GM, Ford, and Chrysler Death Watch Thread

Denny · **Posted:** Sat Jun 28, 2008 6:36 am

gunny7258 wrote:

The UAW wrecked the American auto companies slowly and steadily. Being in skilled trades i have worked in union shops and non union and i can tell you union guys are lazy,overpaid and have a "I deserve it attitude"

Autoworkers are overpaid and as Jeremiah Wright said "The chickens have come home to roost"

Combine that with the ridiculous laws and restrictions imposed on US companies and its a losing battle.

Some of that is true, wages cold likely have been 20% lower for several decades and still have attracted and retained just as many workers.

But, what keeps getting overlooked is the profligate capital spending goofs of these companies. Buying all kinds of peripheral companies when times were good, as both Ford and GM did
(such as EDS and Hughes Aerospace) and ill thought out investments in the 1980's by GM. GM invested $40 billion in new plants and equipment in the 80's, only to write off half of that. Just their write-offs worked out to about $50,000 per U.S. worker over the 80's. So, its hard to believe the unions would have moderated wage demands, seeing the excesses going on all around them.

You may recall Ross Perot of EDS, was on the GM board after its purchase of EDS. But, Perot could not fit in. Nor could GM adjust to Perot's entrepreneurial spirit, thought they initially welcomed him just for that reason. It bothered him that none of the GM execs faced the car purchasing routines that GM's customers did. They did not have a grasp of that most important part of the business. They even dined separately from the other staff of the company. As Ross saw it, GM executives had isolated themselves and became remote from their workers and their customers, just as the French royalty isolated themselves from the citizens before the Revolution.

Perhaps, we are now witnessing the GM revolution. Thankfully, for the executives sake, they will not have to face the guillotine. Maybe just a metaphorical one.

Starvid · **Posted:** Sat Jun 28, 2008 6:40 am

frankthetank wrote:

The state still has an excellent fruit growing operation. Peaches, plums, cherries, etc.

Quote:

GM market cap ($6.5B) is worth about 30% less than southwest airlines ($9.9B) (LUV) .... Right now, I think Southwest is the better investment, wow.

Quote by someone over on marketwatch. Pretty sad.

GM pretty much has to file bankruptcy? They can't afford to keep paying all those retires benefits/etc.

Saudi Arabia could buy GM in a week and SW in ten days, using only oil export income! :lol:

Starvid · **Posted:** Sat Jun 28, 2008 6:44 am

BigTex wrote:

I am virtually certain that GM will seek bankruptcy protection fairly soon. One of the immense benefits GM would see from this move would be that it would enable it to jettison virtually all of its retiree medical and some of its pension plan costs.

In many ways GM is the perfect candidate for bankruptcy protection, since one of the best features of bankruptcy for a company like that is it can basically reject all of its non-core contracts--i.e., all of its contracts with individuals who are no longer working.

It would also give GM the opportunity to re-negotiate all of its current agreements with union employees, which would undoubtedly mean lower wages and fewer benefits for those who did get to keep their jobs.

Why on earth did GM not see this fuel price situation coming for the last five years (at least)? I have no idea. It boggles my mind that GM just wandered down the big truck and SUV road, apparently never considering what a rapid increase in gas prices would do to that business.

Amazing.

What's amazing is the kind of bankruptcy protection US companies get, especially from health and pension liabilities.

Amazing.

frankthetank · **Posted:** Sat Jun 28, 2008 6:47 am

Old Man McCain and McBama...

Quote:

Detroit's calls for help from Washington are gaining some traction, as both Republican John McCain and Democrat Barack Obama this week let auto-industry executives share the spotlight in their presidential campaigns, and suggested they'd lend auto makers a hand.

During a meeting Friday at a General Motors Corp. small-car factory in Lordstown, Ohio, Sen. McCain said he doesn't support a "classic" bailout of the ailing domestic car companies, but he laid out initiatives to help.

"It depends on what you mean by a bailout," he said. "If you're talking about it in the classic terms, I'm afraid not."

But the Arizona Republican said he would offer a spate of tax incentives and infrastructure support aimed at encouraging innovation of more fuel-efficient products and expanding availability of alternative fuel. He vowed to get involved in enforcing trade deals that may disadvantage auto companies trying to export cars and parts.

Quote:

On Thursday. Sen. Obama moderated a panel of business leaders that included GM Chief Executive Rick Wagoner. Mr. Obama, who last year scolded Detroit for failing to focus on fuel efficiency, struck a more sympathetic tone.

"Obviously all of you realize the market has changed so you have every incentive to do so but you may need some bridges to help get there," Sen. Obama said. Mr. Wagoner said he left the meeting encouraged by Sen. Obama's questions and willingness to help. The company is encouraged by Sen. Obama's plan to invest $150 billion in green technology ideas, many of which affect the U.S. auto industry.

Maybe GM should just retool and build scooters.

MyOldTDiIsStillGoing · **Posted:** Sat Jun 28, 2008 7:36 am

Remember during the prosperous times of the 1990's and a little after, the profit sharing the big 3 had with the UAW was, well for them, great. Every time I saw a Chevy Suburban or Ford Excursion barreling down the freeway I would laugh, "Hey, you just gave $12K to the UAW worker that year you bought that "SUV".

Even the Japaneses and European manufactures caught on to the huge profit margins on big, luxury vehicles. Dealing with manufacturing cost while I was working for the auto industry, the true manufacturing cost and labor cost is only a few $K more for a big vehicle versus an econ box.

Most car manufactures lost almost $1K per vehicle to sell an econ box. The stats were out there on this. If they tried to sell at true cost with a little profit, many in the low income bracket would be price out of the market. So the auto companies recouped the lost by sell the big luxury vehicles at huge profit margins. The perception of the general public is: if the vehicle is 2X the size, it must cost the car companies 2X the price to produce it. Ever so wrong.

Tack on the "luxury" label and now it is 3X. Why did Honda start the Acura line, Toyota the Lexus line, Nissan the Infinity line? They learned the big 3 method of GM with Cadillac, Ford with Lincoln. A Cadillac is just a stretched out Chevy Impala when you get down to it. A Lexus is just a fluff and puff Camry with added sound deadening materials and upgraded materials for maybe $1K more.

So when working for the industry, people would ask me "Hey, what is the best car for the money?" Even while working for Japaneses manufacturer, I would reply: A Dodge Neon. Chrysler lost money on the car, so giving to profit, it was priced the lowest, lower than a Civic. You got the most for your money. We did benchmarking on the Neon when it came out and the Japanese manufactures learned to squeeze more money out of their car. A lot of cost savings was needed to off set the constant federal regulation for safety and emissions. Back in the mid 90's, every car had a federal compliance penalty of $4500 tacked on to the sticker price, whether it was an econ box or a luxury boat. Hate to see the price tag today with added things like side impact, air bags to sky heaven, and tighter emissions since then.

Now that the market needs and demands smaller, more efficient cars, the auto industry is screwed. Wards Automotive, the trade magazine for the industry, claims that it would be realistic that the price tag will be $40k for a vehicle to recoup all the cost to produce a vehicle. Even the Japanese manufacturers are scrambling on this since their costs are now almost matching GM's costs (estimated now at only about $100 difference). Ouch, never ends.

frankthetank · **Posted:** Sat Jun 28, 2008 8:29 am

A Dodge Neon? Didn't they have a horrible problem with blowing head gaskets (like so bad there should have been a recall)? A buddy had a Neon RT back in the late 90's and while it was a fast/efficient car, he had nothing but problems with it. Last i know it was dead and he bought an Acura.

I will say that the Ford Escort was a decent car. I use to drive a 4 door/auto for a job i had and i would have to make trips to Madison with it. While maintaining a solid 80mph, i'd still get upper 30's to the gallon. U still see a ton of the older ones on the road, so they must have been built decent.

MyOldTDiIsStillGoing · **Posted:** Sat Jun 28, 2008 9:23 am

frankthetank wrote:

A Dodge Neon? Didn't they have a horrible problem with blowing head gaskets (like so bad there should have been a recall)? A buddy had a Neon RT back in the late 90's and while it was a fast/efficient car, he had nothing but problems with it. Last i know it was dead and he bought an Acura.

I will say that the Ford Escort was a decent car. I use to drive a 4 door/auto for a job i had and i would have to make trips to Madison with it. While maintaining a solid 80mph, i'd still get upper 30's to the gallon. U still see a ton of the older ones on the road, so they must have been built decent.

No agreement on the questioning about the Neon. It was at that time the best for the "MONEY' since the Chrysler lost money on the car and it was the lowest priced vehicle at that time. It was the "best for the money". Take what they give. Just an up graded Model T with a radio. Yep, quality problems up the yang-yang but got good mileage and such.

Ford Escort was out of the picture by then, but when I graduated from college in '88, bought a new Escort GT. Loved the car, sad that hardly any one makes hatch back here in the states. Love to have a 5 door hatchback like those European car companies make. Drop a TDi in it and my old TDi will go off to the pasture. Or put it on eBay and watch the crazies over bid each other over a worn out diesel.

frankthetank · **Posted:** Sat Jun 28, 2008 10:22 am

Ford has always had the smarts to use Madza motors in a few cars. My Focus right now has a Madza motor. Ford also put a Madza motor in the newer Ranger. I think they are called Duratech or something. Efficient motors with decent gas mileage. Mine avg exactly 30mpg over the last 330 miles and thats all city driving. Not bad for a tall, roomy car with an auto.

MarkJ · **Joined:** Tue Mar 25, 2008 12:00 am **Posts:** 485

frankthetank wrote:

A Dodge Neon? Didn't they have a horrible problem with blowing head gaskets (like so bad there should have been a recall)? A buddy had a Neon RT back in the late 90's and while it was a fast/efficient car, he had nothing but problems with it. Last i know it was dead and he bought an Acura.

We used to see tons of Neons with blown head gaskets and tons of Chrysler Minivans with bad transmissions at the auctions. You could pick them up dirt cheap since local dealers couldn't move them and wouldn't offer much on trade if they wanted them at all. Many were sold to the salvage yards by the pound.

frankthetank · **Posted:** Sun Jun 29, 2008 11:12 am

Some more:

Quote:

pdated 59 minutes ago

DEARBORN, Mich. - Every morning, just after getting coffee, Mark Fields fires up his laptop to pore over a computer model showing real-time U.S. auto sales figures.

On this morning in the middle of May, the man who heads Ford Motor Co.’s Americas operations has seen enough.

The line on a chart showing subcompact car sales for the first two weeks of the month goes almost straight up. The one for pickup trucks, Ford’s biggest profit center, runs almost straight down.

Quote:

Why didn't automakers move sooner?
While both companies say they took quick action, critics wonder why they didn’t make more fuel-efficient vehicles sooner. After all, there were many signs that gas prices would do nothing but rise.

“Obviously they were making just too much money off their SUVs and pickups,” said Roland Hwang, vehicle policy director for the Natural Resources Defense Council. “They couldn’t really fully conceive of a world where they would have to rapidly extricate themselves from those markets and those profits.”

At GM and Ford, the pain came quickly. Ford was first, announcing on May 22 that it would dramatically cut truck and SUV production and slash its salaried work force. Factory closures are possible when the company announces specifics next month. A week later, Ford announced accelerated plans for a super-compact car to be built in Mexico and sold in the U.S.

Ford also abandoned its long-stated goal of turning a profit in 2009 and now says it will be difficult to break even next year.

GM followed with larger, more specific cuts, announcing at its annual shareholders meeting June 3 that it would close four truck and SUV factories, cutting more than 8,000 jobs. The company, which is clinging to its title as world’s biggest automaker, also announced it would build a new small car in the U.S., powered by a 1.4-liter four-cylinder engine capable of getting up to 45 miles per gallon of gas.

But neither company’s new compacts will reach showrooms for two years, and when they do, their profit margins will be far smaller than those from trucks and SUVs. Both automakers know they’ll have to make it in the meantime with models already on the market or ones that are planned for the next year.

Industry analysts now are starting to question whether both companies, as well as Chrysler LLC, will have to borrow billions more to cover losses until sales recover.

Quote:

Rising oil prices
As late as February, things were going pretty much according to both companies’ plans. Sales weren’t great, but their main barometer of the market, full-size pickup trucks, was holding up at 13 percent of U.S. sales, according to Ward’s AutoInfoBank. Each automaker had rolled out new cars in expectation of a gradual shift from trucks to cars, and the cars were selling well.

But Digiovanni said oil prices in February began to rise, still not to an alarming level because they were consistent with previous seasonal spikes. Gasoline was still at a nationwide average of $3.03 per gallon.

In March, though, pickups’ share of the market dove to just 11.6 percent and gas rose to $3.24.

“That’s when I said ‘red alert,’ ” Digiovanni remembered. “We’re worried.”

The share dropped to 10.8 percent in April, and when Ford’s computer model predicted only a 9 percent slice of the market for trucks in the first half of May, CEO Alan Mulally decided to turn the giant ship faster than it had ever turned.

Ford would cut truck production and move as fast as it could to retool factories that make cars and crossovers. It would speed up plans to move small cars and trucks to the U.S. from other areas of the world and slash the normal three- or four-year time frame from design to build.

By May, gas prices had soared to $3.77, and both companies also were experiencing huge price increases in steel and other commodities.

When a market segment such as pickups moves up or down even one-half percent in a year, automakers consider it significant. Four points in 2½ months “puts it into perspective,” Fields said.

“We are reacting quickly,” he said. “We are reacting more quickly than we ever had in the past.”

Even critics say it would have been nearly impossible for the automakers to predict the 74-cent-per-gallon spike in regular gas prices between February and May.

msnbc.com

TheDude · **Posted:** Mon Jun 30, 2008 7:52 am

GM shares plunge to their lowest level since 1954

Saw this on CNBC and I was

By Greg Bensinger

Bloomberg News
General Motors Corp. shares fell yesterday to their lowest since 1954 after Goldman, Sachs & Co. cut its rating to "sell" because of a worsening sales outlook.

The stock dropped nearly 11 percent, its biggest daily decline in three years. The Goldman revision follows Fitch Ratings Inc.'s cut Wednesday of GM's long-term debt to "B-," six steps below investment grade.

Gasoline prices that surged 34 percent this year to above $4 a gallon, consumer confidence that is at a 16-year low, and tighter credit conditions have hurt auto-industry profit. GM, which had been rated "neutral," may need to raise money and cut its dividend as its cash flow deteriorates, the Goldman analysts wrote.

"GM's automotive cash flow burn this year and next is likely to lead it to look to raise capital," Goldman analyst Patrick Archambault said in the research note. That "could lead to significant shareholder dilution."

smallpoxgirl · **Joined:** Mon Nov 08, 2004 1:00 am **Posts:** 7742

It occured to me the other day, are all these "free gas" or "$2 gas" incentive programs kind of an all-in bet from the auto manufacturers? Kind of the logic that if gas prices come down, it won't cost us much. If gas prices go up, we're going bankrupt anyway.

jdmartin · **Posted:** Mon Jun 30, 2008 11:51 am

smallpoxgirl wrote:

It occured to me the other day, are all these "free gas" or "$2 gas" incentive programs kind of an all-in bet from the auto manufacturers? Kind of the logic that if gas prices come down, it won't cost us much. If gas prices go up, we're going bankrupt anyway.

I don't think so. I did some quick math and it's really not that expensive of a program, certainly no more than other incentive programs.

Example: Chrysler's $2.99 guarantee applies to almost all the cars, with a 12k mile per year limit, and 3 year limit.

So let's take 2 examples:

1. Dodge Ram, driven 12k miles per year, averages 14mpg combined, let's say gas averages $5 during that time. So Chrysler pays $2/gallon for each overage on the 12k miles:

12,000/14mpg = 857 gallons x $2 = $1714 x 3 years = $5142. A lot of money, but truck incentives are typically that high anyway, and you're factoring it over three years.

2. Dodge Caliber, driven 12k miles per year, averages 28mpg combined, same figures:

12,000/28mpg = 428 gallons x $2 = $856 x 3 years = $2,568.

Figuring these to be the extreme examples (I don't know, does Dodge make something that gets even better fuel mileage?), you're talking about if you averaged it out maybe $1000 per car? That's not really all that great of an incentive, all things considered. Mostly I see it as a gimmick to get people in the door to buy cars for prices they could have had those same size incentives on if not for the gas incentives. Only they would have had all their money at once instead of having to mail things in and wait 3 years.

frankthetank · **Posted:** Mon Jun 30, 2008 12:31 pm

3:24Chrysler to cut truck, SUV production: report
3:24Chrsyler to shut Jefferson North Plant for 1 month: report

no link...

down down baby

GM, Ford, and Chrysler Death Watch Thread

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