Bold Moves at GM May Come With Kerkorian on Board

[Guest Josh]

Nov. 17 (Bloomberg) -- The time may have arrived for General Motors Corp. to try a bold stroke to do something to reverse a slide that has some investors speculating not whether the world's No. 1 automaker will seek bankruptcy, but when.

If GM does something out of character, that man behind it may be none other than Kirk Kerkorian, the octogenarian casino mogul and GM's biggest individual investor.

Yesterday GM stock fell another 5.8 percent, bringing the decline since mid-September to a roughly 37 percent. The stock's slide reflects growing apprehension in equity and credit markets that GM is on its way to becoming the most iconic failure in American business history.

The cascade of bad news for GM during the past 60 days has been extraordinary. It includes the bankruptcy filing of Delphi Corp., its erstwhile parts subsidiary and biggest supplier; GM's $1.6 billion third-quarter net loss, its fourth-straight quarterly deficit; and, last week, the announcement of accounting errors requiring a restatement of 2001 financial results.

Whatever else has plagued GM over the years, the accounting profession always regarded the company as a paragon.

Since last spring, Kerkorian, 88, has amassed 9.9 percent of GM's common shares. But he could lose all or most of his $1.7 billion investment, which already has lost a quarter of its value, in a bankruptcy. The automaker discounts the bankruptcy buzz, saying it has no plan to seek court protection from creditors.

Financial Cushion

GM says its $19.2 billion hoard of cash and other liquid investments is enough to tide it over until it starts making money again.

Bankruptcy doesn't necessarily entail running out of money though. As much as anything, it reflects a loss of confidence among lenders, investors, customers, suppliers and employees in a company's ability to keep commitments.

Kerkorian in May said he was a passive investor. He evidently grew restive as GM's results deteriorated during the summer. On Sept. 21, he disclosed that he may ask for representation on GM's board.

Although credited with a sharp eye for spotting when the fortunes of troubled companies are about to turn positive, the reclusive billionaire may have underestimated the scope of GM's financial woes, not to mention its dwindling position in the all-important U.S. vehicle market.

Full Story: http://quote.bloomberg.com/apps/news?pid=1...id=a73Y0ZE6ZPmU

[jmore1276]

I just pray the "Old Fart" croaks before he can do too much damage. Don't take your billions and help the poor or anything you old tight ass!!!!!!!!!!!!!!!!! hahahaha

[andy82471]

The problem is GM's production is geared toward a 30% NA market share, when it reality its share is actually closer to 20%. The end result is that GM has to resort to gimmicks like "employee pricing progam", "Red Tag Sale" to clear surpluss inventory. GM really needs to come to an agreement with the UAW regarding plant closure soon. If an agreement cannot be reached quickly, then pull the trigger and declare bankruptcy. There will be short term pain but in the end a smaller more competitive GM that can actually sell cars at a profit would be better for the workers and the country. Edited November 17, 2005 by andy82471

[jmore1276]

GM will close plants as they have been for years. And they will cut 25,000 jobs thru attrition as they have been doing for years. This is not new. The UAW will not oppose this as long as the affected active workers have plants to tranfer to which they will. And I was speaking of Kerkorian WILDMANJOE, who if givin the chance will surely put GM's auto business out of business! He want's GMAC and all GM's cash. Soon I suspect he will threaten to pull his cash out in order to Green-Mail GM into giving him (or his buddy YORK?) seat on the board.

[usa1]

GM will close plants as they have been for years. And they will cut 25,000 jobs thru attrition as they have been doing for years. This is not new. The UAW will not oppose this as long as the affected active workers have plants to tranfer to which they will. And I was speaking of Kerkorian WILDMANJOE, who if givin the chance will surely put GM's auto business out of business! He want's GMAC and all GM's cash. Soon I suspect he will threaten to pull his cash out in order to Green-Mail GM into giving him (or his buddy YORK?) seat on the board.

[post="44463"]<{POST_SNAPBACK}>[/post]

Having York on the board of GM would be a good thing. He did wonders at Chrysler and IBM. Yes, many people lost their jobs, but both of those company came out of these changes much stronger than before.

GM needs people who can make the hard, difficult decisions to make GM great again. The current management is working around the edges here and nothing is happening fast enough.

Mark

[sciguy_0504]

Having York on the board of GM would be a good thing.  He did wonders at Chrysler and IBM.  Yes, many people lost their jobs, but both of those company came out of these changes much stronger than before. 

GM needs people who can make the hard, difficult decisions to make GM great again.  The current management is working around the edges here and nothing is happening fast enough.

Mark

[post="44473"]<{POST_SNAPBACK}>[/post]

That's a very interesting thought, Mark.

[FUTURE_OF_GM]

that GM is on its way to becoming the most iconic failure in American business history.

Umm...what? Hard times don't always equal failure... Was Standard Oil a failure just because the government broke it up? I don't think so.

York could even be useful to Wagoner. He not only knows more about the auto business than any GM director,

I'm not so sure about that... I think GM is in good hands BUT York could be the "sense of urgency" that has been needed at GM for 3 or 4 years now.

[prototype66]

Bloomberg Column York brings to the party long and rich experience in financial management posts at automakers, most notably the Chrysler bailout of the early 1980s. He also served as CFO during Lou Gerstner's campaign to turnaround International Business Machines Corp. in the mid-1990s. Why cant the government give GM a bail out like they did Chrysler.? :huh:

[andy82471]

Bloomberg Column

York brings to the party long and rich experience in financial management posts at automakers, most notably the Chrysler bailout of the early 1980s. He also served as CFO during Lou Gerstner's campaign to turnaround International Business Machines Corp. in the mid-1990s.

Why cant the government give GM a bail out like they did Chrysler.? :huh:

[post="44533"]<{POST_SNAPBACK}>[/post]

Because the government is broke too.

[CSpec]

Why cant the government give GM a bail out like they did Chrysler.? :huh:

[post="44533"]<{POST_SNAPBACK}>[/post]

The better question is should the government bail out GM, and the answer is NO.

[goblue1999]

I just pray the "Old Fart" croaks before he can do too much damage. Don't take your billions and help the poor or anything you old tight ass!!!!!!!!!!!!!!!!! hahahaha

[post="44430"]<{POST_SNAPBACK}>[/post]

You either don't know jack, or your don't give a rip. Kerkorian is probably the only thing standing between GM and a total meltdown. Wagoner has consistently shown he doesn't get it. If you actually like GM, and want it to succeed, you'll root for Mr. K.

[goblue1999]

Umm...what? Hard times don't always equal failure... Was Standard Oil a failure just because the government broke it up? I don't think so.
I'm not so sure about that... I think GM is in good hands BUT York could be the "sense of urgency" that has been needed at GM for 3 or 4 years now.

[post="44508"]<{POST_SNAPBACK}>[/post]

You're not sure that York knows more than any GM director?? Have you seen the roster? Edited November 17, 2005 by goblue1999

[FUTURE_OF_GM]

You're not sure that York knows more than any GM director??  Have you seen the roster?

[post="44546"]<{POST_SNAPBACK}>[/post]

Given what Wagoner was handed, he has done an exceptional job. Sure, he could've moved faster and probably tried to. But this is GM, not just a run of the mill manufacturing company. The sheer size and legacy of the company is mind boggling.

I don't envy the the team leading GM at all. EVERYTHING that could go wrong has went wrong and they couldn't catch a break if they owned one. Given the circumstances, I think they've done a decent job. In fact, I'm willing to bet that if you polled the CEOs of most other automakers, they'd agree. GM is just in a nightmare of problems right now that have accumulated (and been put off to an extent) over many years. Some in it's control but many NOT in it's control.

EDIT: As far as the GM board, if that's what the article is referring to, then no, I'm not sure that they have more knowledge than York, but as far as leadership of the company. It'd be a close call IMO.

[ZL-1]

andy82471 made a very good a point about excess capacity. Some excess capacity can be good if he market is growing robustly,as it reduces the lag in taking advantage of that grwoth, but too much of it means higher fixed costs and results that are much more elastic to variations in sales/margins. GM will never have 30% of the US market again imo (I'm not even going into the 50% they had back in the day), so they should be working to make the company profitable at around 20%. It seems like a reasonable target ot me.

[Cortazzo]

The problem with the auto industry is that you can't tell that improvements are being made until the new products reach production, which can take years. All of GMs new products are doing relatively well, G6, HHR, cobalt, LaCrosse are doing as well or better than their predecessors. I'm confident the t900s will own what's left of the large SUV market, and the pickups will probably steal some share as well. The current SUVs are where most of the incentive dollars are, so once the new ones are out, GMs total incentive spending should plummet (so they'll stop most of the bleeding). GM just needs to get rid of the rest of their 'dogs'. Namely the Grand Prix, it needs a complete redesign yesterday. I've already mentioned the old trucks. I'm not 100% the new impala and monte can hold their weight beyond a year or two. I don't think they have enough visual appeal to stand out in the market. Hopefully they'll be moved to a RWD platform by the end of the decade, and the redesigned (and supposedly very hot) new malibu can pick up the slack for chevy. The new crossovers will be huge i feel, and saturns new lineup will be a winner. So, i think if GM can hold out for 2006 limping along on the current product, the big introductions in the next two years should bring them back.

[Ghost Dog]

What about this Scenario. GMAC is spun off, 15 billion dollar dividend, 10% goes to Kerkoriain, He dumps his stock, Then Gm Files Bancruptcy. Not Kosher but I could see it.

[Shantanu]

I just pray the "Old Fart" croaks before he can do too much damage. Don't take your billions and help the poor or anything you old tight ass!!!!!!!!!!!!!!!!! hahahaha

[post="44430"]<{POST_SNAPBACK}>[/post]

What are you stupid? Kerkorian has done something that Rick Wagoner never has, which is to build a successful business. Rick Wagoner took a company that was doing OK for itself, and completely ran it into the ground with a series of boneheaded moves in less than 10 years. He's destroyed about 70% of GM's market value. Edited November 17, 2005 by Shantanu

[CaddyXLR-V]

What are you stupid?  Kerkorian has done something that Rick Wagoner never has, which is to build a successful business.  Rick Wagoner took a company that was doing OK for itself, and completely ran it into the ground with a series of boneheaded moves in less than 10 years.  He's destroyed about 70% of GM's market value.

[post="44615"]<{POST_SNAPBACK}>[/post]

Doing okay? They have been on a track thats taking them off the edge of a cliff for the past 30 years. If you havent noticed, GM has been steadily declining long before Wagoner became CEO. I'm sure he caused the gas spikes which are killing SUV sales too. He cant work miracles, like everyone seems to expect him to do.

[SimonDavid]

If Wagener and the GM board are smart they would use Kerkorian - he could be very useful in extracting concessions from the UAW and generally shaking up the bureaucracy. I think that Lutz gets this point - he said in an interview that he'd have no problem with Kerkorian having a seat on the board. The seat in practice would be held by Jerry York - who Lutz worked with at Chrysler. So it could be recreating the old Chrysler dream team. Also Jerry York was CFO of IBM in the 90s when Gerstner was doing his massive restructuring there, so this is not exactly a new scenario for him.

[corvettekidc6]

In my opinion, GM needs to bring back classic nameplates like the Chevelle, Camaro, Nova, Nomad, Eldorado, and get a "Judge" option for the new GTO. Since Dodge brought back the Charger, their sales have been up, taking sales away from GM. When I saw the first Charger commercial, I went to the mall and saw 3 sitting in the parkinglot. That's what GM needs to do is create a car with a classic nameplate with bold, and I mean BOLD design. Make offers to the public to get them selling, give it DOD (Displacement on Demand) to give it god MPG and if it is a classic nameplate from the 60's and 70's then give it an LS2 at least to give it a good 0-60 rating. Next make fetures like navigation touch screen radios standard on LS models on the chevys. Many more fetures like this would make the interior look good. Also, the new GMT-900 Tahoe has an interior nicer than that of most GM cars, make the cars interior like it but give it distinct differences that would set them apart from each other. I think that we should tell GM about this web site to get ideas from people like us. These ideas could save GM. :)

[Simon C]

I wrote GM more than a year ago telling them about you guys's (yeah, I'm Italian) "chops" and how much better they look then what GM had coming out. I told them to hire these guys because they have some kick-ass designs. I never heard back from them. Did any of you's guy's? :P

[prototype66]

Doing okay? They have been on a track thats taking them off the edge of a cliff for the past 30 years. If you havent noticed, GM has been steadily declining long before Wagoner became CEO. I'm sure he caused the gas spikes which are killing SUV sales too. He cant work miracles, like everyone seems to expect him to do.

[post="44673"]<{POST_SNAPBACK}>[/post]

what year did wagoner sign on with GM, around 94 -96? :huh:

Five years ago, at 47, Mr. Wagoner became G.M.'s youngest chief executive. He was a protégé of John F. Smith Jr., who became chief executive after a boardroom coup in 1992. Mr. Smith pulled the company from record losses to a record profit by 1999.

Mr. Wagoner did not promise to reinvent G.M.
Remember when Chrysler faltered? The Carter Democrats fashioned a loan guarantee program, which the Reagan Administration then put into effect. The Reaganites made one last-minute change, demanding stock warrants; those paid off, with a $311 million profit to the U.S. Treasury
Sounds like good business sence to me.Take out $2.00 an hour instead of $1.00 for the healthcare and slow production a little bit then make more dynamic sheet metal and in 2 tears GM will be on top again. The tech is already in place , now they need to shout about it like toyota does! Ramp up full hybrid in Cobalt/HHR, malibu platforms ASAP and lambda HAS to have a full hybrid offer.

Just mt opinion by the way. Edited November 18, 2005 by prototype66

[Shantanu]

Doing okay? They have been on a track thats taking them off the edge of a cliff for the past 30 years. If you havent noticed, GM has been steadily declining long before Wagoner became CEO. I'm sure he caused the gas spikes which are killing SUV sales too. He cant work miracles, like everyone seems to expect him to do.

[post="44673"]<{POST_SNAPBACK}>[/post]

Would you rather be mugged, or would you rather have someone shoot you in the face? They're both bad things, so they must be the same right? :huh:

GM was not by any means dominating the auto world in the late 1990's, but at least it was profitable. At least it could make cars and sell them for money. At least it had 30 points of market share. At least there were more people buying GM cars back then. At least GM hadn't allowed the Japs to get a foothold in the big truck market. At least GM wasn't involved in a stupid tie up with Fiat. At least Cadillac was still the undisputed #1 luxury seller...

What does GM have now? Incentives? Debt? Humiliation? Bankruptcy? A pile of rubble? :blink:

Sure the product coming out of GM these days is great, perhaps the best ever. But Rick Wagoner isn't in charge of the product. He's in charge of running the business side of things, and he's completely ruined it. He's got the reverse Midas touch, anything he lays his hands on turns into a pile of crap.

At what point is Rick Wagoner going to be held accountable? Most CEO's are fired for much less. His reign has been disastrous. Edited November 18, 2005 by Shantanu

[G. David Felt]

<_< I think most people here will realize that a change is in order, Wagoner had his chance and has pretty much wasted it. Unfortunate but true, the older people get, the more unwilling to change. In this regards it takes a person that is not affraid to force change. Kerkorian while not the most loved business man, has actually done allot for society. For the ultra liberals that feel he should be giving hand out to the poor, you will not find this from this man. What you will find is business that generate profits and create jobs. This grows the working class and stability of this country. If the people on the side of the road are too lazy to take a job at McDonalds or a job at one of Kerkorians companies then they get what they deserve. He is doing what really helps this country, Investing to grow business that create jobs. Yes Profit is a means that all investors and owners want, the reality is if it can be done with a long term view that benefits everyone and Kerkorian seems to be able to achieve this. IMO Kerkorian represented by York on the board will be a good thing for GM. Clean out those that are dragging their feet, close down the useless plants and streamline. Take a page from the little that GM has done and redesign the plants into other uses, mall's, apartments, etc. There are great ways for GM to still keep the land or turn it into some other profit means. Long Live the General! B)

[Simon C]

dfelt, There's no way they could use the property for anything else. Contamination would be way to much.

[enzl]

dfelt,
There's no way they could use the property for anything else. Contamination would be way to much.

[post="44975"]<{POST_SNAPBACK}>[/post]

Not True. They're building luxury condos on the waterfront in Tarrytown NY at the site of the old X-car plant. But that's not a solution, regardless...

...GM has needed to act decisively for years. Many people saw the writing on the wall with regards to the 'perfect storm' of market conditions that could kill GM.

I think the first order of business is to get the workers on board with whatever plan of action is decided. Great cars can only be built by a satisfied workforce and Delphi parts-guys getting a 60% pay cut isn't going to create that atmosphere. A delphi strike will bury GM and destroy its cash horde in a matter of months! So, what do you do? You repay workers shortfalls with a new class of stock or company treasury stock...give people that work for you a better stake in your survival and reward them for a job well done (&, obviously, the stock is worthless if they don't do their part.)

Next...well, I like some of the ideas above, but also I think Wagoner has to go.

[Ghost Dog]

Anyone who thinks Kerkorian is there to save GM is wrong. He is there to get what he can and get out.

[G. David Felt]

dfelt,
There's no way they could use the property for anything else. Contamination would be way to much.

[post="44975"]<{POST_SNAPBACK}>[/post]

As already stated, GM is building Luxury condo's on one site, I know they have a couple of mall's being built on two other sites. If you look at all the realstate that GM own's, they can do many things with the old closed down sites that can bring in cash flow.

Reality is everyone is in the business to make a buck, some are short time others thinking long term. Reality is GM board needs to make a change and Wagoner is the lamb to be sacrificed.

[daves87rs]

In my opinion, GM needs to bring back classic nameplates like the Chevelle, Camaro, Nova, Nomad, Eldorado, and get a "Judge" option for the new GTO. Since Dodge brought back the Charger, their sales have been up, taking sales away from GM. When I saw the first Charger commercial, I went to the mall and saw 3 sitting in the parkinglot. That's what GM needs to do is create a car with a classic nameplate with bold, and I mean BOLD design. Make offers to the public to get them selling, give it DOD (Displacement on Demand) to give it god MPG and if it is a classic nameplate from the 60's and 70's then give it an LS2 at least to give it a good 0-60 rating. Next make fetures like navigation touch screen radios standard on LS models on the chevys. Many more fetures like this would make the interior look good. Also, the new GMT-900 Tahoe has an interior nicer than that of most GM cars, make the cars interior like it but give it distinct differences that would set them apart from each other. I think that we should tell GM about this web site to get ideas from people like us. These ideas could save GM.    :)

[post="44859"]<{POST_SNAPBACK}>[/post]

Interesting...might be nice...never happen though....

GM simply needs to make eye opening cars, and give people a reason to buy them.

It's up to them to figure that out, nameplates or not....

[jmore1276]

What are you stupid?  Kerkorian has done something that Rick Wagoner never has, which is to build a successful business.  Rick Wagoner took a company that was doing OK for itself, and completely ran it into the ground with a series of boneheaded moves in less than 10 years.  He's destroyed about 70% of GM's market value.

[post="44615"]<{POST_SNAPBACK}>[/post]

Are you stupid? (and let's not talk like that) Jack smith (if you read my whole piece) mad money for the big shots by not investing anything into GM's future!!!!
He put in ROBOTS that tried to put "TRUNKS ON STATINON WAGONS" yes picture it...and then he "CUT AND RAN and that's why WAGNER IS IN TROUBLE ...soryy but "STUPID!!

[lakefire]

It's a good thing that many of you guys are not CEO's of giant corporations. Everything is so cut and dry; it's almost like it's treated like politics. I am not targeting anyone in particular; nor am I saying that I could do a better job.