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Thread: Can it get any worse for GM?

  1. #1
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    Can it get any worse for GM?

    Apparently so. This has to do with new proposed accounting rules, which in my opinion, should have been in place all alone. Is the fat lady about to sing?
    ==================

    From today's WSJ, page C3.

    "A review of General Motors Corporations 2005 would include billions of dollars in losses, tepid sales and high costs.

    A fresh year may bring fresh financial woes: If accounting rule makers proceed with a plan to compel companies to account for their pension plans on their balance, sheets, GM might suffer more than any other firm. Such a change may even wipe out most or all of the auto maker's shareholder equity, which is another way of saying that when all of GM's liabilities are subtracted from its' total assets, little or nothing my be left...

    (snip)

    As of the end of 2004, GM's equity was $27.7 billion, so this approach would have slashed the equity as of that point to $3.2 billion. As of GM's latest balance sheet, on September 30, equity had drooped even lower, to $22.4 billion, so it is possible that the new accounting might send GM's equity into the red...

    Snip)

    www.wsj.com
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  2. #2
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    GM will probably survive, what's at stake is their American workforce. Like all the other manufacturing entities that have relocated to economically friendlier locations around the world, they are suffering from the high cost of producing in the United States. Wage, health insurance, retirement plans are all costs that can be drastically reduced by moving "elsewhere".

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    Quote Originally Posted by jskufan
    GM will probably survive, what's at stake is their American workforce. Like all the other manufacturing entities that have relocated to economically friendlier locations around the world, they are suffering from the high cost of producing in the United States. Wage, health insurance, retirement plans are all costs that can be drastically reduced by moving "elsewhere".
    Not to mention the $60 billion they are holding in cash and irrevocable lines of credit. At the rate they are going, it will be years before they even become bankruptcy canidates.


    In the end, they are going to end up dumping their pension plan I think. There is no choice.

    This is pretty much the state of most US businesses. To list pension and health liabilities would put boeing, many airlines, IBM, and most of our other major companies in the red.

    There is an old adage that says "as goes GM goes America".
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    If the UAW doesn't accept Delphi's latest offer and Delphi requests that the BK judge cancel its labor contracts, GM could take a serious hit in what looks like what would be a strike against Delphi and GM:

    http://www.washingtonpost.com/wp-dyn...032700344.html

    The is ridiculous part of the whole situation with Delphi is UAW's stance on wages and benefits. At $75/hr, Delphi's current wage and benefit cost for assembling auto parts, there's no way Delphi can viably continue US operations. What motivates UAW management (membership) attempts to sustain unrealistic wage/benefit levels in the current economic climate? Delphi's books are open and a chimp could understand the UAW is beating a dead horse.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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    Quote Originally Posted by georged
    If the UAW doesn't accept Delphi's latest offer and Delphi requests that the BK judge cancel its labor contracts, GM could take a serious hit in what looks like what would be a strike against Delphi and GM:

    http://www.washingtonpost.com/wp-dyn...032700344.html

    The is ridiculous part of the whole situation with Delphi is UAW's stance on wages and benefits. At $75/hr, Delphi's current wage and benefit cost for assembling auto parts, there's no way Delphi can viably continue US operations. What motivates UAW management (membership) attempts to sustain unrealistic wage/benefit levels in the current economic climate? Delphi's books are open and a chimp could understand the UAW is beating a dead horse.
    My late brother in law was president of a UAW local and he told me about the dilemma he faced when elected:
    (1) Most of his membership considered Management to be the enemy, not to be trusted. His efforts to guide the two into a team relationship were rebuffed, costing him the office at the next election; (2) Most of his membership wanted MORE, regardless of profits or productivity. Most of his membership were stuck in a "Golden Years" mode where increases were expected and demanded; (3) an effort to be rational branded you a traitor , a lackey for management, regardless of any valid argument presented.
    He had many hard working, highly productive, pragmatic, intelligent members. They were, unfortunately, a minority.
    Dono
    That we are to stand by the president, right or wrong is not only unpatriotic and servile, but is morally treasonable to the American public.
    – Theodore Roosevelt

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    Quote Originally Posted by Dono
    (1) Most of his membership considered Management to be the enemy, not to be trusted.
    This is the trumpet which labor has always tooted. Us vs them mentality. There can be no pragmatism, no new understanding, no concessions. In short, suicide.
    - Which is worse--ignorance or apathy? For my part, I don't know and I don't care. -

  7. #7
    JPSartre12 Guest
    Quote Originally Posted by Dono
    My late brother in law was president of a UAW local and he told me about the dilemma he faced when elected:
    (1) Most of his membership considered Management to be the enemy, not to be trusted. His efforts to guide the two into a team relationship were rebuffed, costing him the office at the next election; (2) Most of his membership wanted MORE, regardless of profits or productivity. Most of his membership were stuck in a "Golden Years" mode where increases were expected and demanded; (3) an effort to be rational branded you a traitor , a lackey for management, regardless of any valid argument presented.
    He had many hard working, highly productive, pragmatic, intelligent members. They were, unfortunately, a minority.
    Dono
    You hit the nail right on the head. The rank and file UAW would rather be unemployed than take a pay cut because they still have the "Gravy Train" old school union mentality. In the meantime, the old cagey veterans are taking early retirement in droves, deserting a sinking ship.
    GM can't compete with the transplants as long as they have to pay a $1500 - $2000 legacy cost per vehicle, but the militant UAW is too blind to see that they are the instrument of their own demise.

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    That mentality has been around since unions chose to elect rank and file members as their leadership, foregoing outside, pragmatic board decisions. When US vehicle manufacturers held a captive US market, no problem, give them what they want and pass it on to the consumer. Even better, we won't book the long-term liability and our balance sheets will look great to Wall Street. I have no sympathy for union or management current dilemmas. Unions got what they wanted (better pay/benefits for semi-skills than the average college graduate), white collar workers followed the gravy train, management participated in substantial bonus pools and the hidden liabilities kept growing until retirement from the peak years became a regular, substantial income statement hit. That's now 'the good old days', forever gone.

    GM has a hoard of cash and irrevocable credit; what better time to bite the bullet, accept the strike and get labor/benefit operating costs where they should be in today's marketplace? Move the factories to Alabama, etc. or let them stay in metropolitan areas at what foreign manufacturers pay. I see it as a choice of downsizing now or accumulating not only additional union liabilities, but accompanying white collar future liabilities and paying the same price in prolonged operating losses with the same loss of market share. Let the blood flow now and establish realistic future goals instead of being taken down a bite at a time. No management is capable of realistic planning with the uncertainties GM faces. You can view all the financial models planners spit out, but without a positive, defined direction all they are is models requiring timely consideration until stockholders eventually paper their walls with worthless stock certificates after the BK.

    For GM's sake, Delphi will hopefully force the issue, but I noticed they've raised their wage offer beyond current market price.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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    Delphi to file today to cancel union labor contracts.

    http://quote.bloomberg.com/apps/news...xJA&refer=home

    Which could result in a GM strike, eventually closing most Delphi US manufacturing facilities and renegotiating parts contracts with GM and others.
    A 60-day strike will cost GM almost what they plan on receiving for a majority sale in their finance unit and additional market share.

    Delphi is continuing negotiations, obviously to see what else GM will throw in the pot to avoid a strike.

    I don't quite understand Delphi (and GM) union reasoning; $12.50/hr is far more than they'll make flipping burgers if the jobs are eliminated. Delphi's off-shore manufacturing assets are not included in the BK.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  10. #10
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    Quote Originally Posted by georged
    I don't quite understand Delphi (and GM) union reasoning; $12.50/hr is far more than they'll make flipping burgers if the jobs are eliminated. Delphi's off-shore manufacturing assets are not included in the BK.
    Just like the French they think it's their birthright to make lots of money, get a good pension and cheap healthcare just by doing jobs that a trained monkey can do.
    Apparently they haven't gotten the message that on the other side the world there's about 1 billion Li's and Chen's who are willing to work longer and harder for just a tenth of the salary.

    A basic law of nature is that the ones that adapt will survive and the ones that don't, well, they die.
    Eh, what's this? A Republican from Texas that actually makes sense and can speak English?

    http://www.ronpaul2008.com/html/Issues_fx.html

  11. #11
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    Quote Originally Posted by georged
    Delphi to file today to cancel union labor contracts.

    http://quote.bloomberg.com/apps/news...xJA&refer=home

    Which could result in a GM strike, eventually closing most Delphi US manufacturing facilities and renegotiating parts contracts with GM and others.
    A 60-day strike will cost GM almost what they plan on receiving for a majority sale in their finance unit and additional market share.

    Delphi is continuing negotiations, obviously to see what else GM will throw in the pot to avoid a strike.
    Delphi is obviously looking to the future.

    Delphi will also change what products it makes and how many plants it needs. The company will focus on producing technology products for use in cars and other industries, such as medical. The product areas include in-vehicle entertainment systems, powertrain products, safety systems and temperature controls, Delphi President Rodney O'Neal said in the statement.

    The company will stop making brakes, chassis, catalysts, cockpits, door modules, instrument panels, wheel bearings and steering systems. It plans to sell off all but eight of its 29 remaining U.S. production sites by Jan. 1, 2008.
    This is not just a bankruptcy and a labor tiff, Delphi is using this as an opportunity to take their business a whole new direction.

    I agree with your above post, George, It is time for GM to take a stand, take the hit that would come with the strike, use it as an opportunity to file themselves and re-org, and have their own labor contracts canceled and dump some of their pension and most of their health care liabilities.

    I cannot imagine that there will come a time in the future that would be better for them to take the hit, especially if Delphi is going to stop producing many of GMs parts. GM is not going to find another provider that will consistently sell them parts at a loss. If labor costs have not already pushed them into bankruptcy by 2008, the supply chain disruption almost certainly will.

    If they allow Delphi to take the opening shots and fight the UAW contract now, it should be a walk in the park for GM to get theirs circle filed. GM not weighted down by their rediculous labor contract could be a competitve company. Besides the ability to replace their $75 an hour labor with $12.50 an hour labor, they could move ahead with some technology upgrades (robotics) that currently are not cost effective becuse under the current arrangement they are still required to pay the workers that the machines replace.

    George, this is more your realm than mine. Is there some reason that GM should not do this?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo
    George, this is more your realm than mine. Is there some reason that GM should not do this?
    All I can think of is ego, not wanting to be known as the person(s) associated with putting GM into chapter and further undermining public confidence. About as flimsy as current administration declaring the benefits of democracy in Iraq.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  13. #13
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    Quote Originally Posted by georged
    All I can think of is ego, not wanting to be known as the person(s) associated with putting GM into chapter and further undermining public confidence. About as flimsy as current administration declaring the benefits of democracy in Iraq.
    So essentially it is the same syndrom we are seeing in washington, where nobody wants to be caught holding the bag so everybody just keeps robbing peter to pay paul, making the situation exponetially worse with every poorly concieved dodge.

    Gotcha.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  14. #14
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    Quote Originally Posted by daewoo
    So essentially it is the same syndrom we are seeing in washington, where nobody wants to be caught holding the bag so everybody just keeps robbing peter to pay paul, making the situation exponetially worse with every poorly concieved dodge.

    Gotcha.
    That's the way I read it. It'll be interesting as to how much pressure GM can bring on Delphi's Miller before the May ruling. With a general election coming up, a summer GM strike is not a political desire.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  15. #15
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    Quote Originally Posted by georged
    That's the way I read it. It'll be interesting as to how much pressure GM can bring on Delphi's Miller before the May ruling. With a general election coming up, a summer GM strike is not a political desire.

    Looking at Delphis financials, not only pressure, but a HUGE bag of gold will be required. I have been reading abotu this for a couple days now, and I get the impression that Delphi has chosen their course and is going to stick to it.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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