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GM Needs Help--Right Now
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Enlarge PhotoGeneral Motors CEO Rick Wagoner called his company's financial situation "an issue that needs to be addressed urgently" in an exclusive interview Monday with Automotive News. Wagoner said that his company can't wait until president-elect Barack Obama takes office in January to receive more assistance from the Federal government.
GM recently posted its fifth quarterly loss and announced it may be completely out of cash in a few months under its current spending scenario. The giant burned through nearly $7 billion in the third quarter alone.
In return for more Fed assistance, Wagoner wants to extend preferred stock options to the government, enact limits on executive compensation, and quicken the introduction of more fuel-efficient vehicles.
A bit troubling is Wagoner's lack of a specific number; just how much more help, exactly, is GM requesting? Additionally, Wagoner is basing GM's turnaround on an assumed 11.7 million sales in 2009. With U.S. auto sales currently "mired at 11 million units" annually, according to Automotive News, is it safe to assume an additional 700,000 sales in '09 from a market that's done nothing but nosedive recently?--Colin Mathews
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GM recently posted its fifth quarterly loss and announced it may be completely out of cash in a few months under its current spending scenario. The giant burned through nearly $7 billion in the third quarter alone.
In return for more Fed assistance, Wagoner wants to extend preferred stock options to the government, enact limits on executive compensation, and quicken the introduction of more fuel-efficient vehicles.
A bit troubling is Wagoner's lack of a specific number; just how much more help, exactly, is GM requesting? Additionally, Wagoner is basing GM's turnaround on an assumed 11.7 million sales in 2009. With U.S. auto sales currently "mired at 11 million units" annually, according to Automotive News, is it safe to assume an additional 700,000 sales in '09 from a market that's done nothing but nosedive recently?--Colin Mathews
---
Make sure you check out our partner sites dedicated to focused news, reviews and more for Ford, Chevrolet, Toyota, Honda, and the Toyota Prius.
Responses (16 total)
By JDK | Posted: Nov 18th 2008, 07:22:27 PM
Maybe Wagoner could offer to work without pay or maybe minimum wage for the next 10 years. That'd save the company a couple billion right there.
Why do companies thinks it makes sense to run their organizations with so much debt? Some debt is unavoidable, but certainly not all.
And these unions... Ron Gettelfinger needs to get a brain and tell his people to do the same. Any practical usefulness of unions was done 30+ years ago. It's not about protecting employee pay any more. It's about greed.
By Reece | Posted: Nov 17th 2008, 05:30:01 AM
I have a radical plan for GM, Move its headquaters to Germany, poach some folk from Mercedes, BMW and VW to run the company, remove the cancer by selling off the US assets to the unions (they ran the business for so long anyway and let them deal with high wage offers/healthcare/unprofitable factories) and concentrate on the rest of the world where they can actually make some money and develop some good cars.
By jerseyGEoff | Posted: Nov 14th 2008, 12:16:19 AM
A Much Better Bailout Plan
For years now, the Big Three automakers have been unable to produce cars competitively, largely because they have to buy their employees’ and retirees’ healthcare through private insurance, whereas workers in all other industrialized nations are covered by cost-effective national healthcare plans. Even the foreign manufacturers who produce here undercut Detroit by recruiting a younger, healthier workforce.
Now that the bottom has dropped out of the market for SUVs and light trucks, the Big Three are facing certain bankruptcy and need a bailout, possibly for loans to fund the $51 billion they owe to the VEBAs they promised to set up for their retirees’ healthcare. However, the VEBAs will purchase health insurance through private, for-profit providers, which skim off up to 30% from the top, as compared to Medicare, with only a 3% overhead. It would be far better for Congress to allow the UAW workers and retirees to be the first to enroll in a program based on the Conyers-Kucinich Bill (H.R. 676), an expanded Medicare with no premiums, no deductibles, no co-pays, and no hassles. Like Social Security, the H.R. 676 program would be funded by a payroll tax of 4.5% from employers and 3.3% from employees.
Will this save money for Detroit? You bet. If we’re going to bail out the Big Three, let’s do it in a way that solves a real problem that is strangling U.S. manufacturing: the burden of private health insurance.
This is a more effective bailout, and I am positive that letting 5 midwestern states crater in this rotten economy is not an option now.
you should research hr 2034 and hr 676- they are what detroit needs now!
By Jack | Posted: Nov 14th 2008, 12:15:18 AM
At this point, I think Ford has a better shot at survival than GM. They are following through on their euro car plans.
Bring over the Fiesta (5 door please), Escort, Ka, and Kuga they'll be in good shape.
haha..password for submitting the comment is "batch socialism"
Marty must have thought that one up. :-)
By Ed | Posted: Nov 13th 2008, 11:06:46 PM
Jay is right.
However shocking bankruptcy for such lame godzillas as GM and Ford seems, many other major, big cos have tried it and emerged out of it much more efficient. (airlines etc).
Bankfuprcy will allow GM to RENEGOTIATE the ludicrous UAW contracts and pay its workers the same $30 they get in other industries. And maybe some of them will get dead serious and improve their performance too.
By jay | Posted: Nov 13th 2008, 04:10:41 PM
Could we all just let the market work? The companies need to feel the pain. The unions need to realize the damage they caused and the execs need to be scuttled. If my business went bad I would close or declare bankruptcy - why should they be any different? Go through the process and emerge as a leaner, meaner industry and take down the foreign competition!
By Dave | Posted: Nov 13th 2008, 02:29:30 PM
Holy #@!% I agree with Ed. Like I said in another post, Nardelli, Wagoner have to go. New execs should come in and be paid a lower wage. The government should not come in and tell the execs what they should make, that is not the goverment place but they should set a precedance and do like Iacocca did untill they turn the companys around. I will also bet my pay check that these currant execs have one hell of a golden parachute!
By Tom L | Posted: Nov 13th 2008, 03:35:17 AM
Interesting points Bill (and Reese). Regarding your statement, "What is needed now is a solution which allows all three companies to survive AND to compete in the near and long-term future." I would pose the following question: What if no such solution exists? (or more specifically, what if the consessions you list aren't enough to do the job) What should be plan B? And at what point do we recognize that our solution isn't going to work and we need to go to plan B?
By Reece | Posted: Nov 12th 2008, 10:27:12 PM
Unfortunatelly GM, Chrysler and Ford are too big to fall to many other companies rely on them so it would eba disaster if they fell. But any rescue, most likely by stock options must come at a price and that price is the GM Board and most of its senior execs (not Lutz who at least has tried to turn things around). Selling assets to foreigners is going to have to be considered though this is most likely to be from Cerberus - Jeep to Hyundai, Chrysler to Renault/Nissan or VW. Possibly even a break up of GM into various units to get away from the Chevy bias that is killing the other brands.
Not sure why the financial firms are the only one's deserving of saving since they are the main culprits in the wider economic malaise. A failure in the big 2 and 1/2 will have equally fatal effects on the wider economy.
By Bill Burke | Posted: Nov 12th 2008, 09:49:41 PM
What I fear in this debate is over simplification of the issues and stereo-typical generalizations which are chic but inaccurate. In a rush to place blame and to produce a "quick fix" more harm than good will be done. Are the managers at the big three to blame? Well yes, in part, but not totally, since their decisions were driven by market conditions with little room for production risk due to ironclad union contracts. The unions, indeed, but who can blame them for seeking the best deal they could intimidate from the manufacturers? The Big Three for not standing up to the unions? The government for indifference or union coddeling? The argument goes on and on since there is enough blame to go around. What is needed now is a solution which allows all three companies to survive AND to compete in the near and long-term future. All parties must give to get this done. Union concessions in benefits and pensions. Limits on management compensation.Government loans with repayment guarantees and guidlines on the players in this bailout. What must be understood is that brand identity must be preserved and the unique ethos of each company maintained. In essance, consolidation should be off the table. A Dodge is not a Chevy and a Ford should never be a Pontiac, each is unique onto itself and part of the American culture. Let's not over-react and fail in this effort to save our home-grown auto industry.
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