GM Declares Bankruptcy Imminent After $4.2 Billion Third Quarter Loss

[Jimbo]

They need to file bankruptcy. That's the only way to renegotiate UAW contracts.

THIS IS THE WHOLE ISSUE IN A NUTSHELL.

The reason why the Dems are pushing for a dollar bailout is because there would be no UAW contract reorg this way.

Expect to hear Pelosi, Reid et al, say that this is ALL GM and Ford's fault for not making small cars.

If the Dems give the car companies $$$$ they can also play God by dictating what cars GM and Ford should make.

Let GM go Chap 11. Let them restructure their debt and renegotiate the UAW contracts.

Everyone bitches about CEOs still getting their salary, well let's have everyone take a pay cut. CEOs, Middle management and Workers.

 

[NSXrunner]

In order for the US auto industries to be competitive with foreign markets, we need to get rid of the Unions and stop making garbage. Unions can't help you, if you lose your job due to plant closure or bankruptcy.

I was in the union for a certain "brown" company. I actually was hoping for a career there. I quit because of the BS that went on. Yup I saw a bunch of lazy over paid people sitting around doing nothing. They got more money and got promoted not because of productivity, but because of tenure. So you can have the IQ of a fruit salad and still get paid more and even get promoted. Ever since then, unions, bah! Get rid of them.

 

[steveny]

I was in the union for a certain "brown" company. I actually was hoping for a career there. I quit because of the BS that went on. Yup I saw a bunch of lazy over paid people sitting around doing nothing. They got more money and got promoted not because of productivity, but because of tenure. So you can have the IQ of a fruit salad and still get paid more and even get promoted. Ever since then, unions, bah! Get rid of them.

Well it's pretty obvious the free markets don't like unions and the consumer doesn't like to over pay for inferior products.

 

[Cragar]

When Lee Iaccoca took over Chrysler it was about to go belly-up. He cut his own salary to $1.00 per year , then he had a talk with all the workers and union people and told them this -

" Boys , I have a shotgun to your head . I have jobs for $12.00 per hour , but none at $20.00 "

The unions backed down because they knew that they had to or they would all be out of work.

After things started progressing again , Chrysler worked hard on improving it's product and made some cars people wanted to buy like the K-car and the Caravan.

Yes , Lee Iaccoca worked for a $1.00 per year. After a few years of growth and profitability were restored to the company , Lee made out very well on stock options and he deserved them because if the company failed he would have got nothing.

 

[NSXrebel]

I keep hearing/reading this renegotiate with the UAW crap. Why do you have to negotiate with them? Just get rid of them. Do Honda and Toyota have unions at their US plants??

 

[Jimbo]

I keep hearing/reading this renegotiate with the UAW crap. Why do you have to negotiate with them? Just get rid of them. Do Honda and Toyota have unions at their US plants??

Well, it's a matter of pragmatism. Honda and Toyota started from scratch with no unions.

If GM, Ford just threw the unions out, there would be riots and worse.

Yep, we're up $hits creek without a paddle.

Obama's not gonna have many choices. Either he keeps his promises and we collapse or he breaks his word and we might survive.

-J

PS: And guess who's authoring the proposed Fed Auto Bailout???

Barney "Effin" Frank!

The Fannie Mae thief.

 

[NSXrebel]

Well, it's a matter of pragmatism. Honda and Toyota started from scratch with no unions.

If GM, Ford just threw the unions out, there would be riots and worse.

Yep, we're up $hits creek without a paddle.

Obama's not gonna have many choices. Either he keeps his promises and we collapse or he breaks his word and we might survive.

-J

PS: And guess who's authoring the proposed Fed Auto Bailout???

Barney "Effin" Frank!

The Fannie Mae thief.

I'm pretty sure American car companies started out from scratch without unions too.

 

[Jimbo]

http://en.wikipedia.org/wiki/Henry_Ford#Labor_Unions

Ford was adamantly against labor unions. He explained his views on unions in Chapter 18 of My Life and Work.[20] He thought they were too heavily influenced by some leaders who, despite their ostensible good motives, would end up doing more harm than good for workers. Most wanted to restrict productivity as a means to foster employment, but Ford saw this as self-defeating because, in his view, productivity was necessary for any economic prosperity to exist.

He believed that productivity gains that obviated certain jobs would nevertheless stimulate the larger economy and thus grow new jobs elsewhere, whether within the same corporation or in others. Ford also believed that union leaders (most particularly Leninist-leaning ones) had a perverse incentive to foment perpetual socio-economic crisis as a way to maintain their own power. Meanwhile, he believed that smart managers had an incentive to do right by their workers, because doing so would actually maximize their own profits.

 

[docjohn]

The US plants and domestic market are bleeding but the big threes' overseas operations are making money I agree with the common sentiments on this thread about unions and productivety.Many of the same complaints I have for our hospital departments that are union.Trying to get anyone to care about thier job or thier workplace is futile.I was on the other side as a medical resident. our housestaff joined the local service workers union,and boy oh boy the union reps pretty much promoted the hospital management as evil and completly untrustable.They promoted the air of hatred between management and workers in order to justify thier own existance.The truth is very much more in the middle.

 

[BD]

Interestingly, the GM plants outside of US is doing just fine. With no UAW.

 

[matteni]

GM has the most appealing products of the big 3 right now - hands down. They where a lot quicker to hybrids then the other 2 as well. To say this is all union fault or management fault is an over simplification to say the least.

Personally as a business owner I sympathize with their problem. When you are selling products and own a part of a market (i.e. tens of thousands of SUVs a month) it is hard to dump that and try to compete with Asian car companies that owned the small/fuel efficient market. GM has decent small cars that rate well. They just lose money on them for CAFE standards where the Asians profit on their small cars.

Then overnight gas prices double to record highs and then the financial/capital market completely collapses freezing any ability to sell stock (that is worthless) or even get short term paper. Oh and on top of that the worst recession in - oh - 70 years since the big one hits and no one buys anything but the smallest cars that you lose money on every time you sell one. Oh and that little thing called GMAC dabbled in sub-prime loans and lost as much as some of the smaller investment houses and you can't even loan money to your customers. Can you even imagine how many things had to happen to create this nightmare?

They were turning things around but the world stopped. Even the so called healthy companies are suffering and will continue to do so. If you came up with this plot 2 years ago people would laugh you out of the room or lock you up.

Everyone is a genius on Monday morning.

Oh and the people that say how lazy and overpaid union people are - they are no better or worse then everyone else I know.

Reminds me of my first job when everyone in the office would stand at the window in their suits complaining about the union street workers who had a 15 min break every hour. They would spend 30 mins / hour talking, complaining, chatting, fantasy footballing, whatever. At least after a while the union guys had a road to show for their work. Not sure what a lot of white collar people have to show right now but a big stinking pile of paper losses.

 

[jond]

From the meeting today, it sounds like Paulson isn't bailing them out with the $700 Billion.
Should be interesting. GM probably has 3-4 months left.

 

[steveny]

I remember seeing numbers at one point about how much retirement and health care was built into the price of every American made vehicle and how the car makers could not build a quality product because so much money was being spent to support people who don't even work for the company anymore.

 

[BD]

I took a quick glance at it and realized..... They get more retirement benefits paid by the manufactures though UAW than the Long Shoreman's union.

That is just ridiculous.

If they go BK, they will not go away. No other companies out there will buy them because of the mess. They will have to consolidate many models instead of one car, sold three fifty different GM brands with a different badge and grill.

Many will loose their jobs but it is inevitable when you have BK under such a large operation...

Regardless, they have to be broken before they can grow healthy again.

 

[warrenw]

hey that Corvette of yours, does it have a hemi?

One automaker should prevail. But I doubt if any one North American builder has any cash. Maybe a builder out of Japan buys the GM debit?

 

[steveny]

I tell you what, give me 10 years and the ability to tell the UAW to go screw themselves I will do the job for 1.00 per year and stock options. I know I could turn that thing around without the union attached to it.

 

[BD]

I tell you what, give me 10 years and the ability to tell the UAW to go screw themselves I will do the job for 1.00 per year and stock options. I know I could turn that thing around without the union attached to it.

I can do the job with the union!!! By forcing the union out of the factory.

If they go on strike, I'll fire them all like the air control tower guys in the 80's. Start fresh and offer any one who is willing to ditch the union their job back. I will kill all four and six cylinder power plants if Honda and Toyota is willing to license the US automakers their engines. 8 or 10 OHV are OK for heavy vehicles. With that, you cut cost on engine warrantee repairs, you may have to pay a little more up front, but you can't possibly make the cheesy interior any cheesier. Stop competing within the company by offering same car different badges. Lastly, work with other manufactures to produce green cars. There is no point for each company to produce their own version of Hybrid/FC cars when each one they sell, they loose big bucks. bite the pride, buy those power plants from Honda/Toyota and help them increase production output, hence cut down their cost, and have a reliable engine in every cars.

You can't have a job without the factory.
You can't hold the factory hostage if you don't have any leverage.
You can't hold the workers responsible when the car don't sell, when the product sucks. It has been proven in Japanese own factories US workers can produce quality labor.

And the most important one.

Members have to hold the union liable if they try to force the company out of business.

 

[Crazy Acura]

This sums it up for me.

Many analysts and commentators have seemingly been cheering for the imminent demise of the Detroit-based automakers. Something that needs to be realized amidst all this talk of low-interest loans and bailout money is how interconnected the auto industry is and how it affects our economy as a whole. Just like the global economy where the health of one country impacts all others, the same is true of the auto industry. It's been estimated that if General Motors fails, it will quickly cost the United States anywhere from 2.5-3 million jobs. Beyond the people directly employed by the automakers are direct suppliers and their sub-suppliers, many of which have been on the brink for years already. In addition, there are the tens of thousands of small and large businesses in Michigan communities and elsewhere whose existence depends on patronage from the people working in auto factories.

Even foreign automakers will feel the pain of Detroit's demise in a big way. Toyota, Nissan and Honda have all been hammered by the credit crunch in the last couple of months and their sales will likely drop further if people lose their jobs due to the failure of one or more of the Detroit automakers. The suppliers that will surely fail also supply Japanese-, German- and South Korean-owned factories in the U.S., so their collapse will have a huge impact on companies not based in Detroit.

Yes, the Detroit 3 have made a lot of stupid product decisions over the years and wasted a lot of money, but allowing the free market to pull them under will create a ripple effect that reaches more than just the shores of the Detroit River.

http://www.autoblog.com/2008/11/12/those-cheering-for-detroits-demise-may-want-to-reconsider/

I am in contract manufacturing and one of our larger customers supplies to GM. They have put couple of their jobs on hold and its really hurting us now. We arent in fear of closing but we did lay off few people over it. Sucks all around.

 

[NSXrunner]

I'd like to hire a union to get rid of the union. :wink::tongue::biggrin:

 

[Jimbo]

Good article (even if it is CNN)...

http://www.cnn.com/2008/POLITICS/11/13/mitchell.auto/index.html

-J

 

[BD]

This sums it up for me.



http://www.autoblog.com/2008/11/12/those-cheering-for-detroits-demise-may-want-to-reconsider/

I am in contract manufacturing and one of our larger customers supplies to GM. They have put couple of their jobs on hold and its really hurting us now. We arent in fear of closing but we did lay off few people over it. Sucks all around.

Yes, we understand the job lost in dealerships, supply line, management/human resources, etc.

The question is, what do you think the employment market would be if GM files BK? Or if the government bail them out, and force them to downsize? Result will be similar.

 

[steveny]

Yes, we understand the job lost in dealerships, supply line, management/human resources, etc.

The question is, what do you think the employment market would be if GM files BK? Or if the government bail them out, and force them to downsize? Result will be similar.

I think the job market would be what it should have been years ago. low pay for workers with no skills. shut up and do your job because the union isn't going to help you be lazy. and you want ten breaks a day, tough shit get back to work or your fired.

 

[tosugrad]

Let them go bankrupt.

+1 for sure

Any cash is only delaying the inevitable.......

 

[tosugrad]

I remember seeing numbers at one point about how much retirement and health care was built into the price of every American made vehicle and how the car makers could not build a quality product because so much money was being spent to support people who don't even work for the company anymore.

These "legacy costs" are about $3-4k per car at GM, if I remember correctly.

 

[TC]

These "legacy costs" are about $3-4k per car at GM, if I remember correctly.

Yes and no. As I've posted on other threads, my father worked for GM as a union employee for 20+ years so I a bit of insight into the past and present problems.

GM, like all companies (and gov't agencies) that offer their employees a pension, pays money into a pension fund each week/month/quarter. So the cost to a 100 year old company versus a new company (assuming both offered pensions) is the same - some percentage of payroll. There is no difference in operating cost. The only only difference between the 100 year old company and the new company is that the 100 year old company has (or should have) a huge pension fund. Many 100 year old companies have the so-called "overfunded pension" because not every employee stays on the job long enough to vest in their pension, so that saved-up money turns into a windfall for the company.

In the 70's and 80's when GM got in trouble, it spent its pension fund to cover operating losses. In the 90's, GM sold many/most of its non-automotive assets to replenish its pension fund - it sold EDS, Hughes Aircraft, DirecTV and Fridgidaire to the collective tune of $40billion. In the 2000's, GM again dipped into the pension fund to cover operating losses and now the retirement costs come out of operating expense, not the pension fund.

So, had GM not f'ed up and spent the pension fund, they would not have these so-called "legacy costs." 25 years ago, GM had a fully funded pension and $50b+ of non-core assets like EDS and Hughes Aircraft. Today, they have about $100b in debt (including the underfunded pension liabilities), no non-automotive assets and basically no cash. The banking crisis is a convenient way for GM to hide a problem that has been brewing for 25 years.

The gov't bailout of AIG makes sense; AIG has nearly $1tillion in assets and is profitable (on an operating basis). The losses are due to writing down bad assets but their core businesses make lots and lots of cash. A year ago, AIG was worth $200billion on the stock market - the US govt now owns 80% of AIG. The likelihood that the gov't gets back all of its money from AIG (times 2 or 3) is very good. $25B into GM will be gone in 12 months and there is no asset value to back it up.