GM to go bankrupt?

Wolfy:

Well, that would be the Evil Bastard way out, wouldn't it? A quick Chapter 11 Reorg and all those icky liabilities are gone.

Seems to work for the airlines!

(Sarcasm mode off)

 

Yes, having one's cash flow predictions go from +$2 billion to -$2 billion doesn't say "professional executive management team" to shareholders.

However, in the U.S. at least, it's very difficult to effect corporate change at the boardroom level, even when the majority of the shareholders are p*ssed off. The board itself has to take a stand -- and they often see themselves as inside the moat, rather than trying to storm it from the outside.

It will be interesting to see how this plays out.

 

<div class='quotetop'>QUOTE(bookrats\";p=\"75379)</div>

Jeff:

Oh boy have you got that right. "Raise the drawbridge!"

 

<div class='quotetop'>QUOTE(Danny\";p=\"75390)</div>

Danny:

Let me guess, if GM does a Chapter 11, they can legally walk right up to you and go "Nanananana TFB you're SOL! HA!" or something like that?

Who the h*** is this GMLuvr anyway? He seems borderline insane or at least in need of serious medication. Weird fellow ...

 

So either way we end up paying for it. Cute. What a bunch of boobs.

 

<div class='quotetop'>QUOTE(Danny\";p=\"75390)</div>

Woo! Somebody at GM isn't buying the company line! (At least the public company line...)

Up until now, I thought GM (as big as it is) just couldn't actually go bankrupt. This sobered me up right quick.

 

gee i predicted they would go bankrupt in less than 5 years... didnt think it would happen this soon. but i knew it would happen.

+2 billion to -2 Billion... can we say Worldcom?

 

David:

WorldCom, Enron, Adelphia ... ever get the serious idea that most of these companies are nothing more than a house of cards? They're starting to fall ...

 

Well, "huge" doesn't always mean "crooked" with corporations, like it did with Enron and WorldCom.

However, it does seem to frequently equal "stupid"...

 

It's not just GM but, all three American auto makers according to an article in today's Washington Post business section titled "Big Three Lumbering Toward Failure." The article makes the following points:
1. All three are heading for a train wreck! A revolution is needed in how cars are manufactured. Final assembly plants need to be flexible enough to turn out half a dozen different models with the greatest choices of colors and options with a two-week turnaround between order and delivery.
2. Labor contracts needs to be voided. Retirees' benefits counts up to $2,500.00 per car. Gm pays laid off UAW workers 90% of their salary. Average salary and benefits though out the supply chain is $60.00/hr.
3. Market demands sub-assemblies to be at manufactured at "China rates."
4. State governments subsidize foreign manufacturers up to 1K per car. State franchise laws make it expensive to rationalize dealer networks and nameplates.
3. Clean-air rules require companies to produce low-pollution cars at a loss, just to offset the environmental damage done by all their trucks and SUVs.

 

<div class='quotetop'>QUOTE(jtmhog\";p=\"75757)</div>

Isn't it nonsense how they're blaming their workers? "Your benefits cost too much so we got rid of them, TFB you're SOL."

Like the Asian car makers (Toyota, Honda, Nissan, etc) don't have generous benefits and "cradle to grave" mentality. And I notice their car plants in North America employ UAW workers.

Seriously, talk about grabbing at straws. They should figure out how much per car those gold-plated Executive perks amount to. How much does Lutz make, what are his vesting options, etc?

 

i sincerely dont believe that these large companies are stupid, i think they know they have made mistakes and are trying to lessen the impact to themselves.

all big businesses have to answer to shareholders, and its obvious to me that most (like Worldcom... you will never convince me that ebbers didnt know what the company he loved as he built it from the ground up was doing financially) know the problems WAAAY in advance and are delaying the showing of signs of weakness. that is why we get announcements that say "doing fine to everything is hopeless" turnarounds.

companies are like runaway freight trains, it takes a huge amount of time to get them going anywhere but also they see the signs on the wall. its inconceiveable to me that they cant run with large vehicles and hybrids at the same time. they have enough money to work on both. but spending that money would mean revealing the true nature of their long term outlook a few years sooner.

 

David:

Perhaps not so much stupid but sinister? That is, they milk it dry than walk away from it. I suppose that's good if you are in a position to take advantage of it, the average worker is just along for the ride.

Don't get me started on Ebbers. That megalomaniacal micro-manager even had the bottled water jugs refilled with tap water to pinch pennies, and he used binoculars to spy on workers taking smoke breaks to make sure they weren't spending too much time away from work. What a kook.

 

Perhaps part of the problem is that the big 3 US automakers kowtow to the stockholders too much (as do many american companies) Stockholders who are too interested in short term gains over long term strategic planning. The unfortunate American tendency to favor instant gratification.

Here is an e mail from a friend who is unhappy that I hold Toyota stock which points to a different priority than stockholder (short term?) return on investment.

03/22 4:32P (DJ) AWSJ(3/23) Toyota's Quest To Unseat GM May Threaten Stock
Story 7597 (7201.TO, 7203.TO, DJDAY, F, GM, NSANY, TM, JP3633400001...)
(From THE ASIAN WALL STREET JOURNAL)
By Jathon Sapsford
Tokyo -- TOYOTA MOTOR CORP.'S goal to unseat General Motors Corp. as the
world's biggest car maker raises a question with big implications for its
stock price: Is Toyota sacrificing profit for market share?
Toyota is the world's undisputed leader at producing quality cars with
relatively inexpensive sticker prices. At a time when the global car market is
suffering from a production glut, Toyota is grabbing share in crucial markets
and posing a threat to rivals from Detroit to Stuttgart, Germany. In a
presentation last November titled "We Can & We Will," Toyota Motor outlined
aggressive plans to ramp up global production to 8.5 million vehicles by 2006,
thereby challenging GM as the No. 1 car maker.
Yet, while answering questions after that presentation, Chairman Hiroshi
Okuda acknowledged that Toyota's stock performance is less than ideal. When an
analyst pointed to the company's weak stock price and asked what the company
planned to do about it, Mr. Okuda was stumped. "I have been wondering about
that, too," he said.
Since then, the stock has done little to suggest the company has come up
with an answer pleasing to investors. Toyota is still a must hold for many big
global funds. But in recent weeks, many have become increasingly worried that
Toyota's expansion plans will stretch the company too thin. Stockbrokers in
Tokyo say big shareholders have been paring holdings, weighing down the stock.
News last week that GM will report a loss for its first quarter, in part
because of a weaker U.S. market, is also raising questions about Toyota's
performance in the U.S., further pressuring the stock. Toyota is down 6% this
year and down 7% from its peak last July. Toyota's shares, listed on the Tokyo
Stock Exchange and the New York Stock Exchange, settled at 4,000 yen ($38.06),
down 10 yen, in Tokyo trading yesterday.
Toyota's growth plans are so well-choreographed that few rivals doubt Toyota
will meet its goal of 15% of the global market during the decade beginning in
2010. Shareholders, though, are balking at the costs of getting there. Higher
production means rising overhead and research-and-development costs, all of
which is likely to eat into profitability, particularly over the next year or
two. A growing number of critics say Toyota is already straining its finances.
Toyota's R&D annual spending is expected to hit $7 billion during the fiscal
year ending March 31, up from $4.5 billion in the year ended March 2000. In
part, this number shows that while sales at Toyota are indeed booming, its
product lineup is aging in crucial markets, most notably a worrisome U.S.,
where rising gas prices are likely to pinch sales for all car makers.
Mainstay U.S. products, including the Camry sedan, the Tundra pickup and the
Sequoia sport-utility vehicle, are running to the end of their
product-development cycles at a time when the U.S. market is flat -- and could
start contracting because of rising gasoline prices. New models are coming on
line, including the new luxury Lexus GS sedan. But skeptics say the impact of
aging core models on profitability could outweigh customer enthusiasm for new
models, at least for the short term.
Despite outstanding fundamentals, "we think there is a growing likelihood
that earnings will stall" during the year beginning April 1, says UBS
automotive analyst Takaki Nakanishi, who downgraded Toyota's stock to
"neutral" from a "buy" last month . UBS says it has done business with Toyota
group companies over the past 12 months.
Toyota's push to become the world's biggest car maker has huge ramifications
for the car industry. It also underscores a traditional Japanese preference
for share over profit, a tendency that has caused serious trouble in a slew of
Japanese industries from banking to electronics. Nobody is saying Toyota is in
trouble -- far from it -- but some wonder whether the company's plan to be No.
1 is worth jeopardizing its share price.
Toyota, with a market value of roughly $138 billion, may look like the
picture of financial health when compared with GM or Ford Motor Co.,
particularly with Toyota having a trunk load of $30 billion in cash reserves
and few of the problems with retiree medical liabilities that haunt its U.S.
rivals. Toyota has been telling investors it wants to adopt Western notions of
sharing wealth with shareholders, through expanded share buybacks or higher
dividend payments.
But UBS's Mr. Nakanishi suspects that Toyota is unlikely to raise dividends
as high as many investors expect, ultimately leading to disappointment with
management. That, in turn, could weigh down share prices further in the months
ahead as hopes for a big payout are dashed.
Meantime, investors in Japanese companies, which are notoriously slow to
raise dividends, tend to value companies not by how much they hoard, but by
how much their earnings grow from quarter to quarter. By such measures, Toyota
has been disappointing investors.
As Toyota puts money into new technologies and factories -- including two
new U.S. plants now in the works -- its operating profit is suffering, coming
in flat for the most recent quarter after accounting for adjustments, well
below forecasts. That compares with Japanese rival Nissan Motor Co.'s
operating-profit increase of 5.1% during the same quarter.
Toyota, meantime, keeps spending money. In Tokyo yesterday, Toyota unveiled
for the Japanese market two existing SUV models with new gas-electric hybrid
engines. Toyota plans to role out hybrid versions of the models, the Lexus
RX400 and the Toyota Highlander, in most markets, including the U.S.
These engines have been well-received by consumers, and Toyota is using
hybrid technology in its relentless promotion of itself as an environmentally
conscious car maker. President Fujio Cho, speaking to the media in Tokyo,
raised Toyota's target for overall global sales of hybrids to one million
vehicles, up from 300,000, without giving a firm date.
Yet critics note that hybrid engines are expensive to produce, far more so
than standard engines. Thus some of the company's biggest fans among investors
are wondering just how much shareholder money Toyota is planning on spending
to promote its growth agenda.
"You're starting to get fears of how bad this is going to get," says Phyllis
J. Vance, an analyst with pension-fund manager and Toyota shareholder
Principal Global Investors, $129 billion investment-management arm of
Principal Financial Group. Ms. Vance declined to disclose recent changes in
its Toyota holdings.
(See related article: "Members of Its Group Could Be Besieged By Unwanted
Suitors" -- AWSJ March 23, 2005)

(END) Dow Jones Newswires
03-22-05 1632ET
Additional Codes ( JP3672400003, US3704421052, I/AUT, I/X225, I/XATI,

 

what a bunch of CRAP

Toyota's profit is more than double the Big 3 combined last year so how can they do this and "sacrifice profits for market share?"

 

Agreed!!! If the stock does fall some as the article predicts and I have some spare cash, just seems like a buying opportunity to me.