GM Situation in US getting worse

[Romulus]

Originally Posted by baboon

China, UK, saudi, japanese etc. are lending the US all this bailout money. The money has to be payed back by the US. The US have to pay interest on the money they borrow, just like when you take out a house loan from the bank.

Now when other countries realize the US cannot payback the money, they stop lending to them. This is similar to someone who cannot make their house repayments to the bank. Hence they default on the loan and the lenders repossess the assets (or the house).

Now, Americas solution is to print there way out of this mess. The more money supply the less value each dollar is worth. The countries that lent the money to the US, now have these assets that are decreasing in value everyday. They try to sell these assets at fire sale prices, but nobody but the US government will buy them. Bugger that.

That's the point I was trying to make.

It wouldn't surprise me if the US dumped their dollar and changed currency to the Amero, leaving other countries with billions and billions of worthless US currency.

[SSbaby]

Originally Posted by baboon

China, UK, saudi, japanese etc. are lending the US all this bailout money. The money has to be payed back by the US. The US have to pay interest on the money they borrow, just like when you take out a house loan from the bank.

Now when other countries realize the US cannot payback the money, they stop lending to them. This is similar to someone who cannot make their house repayments to the bank. Hence they default on the loan and the lenders repossess the assets (or the house).

Now, Americas solution is to print there way out of this mess. The more money supply the less value each dollar is worth. The countries that lent the money to the US, now have these assets that are decreasing in value everyday. They try to sell these assets at fire sale prices, but nobody but the US government will buy them. Bugger that.

Great post.

So why is the USD still 'relatively' strong? Or, more to the point, when will it REALLY collapse?

[baboon]

Originally Posted by SSbaby

Great post.

So why is the USD still 'relatively' strong? Or, more to the point, when will it REALLY collapse?

I dont fully understand how markets work, but I know the USD is quite strong, but not strong enough to make new highs.

I think because USD is relatively strong, its sucking in more buyers because no other asset is getting such strong return (except for gold). This hysteria to own US treasury bonds usually signals the top of a market.

Ultimately, if you continue to supply a country with dollars, their currency will eventually be worth nothing. So I dont think this strength in the USD will last. Timeframe? Im not a good market timer so i dont know.

[buggerlugs]

They have just said this morning on the news that the 30 billion GM wants to borrow is knowhere near enough and they could declare themselves bankrupt very shortly.........Also stated that Holden are going to try and cut down shifts to save jobs.........

[ebxr8240]

They have chapter 11 over there.. They can trade under new rules .. Which may mean they don't have to pay out employee's supper etc..
But thats only part of there problems..
People turned off G.M when they went front wheel drive a few years ago..

[Wally]

Here is their 10-k filing:

http://idea.sec.gov/Archives/edgar/d...45144/d10k.htm

I notice they have reduced debt significantly:

2007:
Unsecured $ 102,339
Secured $ 90,089

2008:
Unsecured $ 53,213
Secured $73,108

Which probably accounts for their cash shortage.

[SSbaby]

Ch11 is probably the best option for GM.

You wouldn't want tax payer's money propping up a company that's failed to take the appropriate steps to resurrect itself over the past few decades of sliding market share.

Get rid of the whole board, get rid of all the brands except, Chev and Cadillac... and start again. If that then doesn't work, so be it.

[vztrt]

Originally Posted by buggerlugs

They have just said this morning on the news that the 30 billion GM wants to borrow is knowhere near enough and they could declare themselves bankrupt very shortly.........Also stated that Holden are going to try and cut down shifts to save jobs.........

Here's the Holden story

http://www.theage.com.au/national/ho...x.html?page=-1

Holden work-less plan may save jobs

Ben Schneiders
March 6, 2009

HOLDEN and unions are considering a deal that could mean thousands of manufacturing staff work even less — possibly only a few days a week — in a bid to save jobs and skills in the industry.

The negotiations have been praised by Industry Minister Kim Carr who told The Age that the co-operative approach should be used as an example across the economy.

"The model that General Motors (Holden) has followed in working with the AMWU (Australian Manufacturing Workers' Union) is one that I think others can emulate," he said.

"The number one priority for workers now in terms of their negotiations is job security. Both companies and unions should approach this in a flexible manner."

It is believed the discussions, which are yet to be completed, could result in staff working "rotating shorter weeks", possibly of only a few days.

The reduced work would be on top of the high number of "non-production" days in the industry already, with 10 days chopped out of Holden's manufacturing schedule in April. On those days, workers are typically on half-pay.

While a more co-operative environment exists at Holden, in other parts of manufacturing and the economy mistrust reigns as firms move to cut staff and hours.

At Foster's, industrial unrest threatens to spill over after the company outsourced maintenance work at the cost of 115 jobs, while at Robert Bosch the firm accused unions of adding to job losses with their inflexibility.

Unions have also blamed companies including Pacific Brands for taking the "easier" option of laying off hundreds of staff while executives did not share the pain.

At Holden, the company is reportedly considering cutting the pay of its executives.

Ford has already frozen the pay of white-collar middle and senior managers, spokeswoman Sinead McAlary said yesterday.

AMWU's federal vehicle secretary, Ian Jones, said "everything was on the table" in the Holden talks and he expected the discussions to be completed within a few weeks.

Mr Jones said the goal was to have as many people as possible employed at Holden, and across the sector, by the end of the year.

Manufacturing remains the biggest full-time employer in Victoria.

Mr Jones echoed Senator Carr's comments that he was optimistic conditions would improve in manufacturing and said he expected a much healthier car industry by the end of 2009.

"Everything we do is aimed at ensuring that people have employment," Mr Jones said.

Asked whether workers could be asked to go on half-pay for the extra days they did not work, Mr Jones would not rule that out and said working fewer days was one of a number of proposals on the table.

Mr Jones said there was a spirit of co-operation between unions and car-makers.

Holden, which employs about 6500 people in Australia including 3500 in manufacturing in Melbourne and Adelaide, would not comment directly on the talks. "We're doing everything we can to minimise the impact on our people," said spokesman Scott Whiffen.

Prominent businessman Lindsay Fox said the typical 40-hour week should be modified and the Federal Government should spend more on infrastructure and use the knowledge of top executives.

[SSbaby]

The question was posed, What happens to Ford if GM goes down?

This response from a US auto industry expert...

The entire industry goes into meltdown - and Ford goes along with them.

Even if Ford maintains a reasonably safe internal cash position, when the supply base goes down, they go down.

Failed suppliers don't ship parts.

No parts, no cars.

No cars, no cashflow.

...


Not meaning to insult... but the above belies a significant misunderstanding of how bankruptcy works. Controlled or uncontrolled, GM stops paying, and does not pay the suppliers what it already owes them.

They're going to tank. Wholesale.

That's a scarey prospect in case some didn't realise the full impact of the problem.

[Gobes32]

Which is why no one here wishes GM to go down, Toyota are the enemy after all...........

But seriously, GM need to restructure and whether that happens through bankruptcy or other avenues is at their discretion. They will inevitably come back a smaller organization but they will also come back as a VIABLE organization, which is something they aren't now.

[Bossxr8]

Originally Posted by vztrt

Here's the Holden story

http://www.theage.com.au/national/ho...x.html?page=-1

We were running 3 or 4 day weeks for months, didn't stop job layoffs. Its inevitable that Holden will axe jobs. You can't keep paying too many employees for the number of cars you are selling before you really start losing money, which they probably already are.

Sales aren't just suddenly going to pick up in a few months, its just delaying the inevitable.

[Wally]

I suppose this is one way to survive, although I wouldn't want to be the recipient:

Under the auto maker's conversion offer, debt holders would receive 108 shares of stock and $80 in cash for each $1,000 they have in bonds. The value of the offer would be about 28 cents on the dollar based on Thursday's share price.

Those participating in term-loan offer would receive up to 47 cents on the dollar while the majority of unsecured note holders would get 30 cents. All the figures could change depending on the movement of the company's stock price.

[Gobes32]

Originally Posted by Bossxr8

We were running 3 or 4 day weeks for months, didn't stop job layoffs. Its inevitable that Holden will axe jobs. You can't keep paying too many employees for the number of cars you are selling before you really start losing money, which they probably already are.

Sales aren't just suddenly going to pick up in a few months, its just delaying the inevitable.

Exactly, thank god all that is behind us now.........

[D12]

It isn't great news about GM....but they have made some very stupid decisions over the past few years.....and have also had massive handouts from the US Government.


Ford on the other hand have been preparing for this for near on 4.5 years....not sure if anyone ever watch program called "Ford Bold Moves"....basically it was on how Ford were restructuring for the tough times ahead against Toyota and the like....Ford will be fine we have excepted NO handouts or concessions from the US government...YET???


I cant stand any of GM's products....but this is dangerous times for them....and I wish them the best of luck!!!

Here is a link to some Ford Bold Moves videos....most are really good!!!

http://www.youtube.com/watch?v=pFjwHLSHXQI

[mrbaxr6t]

speaking of bold moves I remember seeing a doco about Ford aust. being in trouble and having major consumer discontent on the reliability front - so they got a car and thrashed it to bits around and around a racetrack for like 24 hrs straight in front of the entire countries' media talk about balls to the wall - they succeeded and just to ram the point home after they ran the 24 hours they kept going just to give the finger to all the doubters and nay sayers was a very bold yet brilliant move, and had they failed I presume we wouldn't have Ford Aust.

<<on topic>>

The troubles GM are having are sad and lots of people will get burnt and be in much financial pain, I agree that Ford has placed themselves better to weather this storm, I know this is not the storm they were setting up to weather. But I believe they will continue - To be honest I am unsure of the future of GM, but am hopeful that they will continue on - possibly the company will shrink I hope they Have the assets to continue after their obligations are met - are their liabilities less than the net worth of their assets? anybody know the answer to this one?

[SSbaby]

Originally Posted by mrbaxr6t

are their liabilities less than the net worth of their assets? anybody know the answer to this one?

Only to the tune of ($60B).

GM were essentially bankrupt years ago but their board's denials over the past few years have led them to start begging to the govt for money as no bank would lend them any.

If GM had the wisdom to restructure, say 10 years ago, perhaps they wouldn't be in this mess today.

[Nikked]

Apparently GM owned the Opel facilties in germany, and now that GM have dumped opal, Opal lost the factories...

Now, does holden own the facilties in aus, or GM...

[buggerlugs]

http://www.news.com.au/business/stor...-31037,00.html Wow, this coming from the man who could of been president........

[whales]

If GM goes down the gurgler we will all be driving cars owned by the Chinese no matter what the badge says

[hy_boi]

With my understanding, in the US, if they declair bankruptcy, they can trade without paying any bills for 18 months, and pretty much after that time period or previous debts are wipped clean? Correct me if I wrong. But if true, it sounds like it be the easiest path to take.

[prydey]

Originally Posted by hy_boi

With my understanding, in the US, if they declair bankruptcy, they can trade without paying any bills for 18 months, and pretty much after that time period or previous debts are wipped clean? Correct me if I wrong. But if true, it sounds like it be the easiest path to take.

would you buy a product from a bankrupt manufacturer??

[Fordman1]

Originally Posted by hy_boi

...., if they declair bankruptcy, they can trade without paying any bills for 18 months,

No....

Who will sell them components if they aren't going to pay bills ?

[hy_boi]

Originally Posted by prydey

would you buy a product from a bankrupt manufacturer??

That is the big question, and prob why they are trying to avoid this path.

Barraxr8 you sure?
From what I understand its trading for 18 months not having to pay bills but bills be due at that 18 months. Or something like that, in saying that I'm no expect on this subject.

[4Vman]

Originally Posted by hy_boi

That is the big question, and prob why they are trying to avoid this path.

Barraxr8 you sure?
From what I understand its trading for 18 months not having to pay bills but bills be due at that 18 months. Or something like that, in saying that I'm no expect on this subject.

Put yourself in the shoes of a supplier...? why would anyone supply goods to a customer that couldnt/didnt have to pay for them for 18 months?
Id cut supply the day my money looked shakey, make them pay upto date and trade C.O.D.....

[Dr Smith]

It's a long read however it's from the US SEC and US courts where Chapter 11 bankruptcy applications are made:
http://www.uscourts.gov/bankruptcyco...chapter11.html

or http://www.sec.gov/investor/pubs/bankrupt.htm

[Dr Smith]

Originally Posted by 4Vman

Put yourself in the shoes of a supplier...? why would anyone supply goods to a customer that couldnt/didnt have to pay for them for 18 months?
Id cut supply the day my money looked shakey, make them pay upto date and trade C.O.D.....

In such a situation the courts and a special committee are involved so suppliers to a company under chapter 11 bankruptcy face less risk although it's often the same suppliers pre and post chapter11. The suppliers need to be looked after because the company is attempting to get back to self survival once under Chapter11.

[SSbaby]

Originally Posted by prydey

would you buy a product from a bankrupt manufacturer??

The airline carriers post 9/11 went bankrupt and restructured... to the point where they are financially viable today.

There should be a clear indication that the car industry as a whole is undergoing a substantial revamp. There is still hope for GM providing the US govt could reassure consumers that cars made in Detroit will continue to be backed with warranty, service and spare parts.

These are just my opinions, not industry speculation.

[buggerlugs]

http://www.news.com.au/story/0,27574...-23109,00.html Hopefully this will help Ford US

[imugli]

Originally Posted by buggerlugs

http://www.news.com.au/business/stor...-31037,00.html Wow, this coming from the man who could of been president........

And I agree with him.

Chapter 11 is the best chance GM have of coming through this not owned by the Chinese. It's also the best chance the US taxpayers have of ever seeing their money again.

Yes, it will mean layoffs, but show me a manufacturing industry in the developed world where that isn't happening anyway? Why should the auto industry be any different? Because there's more of them?

[Ohio XB]

Originally Posted by hy_boi

With my understanding, in the US, if they declair bankruptcy, they can trade without paying any bills for 18 months, and pretty much after that time period or previous debts are wipped clean? Correct me if I wrong. But if true, it sounds like it be the easiest path to take.

If GM doesn't pay those bills the suppliers for them close up. They are smaller companies and cannot do without money. Auto manufacturers don't pay bills for sometimes up to 9 months. That means the suppliers have to take out loans to keep running and then payback loans when they get paid. Yeah, this is a real sorry way to do business but this is not unique to the US manufacturers.


Steve