Forbes: GM Heading to Bankruptcy, again

[PREMiERdrum]

 

President Obama is proud of his bailout of General Motors. That’s 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.

 

 

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

 

Not a very journalistically sound piece, but I can see this gaining some traction in the current political climate.

 

Mr. Cain brings up what we've been saying for months:

[silvrsvt]

I was just reading this...what the hell is the deal with calling it a D-class? That classification isn't even being used in North American lexicon....its European.

[grbeck]

Predictions of another bankruptcy are premature at this point.

 

I do believe that GM needs a complete makeover of its corporate culture, and Akerson is not the person to do it. The company isn't peforming very impressively in the new-vehicle market right now, and won't until it sorts out this type of issue. But that doesn't necessarily mean it will go bankrupt again.

[NickF1011]

Predictions of another bankruptcy are premature at this point.

 

I do believe that GM needs a complete makeover of its corporate culture, and Akerson is not the person to do it. The company isn't peforming very impressively in the new-vehicle market right now, and won't until it sorts out this type of issue. But that doesn't necessarily mean it will go bankrupt again.

 

With little indication of change, I don't think the prediction itself is premature. Saying it will happen in the very near future might be premature though.

[RangerM]

I'm renting a 2012 Malibu this week, and was expecting a similar experience (largely positive) to the one I had with the last Malibu I rented a couple of years ago.

 

The car has less than 6,000 miles on it, and other than seat material that seems more upscale than I remembered, the car is largely a dog. A slow dog. Push the gas, and the 4-cyl thinks about going before it gets back to you, and the transmission seems not to shift from one gear to the next, as much as lunge into it.

 

If the stories of the 2013 Malibu being worse are true, I don't hesitate believing GM is in trouble.

 

[akirby]

I disagree that losing market share is a precursor to losing cost-competitiveness. In fact, you may need to give up market share for the sake of profitability.

 

I hate to defend GM but this a stupid article.

[twintornados]

If GM is serious about being in the car business....Buick needs to go away in North America as it makes no sence in marketing strategy (rebadge them all as Cadillacs or Chevrolets in China) and GMC truck needs to be folded into Chevrolet....an even more radical idea would be to close Chervrolet Truck division and put all trucks under the GMC banner and make GMC Trucks available to all Chevrolet and Cadillac dealerships.

[RichardJensen]

Citing V-black box profits-W and its abusive CEO as good examples does not increase this writer's credibility.

 

This has all the hallmarks of "I read a bunch of widely scattered articles, and know enough to write a feature piece for Forbes" style bad journalism which is admittedly much better than "I made up a bunch of stuff and didn't cite anything else" journalism.

[akirby]

If GM is serious about being in the car business....Buick needs to go away in North America as it makes no sence in marketing strategy (rebadge them all as Cadillacs or Chevrolets in China) and GMC truck needs to be folded into Chevrolet....an even more radical idea would be to close Chervrolet Truck division and put all trucks under the GMC banner and make GMC Trucks available to all Chevrolet and Cadillac dealerships.

 

You could even keep the Buick brand in China but I've said over and over that you only need 2 in North America - Chevy and Cadillac. I think the main reason we still have Buick and GMC (other than Buick in China) is to keep the dealers in business since most Buick and GMC dealerships seem to be paired together.

 

This stupid notion that somehow a person who would buy a GMC pickup would not buy the exact same damn pickup with a Chevy badge if there was no GMC is, well, stupid IMO.

 

The same people said the same thing about Mercury and they were totally wrong. Look at Pontiac and Oldsmobile and Saturn - has GM lost those sales? Don't think so.

[FordBuyer]

GM certainly needs a Mulally type CEO that will come in and chop Buick and GMC pronto. Get it over with quickly. I believe both Chevy and Cadillac are very viable brands and can do well going forward. Forbes has a political agenda and go figure why they are pissed hundreds of thousands of jobs were saved plus the supplier base for rest of auto world. Missing in the math of figuring out how much GM cost the taxpayers is how much GM and its employees plus suppliers contribute in tax revenue to federal, state, and local governments. GM is still a mighty big auto company that this country desperately needs.

[akirby]

GM certainly needs a Mulally type CEO that will come in and chop Buick and GMC pronto. Get it over with quickly. I believe both Chevy and Cadillac are very viable brands and can do well going forward. Forbes has a political agenda and go figure why they are pissed hundreds of thousands of jobs were saved plus the supplier base for rest of auto world. Missing in the math of figuring out how much GM cost the taxpayers is how much GM and its employees plus suppliers contribute in tax revenue to federal, state, and local governments. GM is still a mighty big auto company that this country desperately needs.

 

That's what should happen from a strategic perspective, however given what they just went through with Oldsmobile, then Saturn and Pontiac they may not be able to afford whatever it would take to get rid of Buick and GMC right now. So I can give them a temporary pass on that.

 

However, I'm not sure they WANT to get rid of Buick and GMC and that's what concerns me along with still having a rental fleet queen and financing sub-sub prime Sonics.

[calypsocoral]

Here's the solution-- instead of bailing out GM a second time (while I think it might take another year to two, I'm pretty sure it is bound to happen), let GM file bankruptcy protection so they can restructure, re-negotiate their contracts, and find a model that can work. In the meantime, while I don't believe in throwing taxpayer dollars at the problem, I think we would have to find ways to keep suppliers like Delphi solvent after losing nearly half of their business (aka GM). The suppliers are why Mullaly went to bat on GM and Chrysler's behalf, after all.

 

...and if GM can't figure it out, then we all need to pull the plug on them.

[DEREKC]

The only thing keeping GM alive at all are certain international markets, because locally in NA it is dying! Nothing within GM has changed, and so they continue to do business the same way as they did when they went bankrupt. GM and Chrysler should have been allowed to die in order for the NA free enterprise spirit to create something newer and better!!

[silvrsvt]

The only thing keeping GM alive at all are certain international markets, because locally in NA it is dying! Nothing within GM has changed, and so they continue to do business the same way as they did when they went bankrupt. GM and Chrysler should have been allowed to die in order for the NA free enterprise spirit to create something newer and better!!

 

Thats all fine and good, but at that point time, if that happened, we would have gone into the Second Great Depression, instead of having the Great Recession we are having now.

 

You can't expect as big of a player like GM not to send shockwaves through the rest of the industry if it went belly up...

[grbeck]

With little indication of change, I don't think the prediction itself is premature. Saying it will happen in the very near future might be premature though.

 

The article makes it sound as though whoever wins in November will be faced with a GM bankruptcy within another four years. I doubt that anything will happen that soon.

 

GM has serious problems, but I still think it will be taken over or broken up before it goes bankrupt. There is a fair amount of value in this company...just not under present management.

[grbeck]

Thats all fine and good, but at that point time, if that happened, we would have gone into the Second Great Depression, instead of having the Great Recession we are having now.

 

You can't expect as big of a player like GM not to send shockwaves through the rest of the industry if it went belly up...

 

But if GM does got belly-up again, it is on its own. I believe that even the Democrats would rebel at bailing out GM a second time.

Edited August 17, 2012 by grbeck

[RichardJensen]

so they can restructure, re-negotiate their contracts, and find a model that can work

Two notes:

 

 

- When large companies file for bankruptcy protection, they typically receive very senior loans from large banks. This is called bridge financing, and there was none available to GM when it filed in '09, nor is there likely to be bridge financing available if they file again. The government, through TARP, functioned as a lender of last resort in '09.

 

In order to restructure, these companies need credit.

 

- Bankruptcy filings in general have little success because they do not incentivize a change in culture. Money problems are often secondary to management problems.

 

In brief: Bankruptcy often addresses the symptoms without curing the disease.

[jpd80]

While I don't believe GM is facing imminent money troubles let alone bankruptcy,

their continuing corporate culture is most certainly hurting their ability to make profits.

 

I see GM continuing the sales leader propaganda war and sliding through on modest profits.

Ford on the other hand will actively control losses in their European arm and stem the bleeding,

 

This is not about who wins or loses, it about who is making as much money as they can on investment

and at the moment, I'd have to say that Ford is fighting on all fronts and and working much harder than GM.

If I was a GM stock holder, I'd pretty pissed with their causal approach to solving serious internal and financial problems...

Edited August 17, 2012 by jpd80

[boominup]

 

 

 

 

http://www.forbes.co...nkruptcy-again/

 

Not a very journalistically sound piece, but I can see this gaining some traction in the current political climate.

 

Mr. Cain brings up what we've been saying for months:

MORE PROOF!

http://www.autoblog.com/2012/08/20/feds-expect-greater-loss-on-auto-bailout/?icid=maing-grid7%7Cmain5%7Cdl3%7Csec3_lnk3%26pLid%3D194868

[silvrsvt]

But if GM does got belly-up again, it is on its own. I believe that even the Democrats would rebel at bailing out GM a second time.

 

I agree with that, but the market conditions are different now they where in 2008....GM going out of business at that time would have been a REALLY bad thing. It would still hurt if it happens in the next 5-10 years, but the rest of the industry should be able to survive the impact....

[NickF1011]

I agree with that, but the market conditions are different now they where in 2008....GM going out of business at that time would have been a REALLY bad thing. It would still hurt if it happens in the next 5-10 years, but the rest of the industry should be able to survive the impact....

 

Bankruptcy doesn't mean the same thing as out of business. I think a lot of people seem to miss that point when people talking about "saving the auto industry". Would some people lose jobs? Yes. But it would be a rush judgement to assume everyone would.

[RichardJensen]

I think there was a very real chance that GM would have gone into Chapter 7, which would've meant the suspension of all business activities (thus no ongoing purchases from suppliers), the auction of factories and misc. assets (including the brands), and likely the permanent elimination of a significant number of Michigan & Ohio facilities, as the industry certainly could bear the loss of well over half of GM's 2008 capacity without being capacity constrained.

 

Why would GM have gone Ch. 7? Because, likely, no banks were willing to provide the bridge financing necessary to fund GM's operations through bankruptcy.

 

Arguably, implicit Fed guarantees of bank loans would have been better than outright loans from the TARP fund. However, in such a scenario, it seems likely that the banks would've retained a significantly larger equity stake, at the expense of pensioners who would've basically destroyed the PBGC.

[grbeck]

Arguably, implicit Fed guarantees of bank loans would have been better than outright loans from the TARP fund. However, in such a scenario, it seems likely that the banks would've retained a significantly larger equity stake, at the expense of pensioners who would've basically destroyed the PBGC.

 

But wasn't that the route taken by the federal government in 1979-80 to bail out Chrysler? I don't recall anyone - white- or blue-collar - losing a pension during the Chrysler bail out, although there were wage concessions by both parties. The entire point of the rescue effort was to avoid any bankruptcy proceeding. Chrysler was bankrupt by the summer of 1980, if I recall correctly, and would have definitely gone under without the federal loan guarantees.

 

Of course, GM didn't have an Iacocca to rally the troops and convince lenders that things really had changed. Nor does it have one yet...

[jpd80]

But wasn't that the route taken by the federal government in 1979-80 to bail out Chrysler? I don't recall anyone - white- or blue-collar - losing a pension during the Chrysler bail out, although there were wage concessions by both parties. The entire point of the rescue effort was to avoid any bankruptcy proceeding. Chrysler was bankrupt by the summer of 1980, if I recall correctly, and would have definitely gone under without the federal loan guarantees.

 

Of course, GM didn't have an Iacocca to rally the troops and convince lenders that things really had changed. Nor does it have one yet...

And Chrysler had LOANS which were paid back in full, gM got a spin and rinse with most of it's debts left behind with old GM

You could argue that true change happened at Chrysler and they learned from the experience whilst GM has been given a free pass....

Sure Ford want GM to be saved but looking back, it's clear that Ford was expecting GM to be given LOANS, not bailed out anc cashed up...

Pretty annoying when the government refused to give Ford credit "commercial bank" status....

Edited August 21, 2012 by jpd80

[RichardJensen]

I don't recall anyone - white- or blue-collar - losing a pension during the Chrysler bail out

Chrysler did not file Ch. 11, which meant that their unsecured obligations (e.g. the pension) were not touched.

 

Had Chrysler filed Ch. 11 in '80, it would almost certainly have dumped the pensions onto the PBGC (recall that ERISA & the PBGC were passed and established because of Studebaker's messy Ch. 11)