Skip to comments.General Motors Is Headed For Bankruptcy -- Again [Flashback to 8-15-12 ]
Posted on 11/06/2012 7:41:23 AM PST by tobyhill
President Obama is proud of his bailout of General Motors. Thats good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.
(Excerpt) Read more at forbes.com ...
an Executive Order giving the Chevy Volt a monopoly on the US passenger auto market should do the trick...
How can this possibly be? President Ocarter just said the other day, “the US auto industry is back on top”!
And an EO forbidding any rains or hurricanes...........
With Zero it’s not what he says. It’s what he does not say.
GM is back on top! (of the likely to go tits up list)
I am going to cut the deficit in half! (and add that half back on top)
Chevy has a horrible overpriced line up of cars, and took most of the dealer “mark-up” (invoice to window sticker) away from the dealers.
a $40,000 CAMARO has a 900 markup.
A 30,000 Equinox has an 800 markup.
A friend of mine owns (inherited) a Chevy store, and he showed me the numbers.
“....the US auto industry is back on top!”
Yeah, if Toyota is part of the US auto industry.
GM has become a major player in the Chinese auto industry, that is for sure.
Why doesn’t the US Treasury transfer the GM stock held by the Federal Government to the Chinese in exchange for part of the debt we now owe them? And UAW retirees get preferential relocation to China as part of their retirement package?
That way China could keep the payout on the retirement plans and their earnings from GM in their own country.
Excellent article explaining the dynamics of car sales.
The mileage mandates will finish them off.
President Mitt loves a well-run bankruptcy. “Well-run” being the definitive term here. Get the gov and union off the company’s back.
they want mo money.
” They couldn’t compete in the first bankruptcy and they won’t be able to compete heading into the second.”
” That is no margin to carry the note, pay the staff, turn on the lights etc.”
Without the service dept, and used cars, he would be bankrupt.
Just imagine if GM had been allowed to go bankrupt and instead of being bailed out by the government had been bought out by Toyota or better still Hyundai. Under Hyundai leadership VW would not be number one in the D car class.
The only way GM is even doing what it is doing is Ally financial, GM’s captive finance arm (formerly GMAC) will pretty much finance anyone that will fog a mirror.
It is run exactly like the financing that caused the housing bubble. Over finance collateral and finance folks who have no/poor record of paying back their obligations.
This house of cards will soon fall. I’ve seen it many times over the past 21 years. Usually takes about 2 years. Maybe longer in this case since the Government is backing them.
Ultimately, it is management’s responsibility. The problem with what’s going on now with GM is that they won’t learn from their defeats. They’ll just ask for more taxpayer money. It’s much easier to get taxpayer money than it is to compete with Volkswagen and Toyota. The sad part is that GM could once again become the biggest car company with tremendous products. They have to fight with Volkswagen and Toyota and the environmentalists and the unions and the media and the Democrats. Too much fighting.
I noted in the article that the German CEO was interested in the actual engineering of a quality product.
The American CEO was interested in reorganizing and “integrity.” (As if GM could even think about any claims to integrity after building the poorly engineered trash that they are so justly famous for.
Which is why I will nevah! purchase a gubmit motors car.
And the UAW can shove it up their smelly collective Obamas.
I own an investment company.
The GM name is very toxic, harbors very bad feelings among the public.
The more Obama talked about saving GM, the more it hurt him. Trust me on that...
I notice he backed off that message quite a bit, because it probably polled very poorly with focus groups.
Obama is giving speculators an almost sure thing on shorting GM stock - AGAIN.
Also, If Romney wins clearly tonight, GM will be down 10% tomorrow AM at open.
” Ally financial, GMs captive finance arm (formerly GMAC) will pretty much finance anyone that will fog a mirror.”
Yep.....even D- paper. The Chinese loaned Ally billions recently. The irony did not escape me : )
” I own an investment company.
The GM name is very toxic....”
A safe “short” IMO.
Bankruptcy is exactly what GM needs!!!
Do it right this time, no bailout and wipe out the unions and their benifits/pensions!!!!
Ford is doing quite well.
GM is on top ... of the dungheap.
GM should have been broken up.
Actually, the big problem for all of the US automakers were the many many decades of entitlement programs that were built into f, gm, and c.
By going bankrupt, and robbing the bond holders of GM from their rightful property, the US Govt has unfairly given GM a huge advantage. By wiping off the long term debt from GM’s books, GM is actually in a fairly good position right now. Meanwhile, F is still burdened by a massive amount of long term debt, and GM has a very strong balance sheet advantage.
On 150 billion of revenue, GM has only 17 billion of debt, compared to F’s 130 billion of sales, with 100 billion of debt. Using an interest rate of 6%, that means that F pays 6 billion in interest expense, to GM’s 1 billion in expense.
F is by that measure, in much worse shape going forward than GM.
There's only so much they can do while carrying the dead weight of the UAW on their shoulders.
I blame unions. They are the root economic problem with the auto industry and will kill it just like they did the steel industry. They are a labor monopoly, and cannot be sustained.
Unions are the barnacles on the ship of prosperity; the sandbags on the balloon of profits.
Bankruptcy or reorganize you only have one option.
It’s obvious that the UAW is a cancer that kills any company it gets involved with. Even the brain-dead auto executives at the “American” companies know this. Ford has been moving production away from the Midwest to Mexico for years. Chrysler is dead, and the Italians are going to shift what little production is left overseas. GM is shifting production to China. It’s all to flee the UAW. None of the foreign transplants here want the UAW in their plants.
But the unemployed UAW workers will still go to the union hall for beers, convinced that the overgrown decaying empty plant next door will someday spring back to life. It’s like a cargo cult.
” By going bankrupt, and robbing the bond holders of GM from their rightful property, the US Govt has unfairly given GM a huge advantage.”
Of course. Tantamount to grand theft.
Ford is well run by Mulally, but he retires at the end next year, and
Fields(age 51) is an unproven commodity.
Toyota, Honda and others fundamentally changed the auto industry about 20 years ago. Build quality and owner satisfaction became more important than ever-changing styling and gadgetry. To some extent cars became transportation appliances. It took Ford 10 years to adapt to the changes, GM and Chrysler have yet to evolve. GM is dead, we are just waiting for the funeral.
And for those of you who aren’t threatened by reality...
In the 3rd quarter of 2012, GM overall earned $1.8 billion. Operating cash flow for the first 9 months of 2012 was $9.8 billion, with capex of around $6 billion, giving free cash flow of about $3.8 billion. GM has $33 billion of cash and near cash on the balance sheet, with automotive debt of $5 billion, and pension debt of $25 billion, which is falling.
The Malibu might suck, but the new full-sized pickup comes out next spring, and that’s a cash cow for GM.
I don’t like Government Motors. I’ll never buy another GM product as long as I live, but to say that GM is going bankrupt within 4 years is laughable.
Unless Obambi wins, and we get the Obimbo Depression. Then GM does go bankrupt, but so does Ford, and many others.
My point would be, that F could be so deep in debt and entitlements, that it is beyond saving. I’m not saying it is a buy, or a sell, but the fact is that they are burdened by entitlements. F, GM, and many other companies today, mirror the policies and strategies of the Federal Govt. Sure as heck, our current govt is headed the way of GM. I’m not so sure it can be saved, without destroying the value of the dollar.
So many folks I’ve talked to about GM over the last several years, tried to point their finger about GM products. That is erroneous. They sold plenty of product, but the overhead of debt and entitlements became a burden that could not survive a downturn in the economy. If the economy had stayed fine, they could have limped along for a good while longer. F is in no better shape really. Product, has nothing to do with it.
hahahahahaha...let me catch my breathe....hahahaha...you guys dont think Romney would bailout gm, sadly mistaken.
You’re mixing Ford’s automotive debt with their financial services debt.
Financial services debt/assets need to be stripped out for a good apples-to-apples comparison. Ford has much higher debt and assets in financial services (car loans and dealer floorplan, primarily) than GM due to GM spinning off GMAC when they were in pre-bankruptcy trouble. What they have now is much smaller than Ford
I bought my first Honda in 1979. I bought my last Honda, ever, in 2002. Seshiru Honda died, and now Honda is going down the tubes. I think it’s amazing how the loss of a founder can kill a company. I can’t even remember the name of Honda’s new crossover. That shows how well they’re selling. Toyota is barely hanging on. My Dad’s friend had the best saying about Volkswagens. “Everybody should own a Volkswagen at least once....but only once.” I’ll never buy another GM product. The UAW can get my tax money, but they won’t get any of my other money. I don’t see any car company doing all that good right now.
I agree with you entirely.
Ok, you go ahead and kid yourselves. I’m not going to waste time arguing with you.
I follow these numbers for a living ok. I constantly monitor these numbers.
What happened to “we killed bin ladin and saved the auto industry”
“I follow these numbers for a living ok.”
No, you don’t. Not if you don’t know to strip finco assets and liabilities from the operating company.
Go dingle norwood yourself.
A fake analyst with bad manners. Who’d of thunk it?
Look dumb ass. I posted actual numbers, go look it up. They post financials all over the place.
But hey, let me make it really, really, simple for you, or anyone else...
GM had over 100 billion in lt debt. That debt was owned by a variety of investors. When the company went bankrupt, the bond holders got about 8 cents on the dollar of common stock of new gm, along with some warrants. Then no longer own the bonds, nor are they paid interest. Follow me so far?
Ok, so that means that GM is no longer on the hook for the bonds, and they don’t pay the interest or the principal, right??
That DID NOT happen at F.
My point is, that the lack of expense in paying interest or principal on the debt, GM has a massive cash flow advantage compared to before, and since F DID NOT default on THEIR debt, they have a much, much higer operating expense than GM.
There, I wasted some time on you, I’ll write it off as a charitable expense.
If you want to argue what I just wrote, humor me, and prove how stupid you are.
Do it right this time, no bailout and wipe out the unions and their benifits/pensions!!!!
“That DID NOT happen at F.”
No, it didn’t. They hocked everything, including the blue oval. All those assets are back, unencumbered by debt.
I’m astounded that someone who claims to be an analyst would only look a Ford overall, and not separate the operating company from the finco. They are not the same. S&P and Moody’s (for what they’re worth, which isn’t much) give them separate credit ratings. There’s a reason for that. Think about what the debt of the operating company is used for vs. what the finco uses it for.
You claim that GM’s balance sheet is in much better shape than Ford’s. It is, but the balance sheet isn’t all that matters. Ask yourself why GM’s credit ratings, overall, are lower than Ford’s.
You mention how GM went bankrupt. No, they didn’t. The GM North America subsidiary went bankrupt. The rest of their world-wide operations were unaffected by that.
You may be an analyst. If so, you’re still learning. Keep it up. Trust me - strip out the fincos, and keep working on your CFA.
I read the entire article, which reinforces the long trend of crappier management at GM, followed by still crappier management.
The jist in the article is that GM’s crappy management settled for mediocrity, in the design of the 2013 Malibu, which finished last in comparison to the rivals.
Ford on the othe hand is designing cars which compete favorably, with the best in the world.
Huyndai us building amazing vehicles, some right here in America.
European, Japanese and Korean makers build cars for who they plan to have as customers for the next 40 years. GM builds cars for people that will be dead in ten years.
The head of VW is checking out the Huyndai competition, not GM. Very telling.
Guaranteed repeat bailouts reinforce crappy management, who survive, mediocrity or not. In the USSR they would shoot the head of GM, but here we give him raises and stock options, probably a future in the K Street lobby industry.
“..another dirty management rick to scare us.”
“Studebaker will be here when you’re dead and gone!”
-UAW workers when told the Studebaker plant in South Bend was closing in 1964. Two years later the last of the company’s cars rolled off the Canadian assembly line after 114 years of manufacturing wheeled vehicles.