BusinessWeek: What If GM Did Go Bankrupt...

[Guest Josh]

After weeks of listening to analysts and pundits beat the drum about the possibility of a General Motors Corp. bankruptcy, Chairman and Chief Executive G. Richard Wagoner Jr. decided he had heard enough. On Nov. 16 he declared in an internal memo to his 325,000 employees that bankruptcy is "unnecessary." There is no plan to file for Chapter 11 protection, Wagoner said flatly, calling such an action "contrary to the interests of our employees, stock- and bondholders, dealers, and our suppliers and customers."

In other words, Wagoner was calling bankruptcy unthinkable. And for a long time, that's exactly the way it seemed. GM has $34 billion in cash and could free up roughly $15 billion more selling various businesses. That alone should be enough to keep the company running for a few years. What's more, its cash-burn rate of $2 billion a quarter will slow down as a recent restructuring, which will eliminate nine factories and 30,000 workers over three years, takes hold.

But despite Wagoner's protestations, investors are clearly starting to ponder the unthinkable. The price of GM's credit-default swaps, which are insurance in case the carmaker can't pay back its loans, have soared in the past month. They now cost a premium of 12 percentage points of the value of the debt that they insure, four times what they cost in January. Few people believe that Washington would help bail out GM, as it did with Chrysler. Investors, suppliers, and employees, meanwhile, are starting to imagine how a GM bankruptcy would unfold and taking steps to defend themselves if it should happen. Some suppliers, for example, are trying to get shorter payment terms from GM in exchange for lower prices.

Full Story: http://www.businessweek.com/magazine/conte...gn_id=rss_magzn

[Ultra Magnus]

Dangerous straights the company is now in. (Sorry channeling my inner Yoda!) This could be bad and good at the same time. Hopefully when its all said and done it works out well for the company and the country.

[prototype66]

INTELLEGENT WORDS SPOKEN YOU HAVE, YES.MMMMMMMM ^_^

[andy82471]

Don't these so called experts have anything better to do than speculate on GM's imminent demise ? This is getting so tiring.

[FUTURE_OF_GM]

But retailers such as KMart (SHLD ) and Hechinger and carmaker Mitsubishi all saw sales fall when their financial problems became widely publicized,

That statement is so VERY key :)

a GM that will be downsizing for the foreseeable future.

Another key statement and result.

Still, GM's 450,000 retirees would get hit: They may end up with smaller pension payouts, and their medical benefits, as well as the health-care plans of existing workers, would most likely be whittled back.

Maybe all those old people shouldn't be buying Toyotas :)

Nickname: FredMT
Review: GM will file for Chapter 11 within the next 18 months. Period!
Date reviewed: Dec 2, 2005 2:29 PM

A LOT of people seem to be determined to see that happen.

Review: The bankruptcy of a stalwart such as GM would damage the very core of trust in corporate investments.

LOL... YES IT WOULD!

[puma]

That statement is so VERY key :)
Another key statement and result.
Maybe all those old people shouldn't be buying Toyotas :)
A LOT of people seem to be determined to see that happen.
LOL... YES IT WOULD!

[post="51800"]<{POST_SNAPBACK}>[/post]

I'm in auto sales (Chevrolet/Cadillac/Toyota) and I haven't met a GM retiree yet shopping for a Toyota. It seems that people of that generation do actually have some loyalty, unlike today's younger generation of car buyers. Today's generation are willing to take anything written at face value. They're convinced that if Consumer Reports gives a Jap car a "recommended" rating, then that's the car for them. They're mindless drones who believe everything they read. Have you read some of the complaints by these critics about GM cars? Cup holders that are too small or inconveniently placed, vague steering, designs that are too generic and other dribble that doesn't amount to much. I would be embarassed to admit that I passed on a new Monte Carlo for less money over a competitive import because the steering was "vague". Please! GM is trying to reverse the thinking of these younger buyers, and their products go a long way to accomplishing that. But because these younger buyers have grown up in households where their parents drove imports, they barely know what a Chevrolet is, or a "bowtie", or anything else Chevy related. That's the shame in it all. They don't give a moment's thought to giving their hard earned money to Jap manufacturers to the detriment of their US economy. When GM convinces people that they're not "settling" for one of their products, things will get better. And when the UAW wises up to the fact that it's not the '60's anymore, and their members might have to cough up a contribution for health care coverage and pension, like the rest of the civilized world, things will really get better. GM is certainly doing their part. We're just waiting on the UAW to do theirs.

[Croc]

Actually, today's generation is just very savvy. You forget, we grew up and came of age with the internet. We are very adept at finding information quickly. We can make entire PowerPoint presentations in an hour or two thanks to Google. Presentations used to take days and lots of overhead transparencies. Thing is...loyalty really has nothing to do with car purchases any more than other consumer goods. You see, if I want a vehicle, I want to get one that suits my needs the best. Why should I sacrifice satisfaction just because of the badge on the car? I like GM, but if I see a vehicle at another camaker that I like better, I will go for that car. For example...If I were in the market for a midsized car, I would ignore GM and focus on the new Fords. Why? Because they are better vehicles. I would also look at the new VWs. They satisfy my needs. Yes, there are a lot of uninformed people out there, but I don't think it is so much a generation thing. If anything, this younger generation is far more open-minded than baby boomers, who swore off domestics in the late 70s and early 80s.

[thegriffon]

The rwd sedans were not put on hold for the GMT 900s, which everybody keeps repeating. That was just media speculation. The Zeta sedans were sent back to the drawing board to better align costs and market position, although you may disagree with some of the changes. Spending on product development is increasing to get these and other vehicles to market sooner.

[thegriffon]

I could be wrong, but Yoda-speak is structured Object-Subject-Verb (together with the appropriate modifiers), as prototype66 demonstrates. "in" is a preposition modifying the object, thus "Dangerous straights the company is now in" should be 'In dangerous straits (object) the company (subject) now is (verb). Earlier language was less structured, and forms such as subject-object-verb were used e.g. ek hlewigastiz holtjaz hornam tawidjaz (I, Hlewigast Holt, (the) horn tawed (=prepared, now used only of leather). The difference bwtewen the object and subject was made clear by the use of different case forms (nominative, accusative, dative, genitive), but with the reduction in forms it becomes important for word-order to distinguish between the forms ("lady bugs ate" could mean "lady ate bugs", "bugs ate lady" or "lady-bugs ate" - presumably aphids). Some words do retain case distinction - most pronouns (e.g. nom. he, acc./dat. him, gen. his) and a few substantives - eg. nom. mead acc./dat./gen. meadow (but when does a mead actually do anything?)

[91z4me]

Interesting, Griffon, I didn't know that. You say the Zeta sedans were sent back to the drawing board to better align costs and market position and that I may not agree with some of the changes. Do you mean they are being made more up-scale and expensive or downgraded and cheaper? Or are they trying to use more inexpensive parts? Or am I way off the mark?

[post="52030"]<{POST_SNAPBACK}>[/post]

Since it seems thegriffon is a little high by his last post.

I will guess take the costs out a little more. VE would need a new plant and assembly method making it more expensive to start up. Take some cost out and produce some more profit per car and it becomes doable, without it expect a 10 year run with little changes to recoup the lost capital.

[motownr]

[quote name='puma' date='Dec 2 2005, 03:18 PM']
I'm in auto sales (Chevrolet/Cadillac/Toyota) and I haven't met a GM retiree yet shopping for a Toyota. It seems that people of that generation do actually have some loyalty, unlike today's younger generation of car buyers.

My experience is that GM retirees are more than willing to drive a non-GM vehicle IF they can get the same deep discount that their former employer provides them.

In other words, they are not really loyal to anything other than the price.

In practice, that means they wind up in F or DCX products, not Toyotas or Hondas. However, if they could get Employee prices for those brands, I have no doubt that a significant number of them would happily drive them as well.

My $.02

[balthazar]

Actually, today's generation is just very savvy.  You forget, we grew up and came of age with the internet.  We are very adept at finding information quickly....

I believe puma was talking about the "today's younger generation of car buyers", not the 'young generation' et al. The average age of car buyers today is in the mid 40's, which renders the early 20s statistically insignificant as far as buying habits. That's not to say 30- and 40-somethings don't take advantage of modern methods of car research, but it can reflect a different set of motivators. Don't be so defensive. Edited December 4, 2005 by balthazar

[Newbiewar]

Interesting, Griffon, I didn't know that. You say the Zeta sedans were sent back to the drawing board to better align costs and market position and that I may not agree with some of the changes. Do you mean they are being made more up-scale and expensive or downgraded and cheaper? Or are they trying to use more inexpensive parts? Or am I way off the mark?

[post="52030"]<{POST_SNAPBACK}>[/post]

originally lutz was complaining to cancel the whole thing because it was much too expensive... then a week or two they started working on it again...

so yes i'd say reduce costs...

[hyperv6]

The 300 at $30,000 plus is selling but not in the numbers GM wants to sell Impala's or what ever they car the RWD sedan when it apears. Ford had the 500 Selling in the mid $25K range but the car is lame. Ford comes out with the Mustang priced $25-30K and GM is already selling a GTO in low number over 30K. Chevy could not pricve the Camaro over 30K and sell in the numbers needed to compete with the Mustang. From what I have read and Lutz has stated I think it is clear GM wanted to be able to price the RWD cars around 25K to sell and with reduced cost make more money per unit. Once you get over 30K your numbers start to drop for a family sedan and low priced performance car. They sell at the higher prices but look at the number of units sold. This pricing only works for lower production companies like BMW etc.

[thegriffon]

Interesting, Griffon, I didn't know that. You say the Zeta sedans were sent back to the drawing board to better align costs and market position and that I may not agree with some of the changes. Do you mean they are being made more up-scale and expensive or downgraded and cheaper? Or are they trying to use more inexpensive parts? Or am I way off the mark?

[post="52030"]<{POST_SNAPBACK}>[/post]

I meant market position as the kind of vehicle, not only the price, and not the vehicles you might think they should be doing.

[cmattson]

I'm wondering if it's not better to compare the "Malibu vs the Impala" when trying to decipher Griff's latest. By re-examing price and market pos, that tells me that GM is trying to slot the car in a different area than they originally had targeted. Compare the Malibu and the Impala: both are sedans, but the Malibu is clearly the smaller, more fuel efficient and less powerful of the two. It's price/value also reflects the differences between the two. The Malibu and Impala, while both sedans, are clearly targeted towards different consumers. Perhaps Chevrolet was trying to determine where the Camaro should fit on the scale of things. Perhaps two RWD vehicles? If that's the case, could Chevrolet have a smaller, sporty RWD coupe (Camaro) and later have a larger, touring RWD coupe (Chevelle)?

and not the vehicles you might think they should be doing.

Damn I'm curious! Edited December 5, 2005 by cmattson

[The O.C.]

The 300 at $30,000 plus is selling but not in the numbers GM wants to sell Impala's or what ever they car the RWD sedan when it apears. Ford had the 500 Selling in the mid $25K range but the car is lame.

Ford comes out with the Mustang priced $25-30K and GM is already selling a GTO in low number over 30K. Chevy could not pricve the Camaro over 30K and sell in the numbers needed to compete with the Mustang.

From what I have read and Lutz has stated I think it is clear GM wanted to be able to price the RWD cars around 25K to sell and with reduced cost make more money per unit.  Once you get over 30K your numbers start to drop for a family sedan and low priced performance car.  They sell at the higher prices but look at the number of units sold. This pricing only works for lower production companies like BMW etc.

[post="52675"]<{POST_SNAPBACK}>[/post]

There's a hell of a lot of LX cars (300/Charger/Magnum) selling in the mid-20's with the 2.7L and 3.5L V6 engines. I think at least 50% of them are this configuration....based upon estimations of penetration for the HEMI engine.

I wouldn't call the Ford 500 anywhere near "lame." Blandly-styled? YES....but lame? No. It's certainly a way more up-to-date architecture than what we have in the (old) W-body sedans (LaCrosse, Impala, Grand Prix.)

[hyperv6]

There's a hell of a lot of LX cars (300/Charger/Magnum) selling in the mid-20's with the 2.7L and 3.5L V6 engines.  I think at least 50% of them are this configuration....based upon estimations of penetration for the HEMI engine.

I wouldn't call the Ford 500 anywhere near "lame."  Blandly-styled?  YES....but lame?  No.  It's certainly a way more up-to-date architecture than what we have in the (old) W-body sedans (LaCrosse, Impala, Grand Prix.)

[post="53122"]<{POST_SNAPBACK}>[/post]

The 300 does sell well at 30k, I have not seen the numbers on the Magnum or Charger but around Ohio I see more new FWD Impalas on the old W than I do either of them.

My point is GM wants to keep the family sedan like a RWD Chevy sedan and RWD 2 door coupe under 30K well appointed. Once you climb over 30K your sales start to drop.

I think even with the LX cars under 30K the numbers they turn are far from what Chevy expects in a Family sedan. If any of the LX family is in the top Five let alone top ten in sales in this country I would be suprised. Chevy wants a top ten car! I thought I saw that the 300 sold 77,000 car last year. Chevy want and needs to do better than that.

I have had several people who own the V6 say it is ok but wished they could have afford a V8. Now with the V8 your price climbs quickly. If Chevy can beat 30K with a V8 it will give them a marked advantage and increased sales.

The Camaro need to meet of beat the Mustang and it is at 25K-30K.

The Ford may be newer than the W and have a advantage but it ever so slight for a clean sheet of paper brand new car. The Ford is very unimpressive for the money and work Ford has put into it. At best it is a good car but an average car. I would never trade my GP for one. Ford needed at Home run and got a single or double at best.

Lets face it even Ford has addmitted they failed when the car came out. Ford staff said they need more power and that they already has a restyling in the works. If they had done a better job like they did on the Fusion they would have hit the home run.

Ford really dropped the ball on styling and power! Edited December 5, 2005 by hyperv6

[91z4me]

The 300 does sell well at 30k, I have not seen the numbers on the Magnum or Charger but around Ohio I see more new FWD Impalas on the old W than I do either of them.

[post="53279"]<{POST_SNAPBACK}>[/post]

I would hope you see more W-body Impalas they have been out for what 5 years relatively unchanged AND they sold above 250,000 per year. The LX cars have been out what 2 years?

[hyperv6]

I would hope you see more W-body Impalas they have been out for what 5 years relatively unchanged AND they sold above 250,000 per year.  The LX cars have been out what 2 years?

[post="53332"]<{POST_SNAPBACK}>[/post]

Sorry, I speak of only the present of the new 06 models base on the updated old W platform. Edited December 6, 2005 by hyperv6

[91z4me]

Sorry, I speak of only the present of the new 06 models base on the updated old W platform.

[post="53356"]<{POST_SNAPBACK}>[/post]

I thought you meant you see more of the post 00 Impalas than 300s.