Will the Big Three Survive the Decade?

Don't remember what car?

That's a big part of their problem.
I often wonder if people would buy cars that were built to last for 40 years like they used to be if they had to pay twice as much for them, or do they prefer the lower price for cars that last 3 - 5 years because they would rather have a new car every 3 years.
Chicken or the egg?

 

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It was either that or open the door for the unions to offer health care across the entire industry (eliminating the larger companies' competitive advantages in the area).

And besides, looking more than four or five years down the road has never been a GM executive strong point.

Several have. Toyota hit the papers a couple of years ago for explicitly giving that as a major reason for siting a new plant outside the US.

Many improvements in quality are low cost, or even free. Japanese vehicles don't cost any more to make than US vehicles, even comparing the ones made in the US.

It would not cost twice as much for GM to make much better cars than it does. If they got rid of the layer of Vice Peresidents they promoted from accounting, who have a built in idea that GM makes money rather than cars and have made thousands of manufacturing decisions accordingly, they could get some dramatic quality improvements and save a bundle on executive compensation at one stroke.

This situation is a long delayed inevitability. "On A Clear Day You Can See General Motors" came out in 1973, and among other less banal observations made the obvious point that GM's numerous executives were taking down luxurious compensation (an area in which they beat Toyota hollow) for building lousy cars (that year the Vega was GM's answer to the Corolla, which had become the largest selling car in the world). Without a friendly protectionist government, GM would have gone under in the '80s.

 

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Cant even afford to go bankrupt???

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX3PTMWCvBMw&refer=home

Dec. 6 (Bloomberg) -- Financing a bankruptcy by General Motors Corp. or Chrysler LLC would cost at least twice as much as the automakers say they need in U.S. government bailout loans, Chrysler and a restructuring expert said.

Chrysler, which said yesterday it hired the Jones Day law firm to review bankruptcy as an option it later rejected, would need $20 billion for bankruptcy financing -- triple its $7 billion loan request -- according to a company report to Congress. A GM bankruptcy would cost $40 billion to $50 billion to finance, Edward Altman, a professor at New York University’s Stern School, told Congress yesterday. GM seeks $18 billion in bailout loans.

“Unfortunately, this traditional loan, even for $18 billion, is inadequate and is destined to fail in the current environment and will likely be followed by additional requests for more rescue funds or a bankruptcy petition,” said Altman. He urged the government to push banks that received other bailout aid to provide needed bankruptcy loans for carmakers.

GM Chief Executive Officer Rick Wagoner had the opposite view of bankruptcy, telling Congress that his company wasn’t pursuing that option to solve its cash crisis because it would scare away buyers and further siphon off revenue, forcing liquidation. Even a government-backed bankruptcy would be too difficult and risky, GM lead director George Fisher has said.

Tony Cervone, a GM spokesman, had no additional comment. GM did hire Weil, Gotshal & Manges, a New York law firm, to advise it on bankruptcy matters, a person familiar with the matter said, asking not to be named. Law firm spokesman Mike Ford didn’t respond to a message seeking comment on the hiring.

 

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In bankruptcy the stockholders loose everything. Most corporations no longer offer retirement benefits period. Most have voluntarily terminated their retirement plans and no longer offer medical benefits to retirees. This only exists now in the auto industry and government.

 

Instead of companies paying their employees' retirement and healthcare costs after those employees retire, these companies should contribute annually to a completely separate entity's retirement / healthcare premiums annually, thus discharging their future obligations entirely, and unloading that responsibility to someone else.

 

It's called "socialized medicine". It does indeed work better.

 

One of the problems with the retirement and medical issues is that the financial reporting of those expenses are often inappropriate. A lot of accountants bend the financial reporting rules to make their pensions look better then they really are to the shareholders. But then, when it comes time to pay those pensions, out of a sudden you have a bigger expense that you had accounted for. Hence any plans and budgets are useless when it comes to pensions.

 

That "separate entity" doesn't have to be a government entity. And if it is, it doesn't have to be "socialized medicine" or whatever. An annual contribution, according to any formula, to a 401K (it's my understanding that it's the US equivalent of an RRSP or RSP in Canada?)

Some companies in Canada match 1 for 1 whatever contribution the employee makes to his own RSP / RRSP (retirement savings plan).

Another business model is having labour be mostly contracted. We contractors make more than full-time people, but the premium covers for the fact that the companies we work for don't pay us for vacation time, sick days, no benefits, and certainly no retirement savings. This model would be the "cash" model as opposed to the "accrual" or "credit" model. You pay for the services rendered upfront, instead of putting it on credit and paying for it many years down the line when the person doesn't even work for the company any longer.

 

Pension fund accounting is a bloody mess. They need future tellers (actuaries) to be able to do their accounting, which should tell you how reliable the data that they present is

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. These funds rely on 2 sources to fund their future liabilities: (1) direct contributions by the employers, and (2) investment gains from the shares in which the money from group 1 was invested in. Since group 2 "gains" are not realized until actual sale, they are meaningless. Imagine a pension fund had investments in these toxic real estate assets everyone's talking about right now. For a few years the pension fund's books would have shown huge gains. But then when shit would've hit the fan, the fund's net value would be a coupla billion on the negative. And down goes the fund!

My point is that users of this pension fund's financial statements have to rely on completely unreliable figures which are only based on market fluctuations, and even if they were reliable, are not representative of what the fund has, because these shares need to be sold for these figures to be realized.

 

I find this whole situation pretty ridiculous. I'll confess I don't know if they should be bailed out or not, but as a person with nothing more than a passing understanding of what's going on with the economy the situation is ridiculous.

2 weeks ago the CEO's showed up before Congress and asked for $25 billion. Not only were they turned down, they were ridiculed for flying there on private jets, among other things. Something I think should have been brought up to the bankers too. Now they went back asking for, not $25 billion, but $34 billion. Except this time they all drove to the meeting in hybrids, or carpooled. Wow, I can see you're all really putting it on the line for your companies. Being forced to carpool to a single meeting then gloating about it as if they've made a huge sacrifice.

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is not emoticon enough for this.

To top it off they all agree to "work for $1 salary". Well that's great and all. Now instead of a salary of $1.4 million and total compensation of $21 million per year, you'll only get your multi million $ compensation. What a shame, and again I can see you've made a huge personal sacrifice here for your lack of foresight.

I think realistically they'll need some sort of assistance to get out of this, and I really don't have a problem with that. But it should come with conditions, things like

1. Sell the company's private jets and any other luxuries to help cover the costs.

2. CEO's should be put on a fixed salary of $100,000 per year until the money loaned is paid back to the government in full. That's $100,000 all inclusive, no extra bonuses or compensation packages.

3. Restructuring of the companies involved, either through Chapter 11 or other means. It's time they focused on more than just producing another 8 mpg truck for next year's lineup.

4. If workers are to be laid off they're to be entitled to benefit from the money loaned before anything else. They should be given adequate severance packages and treated as what they are, honest hard working people innocently caught up in a shitstorm created by banks, investors, corrupt government administrations and CEO's with poor foresight.

People will say this isn't fair considering the easy handout the banks got, but in truth it's the other way around. The bailout for the banks wasn't fair, this is how it should have been done for them too.

Sorry for the rant, just needed some place to vent

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No, they won't last the decade. Automobiles have little or no future. Let's have them make trains or something useful.

 

It was a massive mis-investment in suburbia and the automobile. India would do well not to make the same mistake.

 

A day of triumph for the US senators who refused to bailout GM and Chrysler.

A triumph of intelligence over stupidity.

Does anyone seriously believe that a company like GM already tens of billions in debt is going to be able to pay off an additional 10+ billion from the government within a year???

Bankruptcy is just what they need to shake off the labour contracts and the excessive multiplicity of brands.

 

But its going to be a Blue Christmas.

 

I hope one, perhaps two of them go out of business.

I will not be paying income taxes this year because of how disgusted I am with our government and these bailouts.

 

They can't afford bankruptcy.....


They are in financial limbo now......

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A general income tax REVOLT would be groovy!

I can just see the placards swirling around Capitol Hill...'YOURE NOT GOING TO TAKE IT!'

IT being our money, and our children's money...so you can bail out an endless number of incompetent corporations who debtonated themselves.