GM Loses Another $16 Billion -- Bankrupt?

[Dinner]

Originally posted by rmsharpe

Springsteen is an idiot. He'd probably want the car factories still here, but he'd have such stringent environmental and labor restrictions that they wouldn't be able to produce anything.

Just shut up and play your guitar, Bruce.

Except Federal labor and environmental regulations aren't the issue here. GM not standing up to the unions, the unions making demands without regard to the competitions costs, that Mexican/Chinese/Korea auto workers work for very low wages, and the management refused to make a full line of products and instead concentrated just on one sector (namely trucks/SUVs) and now that the market has changed they have nothing to sell which consumers want.

[Dinner]

Originally posted by Vanguard
Um, GM is still the biggest car maker in the world. If they are "destroying" wealth, then it is pretty hard to see how any wealth ever gets created anywhere.

Second largest (Toyota passed them last year in global sales) but I get your point.

[Dinner]

Originally posted by Kuciwalker
Have you been paying attention to this thread at all?

Like, maybe the part where GM's entire history represents a net loss of $40bn of wealth? Largely because of the ridiculously good compensation that union managed to secure?

I have a feeling they haven't adjusted all 100+ years of income for inflation. Sure those cars sold in 1920 for $500 don't add as much when you just look at the raw dollar figures but adjust for inflation and those 1920 dollars are worth a hell of a lot more then today's green peso.

[Lancer]

Nationalize the terribly run, 'smash the electric car' GM and start turning out electric cars that are a right, paid for and maintained by taxes. That would put auto production back in Amaerican hands and get rid of idiotic management from whom we expected more and put it in the hands of stupid government in whom we don't.

[MrFun]

Those who demonize unions do not realize that workers organized into unions in first place, because executives and CEOs do not have the interest of their workers at heart.

[Kuciwalker]

[Dauphin]

Originally posted by MrFun
Those who demonize unions do not realize that workers organized into unions in first place, because executives and CEOs do not have the interest of their workers at heart.

This is priceless.

[Sandman]

Originally posted by Vanguard
Just because workers get some of the wealth created by the manufacture of automobiles instead of shareholders getting all of it, that does not mean that wealth is being "destroyed."

If they spend more on labour and raw materials than the finished products are worth, then wealth is being destroyed.

[Dinner]

Originally posted by lightblue
How do you buy out 19000 workers for $3.3Bn? That's about 175000$ per person, not a bad severance packet if you're an hourly worker..

Welcome to Unionville.

The buy outs basically mean GM gives them a lump sum and then doesn't have to pay their pensions or health care for the rest of their lives. Most of the people who opt for these buy outs don't have enough years to get a full union pension so basically they're taking the money now because they don't expect their jobs to still be there long enough for them to get the remaining years they need to get a full pension.

The big competitiveness issue is you can't pay a union auto worker $90,000 per year plus life time pension plus life time free health benefits when companies like VW and Toyota (Toyota builds Tacoma trucks in Tijuana) have factories in Mexico where they pay people $8-$12 per hour with no benefits. Yes, the unions made outrageous demands but management agreed to them and management created the current crisis by only designing and building gas guzzlers while the market responded to high gas prices by demanding more fuel efficient cars. Cars the big three completely neglected to design despite over a decade of being told fuel prices were going up.

[onodera]

I have a feeling the name "Oleg Deripaska" will appear in this or similar thread later.

[Dinner]

There are plenty of American billionaires, way more then in Russia. The reality is none of them will touch this until the companies go into bankruptcy reorganization and so are freed from all pension and health care liabilities. Once that is done then the companies will resume profits though they'll likely lose a lot of market share and risk corporate raiders jumping in to strip them of their profitable assets. That's one of the reasons I would take the same measure South Korea took with Daewoo; nationalizing the companies and allowing them to reorganize under government control before reprivitizing them more or less intact without the raiders stealing everything which isn't nailed down. It's what France did with Renault, what Malaysia has done with Proton, what Sweden did with Volvo, and a number of other people. If you want the companies to emerge as viable entities instead of terminal groups like Austin-Rove that's the way it has to be done.

The question is do Americans collectively care enough about maintaining their heavy industry to do it or would they rather deindustrialize because the short term costs are lower. I for one know the French solution is superior to the British asset striping solution because France still has a native auto industry (and oil industry and steal industry and aircraft industry) while Thatcher basically wrecked Britain's heavy industry by selling it off piecemeal so that nothing of value remained.

[onodera]

Originally posted by Oerdin
There are plenty of American billionaires, way more then in Russia. The reality is none of them will touch this until the companies go into bankruptcy reorganization and so are freed from all pension and health care liabilities. Once that is done then the companies will resume profits though they'll likely lose a lot of market share and risk corporate raiders jumping in to strip them of their profitable assets. That's one of the reasons I would take the same measure South Korea took with Daewoo; nationalizing the companies and allowing them to reorganize under government control before reprivitizing them more or less intact without the raiders stealing everything which isn't nailed down. It's what France did with Renault, what Malaysia has done with Proton, what Sweden did with Volvo, and a number of other people. If you want the companies to emerge as viable entities instead of terminal groups like Austin-Rove that's the way it has to be done.

Deripaska doesn't need the company. He needs the assets, not the liabilities.

[Dinner]

He'll have stiff competition for those assets unless the government steps in to prevent asset striping (which I hope they do). If we are just talking about individual private citizens who have a net worth in excess of $1 billion then the US has 432 while Russia has 53. Or roughly 8 to 1.

http://aydin.net/blog/2007/03/10/worlds-billionaires-by-country/

Of course the future buyer likely won't be a single man but instead will be a company and the US has thousands to every one Russian firm which can afford to play this game. This is what I predict: The companies will go into bankruptcy, the bond holders will gain control of them and then from there it is a question of the bond holders character. If they are short sighted they will simply cut the companies up and sell them piecemeal if they are thinking long term (unlikely since American companies never think long term thus the reason they have so many troubles while Japanese and German companies continually ride out the storms) then they try to turn the companies around then retake them public.

As I said the best possible solution is for the government to preserve a strategic asset and make sure the country's industrial power houses are reorganized in one piece and are then reprivitized a la the model most successful countries have used. I have little hope that American politicians will think beyond what is quickest and easiest though because Americans are by nature short sighted people; that's why they got into this mess to begin with. They ignored vital and necissary parts of the business because they wanted to make profit quotas for a single quarter or because they wanted to keep the dividend $0.03 per share higher then if they had acted responsibly and actually designed cars to suite likely market conditions instead of just RIGHT NOW.

As a result those short term share holders who demanded those extra $0.03 will be wiped out (assuming they haven't already bailed though they likely have) where as the German and Japanese companies will still be around because the investors understood that positioning the company for the long term yields greater profits then just maximizing returns for a quarter or two. This is one of the great failures of the American economic model.

It's also why the American companies which are most successful long term have a large percentage of shares owned by the founders. I.E. people who are emotionally invested in the company succeeding long term instead of johnny come latelies who just want to turn a quick buck and abandon the company before the policies changes they forced result in the company's collapse. These raiders essentially are hoping to find companies with a lot of assets, then shake those assets lose (in the form of higher dividend or temporary increased profits which will raise stock prices) then they want to bail before their asset striping causes the company to fail. Those people are net asset destroyers.

[Darius871]

Originally posted by Oerdin
Yes, the unions made outrageous demands but management agreed to them

This is the only part I don't get... are you suggesting that inducing a massive strike would have been a better choice by management?

[chequita guevara]

Originally posted by rmsharpe

I sell propane and propane accessories.

Eyup.