The Precursor of American Motors return?

[ktmlew]

http://news.yahoo.com/s/nm/20080603/bs_nm/gm_dc_15

 

I predicted about a year ago that the american car manufaturers would be forced to roll their companies into "one" or just flat go out-of-business. I still believe we are only a few years, or less, from Ford, GM & Chrysler having to merge or shut-down...complete idiots running the show getting a huge bonus at the end of the year for runing the ship aground... /forums/images/%%GRAEMLIN_URL%%/shrug.gif

[ktmlew]

The tumble continues...

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aC0a0JfaO1.0&refer=home

 

GM's `Time Is Very Short' for U.S. Aid, Altman Says (Update1)

 

By Doron Levin and Jeff Green

 

Nov. 5 (Bloomberg) -- General Motors Corp., hammered by the worst auto market in 25 years, needs U.S. aid because ``time is very short'' to stop its collapse, says Roger Altman, the former Treasury official advising GM in merger talks with Chrysler LLC.

 

With the government offering a $700 billion rescue for banks, it should have enough to assist GM, Chrysler and Ford Motor Co., Altman, 62, said in an interview. Altman, now chief executive officer of Evercore Partners Inc., helped with the 1979 Chrysler bailout plan as an assistant Treasury secretary.

 

``The consequences of a collapse by GM or all three would be very severe,'' he said. ``The impact would be widespread,'' with jobs lost by the companies and their suppliers.

 

The completion of yesterday's U.S. elections gives GM and other automakers a chance to renew their case for aid. President-elect Barack Obama said last week that helping the industry would be a top priority.

 

One or more automaker failures ``would be a difficult way for a brand-new administration'' to take office, said Altman, an Obama supporter whose Treasury Department service also included working as deputy secretary under President Bill Clinton. He said he didn't expect to be asked to be Treasury secretary.

 

GM rose 28 cents, or 4.9 percent, to $6 at 11:12 a.m. in New York Stock Exchange composite trading, while Ford was unchanged at $2.16.

 

Altman has been leading the Evercore team advising GM. Two people familiar with the discussions say the group includes William Repko, co-chief of Evercore's restructuring unit, and Daniel Celentano, a former Bear Stearns Cos. banker who has done work for GM. Morgan Stanley is also representing the biggest U.S. automaker.

 

Merger Discussions

 

GM, Chrysler and Chrysler owner Cerberus Capital Management LP aren't commenting on the merger talks, which come with U.S. auto sales slumping last month to the worst since 1983 and Detroit-based GM posting almost $70 billion in losses since the end of 2004. A JPMorgan Chase & Co. team led by James B. Lee Jr. is advising Chrysler, the third-largest U.S. automaker.

 

GM sought about $10 billion from the government last month, with Chief Executive Officer Rick Wagoner lobbying in person for help, people familiar with the plans said.

 

Treasury Secretary Henry Paulson wants any assistance to come from a $25 billion low-interest loan program through the Energy Department, not the bank-rescue funds, the people said last week.

 

Conditions on Aid?

 

Altman declined to say what strings ought to be attached to any aid, though he said such conditions were ``appropriate.''

 

``That's a decision policy makers will have to make, but time is very short,'' he said. He wouldn't say how much time GM had to avoid a collapse and said he wasn't authorized to disclose how much money GM needs.

 

Former Treasury Secretary John Snow, now chairman of Cerberus, joined the call for federal help for automakers today, telling CNBC that the government needs to ensure ``that a vital industry like autos, which is such a big part of the overall economy, doesn't lead us into a deeper and harsher downturn.''

 

A collapse of three U.S. automakers in 2009 would cost almost 3 million jobs in the first year and reduce personal income by $150.7 billion, according to a study released today by the Center for Automotive Research in Ann Arbor, Michigan.

 

The study takes the worst-case scenario of a shutdown of U.S. automotive production.

 

Obama Promise

 

Federal loan guarantees might help stabilize the U.S. automakers, Obama said in an interview last week on NBC's ``Nightly News With Brian Williams.''

 

Obama said he would meet with the chiefs of GM, Ford, Auburn Hills, Michigan-based Chrysler and the United Auto Workers union to develop a plan for an industry overhaul, according to a transcript released by NBC.

 

Evercore began to work with GM three years ago with the sale of a 51 percent stake in auto lender GMAC LLC to New York- based Cerberus, Altman said. Evercore advised GM directors on the sale.

 

Last year, bankers from the firm advised on deals valued at $48.9 billion, including helping First Data Corp. on its $26 billion sale to Kohlberg Kravis Roberts & Co. Evercore was the 23rd-largest adviser on U.S. transactions in 2007, according to Bloomberg data.

 

``With Roger's experience and contacts he's well positioned'' to assist GM, Robert S. Miller Jr., chairman of former GM parts unit Delphi Corp, said in an interview. ``His public policy background and the implications of a bailout would be most relevant in an appeal for government support.''

 

Should automakers falter, the factory closings and loss of jobs ``would inflict a new round of damage on the financial system,'' Altman said.

 

``If we can commit $700 billion to banks and insurers, we ought to be able to commit a small fraction of that to the auto industry, which affects workers directly,'' Altman said.

 

To contact the reporters on this story: Doron Levin in Southfield, Michigan, at dlevin5@bloomberg.net; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

 

Last Updated: November 5, 2008 11:17 EST

[ktmlew]

Noticed nobody seems to want to comment? Hitting a little to close to home, huh?

 

http://news.yahoo.com/s/ap/20081109/ap_on_bi_ge/autos_what_happened

 

Quote:

Automakers struggle to survive past mistakes

 

 

By TOM KRISHER, AP Auto Writer Tom Krisher, Ap Auto Writer – Sat Nov 8, 10:02 pm ET AP –

 

DETROIT – At Ford Motor Co. they called it "Blue," a team set up around the year 2000 to design an array of small, fuel-efficient cars to compete with the Japanese. It didn't get far because no one could figure out how to make money on low-priced compacts with Ford's high labor costs.

 

Besides, the automaker was racking up billions in profits by selling pickups and sport utility vehicles. Times were good and gas was cheap.

 

"Blue" is only a small blip in automotive history, but it tells a big part of the story about why Detroit automakers are in a mess so critical they could be only months away from bankruptcy.

 

Democratic leaders in Congress asked the Bush administration on Saturday to provide more aid to the struggling auto industry, which is bleeding cash and jobs as sales have dropped to their lowest level in a quarter-century.

 

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter to Treasury Secretary Henry Paulson that the administration should consider expanding the $700 billion bailout to include car companies.

 

Critics say leaders over the years at Ford Motor Co., General Motors Corp. and what is now Chrysler LLC were slow to take on unions, failed to invest enough in new products, ceded the car market to the Japanese and were ill-prepared for the inevitable rise in gas prices that would make their trucks and SUVs obsolete.

 

"There's been 30 years of denial," said Noel Tichy, a University of Michigan business professor and author who ran General Electric Co.'s leadership program from 1985-87 and once worked as a consultant for Ford. "They did not make themselves competitive. They didn't deal with the union issues, the cost structures long ago, everything that makes a successful company."

 

Industry representatives, however, say their critics are simplistic, giving them no credit for huge progress this decade in cutting costs, raising productivity, and building competitive cars while handling multiple government regulations and a powerful labor union.

 

"In the last five years, there's been more restructuring done in the automotive business than any other business in the history of the United States," said Tony Cervone, a GM vice president of communications.

 

Whatever the reasons, the Detroit Three are closer to collapse than ever, and likely won't make it without billions in government loans.

 

On Friday, GM posted a $2.5 billion third-quarter loss and ominously said it could run out of money before the end of the year. The company spent $6.9 billion more than it took in for the quarter and reported that it had $16.2 billion in cash available at the end of September.

 

Ford reported a $129 million loss but said it burned up $7.7 billion in cash for the period. It had $18.9 billion on hand as of Sept. 30. Its chief financial officer says he's confident Ford will make it through 2009, but that's because the company took out a huge loan last year.

 

Industry analysts believe Chrysler, now a private company that does not have to open its books, is as bad off as GM as U.S. sales continue to plummet because of tight credit and lack of consumer confidence due to the economy.

 

To survive, automakers are pressing Washington for $50 billion in low-interest loans on top of $25 billion already approved to build more fuel-efficient vehicles. The $25 billion, though, is gummed up in Energy Department regulations and may not be available until next year.

 

The industry's path to cliff's edge is a complex one that even critics say is intertwined with government fuel economy and safety regulations and the United Auto Workers union.

 

The demise started in the 80s when Toyota Motor Corp. and Honda Motor Co. mastered building reliable and efficient cars while the Detroit Three lagged behind.

 

As GM, Ford and Chrysler saw their market share start to slip, the 90s arrived and high profits returned as Americans snapped up pickup trucks and SUVs.

 

As Honda and Toyota took over the small and mid-size car markets, Ford, GM and Chrysler put most of their resources into trucks and SUVs, which brought in billions in profits that covered growing health care, pension and labor costs.

 

"In a market-based economy when you have to try to be profitable, you go where the money is," said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

 

When times were good, the automakers did not take on the UAW, which the companies say drove up their labor costs to $30 per hour more than Japanese companies paid their workers. The figure includes pension and health care costs for hundreds of thousands of retirees.

 

When GM pushed for changes in 1998, the union went on strike at two key Flint, Mich., parts plants, shutting down the company and costing it about $2 billion in profits.

 

"They were making money and the union had a monopoly," Cole said. "They'd shut them down. That's why they had some very lengthy strikes that were very painful."

 

But when the SUV and truck market started to fade in the mid-2000s, executives realized their business model would no longer work and began globalizing their vehicles, streamlining manufacturing processes and developing new and better cars.

 

The UAW, realizing that the companies were in trouble, agreed to a landmark new contract last year that nearly eliminated the labor cost difference between the Detroit Three and the Japanese, shifting retiree health care costs to a union-administered trust fund.

 

But just as the cost cuts started to take hold and new products were rolling out, gas prices rose rapidly to around $4 per gallon and Wall Street collapsed, virtually eliminating credit which 60 percent of car buyers need.

 

"A lot of things sort of coalesced simultaneously," said Tom Libby, senior director of industry analysis for J.D. Power and Associates.

 

Automakers have all said bankruptcy is not an option because people would not buy cars from a company that might not exist in a few years. But if the car companies run out of money and can't pay the bills, bankruptcy could be forced on them, according to industry analysts.

 

GM's statements that it may run out of cash this year or next likely will have an effect on sales, Libby said.

 

"It doesn't help, and they know that," he said.

 

The current crisis, Cervone says, is not unique to the domestics. Honda and Toyota, he says, also have seen huge sales drops in the U.S. in recent months.

 

If Detroit gets federal help, the companies that do survive should become profitable next year, Cole said, if the credit market thaws out.

 

Cole says there's no way at this point the Detroit automakers can survive without federal aid. But if they get it, the ones that do survive should become profitable again next year if the credit markets thaw out.

 

"They'll get out of it," says Libby. "They've got to do what they've got to do. They're backed up against the wall."

 

___

 

AP Business Writer Jeff Karoub in Detroit and AP Writer Deb Riechmann in Washington contributed to this report.

[ChristopherH]

Ouch!!!

I've been following the news on the Big Three for a while now and it seems that most of it is bad. When you see it layed out like that in those stories it really hits home. I noticed on the news that they said 3 million or so jobs would be lost if the 3 domestic automakers failed, but I think their number is off quite a bit. What about all of the dealerships, parts suppliers, financial entities, etc? Right now, I'll admit I'm worried. I am glad to be working as a technician though--because even if people don't buy new cars, they still have to repair what they have. Our sales, body shop, and parts dept are hurting though. One of our salesman was laid off and is working at McDonalds, another has taken a moonlight job at Wal-Mart. Our body shop manager says the trend right now is for people who have minor accidents to collect the insurance check and not repair their cars--so no work for them. Hard times are coming that's for sure.