Market drop revives talk of GM bankruptcy
10-10-2008, 12:17 PM
#1
Team Owner
Thread Starter
Market drop revives talk of GM bankruptcy
Guess GM racing will take a huge hit under bankruptcy filing
That sickening thud you heard Thursday, when the Dow Jones Industrial Average plunged another 678.9 points, was Detroit getting downgraded -- hard.
General Motors Corp. shares lost a third of their value in a single day and closed at $4.76, their lowest point since 1950, thanks to yet another credit smackdown by Standard & Poor's. Ford Motor Co. slumped nearly 22 percent to close at $2.08. American Axle & Manufacturing Holdings shares slipped 9 percent, recognition of its close ties to GM production.
And Fox News e-mailed me to set up a chat today to talk about GM and the "B" word, as the producer said. Get ready, folks: Talk of the "bankruptcy of Detroit" -- GM, Ford, whoever else -- is about to get revived, as surely as Wall Street's capitalists will seek yet more big government socialism to save them from themselves.
Even more, GM's top guy in Europe, Carl-Peter Forster, said an "unprecedented set of economic challenges" -- credit concerns and inflation spiked by surging commodity prices -- have damaged consumer confidence overseas. Why care here? Because the foreign operations that GM (and its rivals) hoped would support their bottom lines are softening, too.
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This is a bad movie that gets worse with each new showing. Contract concessions reached, assets sold, jobs cut, plants closed, brands jettisoned, credit downgraded, cash burned, market share ceded, billions lost, dealers sacrificed, captive finance companies compromised -- and what's left?
Essentially, this: Purely automotive companies that are susceptible to the merciless business cycle and its ugly twin, gyrating consumer confidence. And, second, an industry and its home state sharing a fifth year of their own recession and the increasing likelihood -- depending on the desperate moves to reverse a global economic slide -- that Delphi Corp.'s 3-year-old bankruptcy won't be this town's biggest or its last.
Cash is adequate -- for now
Wonderful. S&P says GM and Ford have "adequate liquidity" to weather the remainder of this year, which is scant comfort considering that we're almost to mid-October. Next year will pose a "serious challenge" because of the rapidly deteriorating conditions, an observation echoed by a similarly dire assessment from J.D. Power and a Wall Street Journal survey of economists predicting recession for the second half of this year and the first three months of next.
Officially, bankruptcy is not an option for Detroit's automakers. But the brutal facts are that the decision to file or not to file isn't so much made by management and boards of directors as it is driven by circumstances they often cannot control. And in the case of credit-poor auto companies, those circumstances are dictated fundamentally by a single four-letter word -- cash.
Gimme Credit, an independent ratings agency, says Ford has "nine to 12 quarters of liquidity." Citigroup Global Markets estimates Ford would end next year with an "adequate" cash surplus of $5.7 billion. But GM, which says it needs between $11 billion and $14 billion in cash to run its business, would end next year with $998 million, Citigroup says, "very thin even with (a) $5 billion asset sale execution."
Not much room for error, that, in a fluid economic environment that seems to change regularly and influences consumer confidence with each trading day.
Which helps explain why GM's shares are tanking to historic lows amid a punishing market sell-off and predictions of "collapse" in the global auto market. Bankruptcy talk is inevitable, if unnerving, and Detroit executives would be wise to acknowledge the chatter and answer it instead of let it run amok.
Bankruptcy advocates argue the cold business merits: GM, Ford and, presumably, Chrysler LLC could use the courts to radically restructure their U.S. operations even more than they already have. Wages, benefits and work rules in union contracts would be streamlined; brands could be killed and dealer networks rationalized; supplier contracts could be renegotiated and the network of parts makers winnowed.
Real people would pay price
And if one goes into bankruptcy, the current thinking atop the automakers goes, the others would be forced to follow. Why? Because no matter how much cash the others may have in the bank, they cannot compete effectively with a domestic rival whose cost structure mirrors industry leaders Toyota Motor Corp. and Honda Motor Co.
The next president and the next Congress would be faced with the likely call, considering the past few weeks, for some form of national intervention to "save" the Detroit automakers, a politically dicey proposition. The economic ramifications of bankruptcy -- not necessarily inevitable -- are deadly serious for the Midwest and American industrial independence.
The costs, not counting the high-priced lawyers and bankers, would be enormous. Employees and communities could see operations downscaled, jobs eliminated and facilities closed. Dealers could see their franchises combined or dropped. Governments could lose tax revenue from fewer and -- potentially -- lower-paying jobs. Retirees could lose their company health care benefits, usually among the first casualties in bankruptcy.
The United Auto Workers, whose 70-year-old promise of delivering good wages and benefits is a core institutional principle, would be fatally compromised by bankruptcy and battles with hard-nosed creditors who can't spell "solidarity," much less care what it means.
None of it is encouraging, and none of it should be cheered.
In almost every case, these are real communities and real people with families, homes and kids to send to college, not mostly out-dated caricatures on a page. And in almost every case, the predicament is not their fault -- even though they could be forced to pay the price.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106 or dchowes@detnews.com. Catch him Fridays with Paul W. Smith on 760-WJR.
That sickening thud you heard Thursday, when the Dow Jones Industrial Average plunged another 678.9 points, was Detroit getting downgraded -- hard.
General Motors Corp. shares lost a third of their value in a single day and closed at $4.76, their lowest point since 1950, thanks to yet another credit smackdown by Standard & Poor's. Ford Motor Co. slumped nearly 22 percent to close at $2.08. American Axle & Manufacturing Holdings shares slipped 9 percent, recognition of its close ties to GM production.
And Fox News e-mailed me to set up a chat today to talk about GM and the "B" word, as the producer said. Get ready, folks: Talk of the "bankruptcy of Detroit" -- GM, Ford, whoever else -- is about to get revived, as surely as Wall Street's capitalists will seek yet more big government socialism to save them from themselves.
Even more, GM's top guy in Europe, Carl-Peter Forster, said an "unprecedented set of economic challenges" -- credit concerns and inflation spiked by surging commodity prices -- have damaged consumer confidence overseas. Why care here? Because the foreign operations that GM (and its rivals) hoped would support their bottom lines are softening, too.
Advertisement
This is a bad movie that gets worse with each new showing. Contract concessions reached, assets sold, jobs cut, plants closed, brands jettisoned, credit downgraded, cash burned, market share ceded, billions lost, dealers sacrificed, captive finance companies compromised -- and what's left?
Essentially, this: Purely automotive companies that are susceptible to the merciless business cycle and its ugly twin, gyrating consumer confidence. And, second, an industry and its home state sharing a fifth year of their own recession and the increasing likelihood -- depending on the desperate moves to reverse a global economic slide -- that Delphi Corp.'s 3-year-old bankruptcy won't be this town's biggest or its last.
Cash is adequate -- for now
Wonderful. S&P says GM and Ford have "adequate liquidity" to weather the remainder of this year, which is scant comfort considering that we're almost to mid-October. Next year will pose a "serious challenge" because of the rapidly deteriorating conditions, an observation echoed by a similarly dire assessment from J.D. Power and a Wall Street Journal survey of economists predicting recession for the second half of this year and the first three months of next.
Officially, bankruptcy is not an option for Detroit's automakers. But the brutal facts are that the decision to file or not to file isn't so much made by management and boards of directors as it is driven by circumstances they often cannot control. And in the case of credit-poor auto companies, those circumstances are dictated fundamentally by a single four-letter word -- cash.
Gimme Credit, an independent ratings agency, says Ford has "nine to 12 quarters of liquidity." Citigroup Global Markets estimates Ford would end next year with an "adequate" cash surplus of $5.7 billion. But GM, which says it needs between $11 billion and $14 billion in cash to run its business, would end next year with $998 million, Citigroup says, "very thin even with (a) $5 billion asset sale execution."
Not much room for error, that, in a fluid economic environment that seems to change regularly and influences consumer confidence with each trading day.
Which helps explain why GM's shares are tanking to historic lows amid a punishing market sell-off and predictions of "collapse" in the global auto market. Bankruptcy talk is inevitable, if unnerving, and Detroit executives would be wise to acknowledge the chatter and answer it instead of let it run amok.
Bankruptcy advocates argue the cold business merits: GM, Ford and, presumably, Chrysler LLC could use the courts to radically restructure their U.S. operations even more than they already have. Wages, benefits and work rules in union contracts would be streamlined; brands could be killed and dealer networks rationalized; supplier contracts could be renegotiated and the network of parts makers winnowed.
Real people would pay price
And if one goes into bankruptcy, the current thinking atop the automakers goes, the others would be forced to follow. Why? Because no matter how much cash the others may have in the bank, they cannot compete effectively with a domestic rival whose cost structure mirrors industry leaders Toyota Motor Corp. and Honda Motor Co.
The next president and the next Congress would be faced with the likely call, considering the past few weeks, for some form of national intervention to "save" the Detroit automakers, a politically dicey proposition. The economic ramifications of bankruptcy -- not necessarily inevitable -- are deadly serious for the Midwest and American industrial independence.
The costs, not counting the high-priced lawyers and bankers, would be enormous. Employees and communities could see operations downscaled, jobs eliminated and facilities closed. Dealers could see their franchises combined or dropped. Governments could lose tax revenue from fewer and -- potentially -- lower-paying jobs. Retirees could lose their company health care benefits, usually among the first casualties in bankruptcy.
The United Auto Workers, whose 70-year-old promise of delivering good wages and benefits is a core institutional principle, would be fatally compromised by bankruptcy and battles with hard-nosed creditors who can't spell "solidarity," much less care what it means.
None of it is encouraging, and none of it should be cheered.
In almost every case, these are real communities and real people with families, homes and kids to send to college, not mostly out-dated caricatures on a page. And in almost every case, the predicament is not their fault -- even though they could be forced to pay the price.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106 or dchowes@detnews.com. Catch him Fridays with Paul W. Smith on 760-WJR.
Last edited by John Shiels; 10-10-2008 at 12:24 PM.
10-10-2008, 04:21 PM
#3
Team Owner
Thread Starter
Friday, October 10, 2008
Ford shares fall to under $2 in heavy trading
David Shepardson / Detroit News Washington Bureau
Ford's stock, which fell 22 percent Thursday to its lowest point since 1983, saw its stock fall below $2 in extremely heavy roller-coaster trading today.
Investors were still deeply uncertain about the future viability of both Ford Motor Co. and General Motors Corp. GM was considering new cost-cutting measures in the face of a withering decline in its stock price this week.
By 2:30 p.m., Ford was down $0.11 a share, or 5.3 percent, to $1.98, after rising as much as 24 percent today to $2.55.
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The company's stock has fallen 62 percent since Sept. 30, losing $7.25 billion of its market capitalization. More than 130 million shares traded hands, more than twice normal volume.
GM, after watching its stock plunge 31 percent Thursday, gave up early some gains by late afternoon, but remained up slightly after a wild day of swings.
GM fell 19 percent at one point to $4 a share -- its lowest point since 1949 -- but recovered to $5.40. They recently traded up $0.09 a share to $4.85 up 1.9 percent. More than 60 million shares traded hands, twice the normal.
The Dow Jones Industrial Average was down 460 points or 5.3 percent in recent trading. The S&P 500 was down 6.3 percent.
GM spokeswoman Renee Rashid-Merem said in a statement Thursday that "bankruptcy protection is not an option GM is considering. It would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive."
Since the beginning of the month, GM's shares have fallen by about 50 percent to their lowest levels since early 1950 on news that September industry auto sales fell by 26 percent to below 1 million for the first time in more than 15 years.
Investors have mounting concerns that both Ford and GM won't have enough cash to operate next year. Gimme Capital said Ford could have just 9 to 12 quarters of liquidity.
GM and Ford Motor Co. were also hurt Thursday by an announcement by Standard & Poors that the ratings agency again might downgrade their credit further into junk status. Citi downgraded both companies from hold to sell and a temporary ban on short selling on financial stocks, which included the two automakers, expired at midnight Wednesday.
J.D. Power and Associates said the global auto industry was in danger of collapse and sharpy revised its forecast for sales this year and in 2009.
Talk of possible bankruptcy at GM heated up after a Merrill Lynch analyst said in a July 2 report that such a move by GM is "not impossible." Analysts estimate that GM is burning through $1 billion a month amid a sharp decline in large truck and SUV sales.
GM chairman and CEO Rick Wagoner sought to quell similar speculation in July when he said bankruptcy was not an option.
Wagoner then that the automaker has "no thoughts whatsoever" of bankruptcy.
"We're still kicking," Wagoner told the Dallas Regional Chamber of Commerce in July. "We have no plans whatsoever to ride off into the sunset."
In an interview with PBS's Charlie Rose in August, Wagoner was asked if he ever imagined the company's market capitalization would fall to $10 billion, as it was then. Wagoner said no.
"I'm equally sure, as happened just last fall after we announced the significant labor agreement break, the stock really shot up quite a bit. So I do believe that as we show more and more that we can get through this challenging time in the U.S., that we'll see a fair reaction from the market," Wagoner told Rose.
By any measure GM's decline in value has been staggering. The company's market capitalization in 2000 was $52 billion. Today, it's about $2.8 billion.
After the 1929 stock market crash, GM's market cap was $4 billion. Adjusted for inflation, GM was worth $51 billion in today's dollars in 1929.
GM and Ford's employees have lost more than $2 billion in the value of company shares held in their retirement plans.
Last edited by John Shiels; 10-10-2008 at 04:28 PM.
10-10-2008, 06:38 PM
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St. Jude Donor '05-'08
I was going to comment, but was too exhausted from buying up stock today 
BTW - John nothing against you. We just have different views of what is going on. I know your situation and many others so I can see your point. Since I work on Wall Street of course I am going to view it in a different light otherwise I might job out of my building...
BTW - John nothing against you. We just have different views of what is going on. I know your situation and many others so I can see your point. Since I work on Wall Street of course I am going to view it in a different light otherwise I might job out of my building...
10-10-2008, 07:24 PM
#6
Team Owner
Thread Starter
Well GM has 20-21 billion and access to 5 billion in loans. They need 10-11 billion to operate before filing. So that leaves 10-11 months before the are tapped out and need to file unless some things changes for them. I doubt people will get over this fast or the market will recover for years. Boat sales dropped over 40% granted not as essential as a car but people can patch a car for a long time.
Last edited by John Shiels; 10-10-2008 at 07:27 PM.
10-10-2008, 08:46 PM
#8
Well GM has 20-21 billion and access to 5 billion in loans. They need 10-11 billion to operate before filing. So that leaves 10-11 months before the are tapped out and need to file unless some things changes for them. I doubt people will get over this fast or the market will recover for years. Boat sales dropped over 40% granted not as essential as a car but people can patch a car for a long time.
Yes when cars had carbs and no electronics. Today's beast is difficult to work on. When a guy takes his car to the GM dealer does GM share in any of that money or only the dealer? What about part sales? If the demand goes up for fixing so will the price. I fear we may loose our ability to get ZR-1's but I bet vettes will still be made perhaps at a lower number. Lots of companies cut R&D when times get bad but what they really need is new ideas and new products to lure the consumer back in the stores.
10-10-2008, 10:26 PM
#9
Drifting
10-10-2008, 10:39 PM
#10
Burning Brakes
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Thank you John for posting these factual informations.
The sad part is that some people don't even consider getting a new GM vehicle over imports. Especially a small car. There is definitely a "perceived" quality advantage of the imports.
The sad part is that some people don't even consider getting a new GM vehicle over imports. Especially a small car. There is definitely a "perceived" quality advantage of the imports.
10-10-2008, 10:49 PM
#11
Yes when cars had carbs and no electronics. Today's beast is difficult to work on. When a guy takes his car to the GM dealer does GM share in any of that money or only the dealer? What about part sales? If the demand goes up for fixing so will the price. I fear we may loose our ability to get ZR-1's but I bet vettes will still be made perhaps at a lower number. Lots of companies cut R&D when times get bad but what they really need is new ideas and new products to lure the consumer back in the stores.
Zr-1's were dropped a long time ago from gm parts so wouldn't worry about them.
10-11-2008, 01:29 AM
#12
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Do you have any input on the text below I received today in an email from a friend?
General Motors and privately-held Chrysler, two of the most iconic names in American industry, are in preliminary talks about a possible merger, according to reports in The New York Times and The Wall Street Journal.
The possibility of the two struggling automakers merging would be a historic move in a time of a hurting economy and tight credit markets.
According to the Times, talks between GM (GM) and Chrysler began nearly a month ago and talks will continue for several more weeks if they progress at all. The newspaper, citing anonymous sources, said a merger between Chrysler and GM was “50/50” as of Friday evening.
Private equity firm Cerberus Capital Management owns Chrysler. Calls and e-mails into GM and Cerberus were not immediately returned.
The Journal reported that Cerberus proposed selling GM all of Chrysler's automotive operations, in exchange for GM selling Cerberus its remaining 49% stake in GMAC.
There are a multitude of logistical, legal and financial hurtles that a merger between two of Detroit’s Big Three would have to go through for a merger to make financial sense.
Labor unions for both companies would have to sign off on the merger, possibly similar to the recent mergers between major airlines. There also the dozens of car and truck factories scattered across the nation and the world that would have to be consolidated.
According to the Journal, GM believes they could save as much as $10 billion in costs with a merger with Chrysler.
GM’s stock fell to nearly a 60-year low this week after rating agency Standard & Poor’s said it was looking into downgrading GM’s long term debt rating. With the credit markets in such bad shape as they are, and GM’s debt rating poor already, a rating downgrade would be quite detrimental to the survival of GM.
Chrysler has had to shut factories in recent months because of a lack of demand for the car company’s trucks and minivans. The company has been shopping itself to a few different global auto makers for the past few months, including Nissan and Renault.
Sincerely,
General Motors and privately-held Chrysler, two of the most iconic names in American industry, are in preliminary talks about a possible merger, according to reports in The New York Times and The Wall Street Journal.
The possibility of the two struggling automakers merging would be a historic move in a time of a hurting economy and tight credit markets.
According to the Times, talks between GM (GM) and Chrysler began nearly a month ago and talks will continue for several more weeks if they progress at all. The newspaper, citing anonymous sources, said a merger between Chrysler and GM was “50/50” as of Friday evening.
Private equity firm Cerberus Capital Management owns Chrysler. Calls and e-mails into GM and Cerberus were not immediately returned.
The Journal reported that Cerberus proposed selling GM all of Chrysler's automotive operations, in exchange for GM selling Cerberus its remaining 49% stake in GMAC.
There are a multitude of logistical, legal and financial hurtles that a merger between two of Detroit’s Big Three would have to go through for a merger to make financial sense.
Labor unions for both companies would have to sign off on the merger, possibly similar to the recent mergers between major airlines. There also the dozens of car and truck factories scattered across the nation and the world that would have to be consolidated.
According to the Journal, GM believes they could save as much as $10 billion in costs with a merger with Chrysler.
GM’s stock fell to nearly a 60-year low this week after rating agency Standard & Poor’s said it was looking into downgrading GM’s long term debt rating. With the credit markets in such bad shape as they are, and GM’s debt rating poor already, a rating downgrade would be quite detrimental to the survival of GM.
Chrysler has had to shut factories in recent months because of a lack of demand for the car company’s trucks and minivans. The company has been shopping itself to a few different global auto makers for the past few months, including Nissan and Renault.
Sincerely,
10-11-2008, 03:05 AM
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New Dodge-built Nissan pickup
in exchange for new small cars
http://www.autofieldguide.com/articl...1008wip04.html
in exchange for new small cars
http://www.autofieldguide.com/articl...1008wip04.html
10-11-2008, 07:35 AM
#14
Team Owner
Thread Starter
First I heard of Chrysler & GM. I gave it a small percentage of going Chapter 11 but they have encounter a perfect storm between gas prices and now the economy. Even Toyota stock went down 30%+. All sectors of automotive business stock is crashing. You will see many suppliers going out in the next year. What will that do to the production lines as the OEM's won't have the money to step in and help them
As the domestics go down so do all the suppliers to them you are probably looking at well over a million jobs. Your American car may be like a American TV soon and it will be America's choice. I wouldn't mind seeing all three domestic link up for the battle.
As the domestics go down so do all the suppliers to them you are probably looking at well over a million jobs. Your American car may be like a American TV soon and it will be America's choice. I wouldn't mind seeing all three domestic link up for the battle.
10-11-2008, 07:38 AM
#15
Team Owner
Thread Starter
New Dodge-built Nissan pickup
in exchange for new small cars
http://www.autofieldguide.com/articl...1008wip04.html
in exchange for new small cars
http://www.autofieldguide.com/articl...1008wip04.html
10-11-2008, 07:50 AM
#16
Team Owner
Thread Starter
Saturday, October 11, 2008
GM, Chrysler talk merger
Firms met for month; Ford, GM prep for more cuts
David Shepardson, Robert Snell and Bryce G. Hoffman / The Detroit News
General Motors Corp. is in talks with Cerberus Capital Management LP about a possible merger with Chrysler LLC, a person familiar with the matter said late Friday.
GM and Cerberus, which owns 80.1 percent of Chrysler, have been in preliminary talks for more than a month.
"A lot of things are being discussed in the industry right now," the person said.
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The talks come amid great turmoil in the auto industry, particularly for Detroit's automakers, which are being further battered by the global financial crisis after coping with slumping sales amid a weak economy and high gas prices that drove buyers away from their profitable pickups and SUVs.
The Wall Street Journal reported late Friday that the GM-Chrysler discussions are on hold because of the financial crisis, but could be renewed once markets stabilize.
GM declined to confirm the talks or their status.
"Without referencing this specific rumor, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers," spokesman Tony Cervone said late Friday. "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere."
Cerberus spokesman Peter Duda and Chrysler officials did not return calls seeking comment.
Cerberus, the private equity fund, had proposed swapping Chrysler for the 49 percent of GMAC that GM still owns. Cerberus purchased 51 percent of GM's lending arm in a $14.1 billion deal in 2006.
The merger talks were first reported by The New York Times.
David Healy, an auto analyst at Burnman Investment Research, said auto mergers have a bad track record. "You would think Chrysler would have learned its lesson," Healy said. "They have primarily destroyed shareholder value."
Healy said GM and Chrysler could benefit from collaborating on vehicle development programs, but not a top-down merger. They also could benefit from reducing capacity and sharing plants and engineering resources, he said.
Chrysler is actively pursuing partnerships with other automakers. Chrysler has agreed to buy a small car from Nissan Motor Co., while Chrysler is building a truck for Nissan and the two companies have held talks about further collaboration.
Automakers have explored consolidation to reduce development costs in a highly competitive auto industry.
On Sept. 24, Daimler AG said it was in talks with Cerberus about selling its 19.9 percent stake in Chrysler.
Daimler sold 80.1 percent of its stake in Chrysler to Cerberus in August 2007 in a $7.2 billion deal.
Reports of possible merger talks between GM and Chrysler came as GM and Ford Motor Co. prepped for more production and job cuts and possible plant closures Friday as a way to combat the panic on Wall Street that has sent their stock shares plummeting to record lows and raised questions about whether GM would file for bankruptcy.
The planned cost-cutting follows a days-long swoon on Wall Street that ended Friday with Ford shares closing at $1.99. GM shares closed at $4.89 after falling at one point to $4 a share -- its lowest point since 1949.
The automakers have been hit hard by the global financial crisis that is keeping potential buyers away from dealer showrooms.
GM is in a desperate race to raise cash and slash expenses. Sources Friday said plans to accelerate production cuts and plant closings could be announced later this month as the automaker struggles to survive an 18.1 percent sales slump this year, weakened consumer confidence and a credit crunch.
Ford also is planning another round of production cuts, which are expected to be announced during its third-quarter earnings call later this month, according to sources familiar with the situation.
The automaker is considering more white-collar job cuts as well, but they are not likely to be immediate, another source said.
There is not much Ford can do to raise its share price other than maintaining "a laser focus" on its restructuring plan, CEO Alan Mulally told The Detroit News in an interview Friday.
A key element of that plan is manufacturing discipline. Mulally did not discuss any plans to further cut production or jobs, but he acknowledged that Ford must respond to market conditions. "The most important thing is that we size ourselves to the real demand," he told the News.
It is unusual for car companies to cut production this late in the year, but the people familiar with Ford's plan said it is a sign of just how much retail sales -- sales to consumers rather than fleets -- have deteriorated in recent weeks. Overall U.S. vehicle sales plunged almost 27 percent last month, but retail sales dropped by a third.
The numbers are still being finalized, but Ford's output cuts are expected to be on the order of 20,000 to 30,000 vehicles. The reduction may seem modest, but Ford has already slashed its fourth-quarter factory output to just 490,000 units. That is 303,000 fewer cars and trucks than it was producing just three years ago.
The cuts will be spread across all segments -- unlike previous reductions that were limited to trucks and sport utility vehicles as consumer demand fell because of high gas prices and a soft economy. GM announced in July it is reducing its salaried spending by more than 20 percent and cutting more than 5,000 jobs. GM's salaried work force has fallen from 44,000 in 2000 to about 32,000 today.
GM's coming cuts are expected to be targeted at engine, transmission and stamping operations. Last month in Flint, Chairman and CEO Rick Wagoner singled out stamping operations as one possible adjustment area.
The expected cuts would come four months after GM said it would close four truck and sport utility vehicle assembly plants in Toluca, Mexico; Oshawa, Ontario; Janesville, Wis.; and Moraine, Ohio.
The Detroit automaker has ceased production at 10 assembly plants since 2005. And last week, GM said it will move ahead the shut down of its SUV assembly plant in Moraine on Dec. 23 as the company shifts focus to smaller vehicles. Moraine was expected to close by summer 2010.
GM's need for extra cash is increasing, one analyst said Friday, as it burns through at least $1 billion a month, and the automaker's executives on Friday tried to dispel fears the company is considering filing for bankruptcy.
"It would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive," GM said in a statement.
GM had access to about $21 billion cash and $5 billion in available credit at the end of June but an analyst Friday said the automaker will probably need $10.3 billion in fresh cash through next year to maintain a minimum liquidity of $14 billion.
"Credit market conditions appear to be weakening confidence that GM will be able to raise, absent additional government intervention, additional cash," Barclays Capital analyst Brian A. Johnson wrote in a research paper Friday.
GM already has started raising some of that money.
GM also is trying to sell assets -- including the Hummer brand, its medium-duty truck business and a transmission plant in Strasbourg, France -- as part of a restructuring plan unveiled by Wagoner last summer aimed at cutting costs by $10 billion by the end of 2009 and raising $5 billion through asset sales and borrowing.
Federal help is coming, too.
Mulally said Ford is talking to the federal government about the precise terms of the $25 billion direct loan program it approved earlier this month to help the nation's car companies develop more fuel-efficient vehicles.
But he said Ford is not seeking additional help from Washington.
Mulally said the best thing the government can do for the auto industry right now is help get the broader economy moving again. That will restore consumer confidence and get customers back into showrooms.
To that end, Mulally said Ford is talking with the Federal Reserve and Treasury Department about fiscal and monetary measures to jumpstart the broader economy.
David Cole, chairman of the Center for Automotive Research, said he thought the rapid decline in GM and Ford's stock prices would cause Congress to act.
"There is a matter of urgency to get it moving," Cole said.
"There is going to be some pushing."
You can reach Robert Snell at (313) 222-2028 or rsnell@detnews.com.
GM, Chrysler talk merger
Firms met for month; Ford, GM prep for more cuts
David Shepardson, Robert Snell and Bryce G. Hoffman / The Detroit News
General Motors Corp. is in talks with Cerberus Capital Management LP about a possible merger with Chrysler LLC, a person familiar with the matter said late Friday.
GM and Cerberus, which owns 80.1 percent of Chrysler, have been in preliminary talks for more than a month.
"A lot of things are being discussed in the industry right now," the person said.
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The talks come amid great turmoil in the auto industry, particularly for Detroit's automakers, which are being further battered by the global financial crisis after coping with slumping sales amid a weak economy and high gas prices that drove buyers away from their profitable pickups and SUVs.
The Wall Street Journal reported late Friday that the GM-Chrysler discussions are on hold because of the financial crisis, but could be renewed once markets stabilize.
GM declined to confirm the talks or their status.
"Without referencing this specific rumor, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers," spokesman Tony Cervone said late Friday. "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere."
Cerberus spokesman Peter Duda and Chrysler officials did not return calls seeking comment.
Cerberus, the private equity fund, had proposed swapping Chrysler for the 49 percent of GMAC that GM still owns. Cerberus purchased 51 percent of GM's lending arm in a $14.1 billion deal in 2006.
The merger talks were first reported by The New York Times.
David Healy, an auto analyst at Burnman Investment Research, said auto mergers have a bad track record. "You would think Chrysler would have learned its lesson," Healy said. "They have primarily destroyed shareholder value."
Healy said GM and Chrysler could benefit from collaborating on vehicle development programs, but not a top-down merger. They also could benefit from reducing capacity and sharing plants and engineering resources, he said.
Chrysler is actively pursuing partnerships with other automakers. Chrysler has agreed to buy a small car from Nissan Motor Co., while Chrysler is building a truck for Nissan and the two companies have held talks about further collaboration.
Automakers have explored consolidation to reduce development costs in a highly competitive auto industry.
On Sept. 24, Daimler AG said it was in talks with Cerberus about selling its 19.9 percent stake in Chrysler.
Daimler sold 80.1 percent of its stake in Chrysler to Cerberus in August 2007 in a $7.2 billion deal.
Reports of possible merger talks between GM and Chrysler came as GM and Ford Motor Co. prepped for more production and job cuts and possible plant closures Friday as a way to combat the panic on Wall Street that has sent their stock shares plummeting to record lows and raised questions about whether GM would file for bankruptcy.
The planned cost-cutting follows a days-long swoon on Wall Street that ended Friday with Ford shares closing at $1.99. GM shares closed at $4.89 after falling at one point to $4 a share -- its lowest point since 1949.
The automakers have been hit hard by the global financial crisis that is keeping potential buyers away from dealer showrooms.
GM is in a desperate race to raise cash and slash expenses. Sources Friday said plans to accelerate production cuts and plant closings could be announced later this month as the automaker struggles to survive an 18.1 percent sales slump this year, weakened consumer confidence and a credit crunch.
Ford also is planning another round of production cuts, which are expected to be announced during its third-quarter earnings call later this month, according to sources familiar with the situation.
The automaker is considering more white-collar job cuts as well, but they are not likely to be immediate, another source said.
There is not much Ford can do to raise its share price other than maintaining "a laser focus" on its restructuring plan, CEO Alan Mulally told The Detroit News in an interview Friday.
A key element of that plan is manufacturing discipline. Mulally did not discuss any plans to further cut production or jobs, but he acknowledged that Ford must respond to market conditions. "The most important thing is that we size ourselves to the real demand," he told the News.
It is unusual for car companies to cut production this late in the year, but the people familiar with Ford's plan said it is a sign of just how much retail sales -- sales to consumers rather than fleets -- have deteriorated in recent weeks. Overall U.S. vehicle sales plunged almost 27 percent last month, but retail sales dropped by a third.
The numbers are still being finalized, but Ford's output cuts are expected to be on the order of 20,000 to 30,000 vehicles. The reduction may seem modest, but Ford has already slashed its fourth-quarter factory output to just 490,000 units. That is 303,000 fewer cars and trucks than it was producing just three years ago.
The cuts will be spread across all segments -- unlike previous reductions that were limited to trucks and sport utility vehicles as consumer demand fell because of high gas prices and a soft economy. GM announced in July it is reducing its salaried spending by more than 20 percent and cutting more than 5,000 jobs. GM's salaried work force has fallen from 44,000 in 2000 to about 32,000 today.
GM's coming cuts are expected to be targeted at engine, transmission and stamping operations. Last month in Flint, Chairman and CEO Rick Wagoner singled out stamping operations as one possible adjustment area.
The expected cuts would come four months after GM said it would close four truck and sport utility vehicle assembly plants in Toluca, Mexico; Oshawa, Ontario; Janesville, Wis.; and Moraine, Ohio.
The Detroit automaker has ceased production at 10 assembly plants since 2005. And last week, GM said it will move ahead the shut down of its SUV assembly plant in Moraine on Dec. 23 as the company shifts focus to smaller vehicles. Moraine was expected to close by summer 2010.
GM's need for extra cash is increasing, one analyst said Friday, as it burns through at least $1 billion a month, and the automaker's executives on Friday tried to dispel fears the company is considering filing for bankruptcy.
"It would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive," GM said in a statement.
GM had access to about $21 billion cash and $5 billion in available credit at the end of June but an analyst Friday said the automaker will probably need $10.3 billion in fresh cash through next year to maintain a minimum liquidity of $14 billion.
"Credit market conditions appear to be weakening confidence that GM will be able to raise, absent additional government intervention, additional cash," Barclays Capital analyst Brian A. Johnson wrote in a research paper Friday.
GM already has started raising some of that money.
GM also is trying to sell assets -- including the Hummer brand, its medium-duty truck business and a transmission plant in Strasbourg, France -- as part of a restructuring plan unveiled by Wagoner last summer aimed at cutting costs by $10 billion by the end of 2009 and raising $5 billion through asset sales and borrowing.
Federal help is coming, too.
Mulally said Ford is talking to the federal government about the precise terms of the $25 billion direct loan program it approved earlier this month to help the nation's car companies develop more fuel-efficient vehicles.
But he said Ford is not seeking additional help from Washington.
Mulally said the best thing the government can do for the auto industry right now is help get the broader economy moving again. That will restore consumer confidence and get customers back into showrooms.
To that end, Mulally said Ford is talking with the Federal Reserve and Treasury Department about fiscal and monetary measures to jumpstart the broader economy.
David Cole, chairman of the Center for Automotive Research, said he thought the rapid decline in GM and Ford's stock prices would cause Congress to act.
"There is a matter of urgency to get it moving," Cole said.
"There is going to be some pushing."
You can reach Robert Snell at (313) 222-2028 or rsnell@detnews.com.
10-11-2008, 07:56 AM
#17
Team Owner
Thread Starter
IH was going to buy the Medium duty truck business from GM and let GM sell them. The economy made the back out of the deal. Izuzu looked at the offer but also declined.
10-11-2008, 08:07 AM
#18
Safety Car
Guess GM racing will take a huge hit under bankruptcy filing
Bankruptcy advocates argue the cold business merits: GM, Ford and, presumably, Chrysler LLC could use the courts to radically restructure their U.S. operations even more than they already have. Wages, benefits and work rules in union contracts would be streamlined; brands could be killed and dealer networks rationalized; supplier contracts could be renegotiated and the network of parts makers winnowed.
Real people would pay price
And if one goes into bankruptcy, the current thinking atop the automakers goes, the others would be forced to follow. Why? Because no matter how much cash the others may have in the bank, they cannot compete effectively with a domestic rival whose cost structure mirrors industry leaders Toyota Motor Corp. and Honda Motor Co.
.
Bankruptcy advocates argue the cold business merits: GM, Ford and, presumably, Chrysler LLC could use the courts to radically restructure their U.S. operations even more than they already have. Wages, benefits and work rules in union contracts would be streamlined; brands could be killed and dealer networks rationalized; supplier contracts could be renegotiated and the network of parts makers winnowed.
Real people would pay price
And if one goes into bankruptcy, the current thinking atop the automakers goes, the others would be forced to follow. Why? Because no matter how much cash the others may have in the bank, they cannot compete effectively with a domestic rival whose cost structure mirrors industry leaders Toyota Motor Corp. and Honda Motor Co.
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This makes it sound like bankrupcy could be a good thing for the big 3 in the long run if it allows them to ditch an outdated cost structure so that they can compete on an even field w/ Toyota. Is this what you think?
10-11-2008, 08:26 AM
#19
Team Owner
Thread Starter
I don't need to be living in the woods to get my car on track. Costing over 1,000 per day it may be a while till I get back. I like running the car like I am trying to break it so it is rough on the consumables Cha - Ching! Having run the car over 40 days some years that would get costly now. The harder and faster you run the car the more it cost for each event.
Yes my car is apart with a few assembly problems and the pet problems have passed this year but not keen on dumping money at the moment if it was together. Then once I start it is like a crack habit. I spend untold dollars on offshore boat racing for years but money was flowing a lot better then. That makes HPDE look like chump change.
Being in construction and living in a state with huge budget problems which will filter to the local level soon I see construction being even worst than it is now, horrible.
Me, I am worried about the future of this country and it's industrial base. So I will continue to buy what ever I can here from socks to vehicles. I turn over every product I buy to see where it is made. If it cannot be found made in the USA I try to pick my next best choice for my beliefs.
Can't stand foreign cars which is no secret as they keep their home markets basically CLOSED to all foreign competition.
10-11-2008, 08:46 AM
#20
Team Owner
Thread Starter
They tables are still tilted against the domestics in many trade policies left in place by BOTH parties. That makes me sick and nobody seems to care.
For years when a foreign company came here they paid no property tax for 15-20 years while the domestics kept paying. The pit one state against the other. The domestic company didn't get that relief as they had all their plants in place. Funny GM could not build a plant in Japan or any other non Japanese car company. I don't care if the want to or not they should have it denied by laws of Japan. One of the many one way streets.
Japan for years required all their DOT testing done over in Japan not
accepting any testing done here. Result huge cost to sell some cars in Japan. Then they would change the DOT laws very often so Detroit could not keep up.
So many road blocks they have thrown up in all industries it makes me sick. How about no finished wood products allowed to be sold in Japan? Not sure if it still stands but it did for years. Why could we not send them a finished 2x4 or Anderson window?
Cheers for Japan they have done a great job 
My wrath is at our politicians and trade negotiators. We never make China hold the line on their agreements they have screwed us for years. We let them to appease them to get their help with idiots like N. Korea. Mean while they sell their military crap all over the world to unstable countries where we pick up the pieces with our military and it's losses.
Chinese car comes here 5% tariff. US car goes to China 25% tariff
. GM wanted to sell US made CTS in China. They say no so now GM is going to build the exact same car in China vs shipping it from here as they wanted. Bend over America!This is the only country that doesn't cherish it's auto industry. They take it for granted but it may be gone soon. How much tax does a foreign car company pay here while domestics have paid untold millions for years. Who has donated untold millions for decades to local communities? Honda donated a million for some enviromental cause and it got so much press it was sickening.
Funny how Michigan offer Ford property tax relief 90 days before a plant closure after it was their near a century. The rest of the country gives it away to foreign companies every time as they slit each other throat with no nnational policy. They laugh at us in Japan.
Last edited by John Shiels; 10-11-2008 at 08:54 AM.