DOW May Drop GM Soon

[FordBuyer]

Dow May Dump General Motors

11/14/08 - 04:03 PM EST

 

, GM , F , AIG , TOY Debra Borchardt

General Motors (GM Quote - Cramer on GM - Stock Picks) may get dumped by the Dow Jones if the nation's biggest carmaker strikes the wrong kind of bailout deal with the government.

 

membership in the Dow may depend on the kind of deal it strikes with the government, said John Prestbo, Editor and Executive Director of Dow Jones Index.

"We took out AIG because the government took a big stake in that company, and now GM has its hand out and we'll be taking a close look at what form it takes," Prestbo said. "If it comes at all, then we'll look at replacing GM."

 

Chrysler > got the boot in 1979, when it faced its bankruptcy days. So, the writing is on the wall for GM, which has said it doesn't have enough cash to last another year.

 

That means that all the ETF's and index funds pegged to the DJIA will need to change accordingly, putting GM in a potential death spiral.

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I believe GM deserves and should get a bridge loan unitl the ecomomy improves. But long term I don't see how GM will keep from fading away. Waggoner IMO needs to give us a detailed plan of how GM is going to get out of its mess even after the economy improves. I don't see a game plan, no vision.

[RichardJensen]

Wonder if News Corp will engage in a bit of self-dealing and put themselves on the DJIA.

[jpd80]

there's two issues here,

1. Immediate survival is threatened by in ability to access refinancing for additional operating cash

 

and

 

2. An underlying problem of negative income due to changing market share and product mix.

 

 

Do we fix GM immediately but realise its illnss may be terminal?

Would funding give product suppliers enough time to make other arrangements as GM winds down?

 

I think some tough soul searching is going on - not only GM but Chrysler too.

If the US lost both of them, then Ford would be a priority 1 Keeper - the custodian of new Detroit.

[FordBuyer]

there's two issues here,

1. Immediate survival is threatened by in ability to access refinancing for additional operating cash

 

and

 

2. An underlying problem of negative income due to changing market share and product mix.

 

 

Do we fix GM immediately but realise its illnss may be terminal?

Would funding give product suppliers enough time to make other arrangements as GM winds down?

 

I think some tough soul searching is going on - not only GM but Chrysler too.

If the US lost both of them, then Ford would be a priority 1 Keeper - the custodian of new Detroit.

 

Let's hope all survive, but it's better to get the domestics through this terrible patch, and then they can sink or swim on their own. To let GM sink now would be really bad news to the whole supplier base. Maybe GM can use this as a wake up call and straighten their house out over the next couple years before the next downturn.

[jafo]

Let's hope all survive, but it's better to get the domestics through this terrible patch, and then they can sink or swim on their own. To let GM sink now would be really bad news to the whole supplier base. Maybe GM can use this as a wake up call and straighten their house out over the next couple years before the next downturn.

 

 

Why would they. All they will learn is someone will bail them out. I would hate to see any of the big 3 go, but I think bankruptcy is better coarse than a government bail out.

[FordBuyer]

Why would they. All they will learn is someone will bail them out. I would hate to see any of the big 3 go, but I think bankruptcy is better coarse than a government bail out.

 

Thank God Obama and the New Congress is not going to gamble and find out how bad things would get. This is bad enough. You guys who like to flirt with disaster will have to wait for another person in the White House.

[jafo]

Thank God Obama and the New Congress is not going to gamble and find out how bad things would get. This is bad enough. You guys who like to flirt with disaster will have to wait for another person in the White House.

 

 

It is going to be a disaster either way. GM has to significantly downsize and change the way it operates, bailout or not. The longer we subsidize incompetence, the more of it we are going to get.

[jpd80]

The fear is that the government is borrowing funds to lend to GM and Chrysler (maybe Ford too).

We're going from an initial effort to buy up distressed loans to giving car companies operating cash.

Where do you draw the line?

Why did GM let their funding get so low?

Why did they not do more to help themselves like Ford?

 

What did Mulally say the other day,

"Whoever is going to invest or loan us money wants to know we're taking the actions to create a viable company going forward," he said. "We are absolutely taking the appropriate actions. We've demonstrated that we're making progress."

 

Can GM honestly say the same?

[jafo]

The fear is that the government is borrowing funds to lend to GM and Chrysler (maybe Ford too).

We're going from an initial effort to buy up distressed loans to giving car companies operating cash.

Where do you draw the line?

Why did GM let their funding get so low?

Why did they not do more to help themselves like Ford?

 

What did Mulally say the other day,

 

 

Can GM honestly say the same?

 

 

You also have to ask, why they allowed themselves to get in position that they had to rely to gas guzzlers to stay in business(this goes for all the big 3). Surely someone at each company knew that was a considerable risk to operate in that manner.

[2005Explorer]

Let's hope all survive, but it's better to get the domestics through this terrible patch, and then they can sink or swim on their own. To let GM sink now would be really bad news to the whole supplier base. Maybe GM can use this as a wake up call and straighten their house out over the next couple years before the next downturn.

 

I understand that GM going out of business would be bad for the supplier base, however don't you think that GM's market-share would just be gobbled up by everybody that is left? I mean wouldn't the remaining companies just buy more from the suppliers then they did before? I assume that US suppliers also supply a lot of things to Toyota and Honda for their domestic production. If this is not the case then I can understand that just Ford and depending on what becomes of Chrysler could not keep all the suppliers going.

 

I mean seriously if GM went completely belly up Ford couldn't build F-150's fast enough.

Edited November 14, 2008 by 2005Explorer

[94bronco]

The only way in hell GM should get a bailout is if Wagoner is gone, It is rather sad what they seem to be doing now which is sitting around waiting for their bailout instead of actually doing something.

[jafo]

I understand that GM going out of business would be bad for the supplier base, however don't you think that GM's market-share would just be gobbled up by everybody that is left? I mean wouldn't the remaining companies just buy more from the suppliers then they did before? I assume that US suppliers also supply a lot of things to Toyota and Honda for their domestic production. If this is not the case then I can understand that just Ford and depending on what becomes of Chrysler could not keep all the suppliers going.

 

I mean seriously if GM went completely belly up Ford couldn't build F-150's fast enough.

 

 

that is right. People are acting like everything would disappear if GM went away. In reality, someone would be waiting in the wings to snap up the parts of GM, to build GM cars under a new name.

[jpd80]

I guess ther's two possible outcomes here:

 

Best Case scenario - GM survives but changes it's ways.

 

Worst case scenario - GM to wind down of over 12-18 months absorbing shock on supplier base

and allowing suppliers time to transfer contracts to other car makers.

 

 

Edit,

There is no money in the credit industry to buy companies at the moment - nothing available.

So no one with cash will be buying parts of GM anytime soon.

 

I mean seriously if GM went completely belly up Ford couldn't build F-150's fast enough.

 

One man's misery is another's fortune.

Edited November 14, 2008 by jpd80

[mnm]

You also have to ask, why they allowed themselves to get in position that they had to rely to gas guzzlers to stay in business(this goes for all the big 3). Surely someone at each company knew that was a considerable risk to operate in that manner.

ok

#1. i think if you say or type the words"gas guzzlers" you should have your hands cut off. they're trucks and suv's

#2. nobody could have predicted oil would have gone up to $100 a barrel let alone $145 like this past summer.

#3. profits on an explorer are north of $4000. profits on a focus are $500 or less. what would you sell?

[2005Explorer]

The only way in hell GM should get a bailout is if Wagoner is gone, It is rather sad what they seem to be doing now which is sitting around waiting for their bailout instead of actually doing something.

 

Good question... Why hasn't Wagoner been fired yet?

[jpd80]

ok

#1. i think if you say or type the words"gas guzzlers" you should have your hands cut off. they're trucks and suv's

#2. nobody could have predicted oil would have gone up to $100 a barrel let alone $145 like this past summer.

#3. profits on an explorer are north of $4000. profits on a focus are $500 or less. what would you sell?

 

Yeah the problem was manufacturers couldn't change their poduct mixes fast enough

to keep ahead of soaring gas prices, market panic did the rest - yet I sense GM were in denial.....

Remember in 2001 gas was something like $1.00/gallon

Edited November 14, 2008 by jpd80

[jafo]

ok

#1. i think if you say or type the words"gas guzzlers" you should have your hands cut off. they're trucks and suv's

#2. nobody could have predicted oil would have gone up to $100 a barrel let alone $145 like this past summer.

#3. profits on an explorer are north of $4000. profits on a focus are $500 or less. what would you sell?

 

This is the mindset that got the big 3 in trouble....

 

1. they are what they are. I own one of those gas guzzlers.

 

2. nobody? With all the people that work at the big 3, none of them have ever picked up a history book and seen past commodity spikes.

 

3. Maybe they should have taken some of those fat profits and hedged their production capabilities.

Edited November 15, 2008 by jafo

[2005Explorer]

#3. profits on an explorer are north of $4000. profits on a focus are $500 or less. what would you sell?

 

Well that would not be an issue if you could get Americans driving "premium" small cars.

[jpd80]

Good question... Why hasn't Wagoner been fired yet?

[Extreme Sarcasm] It's not his fault the company is near collapse? [/Extreme sarcasm]

Edited November 14, 2008 by jpd80

[Ron W.]

People are acting like everything would disappear if GM went away. In reality, someone would be waiting in the wings to snap up the parts of GM, to build GM cars under a new name.

 

Yep same sort of thing thing happened here in small town Minnesota, the Ford dealership folded and the farmers traded their trucks in for GM & Dodge trucks.

Damn I miss my old job.

[2005Explorer]

[Extreme Sarcasm] It's not his fault the company is near collapse? [/Extreme sarcasm]

 

GM made a lot of near fatal mistakes over the years, but I still think one of the biggest ones was the GMT-900. Instead of using their resources to push ahead car designs they dropped every last dollar into that beast. In hindsight they should have slapped a new grille on the previous version and used the money to beef up their car lines. When they fixed their passenger car lines then they could have took a look at a new full sized SUV. I think they were still in a dreamy 1990's SUV craze state when they pushed everything else back to push that ahead. I mean look at what Ford did to the Expedition with much less investment then GM? Ford has made a lot of mistakes too, but I am glad they did not piss everything away on an all new full sized SUV a couple years ago.

 

People bitched and complained on end around here because Ford only did facelifts on the Expedition, Navigator, Explorer and Mountaineer, but in the end it was a heck of a lot smarter then if they had thrown all of their resources into those vehicles like GM did.

Edited November 14, 2008 by 2005Explorer

[jpd80]

I'm thinking Bill Ford, Mulally, Fields and others realise one good market crunch could wipe them out

and said "let's not be the ones going out of business" so, back in 2006 they bravely restructured Ford company by mortgaging everything and severely downsized.

 

In my eyes, Ford now deserves the bulk of the domestic market, the others should just fade away,

drowning in huge debts and let all the suppliers swing over to a massive Ford resurgance.

Edited November 14, 2008 by jpd80

[RichardJensen]

Why would they. All they will learn is someone will bail them out. I would hate to see any of the big 3 go, but I think bankruptcy is better coarse than a government bail out.

Which "they"?

 

This bailout is not about bailing out =management= it's about bailing out =employees=.

[RichardJensen]

that is right. People are acting like everything would disappear if GM went away. In reality, someone would be waiting in the wings to snap up the parts of GM, to build GM cars under a new name.

The market, as it sits currently and for the next year or so, could very easily absorb the disappearance of GM. There is sufficient capacity to replace GM--in this market.

[RichardJensen]

I understand that GM going out of business would be bad for the supplier base, however don't you think that GM's market-share would just be gobbled up by everybody that is left? I mean wouldn't the remaining companies just buy more from the suppliers then they did before? I assume that US suppliers also supply a lot of things to Toyota and Honda for their domestic production. If this is not the case then I can understand that just Ford and depending on what becomes of Chrysler could not keep all the suppliers going.

 

I mean seriously if GM went completely belly up Ford couldn't build F-150's fast enough.

Well the thing is, most of the suppliers would be in ch. 11 before demand would bounce back at other companies.

 

Also, at current sales rates, Chrysler and Ford could replace GM's truck volume without breaking a sweat. In fact, Chrysler & Ford could probably replace GM's truck volume and Toyota's truck factories would still be understaffed.

 

That's the problem with this market and GM.

 

There is no =need= for GM's product. No demand for them to meet. Absent that demand, they have blown away being the least securely tethered auto maker.