How Long Can GM Stay Alive?

[Oracle of Delphi]

DETROIT--General Motors Chief Executive G. Richard Wagoner, in Washington to plead his case for more government financing, brought fresh evidence Thursday of GM's desperate situation--a $9.6 billion loss in the final three months of 2008.

The Presidential Task Force on Autos had summoned Wagoner and several other senior executives to Washington to answer questions about the company's request for up to $16.6 billion more in taxpayer aid, on top of the $13.4 billion it has already received from the U.S. Treasury since Dec. 31.

The task force, led by Treasury Secretary Timothy Geithner and White House Economic Advisor Lawrence Summers, wanted a better understanding of GM's (nyse: GM - news - people ) massive restructuring plan submitted to the government on Feb. 17, GM officials said.

"It's about rolling up your sleeves and diving into the viability plan," said GM spokesman Greg Martin. A Treasury department spokesman declined to comment.

Thursday's dismal fourth-quarter results no doubt underscored the seriousness of GM's plight. The automaker burned through $5.2 billion in cash during the quarter--$19.2 billion during the course of the year--as car sales collapsed around the world. GM ended the year with $14 billion in cash, barely enough to fund day-to-day operations.

GM's crisis, once concentrated mostly in North America, has now spread to the rest of the world. GM lost money in all of its operating regions: $2.1 billion in North America, $956 million in Europe, $154 million in Latin America and $879 million in Asia.

As the contagion spread, GM was forced to cut production even in once-booming markets like Korea, which hurt cash flow in December, according to GM Chief Financial Officer Ray Young. When the plants were idled, revenue stopped flowing, but GM still owed parts suppliers for previous months' production. Total worldwide production was down 31%, compared with the fourth quarter of last year.

GM's net loss for the year was $30.9 billion, as revenues fell 17% to $149 billion. In a statement, Wagoner said, "2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half. These conditions created a very challenging environment for GM and other automakers, and led us to take further aggressive and difficult measures to restructure our business."

GM said it would delay filing its 10K annual report to the Securities and Exchange Commission. It also said that without additional government financing, its auditors will probably determine there is substantial doubt about GM's ability to continue as a going concern.

"GM requires this funding in 2009 to continue operations until global automotive sales recover and its restructuring actions generate benefits, resulting in the company being able to fund its own operating requirements," the company said.

Link: http://www.forbes.com/2009/02/26/autos-gm-...mobiles_gm.html

Edited February 27, 2009 by Pontiac Custom-S

[Camino LS6]

Bleak.

[Z-06]

GM's crisis, once concentrated mostly in North America, has now spread to the rest of the world. GM lost money in all of its operating regions: $2.1 billion in North America, $956 million in Europe, $154 million in Latin America and $879 million in Asia.

The entire world is struggling with no money so this statement should be viewed in that context not as a premise for cutting and amputating GM.

[enzl]

The entire world is struggling with no money so this statement should be viewed in that context not as a premise for cutting and amputating GM.

As sad as it is, you've struck upon the exact reason why GM (& other companies in similar straits) may need to be euthanized...there's a challenge for well-run, cutting edge companies who deserve help---propping up hopeless cases is a luxury that we may not be able to afford.

It is awful, but there's a "sophie's Choice" that needs to be made.

[Camino LS6]

There will be blood - the question is whose blood?

[Intrepidation]

But we've got EXCITING!!!!!!!!!!! products like a FWD Cadillac large car, a G3, and G6 with a new nose to look forward to! Those are sure fire winners right there!

[Blake Noble]

Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

[Oracle of Delphi]

It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

[vonVeezelsnider]

But we've got EXCITING!!!!!!!!!!! products like a FWD Cadillac large car, a G3, and G6 with a new nose to look forward to! Those are sure fire winners right there!

You know it would be fine with me if they did a revamp of the G-Body and made a nice new DTS on it... but the prospect of an effing EPSILON DTS has me fuming.

Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

Isn't the jury still out on whether it was Nearer My God to Thee or that popular time-period piece called "Autumn" that they played?

[Justin Bimmer]

My question to all of us is this:

What is the difference between bailing out GM with a "loan" and all the people working for GM going on Unemployment?

Not a whole lot. . .

[daves87rs]

It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

That sucking sound you hear in Detriot sinking into a giant pothole.....while GM burns...

Welcome to MY world......

[daves87rs]

Should someone tell the band to be ready and standing by to play "Nearer My God To Thee?"

Maybe for all those soon to be cut models......

[BuddyP]

I hope this just goes to Chapt. 11.......... let's just purge the system and get it over with.

It should've went Chapt. 11 the first time around.

[the_yellow_dart]

I remember hearing that the bailout would be "enough money to polish the windows on the titanic as it sinks".

I can't say I disagree at this point.

[carman21]

This is what happens when the economy flies off a cliff when you are paying off debts and spending big on a product renaissance.

GM will survive and will be in its best global and domestic position since the 1930s.

I expect that GM will regain and secure the top spot globally by 2020.

[G. David Felt]

This will be an interesting 50/50 death/survival watch.

[hyperv6]

If the economy stays down long enough GM is not the onky one in trouble.

Even Toyot.s money reserves have limits and they are in the best shape.

[G. David Felt]

If the economy stays down long enough GM is not the onky one in trouble.

Even Toyot.s money reserves have limits and they are in the best shape.

If we see no economic up tick at all this year, then this depression we are in will be truly bigger than our first one and you are correct even Toyota will end up being hurt by this.

It is going to be interesting as we will probably see a whole new model of auto companies. Maybe one or two that have been financially conservative to not over extend themselves will survive as is, but I think all companies are going to be changed no matter what.

[daves87rs]

It's funny you say depression....because it just may start looking like that later this year...

And if things really start heading downhill, well, let's just say there will be no big three at all.

[smk4565]

I wonder if they had filed Chapter 11 a year ago before burning through most of that $19 billion in cash, if they could have reorganized. Now they are so deep in the hole, it may be too late.

[hyperv6]

If we see no economic up tick at all this year, then this depression we are in will be truly bigger than our first one and you are correct even Toyota will end up being hurt by this.

It is going to be interesting as we will probably see a whole new model of auto companies. Maybe one or two that have been financially conservative to not over extend themselves will survive as is, but I think all companies are going to be changed no matter what.

Things are not great here and [not a politcal statment] but ther moves made here do not make me thing they will help. But when I see other countries and how things are there they are in even worse shape.

Japan relys on MFG and they are closing plants left and right. They have not seen things like this since WW2.

I just fear the economic moves here are not going to inspire many to invest in buisnesses and this will slow things evenmore.

I just get tired of the hate the rich idea as I work for a verey wealthy person that does very much for me and my co workers. He is not the only one that is good. You just hear about the bad. But if they tax him to death he will have to make changes as that is money he puts back into our company for growth. I would rather see him put money into employing people at our company vs supporting goverment programs.

[Sixty8panther]

It's odd, but what came to my mind was that Ross Perot quote talking about the large sucking sound, is that the sound of GM going down the drain?

More like the USA as a whole doing down the drain.

[ellives]

I have thought about this situation long and hard and I would make the case for helping salvage GM if two things happened:

1. The UAW was purged from GM completely. No unions workers employed by GM. Done. Over. Bye bye.

2. The Company was brought private. It is a ridiculous scenario under which those dirtbags in congress tied the continuation of loan support by requiring a business plan. This shows just how stupid and clueless about business those idiots are. Give us a business plan that makes you viable and of course your competitors can all see it. Red Ink Rick needs to grow a pair and give Dodd and the rest of the motley crew in congress the big FU if that's what they wanted. Just walk away and let those idiots deal with it.

If these two things happened, GM would have a shot of survival. Otherwise, "stick a fork in 'em honey. They're done."

[01Malibu]

How does shrinking a company keep it alive? When you reduce models, you limit variety and drive off customers. DId killing oldsmobile increase sales, market share or profitability? Why will killing Pontiac and Saturn be any more successful?

GM suffers from bad PR. Some of it not their fault. Some of it their fault such as some bad products that were poorly planned and executed...Aztek, GM's many minivans, etc.

GM needed some swagger. The company needs to get its head up. Shrinking things won't help. Cutting dealers only hurts sales in the small towns.

They need to cut the cost per vehicle and increase the profit per vehicle. Whether you have 10 or 50 models, you need to increase the sales and the profit. GM owned the market when the offered variety. Now there is little choice and consumers are going elsewhere.

The coolant leaks/intake gasket problem in the 97-03 Malibus and GM's refusal to fix them free of charge soured some customers and they won't buy a GM car. GM would have made more money by replacing intake gaskets free. A thousand dollar repair bill to fix the coolant leaks don't set well. Just one example.

Respect the customer. Go the extra mile to keep happy customers. I rest my case.

[smk4565]

If they gave congress a big FU then they would be in bankruptcy already. The only thing keeping them afloat right now is the $13.4 billion that Congress gave them.

The decline of GM is part legacy cost and part uncompetitive product. The legacy costs have become unsustainable at almost any level of sales. They lost market share over the years because the product wasn't good enough. If they had by far and away the best midsize sedan they could sell 500,000 a year and get sticker price. But in 03-2007 they had the Malibu, G6, Regal, LaCrosse, Grand Prix, etc and those are just average cars that needed $3500 cash back deals to sell.

If they cut brands, and make the remaining brands twice as good they can gain market share. Now if they cut brands and leave the remaining 4 as they are, they are in trouble.

[MyerShift]

More like the USA as a whole doing down the drain.

I completely, utterly agree.

I hope my gut is wrong, but something tells me the worst is yet to come.

[ellives]

Your probably right. My neighbor told me tonight that his financial advisor told him to get out of the stock market and into cash because the whole banking industry is a big Ponzi scheme and the NYSE is going to 6000...

[daves87rs]

I completely, utterly agree.

I hope my gut is wrong, but something tells me the worst is yet to come.

Your gut is right.

[daves87rs]

Your probably right. My neighbor told me tonight that his financial advisor told him to get out of the stock market and into cash because the whole banking industry is a big Ponzi scheme and the NYSE is going to 6000...

Umm...it's bigger than that...

[A Horse With No Name]

You know it would be fine with me if they did a revamp of the G-Body and made a nice new DTS on it... but the prospect of an effing EPSILON DTS has me fuming.

Isn't the jury still out on whether it was Nearer My God to Thee or that popular time-period piece called "Autumn" that they played?

Yes, the julry is still out...

Chris

[ShadowDog]

The whole nature of the financial turmoil takes the majority of the blame for the current automobile crisis. The only thing GM can take the blame for is not being in an appropriate position to sustain themselves through this crisis. What really bothers me is reading all of the articles that focus on the 'failures' committed by GM (design, quality, product, management, etc.) that emphasizes blame upon them to be the only reason they are struggling. They didn't cause their financial problems; rather, their operational direction was only functional during the best of times.

I dread the outcome of restructuring that will bring about change not unlike what was seen in the late 80's / early 90's with broad platform sharing and standardized drivetrain packages for many models across the board. I fear it will be worse. What with eliminated brands, lighter model offerings and simpler design elements, GM is looking at bone-cutting measures beyond trimming the fat. As long as there is still an effective marketing campaign to promote an image that can be carried onward into successful years, there is some hope. The only thing I don't want to see GM do is prolong the pain we see as they play the useless politics game with government; or go with heart-tugging commercials that provide mostly fluff, as if to say things like 'care' for this or that, employees or customers, blah blah blah... I'm a consumer and I don't care if they care or not; rather, I just want to see them continue to provide good design, build great products and retain a global position. That's the only thing that will speak to me. If they go the other direction, we'll have crap product and a lot of talk. Has that ever worked for anyone? Certainly not for GM.

Face it folks, we'll see things we won't be happy with because we care about the product. In the end, as important as we know image is, GM can't hope to do everything to please the prospective, the loyal and the enthusiastic. If I had to drop one of the three to sustain myself, I'd pick the enthusiast.

[dwightlooi]

The whole nature of the financial turmoil takes the majority of the blame for the current automobile crisis. The only thing GM can take the blame for is not being in an appropriate position to sustain themselves through this crisis. What really bothers me is reading all of the articles that focus on the 'failures' committed by GM (design, quality, product, management, etc.) that emphasizes blame upon them to be the only reason they are struggling. They didn't cause their financial problems; rather, their operational direction was only functional during the best of times.

I dread the outcome of restructuring that will bring about change not unlike what was seen in the late 80's / early 90's with broad platform sharing and standardized drivetrain packages for many models across the board. I fear it will be worse. What with eliminated brands, lighter model offerings and simpler design elements, GM is looking at bone-cutting measures beyond trimming the fat. As long as there is still an effective marketing campaign to promote an image that can be carried onward into successful years, there is some hope. The only thing I don't want to see GM do is prolong the pain we see as they play the useless politics game with government; or go with heart-tugging commercials that provide mostly fluff, as if to say things like 'care' for this or that, employees or customers, blah blah blah... I'm a consumer and I don't care if they care or not; rather, I just want to see them continue to provide good design, build great products and retain a global position. That's the only thing that will speak to me. If they go the other direction, we'll have crap product and a lot of talk. Has that ever worked for anyone? Certainly not for GM.

Face it folks, we'll see things we won't be happy with because we care about the product. In the end, as important as we know image is, GM can't hope to do everything to please the prospective, the loyal and the enthusiastic. If I had to drop one of the three to sustain myself, I'd pick the enthusiast.

No, GM is not responsible for all that went down. In fact, they have done a great deal in bring their product line back to a competitive level. Solstice, G6, G8, GMT900s, Aura, Traverse, CTS and especially the Malibu -- you name it, all huge steps forward.

However, I will rather see a 3 brand GM -- Chevy for mainstream cars, GMC for all SUVs and trucks, Caddy for Luxury stuff -- than a continuation of this 10 brand mess. We need more good cars, not more brands of cars. I don't see a need to expend resources developing body styles of the same vehicle, promote these different products and share the marketing pie over multiple overlapped brands. Heck I think that even Toyota has one too many brands with the addition of Scion.

Edited March 1, 2009 by dwightlooi

[turbo200]

The whole nature of the financial turmoil takes the majority of the blame for the current automobile crisis. The only thing GM can take the blame for is not being in an appropriate position to sustain themselves through this crisis. What really bothers me is reading all of the articles that focus on the 'failures' committed by GM (design, quality, product, management, etc.) that emphasizes blame upon them to be the only reason they are struggling. They didn't cause their financial problems; rather, their operational direction was only functional during the best of times.

that's because it is all GM's fault. the financial crisis has brought to a head all the different hurdles that GM created for itself. you're honestly living in the past. there are many different sources here and over the internet that can paint you the picture of the inner-workings of the company; I can only look at the situation from the outside and tell you for too long and in a dismal fashion there product has failed to compete. they are a pathetic and self-obstructed story at this point; it's almost time for them to be put out to pasture. their product has finally started to turn around, but more could have been done, long ago, to continue to take advantage of the good will consumers had for them. it's a shame they are such a poorly run business and this was all a bit of a sham. their are too many execs within getting paid lots of money to have contradictory opinions and not look at the marketplace and not accurately gauge what is going on with the consumer and expectations. they have been performing the job of running the business into the ground. they've completed it.

[FUTURE_OF_GM]

I think the blame lies with both GM and the market...

The financial firms DEFINITELY share in the blame (a lot) However, had this not happened, how long would it have taken GM to slowly die? GM's corporate culture is HORRIBLE. And unless that changes, all the marketing/phenominal product/bailouts/whatever won't help them.

Maybe, JUST MAYBE, this "crisis" will be GM's saving grace. Either through very dedicated government support, something to scare the hell out of the leadership and bring them to their senses OR even something to wake americans up and educate them about THE WHOLE STORY.

Even the most anti-Detroit consumer KNOWS why GM's products have been bad now. The result of all this negative press has, at the very least, informed the consumer. And it might even cause them to give a refocused GM a fighting chance (as long as the company is STABLE enough to prove it can continue)

[CaddyXLR-V]

Your probably right. My neighbor told me tonight that his financial advisor told him to get out of the stock market and into cash because the whole banking industry is a big Ponzi scheme and the NYSE is going to 6000...

And that is why the depression continues! Panic, and fear, are causing companies to collapse now. If everyone were to panic, and pull all their money out of banks, like what happened to WAMU, the whole country would collapse. People are already doing it with stocks, which is why everything is down, even financially sound companies. $9 Trillion has been pulled out of stocks and is just sitting around in securies because people are afraid. No one is spending(maybe why GM is on the verge of collapse, no?). If no one is buying anything, companies lay people off because they can't sell anything.

The consumer needs to share the blame. They also had a part in taking out interest only ARMs for mortgages they new they couldn't afford because they figured the value of their house would never go down and could sell it once their rate adjusted. When they couldn't sell it, it was foreclosed.