar with the thinking of the board's outside directors.
In a statement provided to The Wall Street Journal on Friday, GM said the board had discussed bankruptcy but didn't view it as a "viable solution to the company's liquidity problems." The board "is committed to considering all options in light of circumstances as they may develop." A GM spokesman, Tony Cervone, said that management is considering doing everything in its power to avoid a filing.
GM said Mr. Wagoner declined to be interviewed. Several of GM's board members could not be reached for comment on Friday. It is unclear whether the board has hired independent advisers to help it evaluate options it may have to consider.
New signs of tension in the boardroom could complicate the next few weeks for Mr. Wagoner, 55 years old. In the past month, he has had to acknowledge GM is using cash at an alarming rate. Mr. Wagoner said that as soon as January, amid frozen credit markets and a collapse in demand for automobiles, the company could fall short of the minimum levels it needs to stay out of bankruptcy court. On Friday, GM shares closed at $3.06, up 18 cents, or 6.25%. A year ago, the stock was trading at about $42.
Friday's split represented at least the second time in recent weeks the board has shown a willingness to oppose Mr. Wagoner. This fall, Mr. Wagoner's management team presented a plan to potentially merge with Chrysler LLC. Some directors gave that plan a cold reception, according to people familiar with the meetings. By early November, when GM was set to report deep losses and $6.9 billion in cash outflows for the third quarter, the board encouraged GM management to quit the merger talks and focus solely on its liquidity crisis, these people said.
Of GM's 14 board members, nine have been in place since Mr. Wagoner became chairman in 2003. Many were elected when Mr. Wagoner's mentor and predecessor, Jack Smith, was running the auto maker. Lead director George Fisher, the retired chairman of Eastman Kodak Co., several times in recent years voiced support for Mr. Wagoner as the company racked up billions in losses. Other directors include Phil Laskawy, the retired Chairman of Ernst & Young, who was recently named Chairman of Fannie Mae, and University of North Carolina president Erskine Bowles, who was chief of staff for President Bill Clinton.
In a break from its traditional monthly board meetings, early in the summer the board started convening by phone each Friday. In recent weeks it has added several more weekly teleconferences to discuss how GM should approach the liquidity option.
On Friday, GM said it is pushing ahead with new cost-cutting measures. It said three plants in the U.S. and one in Ontario, Canada, would extend their normal two-week holiday shut-downs into January. It also said it would close down an Ontario truck plant sooner than it had planned.
GM also confirmed it is ending leases on two of the five remaining corporate jets in its fleet. The move comes after Mr. Wagoner and Detroit's two other auto CEOs were chastised in Congress for flying corporate jets to meetings this week in which they asked for billions of dollars in public assistance.
"We understand the symbolic issue of people showing up in Washington in corporate jets," GM spokesman Tom Wilkinson said. "We're very sensitive to that."
Mr. Wagoner and the chief executives of Ford Motor Co. and Chrysler LLC were in Washington hoping to get $25 billion from the $700 billion fund administered by the Treasury Department for troubled financial institutions, or to persuade Congress to accelerate the release of $25 billion in loans that had already been pledged to Detroit through an Energy Department fuel-efficiency program.
Mr. Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli told lawmakers they have been restructuring their companies and need bridge loans to carry them through until the economy recovers. Mr. Wagoner asked the government for $10 billion to $12 billion in immediate funding.
All three expressed concern that a bankruptcy filing by any one of their companies could cause a collapse of the others. Because the companies share suppliers, one maker's failure could bring down the supplier network, they say, impacting one or both of the others. They also point to studies showing that consumers would be unwilling to buy cars from bankrupt auto makers, out of concern that warranties may not be honored or spare parts could become unavailable.
Lawmakers were skeptical that the companies had taken the tough steps to put their companies on the road to profitability. After enduring two days of harsh criticism, the Detroit CEOs were told to come back by Dec. 2 to describe how they'd use taxpayer funds to become "viable."
On Friday, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter that auto makers must provide "a forthright, documented assessment" of how much cash they need to become stable for the long term. They also said the companies, if granted loans, must make the government senior to all other creditors, meet fuel-efficiency targets, limit executive pay and offer warrants to allow taxpayers to profit if the companies recover.
Some in Congress remain convinced that bankruptcy is a possible avenue. Republican Sen. Bob Corker of Tennessee, a member of the Senate Banking Committee, said Republican senators have been discussing a so-called prepackaged bankruptcy, in which creditors agree to restructure debts before a company seeks court protection.
Companies sometimes are able to use such an option to avoid long stays in bankruptcy court. Bankruptcy experts warn, however, that a bankruptcy proceeding for a large company such as GM could get bogged down because of its complex union and dealership contracts and array of creditors.
From today's WSJ.
NOVEMBER 22, 2008
Bankruptcy Is Option to GM Board
By JOHN D. STOLL
DETROIT -- Members of General Motors Corp.'s board of directors are willing to consider "all options" for the ailing auto maker, including an eventual filing for bankruptcy protection, a stance that puts them in rare disagreement with Chairman and Chief Executive Rick Wagoner, people familiar with the matter said.
As part of his push to win a federal bailout for the company, Mr. Wagoner told Congress this week that GM management believes bankruptcy protection is not a viable option for the company. Instead, GM is focusing on persuading lawmakers to provide financial help, Mr. Wagoner said.
Skidding Auto Makers
The board, which in the past has publicly offered Mr. Wagoner its strong support, agrees that seeking government funding is the company's top priority. But it isn't willing to dismiss the possibility of a bankruptcy filing, say people familiar with the thinking of the board's outside directors.
In a statement provided to The Wall Street Journal on Friday, GM said the board had discussed bankruptcy but didn't view it as a "viable solution to the company's liquidity problems." The board "is committed to considering all options in light of circumstances as they may develop." A GM spokesman, Tony Cervone, said that management is considering doing everything in its power to avoid a filing.
GM said Mr. Wagoner declined to be interviewed. Several of GM's board members could not be reached for comment on Friday. It is unclear whether the board has hired independent advisers to help it evaluate options it may have to consider.
New signs of tension in the boardroom could complicate the next few weeks for Mr. Wagoner, 55 years old. In the past month, he has had to acknowledge GM is using cash at an alarming rate. Mr. Wagoner said that as soon as January, amid frozen credit markets and a collapse in demand for automobiles, the company could fall short of the minimum levels it needs to stay out of bankruptcy court. On Friday, GM shares closed at $3.06, up 18 cents, or 6.25%. A year ago, the stock was trading at about $42.
Friday's split represented at least the second time in recent weeks the board has shown a willingness to oppose Mr. Wagoner. This fall, Mr. Wagoner's management team presented a plan to potentially merge with Chrysler LLC. Some directors gave that plan a cold reception, according to people familiar with the meetings. By early November, when GM was set to report deep losses and $6.9 billion in cash outflows for the third quarter, the board encouraged GM management to quit the merger talks and focus solely on its liquidity crisis, these people said.
Of GM's 14 board members, nine have been in place since Mr. Wagoner became chairman in 2003. Many were elected when Mr. Wagoner's mentor and predecessor, Jack Smith, was running the auto maker. Lead director George Fisher, the retired chairman of Eastman Kodak Co., several times in recent years voiced support for Mr. Wagoner as the company racked up billions in losses. Other directors include Phil Laskawy, the retired Chairman of Ernst & Young, who was recently named Chairman of Fannie Mae, and University of North Carolina president Erskine Bowles, who was chief of staff for President Bill Clinton.
In a break from its traditional monthly board meetings, early in the summer the board started convening by phone each Friday. In recent weeks it has added several more weekly teleconferences to discuss how GM should approach the liquidity option.
On Friday, GM said it is pushing ahead with new cost-cutting measures. It said three plants in the U.S. and one in Ontario, Canada, would extend their normal two-week holiday shut-downs into January. It also said it would close down an Ontario truck plant sooner than it had planned.
GM also confirmed it is ending leases on two of the five remaining corporate jets in its fleet. The move comes after Mr. Wagoner and Detroit's two other auto CEOs were chastised in Congress for flying corporate jets to meetings this week in which they asked for billions of dollars in public assistance.
"We understand the symbolic issue of people showing up in Washington in corporate jets," GM spokesman Tom Wilkinson said. "We're very sensitive to that."
Mr. Wagoner and the chief executives of Ford Motor Co. and Chrysler LLC were in Washington hoping to get $25 billion from the $700 billion fund administered by the Treasury Department for troubled financial institutions, or to persuade Congress to accelerate the release of $25 billion in loans that had already been pledged to Detroit through an Energy Department fuel-efficiency program.
Mr. Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli told lawmakers they have been restructuring their companies and need bridge loans to carry them through until the economy recovers. Mr. Wagoner asked the government for $10 billion to $12 billion in immediate funding.
All three expressed concern that a bankruptcy filing by any one of their companies could cause a collapse of the others. Because the companies share suppliers, one maker's failure could bring down the supplier network, they say, impacting one or both of the others. They also point to studies showing that consumers would be unwilling to buy cars from bankrupt auto makers, out of concern that warranties may not be honored or spare parts could become unavailable.
Lawmakers were skeptical that the companies had taken the tough steps to put their companies on the road to profitability. After enduring two days of harsh criticism, the Detroit CEOs were told to come back by Dec. 2 to describe how they'd use taxpayer funds to become "viable."
On Friday, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter that auto makers must provide "a forthright, documented assessment" of how much cash they need to become stable for the long term. They also said the companies, if granted loans, must make the government senior to all other creditors, meet fuel-efficiency targets, limit executive pay and offer warrants to allow taxpayers to profit if the companies recover.
Some in Congress remain convinced that bankruptcy is a possible avenue. Republican Sen. Bob Corker of Tennessee, a member of the Senate Banking Committee, said Republican senators have been discussing a so-called prepackaged bankruptcy, in which creditors agree to restructure debts before a company seeks court protection.
Companies sometimes are able to use such an option to avoid long stays in bankruptcy court. Bankruptcy experts warn, however, that a bankruptcy proceeding for a large company such as GM could get bogged down because of its complex union and dealership contracts and array of creditors.
That's just shit stirring from the journal.
You'd be an idiot not to examine all options, because if they don't get the government loans they will go bankrupt very, very quickly. That doesn't mean they are examining it as the solution.
You'd be an idiot not to examine all options, because if they don't get the government loans they will go bankrupt very, very quickly. That doesn't mean they are examining it as the solution.
Cobrar
GT Owner
DBK,
1) What did you do with your hair? The wife is gonna' have your butt..
2) The GM PR machine has always been an impressive thing to behold - second to none. Possible strategy ~ leak a 'difference of opinion' between GM's board and Wagner to help passify the rather vocal industry pundits from the hearing. I love theatre.
AlohaGT
GT Owner
Many will agree that Chapter 11 is the court of last resort; however, given the intransigence of those on other side of the aisle, the administration and the general sentiment of the public, it can't be dismissed as, potentially, the only viable court. A substantive lifeline thrown in the direction of industry, prior to January 20, is not viewed with great optimism by most.
Gulf GT
GT Owner
Give it a year or two. This is only the beginning. It's like taking last gasps for air without realizing that they haven't even traveled 1/4 of the distance yet. It's going to be interesting to see how all this plays out. The U.S. government does not have the money to bail out every industry. One thing is for certain, the money must come from "somewhere", and that somewhere isn't here. Just waiting see which foreign language I have to learn.
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Empty Pockets
ex-GT Owner
Chinese.
The have, what?, 2 trillion in cash lying around? They could buy The Big 3 outta their petty cash drawer. :frown
AlohaGT
GT Owner
Agreed, Gulf, but some of it will come from here as many of us will be throwing more into the pot to spread the wealth. :wink
AJB
GT
Just got back from the LA Auto show...GM was dead and Chrysler did not even have lights on...! And 'zero' corporate people in attendance...
The Ford Press release was well done by Mark Fields, Farley, Gaffka, Gioia and others and the product was nice. Big attendance on Press-day and good data given (ie Focus Hybrid at 39 mpg) .... But even then the headline in the papers was ...
"Automakers CEO's and UAW Gettlefinger---Dinosaurs who have outlived their usefulness".
Everyone (at least those I spoke to) feel that the Detroit 3 will need to declare Chapter 11 ...and they spoke of it with Glee!
AJB
The Ford Press release was well done by Mark Fields, Farley, Gaffka, Gioia and others and the product was nice. Big attendance on Press-day and good data given (ie Focus Hybrid at 39 mpg) .... But even then the headline in the papers was ...
"Automakers CEO's and UAW Gettlefinger---Dinosaurs who have outlived their usefulness".
Everyone (at least those I spoke to) feel that the Detroit 3 will need to declare Chapter 11 ...and they spoke of it with Glee!
AJB