GM hit 18 Year Low, to follow subsidiary Delphi bankrupt?

[Timmeh]

From NEWS.com.au:

SHARES of struggling General Motors closed at their lowest level in nearly two decades overnight as investors reacted to a strike threat at its largest auto parts supplier.

After having dropped more than 30 percent in the past month, shares of the world's largest automaker closed down 5.8 per cent at $US21.29, up from a low of $US20.90 in afternoon trading.
It was the weakest close since the crash of October 1987, said Art Hogan, an analyst at Jefferies, who said some investors are concerned that GM could follow its subsidiary, Delphi, into bankruptcy.

They have the same issues in term of legacy costs," he said

"If they had to follow the same path and file for bankruptcy as well, that would be a major issue."

A spokeswoman for GM downplayed those fears, and said the company had recently obtained major concessions from the union on health care costs.

The comments from the United Auto Workers "are related to Delphi," said spokeswoman Toni Simonetti.

The UAW said Wednesday that the "unprecedented" salary cuts proposed by Delphi could not be accepted by union members and warned that a strike was possible at GM's largest supplier.

"We have been subject to an unprecedented attack on our wages," the UAW said on its website. "Delphi's solution is to force its workers to near poverty-level wages while rewarding executives with $US90 million in bonuses."

A strike at Delphi could interrupt production at GM, a costly interruption at a time where GM can ill afford it.

GM has been struggling with a loss of profit and market share as consumers shy away from its gas-guzzling sport-utility vehicles. It lost $US3.8 billion in the first three quarter of 2005 and has seen sales drop by more than 20 per cent in September and October.

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Just highlighted some areas from a current article on www.news.com.au. I can't help but feel concerned if I was a GM shareholder, or enthusiast. I know alot of car manufacturers must be hurting somewhat in the current fuel climate, but losing 3.8 billion US in one quarter of a year is incredible.

I know media is often sensationalism at its finest, but doesn't look too healthy for Generic Motoring at the moment. Would Holden buy itself out of GM ownership if they went bankrupt (not saying it will happen but theorising)? Indeed, is Holden part of the big GM badge or is GM Daewoo a subsidiary? Not sure on how Holden fits into the big picture with this!

Considering GMs military contracts also (like Humvees and other ground support equipment), they must be doing something wrong!

From CNN News: GM sold 257,623 vehicles last month (Oct 2005), compared with 346,058 in the same period last year. GM's light truck sales, which include SUVs, pick-up trucks and minivans, sank 30 percent in October.

From VFacts Oct 2005, Holden sold a mere 13,923 vehicles. Ford Australia sold only 9,192 vehicles. So how does a company that sells 28 times as many vehicles each month (on a bad month, a year before that figure was 37 times as many) as Ford Aus still lose 3.8 billion US in three months. Does anyone else find that remarkable?

And consider this, from the Sydney Morning Herald:

Originally Posted by Sydney Morning Herald

The Federal Government will spend more on protecting overseas missions against terrorist attack and upgrading Australia's intelligence capabilities under a $1.1 billion national security program.

The Australian Security Intelligence Organisation will be provided with $48.1 million for enhanced capability "to meet the demands of counter-terrorism investigations", $5.2 million to enhance intelligence on proliferation, and $3.1 million to build language skills, all over four years. The extra funding for language skills follows a recommendation of the Flood inquiry into Australian intelligence agencies.

Defence will also get $14.8 million over four years for counter-proliferation intelligence, while Australia's overseas intelligence agency, the Australian Secret Intelligence Service, will be given $19.4 million.

Compares those figures to GMs losses, it seems the automotive world for one company in the US is worth far more than national security in Aus in dollar terms, which is small change! Goes to show how much money there is in the US.

Well, that's just my food for thought for this week. Not trying to stir a Ford vs Holden debate (oh no! I mentioned both words in one sentence!), just some food for thought. I know there are lots of issues to consider on all things I have posted about, but I just find some figures amazing when compared side by side that you never hear about much.

Tim