GM Declares Bankruptcy Imminent After $4.2 Billion Third Quarter Loss

[TinmanMS6]

GM today announced a third-quarter loss of $4.2 billion on revenues of $37 billion while spending $6.9 billion of their lifeblood-like cash on hand. Although initially we thought the big news here was a cash spend of $2.3 billion per month, compared to around $1.1 billion a month in the previous quarter, but the real story is that GM basically acknowledged what we said first last month that bankruptcy is imminent (and we might add, were laughed at by some members of the auto intelligentsia for it) — as close as the end of the year if GM doesn't receive help.

Why is the cash burn rate so important? GM isn't exactly cash rich and needs to have at least $10 billion to operate and currently has around $15.8 billion on hand. This means that if the current trend continues the company will be unable to operate in approximately three months, meaning that they'll have to declare bankruptcy as we previously outlined. GM itself basically admits this themselves saying:

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing."
To summarize: give us some money or we're going to go bankrupt and the economy will have to grapple with the horror of hundreds of thousands of unemployed workers. Announcement from General Motors below.


GM Reports Third Quarter Financial Results

DETROIT –General Motors (NYSE: GM) today announced its financial results for the third quarter of 2008, reflecting rapidly deteriorating market conditions in the U.S., slowdowns in other mature markets around the world, and continued losses at GMAC Financial Services (GMAC).

http://cache.gawker.com/assets/images/jalopnik/2008/11/threeqrev.jpg

During the third quarter the turmoil in the global credit markets resulted in the worst financial crisis in more than 70 years. The upheaval has had a dramatic impact on the auto business in particular, especially in the U.S. and Western Europe.

Tight credit, rising unemployment, declining income, falling stock markets, and continuing deterioration in the housing market in the U.S., resulted in an abrupt halt in consumer spending, with most consumers exiting the vehicle market. Many of those still intending to purchase vehicles were denied financing, or found the cost of financing prohibitive.

“The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales,” said Rick Wagoner, Chairman and Chief Executive Officer. “The U.S. government’s actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy’s and the auto industry’s recovery, but further strong action is required.”

GM reported a net loss of $2.5 billion or $4.45 per share for the third quarter, including special items. That compares with a net loss from continuing operations of $42.5 billion or $75.12 per share in the third quarter of 2007, which included a non-cash charge of $38.3 billion to establish a valuation allowance against some of the company’s net deferred tax assets.

On an adjusted basis, GM posted a net loss of $4.2 billion or $7.35 per share, compared with a net loss from continuing operations of $1.6 billion or $2.86 per share in the same period last year.

Revenue for the third quarter was $37.9 billion, down from $43.7 billion in the year-ago quarter, reflecting dramatic sales declines across the industry driven by unstable market conditions, instability in the credit markets and dramatic retraction in consumer demand, especially in North America and Europe.

GM recorded net favorable charges of $1.7 billion for special items in the third quarter. Included in the charges was a curtailment gain of $4.9 billion resulting from the UAW Settlement Agreement becoming effective. The curtailment represents the accelerated recognition of net prior service credits, largely relating to the 2005 GM UAW healthcare agreement, scheduled for amortization after January 1, 2010.

The curtailment was recorded because GM's UAW retiree health plan will not exist after January 1, 2010, and therefore no further basis for deferring unamortized prior service credits exists beyond that date. The $4.9 billion curtailment gain was partially offset by a non-cash $1.7 billion settlement charge related to the elimination of post-65 salaried retiree healthcare coverage, including the cost of increased pension benefits that were announced in July as part of GM’s operating actions to improve liquidity as well as the recognition of accumulated deferred losses related to the healthcare plan.

In addition, GM reported charges of $652 million relating to its commitments as part of Delphi’s bankruptcy proceedings, $251 million for impairment of investments in GMAC, and $641 million in restructuring-related and other charges. Details on these and all other special items are in the financial highlights section of this release.

GM Automotive Operations

GM reports its automotive operations and regional results on an earnings-before-tax basis, with taxes reported on a total corporate basis.

GM recorded an adjusted automotive loss of $2.8 billion ($947 million reported loss) in the third quarter 2008. The loss compares with adjusted automotive earnings from continuing operations of $98 million in the third quarter of 2007 (reported net loss of $1.6 billion).

The results reflect losses in GM North America (GMNA) driven largely by the U.S. industry volume decline of nearly 20 percent, and shifts in product mix. In addition, Europe saw rapid auto market contraction, leading to sharply lower GM Europe (GME) sales volume in the third quarter. GM Asia Pacific (GMAP) results were down due to commodity hedging charges and moderating demand in key markets including China, Australia and India. These losses were partially offset by very strong results in the GM Latin America, Africa and Middle East (GMLAAM) region.

GM’s automotive results in the third quarter include $1.5 billion of expenses related to mark-to-market changes in the value of GM’s commodity and foreign exchange hedging contracts, due almost entirely to falling commodity prices.

GM sold 2.1 million vehicles worldwide in the third quarter, down 11 percent year over year. Sales in GMNA were down 19 percent compared to third quarter 2007. GM global market share was 13 percent, down 0.7 percentage points compared with the third quarter of 2007, due largely to weakness in North America and Western Europe.

Cash and Liquidity

Cash, marketable securities, and readily-available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaled $16.2 billion on September 30, 2008, down from $21.0 billion on June 30, 2008.

The change in liquidity reflects negative adjusted operating cash flow of $6.9 billion in the third quarter 2008, driven by the industry-wide slowdown in vehicle demand and compounding credit crisis, especially in North America and Europe. During the quarter, GM drew the remaining $3.5 billion of its secured revolving credit facility and made $1.2 billion in payments to Delphi as required by agreements between the companies as part of Delphi’s bankruptcy proceedings.

GM expects adjusted operating cash flow in the fourth quarter to be much improved versus the third quarter, and more consistent with the first half of the year. Improvements in fourth quarter cash flow are largely driven by anticipated improvements in working capital in North America relating to sales allowances, and lower fourth quarter finished vehicle inventory in Europe.

Improving its liquidity position remains a top priority for the company. In response to deteriorating market conditions, GM announced today that in addition to the $15 billion in liquidity initiatives it outlined in July 2008, it has identified $5 billion of incremental liquidity actions. Cumulatively, GM has announced actions aimed at improving liquidity by $20 billion through 2009. To date, $10 billion in internal operating actions have either already been completed or are on track for full execution by the end of 2009.

Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing. The success of GM's plans necessarily depends on other factors, including global economic conditions and the level of automotive sales, particularly in the United States and Western Europe.

[Kymerik]

nana na na...nana na na hey hey hey goodbye...

LOL this will be funny to see. I somewhat feel bad for the countless thousands of GM employees that will be affected by this, but hell, this is what happens when unions become greedy.

[TinmanMS6]

Bankruptcy != Out of business

If GM filed bankruptcy, they'd be free of most of their previous debts, including commitments to the unions and any money owed to suppliers--obviously this is oversimplified, but that's the general idea. The unions and suppliers would be fucked. GM would be in good shape. I think they should be filing bankruptcy, not asking for gov't handouts.

[SubieKiller3]

thats their fault for making shitty cars.

[Kymerik]

yea i know, the company my dad works for filed protection bankrupcy, i was just being overdramatic. I hope this finally wakes up the blue collar worker that they CANNOT take advantage of company's by jerkin around lobbyists to bully companies into bending at the waist and taking it in the arse...I'm sorry but you do not deserve 75K+ for screwing together a car on a mostly mechanized assembly line.

Oh and the last time i went on a tour of the GM plant east of me, I swear on my soul that no less than half of the people were sitting on their asses. I have heard from a couple family members that brag about being on the clock getting paid when they're not even @ the plant!

Hopefully this wakes people up.

However, I will say management should give up some of their benefits, bonuses and such during hard times like this.

Oh well

[NVP5White]

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business."

This is why Chapter 11 (restructuring) must happen for GM. C11 allows them to cancel contracts with suppliers, unions, franchises without further financial obligation. They can focus on the core aspects of the business such as making good cars instead of worrying how they're going to make next month's payroll.

Restructuring will allow GM to sell assets like factories to Audi, who the other day admitted they need domestic US production facilities in order to make sales & profit goals. GM could cut brands since the franchise agreements with dealers is a current roadblock there. I would hope to see a very quick move to 3 brands (from the current 8) to Chevy for cars & crossovers; GMC for trucks & truck-based SUVs; Cadillac for luxury cars. In the USDM all other brands will cease to exist.

The only form of government bailout (loan) I would like to see would be to offset the development costs of true alternative-energy vehicles such as the Volt.

[Kymerik]

thats their fault for making shitty cars.

Good point

My gf had a chevy cobalt when here mazda6 was getting repaired after her wreck and my god that thing was a POS!!! Loud, rough, uncomfortable and just all around miserable even for an entry level car. It was like driving my friend's 1989 Toyota

[Olestra]

It won't be funny to see, the economy will get f-ed up even more.

What would also suck is if your turbo Cobalt threw a rod and you tried to go in for warranty only to find the GM dealerships all closed down.

[Kymerik]

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business."

This is why Chapter 11 (restructuring) must happen for GM. C11 allows them to cancel contracts with suppliers, unions, franchises without further financial obligation. They can focus on the core aspects of the business such as making good cars instead of worrying how they're going to make next month's payroll.

Restructuring will allow GM to sell assets like factories to Audi, who the other day admitted they need domestic US production facilities in order to make sales & profit goals. GM could cut brands since the franchise agreements with dealers is a current roadblock there. I would hope to see a very quick move to 3 brands (from the current 8) to Chevy for cars & crossovers; GMC for trucks & truck-based SUVs; Cadillac for luxury cars. In the USDM all other brands will cease to exist.

The only form of government bailout (loan) I would like to see would be to offset the development costs of true alternative-energy vehicles such as the Volt.

Have you EVER thought of just walking into GM's headquarters and saying, I'll fix your problems?

That's absolutely brilliant mate :) *applaud*

[Kymerik]

It won't be funny to see, the economy will get f-ed up even more.

What would also suck is if your turbo Cobalt threw a rod and you tried to go in for warranty only to find the GM dealerships all closed down.

it wouldnt do squat to the economy :P the demand for GM cars would just shift to other brands thus maintaining the cash flows, the only thing that would suck is the tens of thousands of new welfare recipients

[Discretion'sMX6]

Consider everyone that profits from GM being in business. Dealerships employ accountants, salesmen, mechanics, secretarys, managers. Don't forget about factories. Everyone of those people have rent/mortagages, bills, kids, etc. If they are out of a job and can't pay their bills, they lose their houses. Those possible foreclosures bring down the value of homes in that city. Those unemployed are not shopping and adding money into the economy, thus the economy is f'ed up even more.

Like it or not, we are better off with GM here.

However, I do agree with NVP5White about restructuring as to keep GM from bleeding money out of every orifice.

[NVP5White]

Consider everyone that profits from GM being in business. Dealerships employ accountants, salesmen, mechanics, secretarys, managers. Don't forget about factories. Everyone of those people have rent/mortagages, bills, kids, etc. If they are out of a job and can't pay their bills, they lose their houses. Those possible foreclosures bring down the value of homes in that city. Those unemployed are not shopping and adding money into the economy, thus the economy is f'ed up even more.

Like it or not, we are better off with GM here.

This is an interesting question to consider. If all of these people are employed making something no one wants, using scarce financial, energy and material resources in the process, are we really better off? While the short-term pain will be measurable, the long-term benefit of having the hundreds of thousands of skilled and white-collar workers actually being productive members of society far outweighs the short-term costs.

Besides, restructuring GM would mean that not all factories would close; not all dealers would close; and not all white-collar jobs would go away. A smaller, stronger GM would eventually prosper in the USDM. Besides, they would still have a strong international business which they could utilize for outsourced engineering work, just as they did with the Chevy Malibu (Opal Astra) and Chevy Cruze/Volt (Opal Zafira). These chassis were designed in Europe with conversion to USDM standards in mind. We already know GM's international operations are profitable with these design costs factored in so GM could continue to leach engineering resources from their international divisions and be successful in the long term.

[Discretion'sMX6]

Well said!

I'd hire you in a second.(bowdown)

[MazdaSpeeder]

I'm no GM fan, but auto manufacturing is one of the few industries that the US has left. Industry used to be how we could boost our GDP to avoid and pay off debt, but that is less and less the case anymore. GM going out of business would be a death blow to the US economy...certainly they need to downsize a ton and it's going to hurt, but the alternative is going to be horrendous.

This Chrysler merger talk makes me even more nervous...why would a nearly bankrupt company with too many models purchase another nearly bankrupt company with inventory control problems and excessive dealerships, not to mention cars that no one wants? Yikes. Ford looks like they may be in the best shape of anyone to survive this.

[NVP5White]

Well said!

I'd hire you in a second.(bowdown)

Thanks. I'm reading John DeLorean's book On a Clear Day You Can See General Motors and it is an incredibly prescient tales of the current GM situation. Or rather, it describes the management psychopathy that leads to such a long, focused destruction of an enormous corporation. Its really pretty rare that a company the size of GM is able to run itself into the ground. I sincerely believe that GM management is culpable for its current condition. I would estimate that 0% of the fault lies with the current economic and/or financial climate. The economy and financial conditions simply accelerated by a few months (maybe 12 months) an inevitable conclusion.

DeLorean was an incredibly successful young engineer who eventually lead the Pontiac division during its heyday. He is credited with the development of the turn signal and the Pontiac GTO, the first American muscle car.

He was an engineer through and through (although he did earn his MBA) and was constantly seeking to improve the GM product. I am only part way through the book but he has already described several instances where GM management failed to listen to the engineers in favor of greater profits. The most famous case is that of the Chevy Corvair. Wikipedia glosses over the impact of this car. The Corvair was one of the very first products Ralph Nader came out against. The prolonged and very public battle with GM made Nader into the public figure he is today.

So, before GM began production it was learned that the swing axle rear suspension caused a dangerously high role center. DeLorean wanted to add a swaybar that would made the car safe but also would have increased production costs by $35 per vehicle. GM executives refused on the grounds that it would erode profit and potentially delay production. They did decide to make an adjustment to the air pressure in the front tires. It was set very low at 15psi to 19psi so that the car would understeer before cornering forces built sufficient to flip the car. Of course, most people don;t read the manual and began to set air pressures at the industry standard 32psi which made the car unsafe again.

So, two years into production GM had over 100 lawsuits pending because the Corvair had lost control and resulted in grave bodily harm. Even some top GM executives had lost family members. When Nader brought this situation to the media GM tapped his phones and hired PI's to trail him 24 hours per day. GM's tactics eventually came to light and they agreed to settle with Nader.

Anyway, DeLorean makes it clear that as individuals executives at GM were not bad people. But as an organization, one that placed revenue and profit above all, GM was dangerous and grossly incompetent at making good automobiles.

Flash forward to 2008, I don't see much change in GM executives. Rick Wagner just today blamed the current "unforeseeable" market conditions on GM's poorly performance. My friends, the Titanic did not go down instantly. The iceberg for GM was their failure to realize that giant truck-based SUV's were a fad. They totally abandoned small and mid-sized car markets. They let their SUV's rot away to nothing. They rushed development of the GMT-900 platform at great engineering and financial expense. This was in 2005 when Katrina caused gas prices to pike above $3 for the first time since the 70's (adjusted for inflation). This general trend continued with the poor showing with the Chevy Colorado/Equinox vehicles. When they realized gas prices were causing a shift in the type of vehicles people buy (i.e. smaller) they canceled development of their next generation RWD car platform. This was mere months before the Chevy Camaro concept car made such a big splash. After realocating engineering and financial resources GM had to scramble to develope a new platform basically from scratch. In the mean time, the only new RWD cars have been imports from their Holden division in Australia (G8 and GTO).

Okay, too many words...you get the idea (I hope).

[NVP5White]

This Chrysler merger talk makes me even more nervous...

Merger talks have ended as of late yesterday (Thursday). GM has [probably] received guidance from the Government that it would not be a good idea to involve a bloodsucking hedge fund (Cerberus) in its future plans if it wants a bailout/loan.

In any event, GM folding is probably not an option, as you indicate and for the reasons you indicate. The question becomes, under what conditions with GM get federal assistance? The better option is under C11 bankruptcy. This would screw suppliers, at least the ones they no longer use, factory workers and dealers. Of course, good medicine often tastes bad...

[MazdaSpeeder]

Merger talks have ended as of late yesterday (Thursday). GM has [probably] received guidance from the Government that it would not be a good idea to involve a bloodsucking hedge fund (Cerberus) in its future plans if it wants a bailout/loan.


I didn't hear that, but I'm glad...what amazes me is that someone thought it was a good idea in the first place!

[Cellerator]

Z06 and ZR1's for cheap, maybe?

(2thumbs)

[TinmanMS6]

Z06 and ZR1's for cheap, maybe?

(2thumbs)

Probably not. You should've hit up the Z06 while they had employee pricing on it. I think it's ~$10k off for employees--around $60k instead of $70k.

[mikeyb]

Restructuring will allow GM to sell assets like factories to Audi, who the other day admitted they need domestic US production facilities in order to make sales & profit goals. GM could cut brands since the franchise agreements with dealers is a current roadblock there. I would hope to see a very quick move to 3 brands (from the current 8) to Chevy for cars & crossovers; GMC for trucks & truck-based SUVs; Cadillac for luxury cars. In the USDM all other brands will cease to exist.


The problem selling plants to Audi or any other manufacturer is that they will have to completely upgraded to their specs. Compare American plants with German or Japanese plants. The American plants are very outdated were the others are state of the art.

[NVP5White]

The problem selling plants to Audi or any other manufacturer is that they will have to completely upgraded to their specs. Compare American plants with German or Japanese plants. The American plants are very outdated were the others are state of the art.

Well, maybe not Audi but maybe John Deere, or a prefabricated building manufacturer, or a cooperative of smaller manufacturers who don't have the capital to build-to-suit. Point is they can get out from existing obligations to do what makes sense for the long-term health of the business.

[mikeyb]

What GM needs to do is have their plants be able to manufacture every product they sell. Look at BMW's Spartenburg plant. They build the X5 and X6 side by side and the now disconutined US built Z4. BMW can techinally build just about any model there if they wanted too. Aslo look at Nissan's plant in TN. Nissan builds the Altima, Maxima, Frontier/Suzuki Equator, Pathfinder and Xterra in the same building. Does GM really do the same?

[NVP5White]

What GM needs to do is have their plants be able to manufacture every product they sell. Look at BMW's Spartenburg plant. They build the X5 and X6 side by side and the now disconutined US built Z4. BMW can techinally build just about any model there if they wanted too. Aslo look at Nissan's plant in TN. Nissan builds the Altima, Maxima, Frontier/Suzuki Equator, Pathfinder and Xterra in the same building. Does GM really do the same?

GM does not utilize a true flexible manufacturing facility in the production of its vehicles. Of course, the practice a form of this by re-badging a Chevy as a Buick and a Saturn. They can shift production between the different brands of the same vehicle as demand warrants.

In any event, we're really in agreement about different parts of the bigger GM mess. I think they need to downsize; you believe they need to work smarter, not harder, so to speak. I also agree they need flexible manufacturing but that, in itself, will not help GM right now. Cutting production capacity by 60% will.

10 years from now when we re-examine this period in GM's history we will look to GM leadership (CEO Wagner and the Board of Directors) who played the part of the consummate addict; refusing to believe they had a problem until it was too late. Even Friday CEO Rick Wagner refused to admit that with only 60 days of cash on hand it was not yet time to CONSIDER filing for bankruptcy protection. Not even a bailout of $25B would be sufficient to turn the tide for GM as its currently structured.

Evidence: GM had ~$40b cash on hand about 18 months ago. At the time they believed that the (then) new GMT-900 trucks and SUVs, the Malibu/Aura/G6 cars, the Volt and the Solstice/Sky would generate sufficient profits to save GM. In the ensuing months, before the economy tanked, GM was shedding market share like crazy, renegotiated a sweet deal for the unions, and spun-off then bailed-out Delphi.

Today, GM has effectively no high-volume new cars in development, no cash to update faltering models (Cobalt, G6, Impala, Colorado, Solstice, etc) and assets left to sell or put-up as collateral. They literally are trying to sell the shirts on their backs (RenCen). Not protecting the share-holders and other GM creditors through Bankruptcy is dereliction of duty by any definition for Rick Wagner.

I just can't wait for the books and inevitable movie to come out. These are going to make The Smartest Guys in the Room (about the rise and fall of Enron) look like tales of the high school lunch room.

[dmitrik4]

What would also suck is if your turbo Cobalt threw a rod and you tried to go in for warranty only to find the GM dealerships all closed down.

this is the main impediment to an automaker declaring bankruptcy. especially given most people's misunderstanding of C11 bankruptcy, it will be tough for any in-bankruptcy automaker to sell new cars for exactly the above reason.

[NVP5White]

this is the main impediment to an automaker declaring bankruptcy. especially given most people's misunderstanding of C11 bankruptcy, it will be tough for any in-bankruptcy automaker to sell new cars for exactly the above reason.

Valid point and one I am drawn to make myself unless I consider other recent examples of C11. Take the airlines for example. Several have declared C11 bankruptcy multiple times in the last decade and rarely did this result in a decrease in business. One might point to the advanced-purchase nature of airline tickets as a primary difference between the industries. However, even under the pre-purchase business model we would expect to see a marked decrease in business just offset by a few weeks to a few months. This is just not the case. If anything, C11 allows airlines to immediately realize efficiencies which were not available under burdensome contracts and lower costs for consumers. We generally do not see where C11 raises consumers concerns about reliability or safety, at least not to levels which make them change their buying behavior.

I believe this could also be the case for GM...if they hire the right folks to reorganize. There will be a steep learning curve since no modern auto manufacturer has declared C11. In the airline industry there is a pretty clear path for C11 which increases the chances of a company emerging from protection stronger.

So, ask yourself: Is GM willing to murder The General as we know it? Are they willing to ax brands that have been around for decades? No doubt they will see this as euthanasia and have a difficult time doing what's needed. This is the biggest risk to customers...that they will not take big enough steps even in C11.

[dmitrik4]

Valid point and one I am drawn to make myself unless I consider other recent examples of C11. Take the airlines for example. Several have declared C11 bankruptcy multiple times in the last decade and rarely did this result in a decrease in business. One might point to the advanced-purchase nature of airline tickets as a primary difference between the industries.

the primary difference is that one industry sells a durable good, and one industry sells a service. once you take your trip, you're not concerned about the airline's survival...they don't owe you anything else. on the other hand, a lot of people are going to be wary of buying a car with a warranty if they're not sure that the warranty or parts are going to be available.

while pre-purchasing tickets is an example of something the airline still ows, the timeframe is much shorter and the financial risk taken by the consumer is much less (even w/ ticket prices being what they are these days!). there is a huge difference between prepurchasing a $400 ticket for a trip next month, and buying a $25,000 car that you'll be using for 5-7 years.

again, though...the actual risk is much less than the perceived risk. most people likely don't understand that "bankrupt" doesn't mean "out of business." GM would still be around, still selling and servicing cars, but the damage created by peoples' perception of the risk is another issue altogether.

[NVP5White]

again, though...the actual risk is much less than the perceived risk. most people likely don't understand that "bankrupt" doesn't mean "out of business." GM would still be around, still selling and servicing cars, but the damage created by peoples' perception of the risk is another issue altogether.

I suppose we agree about different sides of the same issue.

The "risk" airline travelers might perceive would be of the plane falling out of the sky. I know that when I've been waiting to board a flight on an airline that had recently declared bankruptcy no one was joking about the flight being canceled. They were all joking about the engine falling off after the airline cut costs.

If airline travelers were willing to risk death to patronize a bankrupt airline I figure there's enough people out there to buy new cars at fire sale prices from GM.

[NVP5White]

From this morning's Washington Post:

"It is quite possible the auto industry is not thinking in truly contemporary terms," he said. "Consumers have lived through a lot of bankruptcies over the last 10 or 20 years. A couple of generations ago, the word bankruptcy meant liquidation. Now it very often means reorganization. That can be quite transparent from a consumer perspective." -Michael E. Levine, a former senior airline executive and a lecturer at New York University School of Law

[dmitrik4]

"It is quite possible the auto industry is not thinking in truly contemporary terms,"

that pretty much sums up the last 35 years, doesn't it? why change now? ;)

i think C11 is the right thing for GM, if accompanied by a media campaign stressing that the company is not going anywhere. there is probably more danger of the company folding if C11 doesn't happen. either way, i agree that there are probably some deals to be had on GM products in the near future. tow rig, anyone? and those camaros and G8s are pretty sweet. :)

[TinmanMS6]

You are correct. I probably could tow my Miata with a G8. :D If only they'd made the wagon, I could throw spare tires in the back, too.

Come to think of it, I'm going to go ahead and blame the current troubles of GM directly on them passing on the G8 wagon. :p

[Kymerik]

I for one hope they actually fail completely. Death to UAW!! woohoo!!

This way, all the support industries that are dependant on GM will lay off their workers and those workers will go riot against the UAW workers and it'll be a good ol southpark fight in the streets

[dmitrik4]

You are correct. I probably could tow my Miata with a G8. :D If only they'd made the wagon, I could throw spare tires in the back, too.

Come to think of it, I'm going to go ahead and blame the current troubles of GM directly on them passing on the G8 wagon. :p

i hear you...but that what back seats are for! BTW, the Magnum tows 3800 pounds. spring for a fancy aluminum trailer and there you go.

you mean the El Camino thing isn't going to save the company? i can't believe that thing won't be a huge success! (confused)

[NVP5White]

[QUOTE=dmitrik4;4184571i think C11 is the right thing for GM, if accompanied by a media campaign stressing that the company is not going anywhere.[/QUOTE]

Exactly, and this is where the government can really help. GM, with the government's cooperation and input, would develop a C11 strategy and put it in place ahead of the bankruptcy filing. They could file on Friday and have it approved and in place by Monday. But, and this is where the details get fuzzy for me, the government would then become a debtor-in-possession by way of their providing of funding to support GM during C11 reorganization.

If you're interested you can read about the plan posted on TheTruthAboutCars.com HERE (http://www.thetruthaboutcars.com/editorial-general-motors-death-watch-213-blueprint-for-a-taxpayer-funded-gm-c11/)

PS: this site is fascinating and full of extremely well informed commenters. I know that sounds like an impossibility in this age of the Internet, but for TTAC, its true.

[R-X-R]

result of making huge trucks for no reason.,.,

[dmitrik4]

actually, they were incredibly profitable, and propped up a horrid passenger car line. that's a great reason.

edit: interesting analysis of the effect of a C11:

http://www.time.com/time/business/article/0,8599,1858702,00.html?iid=tsmodule

[NVP5White]

actually, they were incredibly profitable, and propped up a horrid passenger car line. that's a great reason.

edit: interesting analysis of the effect of a C11:

http://www.time.com/time/business/article/0,8599,1858702,00.html?iid=tsmodule

Nice article but consider the source:

"A carefully planned, prepackaged bankruptcy would still be troublesome," says Nicole Y. Lamb-Hale, a bankruptcy expert at the Detroit office of Foley & Lardner, a law firm that represents some GM suppliers.

Contrary to the statement above not all bankruptcy plans are created equal. The carefully planned, prepackaged bankruptcy from TTAC does not dump employee pensions on the Pension Benefit Guaranty Corp. as Ms, Lamb-Hale posits. Frankly, the whole article is heavy on doom and gloom and light on details (as I suspect most reporting at Time.com is).

I'd rather read the opinions of Paul Ingrassia of the WSJ (http://online.wsj.com/article/SB122628230122212449.html?mod=googlenews_wsj) and Thomas L. Freedman of the NYT (http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&oref=slogin). I don't agree with 100% of their recommendations, but their reporting of the Big 2.8's situation and its context are second to none.

[dmitrik4]

agreed. i did notice the identity of most of the sources. but the point about the potential ripple effect is a good one. there are a lot of job dependent on payment of debts owed by GM. problem is, eventually those debts won't get paid, one way or another.

[TinmanMS6]

There are grumblings of the government bailing out the suppliers and unions if GM does end up filing bankruptcy. That might end up being a win-win for GM and the rest.

I don't think there's any end to this that's a win for the American public as a whole. Either there's an economic bloodbath as GM and its suppliers, dealerships, etc. cut thousands of jobs, or there's a whole lot of tax dollars going to bail somebody out.

[mazdaspeedster3]

How many of you work or live in the Detroit metro area? Pro/Con to the Unions you are going to unemploy an awful lot of people while NOT generating jobs for others. Granted, the idea that Unions are not needed in a world with our current labor laws is ridiculous to some extent but if you knew anything about how these industries operate and the ammount of work really put into manufacturing ANYTHING at that level you need someone in the middle to control the labor force with some understanding and to handle the lay offs and change overs...
For not wanting to start an argument I do think this will bring a lot of light to the Union money and not needing an agency at that level and really should make them non-profit or something along those lines with all un-used union dues going back to the industry or into pension retirement plans...
It is going to be an interesting end to this year and start to a new year... There are going to be some INCREDIBLE changes to the world as we know it. It is going to get a lot worse before it gets better!

[TinmanMS6]

While I understand the unions are huge for the domestic automakers, there are a lot of manufacturers who get by just fine building cars in the US without them. Honda and Toyota come to mind. There's a lot of overhead in dealing with the unions that the Big Three really don't need right now.

One way or another, there's not a pretty resolution to this whole mess. I'm generally in favor of the government leaving things alone, but I think they're going to have to get involved somewhere.

[Kymerik]

The bailout for the big 3 has DIED in congress!! woohoo!!! Bankrupcy will happen!

[Reyan]

The freaking gov. will give money to loan shark banks, the very next week they have a 450k party for their executives, but not to the car companies to keep americans employed.

[NVP5White]

How many of you work or live in the Detroit metro area?

How many people live in Northern Virginia when Worldcom, AOL, PSInet, Sprint, and Micro Strategy all laid-off thousands of workers? I did, and there was no bailout for SysAdmins or Data Center installers who were all highly skilled but dependent on the continued growth of IT services.

Right now the gambling industry is reeling in Nevada and the total number of people employed by that industry is greater then the auto industry in the US. No one is lobbying Congress for a bailout of the gambling industry.

On another website I read somone mention the super-fantaic-ultra-incredible amount of R&D funding that is spent in and around SE Michigan...something like several billion dollars. But companies with major operations within 5 miles of where I sit right now generate LOCAL revenus of $65B every year! Mainly in the defense and intel services marketspace, which BTW, is not considered safe under new POTUS Obama. No one here is asking for a bailout.

However, that did not stop me from voting for Obama. I knew that there was a possibility that could loose my job due to cuts in Defense spending under Obama. But I felt strongly that an Obama presidency was the right thing for this country. Even if it meant losing my job.

Folks, we need to do whats right for the majority, not the minority. For if we don't everyone will lose.

[Kymerik]

The freaking gov. will give money to loan shark banks, the very next week they have a 450k party for their executives, but not to the car companies to keep americans employed.

The government shouldnt be bailing anyone out at all...smart business practices = profitable business...stupid business practices = out of business

that's how it should work. Government is here to keep the peace and protect us from invaders...end of story

[i12drivemyMP5]

A big problem here with all of this is the fact that the government is not leading by example with respect to how they run their shit. Everyone else is just following their example of greed, unaccountability & profit over responsibility. So how does the government have a leg to stand on telling small business & citizens about being fiscally responsible? Lead by fucking example please! Reward people & businesses for doing right things not for fucking the most people the hardest. Nothing will change until that happens, it'll only be survival of the scaminest. Fuck or be fucked is basically what it's turned into.

[TinmanMS6]

While I agree that our government is a mess (Libertarians FTW), let's try not to veer off topic.

[Reyan]

How many people live in Northern Virginia when Worldcom, AOL, PSInet, Sprint, and Micro Strategy all laid-off thousands of workers? I did, and there was no bailout for SysAdmins or Data Center installers who were all highly skilled but dependent on the continued growth of IT services.

Right now the gambling industry is reeling in Nevada and the total number of people employed by that industry is greater then the auto industry in the US. No one is lobbying Congress for a bailout of the gambling industry.

On another website I read somone mention the super-fantaic-ultra-incredible amount of R&D funding that is spent in and around SE Michigan...something like several billion dollars. But companies with major operations within 5 miles of where I sit right now generate LOCAL revenus of $65B every year! Mainly in the defense and intel services marketspace, which BTW, is not considered safe under new POTUS Obama. No one here is asking for a bailout.

However, that did not stop me from voting for Obama. I knew that there was a possibility that could loose my job due to cuts in Defense spending under Obama. But I felt strongly that an Obama presidency was the right thing for this country. Even if it meant losing my job.

Folks, we need to do whats right for the majority, not the minority. For if we don't everyone will lose.

They did not bail them out because that was part of the plan to take the jobs overseas, why is it in these times when american's are loosing their jobs work permits are still being issued to foreigner's to come here and work for big corporations? We need to get out of NAFTA and stop outsourcing everything.

People who were working for an average of 10 -15 per hr in american factories, are now working at wal mart for 8 per hr selling chinese goods. This country is self sufficent so why are we relying on other countries?

[Reyan]

The government shouldnt be bailing anyone out at all...smart business practices = profitable business...stupid business practices = out of business

that's how it should work. Government is here to keep the peace and protect us from invaders...end of story


I agree with you 100%, but the goverment is not working for either of us, they only working for big corporations with lobbyist in congress.

Check out Alex Jones website www.infowars.com, it will wake you up as to what's really going on.

[astraelraen]

"The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,” Mr. Shelby said in a statement. The financial situation facing the Big Three is not a national problem, but their problem."

Companies don't fail and just disappear. In all likely hood if GM/Ford/Chrysler failed they would go into some form of bankruptcy where they would either restructure, merge with another company or simply be bought outright.

This would benefit the companies in multiple ways. It would reduce the supply of cars in the market due to removing a competitor. GM themselves said there were too many manufacturers in the segment and that if they could afford to merge/buy Chrysler they would do it JUST to remove a competitor from the marketplace, or just to remove the cars that Chrysler sells. They SPECIFICALLY said that they would probably discontinue almost all of Chrysler's line of cars. There is a glut of cars in the market right now.

Secondly, bankruptcy would allow them to really strip down their labor agreements with the UAW, which is a large portion of their problem. GM pays most of their legacy workers something like 30 bucks an hour in addition to full benefits, this probably equals something like 40-50/an hour. That is a BURDEN in producing competitive cars. No manufacturing worker deserves to stand on an assembly line and stick door handles in a car for 50 bucks an hour, that's ridiculous. Their new UAW contracts cost something like 15 bucks an hour and partial benefits.

Noone can say that automakers cannot produce a profitable car in the US. Foreign firms do it everyday. You can use US labor to produce cars and still make money, but not with ridiculous legacy labor agreements.

Yes it would hurt significantly for these companies to go under, jobs would be lost and some companies probably would go out of business. It happens, you can't keep producing something that noone is buying... no matter how much people want low unemployment numbers.

In the end at worse we would end up with Fogmysler or Gorder or Chrygmord. American auto manufacturing would not disappear.

[Reyan]

American auto manufacturing would not disappear.[/QUOTE]

I better not ................i would hate to see a corvette with a Honda badge on the hood.

[bazooka joe]

greed, poor management and products suck! my wifes company is about 90% automotive...after laying off 150 workers over the last 9 months, moving what's left of the plant to TN this past summer...today they announced a longer holiday shut down (no pay) slaried workers will get a 10% pay decrease effective today, and no matching 401k contributions...the end is near!