Who really likes any GM products? What can they produce that will sell in enough numbers to reverse the decline? Who will they sell it to? All these questions and more can be answered by looking below.
Carved up like a Dickenson goose at a table surrounded by the French, Indian, and Japanese. Maybe even the Chinese. Germans represented by VW may come in later for the scraps.
GM is up after the announcement. I can't recall a dividend elimination ever being seen as good news.
GM is in lousy shape, but I applaud their announcement this morning. I think they need to be very agressive in trying to save the company. I doubt it will save them in the end, but at least they're willing to try.
These guys still haven't conceded that bankruptcy is inevitable. Who are they trying to fool? Their debt is junk and their stock is now a penny stock. Still a good short IMO. Global operations outside China are almost as worthless as their US ops.
Sadly GM doesn't even acknowledge what ails it. The first step on the road to recovery is acknowledgement of how you got sick in the first place. They stopped innovating technically and started what they so insultingly called financial engineering. "Trimming costs, "raising capital," "suspending stock dividends," "enhanced liquidity" are all more financial manipulation.
I've said before what an American automaker needs to do is buy a copy of every single Honda CVCC through Civic extrapolate for quality and features and plan on putting out the 2013 model of that series themselves but in 2011 or sooner.
Allow me a moment to quibble over words. Liquidity means the ability to convert an asset into cash, as cash is the most liquid asset. If the asset has been already converted to cash, as GM is doing with its move to sell $4b in assets and tap a $2b equity line, then it has actually reduced its liquidity, as it now has fewer assets to convert to cash, i.e., to make more liquid.
I know that the financial press reports moves to enhance "liquidity" like these regularly these days, but what they are really talking about are moves to liquidate assets such that they are cash, or a close substitute. GM is increasing its amount of liquid assets, at the expense of liquidity, ie, at the ability to turn assets into cash at a later date.
I know, I quibble, but there, I feel better. And since this is a self-proclaimed uber-nerd site, I figured it was a good place to act like one.
July 15 (Bloomberg) -- Retail sales in the U.S. rose less than forecast in June, a sign the boost from the tax rebates may already be fading.
The 0.1 percent increase was the smallest since February and followed a 0.8 percent gain in May that was less than previously reported, the Commerce Department said today in Washington. Purchases excluding gasoline dropped.
[snip]
They stopped innovating technically and started what they so insultingly called financial engineering.
Not to be on-topic but...what killed GM and all american car companies was too much attention to the financial end of the business and not enough attention to the business of building cars. And the moment in time that the gong struck was when they started sharing parts across divisions from the same parts bin. You know, if I wanted a Buick I'd buy one. When I buy a Caddy, I expect a Caddy not a tarted up Buick.
I've not owned a US made car since I was just out of college. I've really wanted to buy one, but then when I drive one I can't. I'd have more respect for the executive staff if they came out with specfic plans on, you know, like building cars instead of how they are going to financially restructure. And all three are dead men walking until they figure this out and do that. Stop playing to the shareholders and play to the consumer. This is going to be the big lesson for business in the next few years across the board.
Be careful on SKF. I think the upside is not as great as it was and will move more in line with the S&P. The SRS on the other hand can move to 150 and still be only near its 52 week high. More upside and Cheaper at this point IMO. CR said himself the second recession tidal wave would be the consumer and commercial property.
char writes:
Get rid of pontiac, saab, saturn, and perhaps buick and then this might work.
char | 07.15.08 - 9:21 am | #
Disagree -
Saab should be an autonomous European producer - GM just banks rolls & profits from. Possibly sell off but hold minority stake. I think it could come around if no meddling from Detroit.
Pontiac, Chevrolet, Cadillac should all be 'brands' under one division (consumer cars). The actual nameplates differentiating the vehicles (brands) isn't what costs money - its the separate overhead and marketing budget. Tighten & consolidate... don't have to eliminate.
Saturn should be semi-autonomous division (very small cars, very frugal). That was their original mission before 'SUV craze - return to that mission.
GMC should be truck/SUV/commercial vehicle group (larger vehicles). Shrink this division to the size it was in say 1990, before SUV craze.
Kill hummer - no one would buy it.
Far fewer divisions, less white collar overhead, more focused offering.
:::::
This is going to be a white collar recession. Mid-level white & pink collar paper pushers are the lion's share of the work force now - they will feel the lion's share of the pain. I see it happening already - talked to a buyer working for a tier one yesterday... they have only one QE assigned to their team and he has over 200 'projects' in backlog spread over supply chain from India, China through NAFTA Zone to Eastern Europe & Turkey... the guy lives on a plane.
I still say the big three are BK city. It's only a matter of time, and not much at that.
tj & the bear | 07.15.08 - 9:34 am | #
I disagree. I can see Chrysler and possibly GM, but not Ford. They started their downsizing/restructuring first and got much more favorable financing.
They are also farther along in the small-car-for-America game. While GM appears to be first with the Saturn Astra, it's being imported from Germany and they have to deal with exchange rates. No profit. Ford is already in the tooling-up-the-factory stage for the Fiesta, to be produced in Mexico so it can be sold for a profit in the US.
This is going to be a white collar recession. Mid-level white & pink collar paper pushers are the lion's share of the work force now - they will feel the lion's share of the pain.
Great. Precisely the people who are politically naive and unsavvy.
Thanks - not a huge TA guy but that spike above 30 mark has been pretty reliable - also wondering if as this bear 'matures' whether higher thresholds of fear will be needed to signal the bear rally...
Oh, now I see it, we're finally going to have that round number day (soon): $150 oil, $1000 gold, $20 silver, and the danse macabre of the currencies can begin.
"I've said before what an American automaker needs to do is buy a copy of every single Honda CVCC through Civic extrapolate for quality and features..."
RobDawg, I was wondering 25 years ago why the American manufacturers couldn't summon the brainpower to do that. What many have forgotten is that the Japanese imports became successful first on price and economy but really became dominant by producing cars that were light years ahead of domestics in terms of powertrain quality and fit-and-finish considerations. I worked in a Chrysler assembly plant in Detroit in the early 1970s while in college, and the shoddiness of the product in terms of basic engineering and component assemblies was eye-opening. As a line worker, I had first-hand experience with the fact that nothing fit correctly or snugly; everything was sloppy and half-assed. (And the full-timers were another story...)
It was well-recognized within the auto industry in the Detroit area as far back as the 60s and 70s that GM was run at the top by financial guys, not car guys. Sure, there were some great car guys in charge of the individual product lines, but the bean counters were firmly in control at the top. In addition, the management culture at GM was very bureaucratic, with individuality being discouraged in favor of a group-think corporatism, wherein only those patient enough to work their way silently up the ladder stood a chance of attaining true power and responsibility. Lee Iaccocca would never have made it at GM.
This mentality may have been adequate when GM had half the domestic market to itself, but it meant that GM was catastrophically unprepared to effectively deal with the Japanese invasion.
Most Canadian banks didn't touch the US MBS market.
I hear ya. But it's the perception and the overall gloom that's weighing on all of them. Still prefer precious metals and commodities, think there's a bit yet to run.
It was well-recognized within the auto industry in the Detroit area as far back as the 60s and 70s that GM was run at the top by financial guys, not car guys.
Again, not to be on-topic (really, can these guys that like to get their stock advice on line find a blog devoted to that?) but this is the story of the last 30 years. Somehow, the love of finance took the place over the love of product. People don't by finance, people buy product. The people disucssing stocks on this board buy finance, and that's the problem...extant here for all to see.
The markets are a huge gambling den right now. And all these discussions are the exact problem we're facing - people chasing returns instead of investing. Building wealth takes time and patience and a lot of work. Talking about the VIX on haloscan breeds the same behavior that got us into this mess in the first place.
Finance has its place as part of executive discussion but is NOT for general consumption. And it certainly plays a part in decisions of investment but a company's product should weigh in more. Until everyone figures this out, all of you playing the market will be in for some rude surprises in the coming quarter.
Yep,thats the way I see it. I went through two layoffs in the early Nineties. I actually have zero worry about my current job(co. is debt free). Frankly nobody wants to do manual labor anymore. I kinda like it.
"Finance has its place as part of executive discussion but is NOT for general consumption. And it certainly plays a part in decisions of investment but a company's product should weigh in more.
I'm not sure I agree with you about the general consumption part, but I totally agree with you about the importance of a company's product.
and why do you think we are chasing returns? could it be because we see the destruction of our savings?
I was 100% long the market and also was saving in banks until this fall(although I did have some gold/silver)
however, this is all being taken from me. Negative real rates of return means that I can no longer afford to keep my money in banks... I'm losing too much in inflation.
as Wayne Angel (ex-Fed governor) stated: "we need to drop real interest rates to a level that forces savers to invest in the housing market.
well, I'm sorry... I won't do this. So I look around... in what can I invest?
Oil. done
Gold. done
short funds. I guess.
Treasurys. Yep, but getting harder by the day.
The Fed has forced me to do this.
as this continues and the markets become even more volatile, I will likely reduce my exposure (gambling as you would say)... but HOW?
so deflect your anger elsewhere... If the Fed had held the line and FULFILLED the other half of its mandate (maintaining price stability) then things would be different.
But this is not a phenomenon unique to the U.S. It's global.
That's true, which is why trillions of paper "wealth" is evaporating before your eyes. Stay tuned for more until the excess is wrung out, and all these types find somewhere else to ply their "experise".
In the meantime, the interesting discussion would be about GM and the big three in general. Survive? Where should they be trading based on fundamentals. Where is the corporate valuation now? For GM, I'm not very optimistic...they've been living off of the fat from financing for a long time. Perhaps they have lost to ability to actually make good product now and they are in a slow, failing spiral, only to be sold to someone.
well, I'm sorry... I won't do this. So I look around... in what can I invest?
Start by getting yourself a feed for historic stock prices and corporate data, and then a piece of software that will do analysis. Probably cost you around $500. Then screen for data points that you find interesting and do the work if you like stocks.
If you don't like the work find a mututal fund or an index fund as you're unlikely to beat it on your own anyhow, no matter what people on here say.
Stay in cash and take the pervailing yield in times of uncertainty. You could have gotten a sweet CD rate at Indymac last week that is now in the safest bank in the US if you kept it under 100k.
Or look at GM and do the analysis I suggeted and tell me if it is a buy for being undervalued.
I am curious - are you long now that the Dow is undervalued by ~4% according to your calculations?
The process of squeezing the leverage out of the system so it returns to being based on product and earnings is underway...I will applaud that day. Until it arrives I will learn the rules of the jungle that your executive financiers built for all of us to place our retirement savings.
Based on your prior statements, that day is here so is it walk or just talk?
energycon, did you read my comments about the market carfully? Because if you did, I said that the market, by my calculations, should have been trading at 11,200 when I posted. That does NOT mean that I think the market is undervalued. If the market was trading in the 13's when I said that and it's now trading where I said it OUGHT to be then, what does that imply now?
Or, again, is this about personality and not analysis? Reading is fundamental you know.
Financial alchemy has infiltrated so many businesses that the income statements/balance sheets are often lies or unintelligible (Enron Stock anybody?). I learned long ago, never invest in something that you don't understand.
I don't understand GM's relationship with GMAC as example.
Too many businesses have these issues. Off balance entities, opaque accounting
you assume I haven't screened some companies. I have. That's why I got into oil and energy stocks. That's also why I got into Gold. It's why I got into Johnson and Johnson (now I'm out). Also why i went SHORT financials.
to you it's a gamble. to me it was a rational investment choice.
yeah, I like to hear what people think of skf? what of it? It doesn't mean I'm going to go out and do what others do. It means I get their thought processes and can try to integrate it into my own.
I would be the model of investment as you propose IF
-the US financial system tried to be a little more honest and open
-the Federal Reserve cared about price stability.
We've got 2 GM cars in the driveway and we're happy with both of them. According to J. D. Powers the highest quality midsize Sedan is - not the Camry - not the Accord - but the Malibu.
GM has been competitive with the Japanese qualitywise for about a decade now.
20% of white collar work force? If it's engineers and supply chain, may GM R.I.P.
Quick observations on GM's brands: Sell or discontinue Pontiac; I never understood the point of Pontiac. Sell the Buick brand to a Chinese firm, since the brand still has cachet there.
I will go long GM as soon as
-they propose a plan that addresses future products and future quality gains going forward
-they get rid of their legacy costs (i.e. healthcare).
-they are only a car company.
until they do these things, I will not bite on them. why? when I can simply bet on Toyota, which has everything that GM has and more, without the liabilities.
I will tell you however, there is one time when I MIGHT bite earlier than the above... if I see movement on the Chevy Volt. it is the first shining star in American Car industry in decades.... if they can show movement before Volvo (coming out with their electric) or others then I may bite
I actually think that GM does produce a couple of good cars. But the overhead of those divisions are not worth the money if they are all sharing parts with each other. If they were distinct consumer products, then you'd have separate identity on the product level. GM lost that a long time ago.
I think that the best thing would be to do what dryfly (I think) suggested: make them simply nameplates of a type of car or truck...Pontiac is the sports/performance, Caddy luxury, Chevy the Honda of GM, Buick the luxo-barges with the seats of old butts, and GM the truck/SUV division. Then, you know, let each division design their cars by trying to use as much from the parts bin as they can, modifying as needed. Makes much better sense to me but hey, I run software companies not car ones
"GM has been competitive with the Japanese qualitywise for about a decade now."
Fair Economist | 07.15.08 - 10:45 am
I have been wrenching on anything with wheels for over 20 years. I learned to keep my opinion to myself and let people have their own preconceived notions about vehicles...
Nova wrote: Who really likes any GM products? What can they produce that will sell in enough numbers to reverse the decline? Who will they sell it to? All these questions and more can be answered by looking below.
My wife and I have owned many cars, mostly foreign over the years. I bought a Ford Ranger 7 years ago, my wife bought a Buick Rendevouz 3 years ago. Best and most trouble free vehicles we've ever had and at a great price. They are finally making good american products...maybe too late...but nevertheless good products at a great price.
I haven't been a great fan of them in the past as my last post concerning GM and the UAW attest, but some times see the face of "death" will wke one up.
"when you determine that the game is rigged, you take your money off the table."
There is a huge flaw with your argument though. If I'm gambling in Vegas and take my money off the table, I stay even.
In this game, when I take my money off the table, the house still charges me money just for living.
would you fly to vegas, stay in the Mirage day after day after day, and then never leave the room? just sit in your room with your money off the table? No, you can't do that as the cost of inaction is too high.
As I said, the Fed has forced me to put my money in the game by its negative real interest rate policy.
FWIW: ALMOST all of my money is "off the table" (Treasurys, savings accounts, etc).
I also find it humorous that you on one hand tell me to stop gambling and chasing yield and in the next breath tell me to PUT MY MONEY IN A FAILING BANK??????
According to J. D. Powers the highest quality midsize Sedan is - not the Camry - not the Accord - but the Malibu.
That would be "initial quality." Oh, and at $22,790 the hybrid gets poorer mileage and stickers for more than the Civic and Prius equivalents. Let's wait for the consumer reports reliability before claiming the laurels.
Xeno's paradox for an investment strategy, ipodius?
No energycon. Why would I publish my investment strategy explicitly in haloscan? There is enough in what I say to point in a direction and to get the gist of what I think. Sometimes I do make numeric posts, as when I said the DOW should be at 11,200. But that was then. What do I think now? Capitulation isn't far away, actually, and now I have shifted my thinking to what has been punished too severely.
I'd also short the Euro, but hey, I live on the edge.
Diogenes:
I agree with you that GM and Ford's products have improved of late. the spread in quality between Japanese and US cars is thinning.
there are also some products that look good. I almost bought the GMC Acadia because I liked it a lot, but it was too big for me. I wanted an SUV so it came between the Lexus RX, the Acadia, and the Toyota Prius. Too bad they don't make a smaller version of the Acadia.
One example of something that they could do would be to COPY Hyundai. Hyundai started the 10 year warranty and this helped the rise of Hyundai. it restored confidence in the product.
GM will never have the vision to do what a Korean automaker did 10 years ago though.
I also find it humorous that you on one hand tell me to stop gambling and chasing yield and in the next breath tell me to PUT MY MONEY IN A FAILING BANK??????
Yearning, that thinking will get you no where. That isn't gambling, it was a sure thing. The bank is now the safest in the US and there you'd be getting a risk-free juicy yield all nicely managed by the FDIC. Leave the "bank failing" stupidity to the people that were lining up. It's a greet place to be parked while the market is still a ways away from capitulation.
Now, on the subject of GM...I'm on the fence. It could go either way. But I'm thinking they are awfully close to be in the "over-punished" category.
GM's problem isn't that they don't know how to build quality cars. They do. The problem is that their pension and retiree health care costs are so high that they can't afford to do so. They face something like $2000 in extra "legacy costs" per vehicle compared to the Japanese makers in the U.S. This is also what pushed them to focus nearly exclusively on SUVs which are very high margin products when compared to compact cars.
ly writes:
20% of white collar work force? If it's engineers and supply chain, may GM R.I.P.
Yes they need to part with some of those folks too... along with marketing & bean counters.
There is a lot of analysis and precious little action at big three. Call on a Japanese transplant & compare - they have fewer engineers, less white collar overhead and far more actual action.
GM, Ford et al 'designers' generate lotsa 'paper activity' but precious little of it goes into actual stuff being produced. They have to focus on the knitting - now.
Before they can dream about the future, they need survive today - cutting DEEP into white collar is the place to start. They will cut much deeper before this is over. JMHO.
Winston writes:
GM's problem isn't that they don't know how to build quality cars. They do. The problem is that their pension and retiree health care costs are so high that they can't afford to do so. They face something like $2000 in extra "legacy costs" per vehicle compared to the Japanese makers in the U.S. This is also what pushed them to focus nearly exclusively on SUVs which are very high margin products when compared to compact cars.
Winston | 07.15.08 - 11:09 am | #
I've talked to insiders who tell me that is a bit of a red herring. The $2000 is real but the premium Toyota & Honda receive is even greater than the $2000 'legacy tax' - that isn't what is killing GM.
Honda & Toyota pay their managers on a global basis WAY less than the big three pay theirs at similar levels of responsibility. They also do not reward their stockholders much at all - great cars but lousy stocks.
If GM had Toyota's market premiums & compensated management like Toyota did & 'rewarded' stockholders like Toyota does (not much)... the legacy cost would be a 'non-issue'.
"I actually think that GM does produce a couple of good cars. But the overhead of those divisions are not worth the money if they are all sharing parts with each other"
Toyota innovated part sharing. It's o.k. to share parts between product lines, it saves money and reduces design and inventory costsÂ…
What is not cool is to do what Ford does with Lincoln Mercury-same car, different brands.
I really hope people understand the consequences of GM failing...
What is not cool is to do what Ford does with Lincoln Mercury-same car, different brands.
I really hope people understand the consequences of GM failing...
detroitr | 07.15.08 - 11:24 am | #
If all they do is change label (and price) - I agree. If they keep say 90% of parts the same & only change 'differentiators' - who cares.
They have to get FAR fewer offerings at far less cost. They need to cut white collar head count by 50% or more, especially at central HQ, and support fewer 'sites'. The only way they do that and compensate the remaining survivors & stockholders is to reduce part & platform options dramatically (that is what drives overhead - options & variety).
If they keep say 90% of parts the same & only change 'differentiators' - who cares.
I agree and that was my point. Each division should use the parts bin to develop their own cars under the brand mission. But GM seemed to develop one car and then gave it to the division to customize. That's where the failing strategy began. Think Cadillac Cimmaron, which was a tarted-up Chevy. Develop quality components and then let the divisions design the cars around them and even tweak them.
And, btw, that gets rid of the middle management bloat too. Lean each division down and make it responsible for it's own goals under it's mission. I bet each could shed 50% of its management layers, grow R&D and be profitable if they'd build cars that people wanted in each segment.
Speaking of using parts from the same bin; I once had to replace the heater core in a Ford station wagon. This involves removing the whole dashboard and some things from the engine compartment. There was no consistency at all in the type of fastener used; slot head...philips...torx...metric...sae. Every screw was a different head and a different diameter. A royal pain when you are laying on your back with a flashlight and socket trying to figure out which socket to use. My theory is that the engineers just the cheapest screw for each hole depending on what day of the week it was when they were putting the blueprints together. A total nightmare!
Toyota also works their employees like galley slaves...Google Toyota karoshi engineer and you'll get a bunch of hits with news reports about a Toyota employee who died recently where the Japanese govt ruled officially that he died from overwork.
Nothing like California, to be sure. But except for New Brunswick Canadian RE doesn't look dirt cheap. And Vancouver looks utterly outrageous. Any Canadians care to comment on the prospects for Canadian banks?
Sure, there were some great car guys in charge of the individual product lines
No their car guys are a big part of the problem. I've seen way to many quotes from Lutz, et. al. that transmit the belief that small, efficient vehicles are for "kiddies and europeans" and real Amuricans buy "grown up" (read big and flashy) vehicles.
The catty remarks about the initial Prius are legion. Now they get to shamefacedly license the technology. Kind of a penis-shriveler, huh?
But the positive comments about quality above are true, and as much as I respect somebody who calls himself "cobradriver"'s gearheadedness, you can't dismiss the big-ass pile of statistics that say, yeah a Malibu will work really well out of the box, just like a Toyota.
But this means you really have to stop blaming the unions for assembly quality. I pointed out in another thread that, if you still think there is a big difference between American and Japanese cars, the UAW builds highly-rated cars in transplants. There is no reason to think that assembly-line workers, just because they don't have a union card, don't show up just as hungover and preoccupied with being p&ssed at the spouse/in-laws/local pro football team as the UAW guy.
It's 8-hrs of mind-numbingly boring repetitious tasks that are done by humans because we just can't make machines dextrous enough yet. And you get the type of humans that ain't going to find a better job.
So assembly quality will be no better than the basic design. If things are hard to put together then your average high-school graduate - I don't care if he is an Ed Bundy or some nicely outfitted Japanese worker fresh from morning singing and exercise - is going to regularly muck it up.
But pointing the finger at the underclass never gets old in America, does it? I thought this society was founded to be exactly the opposite of that particular attitude, but we just seem to have figured out how to draw lines between us without the need of pedigree consultation.
shorter different chris - nowadays they can make "good product" if you define drawing-board-to-showroom, it's on the drawing board where things have gone terribly wrong.
A combination of machismo, cheap gas, and really good marketing chops kept them going, but when the "cheap gas" leg fell off the stool the whole thing toppled.
But this means you really have to stop blaming the unions for assembly quality.
One of my advisors where I got my masters in mfg (sort of a cross btwn ms engineering & mba) used to say...
"If you believe line workers control quality & productivity then you must think there was a proletarian revolution on the factory floor & the whole place is run by 'soviet'... clue for you - that hasn't happened, the workers don't run the factory - MANAGEMENT DOES!"
He would say that over & over when faced with the 'lazy ignorant worker' myth.
TD - the only one that didn't touch US MBS
CIBC - this one is the most exposed. Got burned badly with Enron. Played carelessly again.
BMO - had significant exposure, they had some internal problems.
RB and SCOTIA - these two are the best ones. SCOTIA jusy yesterday announced buying E-Trade Canada for $440 mil.
They are all safe from falling in US style.
Canadian gov. has been resisting for long time allowing these banks to merge. Banks believe that would help them become significant players on the world scene. They are all carefully considering potential US acquisitions.
...what killed GM and all american car companies was too much attention to the financial end of the business and not enough attention to the business of building cars.
-ipodius
I agree with that, but would add something I noticed that's a little more specific: They wait far too long before they redesign an existing model or introduce new ones. So, in essence, when you shop for a domestic vehicle you are often looking at new clones of 7-year old models in many cases. Yawn. They are just lazy, IMO. It was easier to add a lot of extras to turn a truck into a mobile home, and just make money on the extras.
CR - good luck keeping up with today!
This is the best blogsite for relevant news and comments.
uh oh. WSJ recommends putting Fannie and Freddie into receivership.
That's gonna take out haloscan.
Per cnbc: Put Fannie, Freddie into Federal Receivership: WSJ - CNBC
Who really likes any GM products? What can they produce that will sell in enough numbers to reverse the decline? Who will they sell it to? All these questions and more can be answered by looking below.
Carved up like a Dickenson goose at a table surrounded by the French, Indian, and Japanese. Maybe even the Chinese. Germans represented by VW may come in later for the scraps.
Agreed. On days like today, I pretty much have CR on every-30 second refresh.
CR: Thank you.
Trading stats:
Any targets for today?
DOW 10725?
How do you put it on Refresh?
Nova- Wish I could disagree with you.
making popcorn for the testimony today. bernanke is going to be sweating bullets. this should be fun.
as for GM, it's about time we started getting some admission that the dividend was not safe. now get some banks to admit same.
TED spread pinging 1.42...
"borrow at least $2 billion "
At what terms?
OT:
PPI up 1.8% in June.
Producer Price Index News Release text
Tally ho!
Get rid of pontiac, saab, saturn, and perhaps buick and then this might work.
Lehman Mulls Going Private: New York Post
Lehman Mulls Going Private: New York Post - CNBC
This is surely the emboldening of confidence..
GM is up after the announcement. I can't recall a dividend elimination ever being seen as good news.
GM is in lousy shape, but I applaud their announcement this morning. I think they need to be very agressive in trying to save the company. I doubt it will save them in the end, but at least they're willing to try.
I use a firefox plugin called ReloadEvery.
(be careful, the reload wipes comments you're writing here...)
charlie writes:
GM is up after the announcement. I can't recall a dividend elimination ever being seen as good news.
It's the 15B they are going to raise not the dividends.
"borrow at least $2 billion "
A loan from GMAC most likely...
These guys still haven't conceded that bankruptcy is inevitable. Who are they trying to fool? Their debt is junk and their stock is now a penny stock. Still a good short IMO. Global operations outside China are almost as worthless as their US ops.
Sadly GM doesn't even acknowledge what ails it. The first step on the road to recovery is acknowledgement of how you got sick in the first place. They stopped innovating technically and started what they so insultingly called financial engineering. "Trimming costs, "raising capital," "suspending stock dividends," "enhanced liquidity" are all more financial manipulation.
I've said before what an American automaker needs to do is buy a copy of every single Honda CVCC through Civic extrapolate for quality and features and plan on putting out the 2013 model of that series themselves but in 2011 or sooner.
You all need to lay off Gretchen.
Oh, wait, wrong GM.
In a nutshell, GM begins to unwind.
There is nothing here that will increase their business base, enhance their design expertise, restore competitiveness or make them a future profit.
Who would throw money at them now? You do not save a company by cutting it back to nothing, you end its life.
charlie writes: I can't recall a dividend elimination ever being seen as good news.
perhaps stocks are getting pounded until they admit the dividend is not safe; then relief.
Allow me a moment to quibble over words. Liquidity means the ability to convert an asset into cash, as cash is the most liquid asset. If the asset has been already converted to cash, as GM is doing with its move to sell $4b in assets and tap a $2b equity line, then it has actually reduced its liquidity, as it now has fewer assets to convert to cash, i.e., to make more liquid.
I know that the financial press reports moves to enhance "liquidity" like these regularly these days, but what they are really talking about are moves to liquidate assets such that they are cash, or a close substitute. GM is increasing its amount of liquid assets, at the expense of liquidity, ie, at the ability to turn assets into cash at a later date.
I know, I quibble, but there, I feel better. And since this is a self-proclaimed uber-nerd site, I figured it was a good place to act like one.
charlie writes: I can't recall a dividend elimination ever being seen as good news.
perhaps stocks are getting pounded until they admit the dividend is not safe; then relief.
People who were expecting the dividend cut thats why its 9 dollars no surprise here.
where's sebASStion cried the king... fetch me my foool... I want to laugh.
(used with permsission by mock turtle)
TED on the move. Now at 1.45.
TED on the move. Now at 1.45.
Here come the write ups!!!!!
And the dollar off it's lows... is Ben going to say something to strengthen it??!
BTW -- here is a summary of the pounding asian markets took overnight:
http://finance.yahoo.com/intlindices?e=asia
Retail Sales in U.S. Rose Less Than Forecast in June (Update2)
By Shobhana Chandra
July 15 (Bloomberg) -- Retail sales in the U.S. rose less than forecast in June, a sign the boost from the tax rebates may already be fading.
The 0.1 percent increase was the smallest since February and followed a 0.8 percent gain in May that was less than previously reported, the Commerce Department said today in Washington. Purchases excluding gasoline dropped.
[snip]
Max writes:
TED on the move. Now at 1.45.
Will we top out at 2 or move higher?
raise 2 billion???
it does'nt cost that much to store and extra 2 million vehicles produced each year.
10mm tops.
FNM and FRE will continue their decline today, 0.00 will be here anyday for these entities.
I think common and preferred will be wiped out.
CR mentioned this(the preferred shares dropping) having an impact on regional banks, I am not sure why...
Will SKF hit $200 today?
I still say the big three are BK city. It's only a matter of time, and not much at that.
they are really talking about are moves to liquidate assets
Liquidate? We're back in the 80s!
Actually, this is the first time I have read Liquidate in many months.
It is definitely the correct term to use today.
The MSM are lying if they are saying what GM is doing is to improve liquidity.
FNM opens down 13% Ouch!
FRE down 24% double ouch
Dow opens down 100...
Citi is below 15, down 4%.
Those SWFs must be swearing to get in as early as they did.
Anonymouse, I raise my glass to you, wherever you are.
SKF = $200.
That didn't take long.
f#ck GM, really. They continued to build ginormous cars with shitty MPG all the while other automakers knew to switch to hybrids and smaller vehicles.
One day people will be openly mocked for soccer-momming around in an Escalade and Excursion.
it's all in your head...
They stopped innovating technically and started what they so insultingly called financial engineering.
Not to be on-topic but...what killed GM and all american car companies was too much attention to the financial end of the business and not enough attention to the business of building cars. And the moment in time that the gong struck was when they started sharing parts across divisions from the same parts bin. You know, if I wanted a Buick I'd buy one. When I buy a Caddy, I expect a Caddy not a tarted up Buick.
I've not owned a US made car since I was just out of college. I've really wanted to buy one, but then when I drive one I can't. I'd have more respect for the executive staff if they came out with specfic plans on, you know, like building cars instead of how they are going to financially restructure. And all three are dead men walking until they figure this out and do that. Stop playing to the shareholders and play to the consumer. This is going to be the big lesson for business in the next few years across the board.
Phil Gramm to Rick Wagonner - Quit whining!
Well they are starting to throw out the baby with the bath water.....looks like Gold is the only buy today
Trading stats:
Any targets for today?
DOW 10725?
1219 was target and 06' low.
since were below that now, we could be considered in uncharted water. avoid indexes and look to names you know.focus on those charts.
nibbled on bac yesterday, and it did'nt taste so good, flipped and hit JPM much more. nimble , fast and small for now
skf alert, its shooting for the moon.
looks like Gold is the only buy today
Hank Jestor | 07.15.08 - 9:48 am | #
When stocks are down, it's a recession.
When commodities and stocks are down, it's a depression.
Anonymous,I raise my coffee cup too. Good work.
Interesting Times writes:
When commodities and stocks are down, it's a depression.
May that not happen. Incidentally did you get back into gold?
Be careful on SKF. I think the upside is not as great as it was and will move more in line with the S&P. The SRS on the other hand can move to 150 and still be only near its 52 week high. More upside and Cheaper at this point IMO. CR said himself the second recession tidal wave would be the consumer and commercial property.
I want to see the Fed RAISE FF to a 2.5% premium over purported core. This would put it around 5.5-6%.
Stocks would soar, dollar would soar, crude would plummet, banks would sort themselves out.
char writes:
Get rid of pontiac, saab, saturn, and perhaps buick and then this might work.
char | 07.15.08 - 9:21 am | #
Disagree -
Saab should be an autonomous European producer - GM just banks rolls & profits from. Possibly sell off but hold minority stake. I think it could come around if no meddling from Detroit.
Pontiac, Chevrolet, Cadillac should all be 'brands' under one division (consumer cars). The actual nameplates differentiating the vehicles (brands) isn't what costs money - its the separate overhead and marketing budget. Tighten & consolidate... don't have to eliminate.
Saturn should be semi-autonomous division (very small cars, very frugal). That was their original mission before 'SUV craze - return to that mission.
GMC should be truck/SUV/commercial vehicle group (larger vehicles). Shrink this division to the size it was in say 1990, before SUV craze.
Kill hummer - no one would buy it.
Far fewer divisions, less white collar overhead, more focused offering.
:::::
This is going to be a white collar recession. Mid-level white & pink collar paper pushers are the lion's share of the work force now - they will feel the lion's share of the pain. I see it happening already - talked to a buyer working for a tier one yesterday... they have only one QE assigned to their team and he has over 200 'projects' in backlog spread over supply chain from India, China through NAFTA Zone to Eastern Europe & Turkey... the guy lives on a plane.
C and MER are the ones in trouble if you believe the markets.
Anyone have a realtime read on VIX or VXO?
mikhail writes:
I want to see the Fed RAISE FF to a 2.5% premium over purported core. This would put it around 5.5-6%.
Stocks would soar, dollar would soar, crude would plummet, banks would sort themselves out
Yes and the poor unemployed can eat the rich.
If you want to see riots in the streets raise rates to 5.5%.
Next question: Will gold hit $1K today?
Can you hear me now ? Is it a depression now?
Mr. Beach writes:
Next question: Will gold hit $1K today?
Unlikely, dollar is weak but not that weak.
DX looks to be strengthening now, prolly need to crack 71 to the downside for glod to hit 1000...
I still say the big three are BK city. It's only a matter of time, and not much at that.
tj & the bear | 07.15.08 - 9:34 am | #
I disagree. I can see Chrysler and possibly GM, but not Ford. They started their downsizing/restructuring first and got much more favorable financing.
They are also farther along in the small-car-for-America game. While GM appears to be first with the Saturn Astra, it's being imported from Germany and they have to deal with exchange rates. No profit. Ford is already in the tooling-up-the-factory stage for the Fiesta, to be produced in Mexico so it can be sold for a profit in the US.
May that not happen. Incidentally did you get back into gold?
BB | 07.15.08 - 9:51 am | #
Nope. I got out of the short right on time. Then held cash.
I am now considering some Canadian banks that are very very cheap.
I wonder what tune Bush et al are fiddling today. Something along the lines of a dirge maybe? And what's that orange glow on the horizon?
OT -- June GDP down for the third consecutive month (scroll down to bottom):
US Monthly GDP for October 2009
This is one of the two monthly GDP series that the NBER folks look at.
This is going to be a white collar recession. Mid-level white & pink collar paper pushers are the lion's share of the work force now - they will feel the lion's share of the pain.
Great. Precisely the people who are politically naive and unsavvy.
cboe vix 29.93
"This is going to be a white collar recession."
Tell that to the drywallers and framers and shinglers.
cboe vxo 32.42
Bernanke just blurbed. Market reacts.
Was it Baruch who said there was fortunes being handed out but no one was buying?
BAC has broken $20, down 10% in two days.
If the Fannie Mae takeover turns the US government into the world's largest hedge fund, can we move the US to the Cayman Islands?
Of course, to paraphrase Wittgenstein: If you could speak to a drywaller, he wouldn't understand you.
Look out below.
Am hoping the speeches by the big wigs today will cancel each other out.
skf alert, its shooting for the moon.
Forget the moon, it's heading for Mars.
And take me to your leader.
are y'all selling your skf?
how much higher can it go? My goal was to hold onto it for a year but I just don't know...
TS,
Thanks - not a huge TA guy but that spike above 30 mark has been pretty reliable - also wondering if as this bear 'matures' whether higher thresholds of fear will be needed to signal the bear rally...
Don't worry; Bush will speak soon and restore everybody's confidence.
TED at 1.47. +9.82%
Oh, now I see it, we're finally going to have that round number day (soon): $150 oil, $1000 gold, $20 silver, and the danse macabre of the currencies can begin.
Interesting Times writes:
I am now considering some Canadian banks that are very very cheap.
Financial... ugh. But good luck on that.
Is Bernanke setting us up for a 0.25 hike? Could it happen?
The British guns were aimed and the shells were coming fast
The first shell hit the Bismarck they knew she couldn't last
"I've said before what an American automaker needs to do is buy a copy of every single Honda CVCC through Civic extrapolate for quality and features..."
RobDawg, I was wondering 25 years ago why the American manufacturers couldn't summon the brainpower to do that. What many have forgotten is that the Japanese imports became successful first on price and economy but really became dominant by producing cars that were light years ahead of domestics in terms of powertrain quality and fit-and-finish considerations. I worked in a Chrysler assembly plant in Detroit in the early 1970s while in college, and the shoddiness of the product in terms of basic engineering and component assemblies was eye-opening. As a line worker, I had first-hand experience with the fact that nothing fit correctly or snugly; everything was sloppy and half-assed. (And the full-timers were another story...)
It was well-recognized within the auto industry in the Detroit area as far back as the 60s and 70s that GM was run at the top by financial guys, not car guys. Sure, there were some great car guys in charge of the individual product lines, but the bean counters were firmly in control at the top. In addition, the management culture at GM was very bureaucratic, with individuality being discouraged in favor of a group-think corporatism, wherein only those patient enough to work their way silently up the ladder stood a chance of attaining true power and responsibility. Lee Iaccocca would never have made it at GM.
This mentality may have been adequate when GM had half the domestic market to itself, but it meant that GM was catastrophically unprepared to effectively deal with the Japanese invasion.
C and MER are the ones in trouble if you believe the markets.
Add WB to that list as it is down almost 20% from yesterday's close.
are y'all selling your skf?
Not until I see somebody start dealing with the root cause of the problem in an intelligent way.
Perhaps it will happen before the next administration, but I doubt it. (Would love to be wrong.)
BB - Lol. I said considering... Right now the volitility is keeping me clear headed.
Most Canadian banks didn't touch the US MBS market.
Nemo writes:
Don't worry; Bush will speak soon and restore everybody's confidence.
I need an interpreter for that.
Interesting Times writes:
Most Canadian banks didn't touch the US MBS market.
I hear ya. But it's the perception and the overall gloom that's weighing on all of them. Still prefer precious metals and commodities, think there's a bit yet to run.
Gee....I didn't think it would be another Black Tuesday....but I guess I was wrong
Link to Bernanke story at Marketwatch:
http://tinyurl.com/5pq5ab
S&P approaching the 1200 mark. Didn't think we'd get here so soon and probably won't stay there today unless this is a full on crash.
DOW 10725, that will be defended like heck.
Wachovia has changed their name to Wachovaus
vxo giving all kinds of different readings.... 33.09 now
TED pinging 1.49...
was the 1200 S&P they are defending
since may 19th closing peak of 1427, were down 220 spu points, in under 40 trading days!
this is reminding me of fall '02 trading action, where markets bounced 10-20% monthly.
wicked
SDS has hit all-time high (its first day on the market @ $74)
Would imagine that its not buys but programed short covers on S&P at 1200.
Will commence again after there are no buyers
It was well-recognized within the auto industry in the Detroit area as far back as the 60s and 70s that GM was run at the top by financial guys, not car guys.
Again, not to be on-topic (really, can these guys that like to get their stock advice on line find a blog devoted to that?) but this is the story of the last 30 years. Somehow, the love of finance took the place over the love of product. People don't by finance, people buy product. The people disucssing stocks on this board buy finance, and that's the problem...extant here for all to see.
The markets are a huge gambling den right now. And all these discussions are the exact problem we're facing - people chasing returns instead of investing. Building wealth takes time and patience and a lot of work. Talking about the VIX on haloscan breeds the same behavior that got us into this mess in the first place.
Finance has its place as part of executive discussion but is NOT for general consumption. And it certainly plays a part in decisions of investment but a company's product should weigh in more. Until everyone figures this out, all of you playing the market will be in for some rude surprises in the coming quarter.
Jan-10 BAC @ 27.50 going for ~$2 now. BAC's yield is 13% at current price and earning guidance
wally writes:
"This is going to be a white collar recession."
Tell that to the drywallers and framers and shinglers.
wally | 07.15.08 - 10:05 am | #
I can't... no habla espniol.
There is nothing to fear. It is all clear.
Talking about the VIX on haloscan breeds the same behavior that got us into this mess in the first place.
I'm inclined to agree. And this really is just a rephrasing of the 1929 saw about shoe-shine boys talking about stocks.
But this is not a phenomenon unique to the U.S. It's global.
"This is going to be a white collar recession."
dryfly,
Yep,thats the way I see it. I went through two layoffs in the early Nineties. I actually have zero worry about my current job(co. is debt free). Frankly nobody wants to do manual labor anymore. I kinda like it.
Chris
ipodius said:
"Finance has its place as part of executive discussion but is NOT for general consumption. And it certainly plays a part in decisions of investment but a company's product should weigh in more.
I'm not sure I agree with you about the general consumption part, but I totally agree with you about the importance of a company's product.
ipod:
and why do you think we are chasing returns? could it be because we see the destruction of our savings?
I was 100% long the market and also was saving in banks until this fall(although I did have some gold/silver)
however, this is all being taken from me. Negative real rates of return means that I can no longer afford to keep my money in banks... I'm losing too much in inflation.
as Wayne Angel (ex-Fed governor) stated: "we need to drop real interest rates to a level that forces savers to invest in the housing market.
well, I'm sorry... I won't do this. So I look around... in what can I invest?
Oil. done
Gold. done
short funds. I guess.
Treasurys. Yep, but getting harder by the day.
The Fed has forced me to do this.
as this continues and the markets become even more volatile, I will likely reduce my exposure (gambling as you would say)... but HOW?
so deflect your anger elsewhere... If the Fed had held the line and FULFILLED the other half of its mandate (maintaining price stability) then things would be different.
But this is not a phenomenon unique to the U.S. It's global.
That's true, which is why trillions of paper "wealth" is evaporating before your eyes. Stay tuned for more until the excess is wrung out, and all these types find somewhere else to ply their "experise".
In the meantime, the interesting discussion would be about GM and the big three in general. Survive? Where should they be trading based on fundamentals. Where is the corporate valuation now? For GM, I'm not very optimistic...they've been living off of the fat from financing for a long time. Perhaps they have lost to ability to actually make good product now and they are in a slow, failing spiral, only to be sold to someone.
well, I'm sorry... I won't do this. So I look around... in what can I invest?
Start by getting yourself a feed for historic stock prices and corporate data, and then a piece of software that will do analysis. Probably cost you around $500. Then screen for data points that you find interesting and do the work if you like stocks.
If you don't like the work find a mututal fund or an index fund as you're unlikely to beat it on your own anyhow, no matter what people on here say.
Stay in cash and take the pervailing yield in times of uncertainty. You could have gotten a sweet CD rate at Indymac last week that is now in the safest bank in the US if you kept it under 100k.
Or look at GM and do the analysis I suggeted and tell me if it is a buy for being undervalued.
dryfly:
exactly.
ipdoius,
I am curious - are you long now that the Dow is undervalued by ~4% according to your calculations?
The process of squeezing the leverage out of the system so it returns to being based on product and earnings is underway...I will applaud that day. Until it arrives I will learn the rules of the jungle that your executive financiers built for all of us to place our retirement savings.
Based on your prior statements, that day is here so is it walk or just talk?
energycon, did you read my comments about the market carfully? Because if you did, I said that the market, by my calculations, should have been trading at 11,200 when I posted. That does NOT mean that I think the market is undervalued. If the market was trading in the 13's when I said that and it's now trading where I said it OUGHT to be then, what does that imply now?
Or, again, is this about personality and not analysis? Reading is fundamental you know.
ipod:
those would be good ideas EXCEPT:
I don't understand GM's relationship with GMAC as example.
Too many businesses have these issues. Off balance entities, opaque accounting
to you it's a gamble. to me it was a rational investment choice.
yeah, I like to hear what people think of skf? what of it? It doesn't mean I'm going to go out and do what others do. It means I get their thought processes and can try to integrate it into my own.
I would be the model of investment as you propose IF
-the US financial system tried to be a little more honest and open
-the Federal Reserve cared about price stability.
neither is true...
We've got 2 GM cars in the driveway and we're happy with both of them. According to J. D. Powers the highest quality midsize Sedan is - not the Camry - not the Accord - but the Malibu.
GM has been competitive with the Japanese qualitywise for about a decade now.
yearning here is my best advice ever:
when you determine that the game is rigged, you take your money off the table.
Full stop.
20% of white collar work force? If it's engineers and supply chain, may GM R.I.P.
Quick observations on GM's brands: Sell or discontinue Pontiac; I never understood the point of Pontiac. Sell the Buick brand to a Chinese firm, since the brand still has cachet there.
In listening to the GM infomercial, I kept hearing a C&W song that had the words "know when to fold 'em" - What song was this anyway?
"Lehman Mulls Going Private: New York Post"
The Warren Buffet takeover rumours no longer make a hit - so, now, we all go private.
to go back to GM:
I will go long GM as soon as
-they propose a plan that addresses future products and future quality gains going forward
-they get rid of their legacy costs (i.e. healthcare).
-they are only a car company.
until they do these things, I will not bite on them. why? when I can simply bet on Toyota, which has everything that GM has and more, without the liabilities.
I will tell you however, there is one time when I MIGHT bite earlier than the above... if I see movement on the Chevy Volt. it is the first shining star in American Car industry in decades.... if they can show movement before Volvo (coming out with their electric) or others then I may bite
I actually think that GM does produce a couple of good cars. But the overhead of those divisions are not worth the money if they are all sharing parts with each other. If they were distinct consumer products, then you'd have separate identity on the product level. GM lost that a long time ago.
I think that the best thing would be to do what dryfly (I think) suggested: make them simply nameplates of a type of car or truck...Pontiac is the sports/performance, Caddy luxury, Chevy the Honda of GM, Buick the luxo-barges with the seats of old butts, and GM the truck/SUV division. Then, you know, let each division design their cars by trying to use as much from the parts bin as they can, modifying as needed. Makes much better sense to me but hey, I run software companies not car ones
"GM has been competitive with the Japanese qualitywise for about a decade now."
Fair Economist | 07.15.08 - 10:45 am
I have been wrenching on anything with wheels for over 20 years. I learned to keep my opinion to myself and let people have their own preconceived notions about vehicles...
Chris
Xeno's paradox for an investment strategy, ipodius?
Nova wrote: Who really likes any GM products? What can they produce that will sell in enough numbers to reverse the decline? Who will they sell it to? All these questions and more can be answered by looking below.
My wife and I have owned many cars, mostly foreign over the years. I bought a Ford Ranger 7 years ago, my wife bought a Buick Rendevouz 3 years ago. Best and most trouble free vehicles we've ever had and at a great price. They are finally making good american products...maybe too late...but nevertheless good products at a great price.
I haven't been a great fan of them in the past as my last post concerning GM and the UAW attest, but some times see the face of "death" will wke one up.
"when you determine that the game is rigged, you take your money off the table."
There is a huge flaw with your argument though. If I'm gambling in Vegas and take my money off the table, I stay even.
In this game, when I take my money off the table, the house still charges me money just for living.
would you fly to vegas, stay in the Mirage day after day after day, and then never leave the room? just sit in your room with your money off the table? No, you can't do that as the cost of inaction is too high.
As I said, the Fed has forced me to put my money in the game by its negative real interest rate policy.
FWIW: ALMOST all of my money is "off the table" (Treasurys, savings accounts, etc).
I also find it humorous that you on one hand tell me to stop gambling and chasing yield and in the next breath tell me to PUT MY MONEY IN A FAILING BANK??????
rediculous
According to J. D. Powers the highest quality midsize Sedan is - not the Camry - not the Accord - but the Malibu.
That would be "initial quality." Oh, and at $22,790 the hybrid gets poorer mileage and stickers for more than the Civic and Prius equivalents. Let's wait for the consumer reports reliability before claiming the laurels.
Xeno's paradox for an investment strategy, ipodius?
No energycon. Why would I publish my investment strategy explicitly in haloscan? There is enough in what I say to point in a direction and to get the gist of what I think. Sometimes I do make numeric posts, as when I said the DOW should be at 11,200. But that was then. What do I think now? Capitulation isn't far away, actually, and now I have shifted my thinking to what has been punished too severely.
I'd also short the Euro, but hey, I live on the edge.
Diogenes:
I agree with you that GM and Ford's products have improved of late. the spread in quality between Japanese and US cars is thinning.
there are also some products that look good. I almost bought the GMC Acadia because I liked it a lot, but it was too big for me. I wanted an SUV so it came between the Lexus RX, the Acadia, and the Toyota Prius. Too bad they don't make a smaller version of the Acadia.
One example of something that they could do would be to COPY Hyundai. Hyundai started the 10 year warranty and this helped the rise of Hyundai. it restored confidence in the product.
GM will never have the vision to do what a Korean automaker did 10 years ago though.
I also find it humorous that you on one hand tell me to stop gambling and chasing yield and in the next breath tell me to PUT MY MONEY IN A FAILING BANK??????
Yearning, that thinking will get you no where. That isn't gambling, it was a sure thing. The bank is now the safest in the US and there you'd be getting a risk-free juicy yield all nicely managed by the FDIC. Leave the "bank failing" stupidity to the people that were lining up. It's a greet place to be parked while the market is still a ways away from capitulation.
Now, on the subject of GM...I'm on the fence. It could go either way. But I'm thinking they are awfully close to be in the "over-punished" category.
My new plan to get to financial security: start working fewer hours and raise a few billion 'liquidity'.
What's good for General Motors is good for wally.
GM's problem isn't that they don't know how to build quality cars. They do. The problem is that their pension and retiree health care costs are so high that they can't afford to do so. They face something like $2000 in extra "legacy costs" per vehicle compared to the Japanese makers in the U.S. This is also what pushed them to focus nearly exclusively on SUVs which are very high margin products when compared to compact cars.
ly writes:
20% of white collar work force? If it's engineers and supply chain, may GM R.I.P.
Yes they need to part with some of those folks too... along with marketing & bean counters.
There is a lot of analysis and precious little action at big three. Call on a Japanese transplant & compare - they have fewer engineers, less white collar overhead and far more actual action.
GM, Ford et al 'designers' generate lotsa 'paper activity' but precious little of it goes into actual stuff being produced. They have to focus on the knitting - now.
Before they can dream about the future, they need survive today - cutting DEEP into white collar is the place to start. They will cut much deeper before this is over. JMHO.
Winston writes:
GM's problem isn't that they don't know how to build quality cars. They do. The problem is that their pension and retiree health care costs are so high that they can't afford to do so. They face something like $2000 in extra "legacy costs" per vehicle compared to the Japanese makers in the U.S. This is also what pushed them to focus nearly exclusively on SUVs which are very high margin products when compared to compact cars.
Winston | 07.15.08 - 11:09 am | #
I've talked to insiders who tell me that is a bit of a red herring. The $2000 is real but the premium Toyota & Honda receive is even greater than the $2000 'legacy tax' - that isn't what is killing GM.
Honda & Toyota pay their managers on a global basis WAY less than the big three pay theirs at similar levels of responsibility. They also do not reward their stockholders much at all - great cars but lousy stocks.
If GM had Toyota's market premiums & compensated management like Toyota did & 'rewarded' stockholders like Toyota does (not much)... the legacy cost would be a 'non-issue'.
Barley writes:
In listening to the GM infomercial, I kept hearing a C&W song that had the words "know when to fold 'em" - What song was this anyway?
You serious? The Gambler sung by Kenny Rogers.
"I actually think that GM does produce a couple of good cars. But the overhead of those divisions are not worth the money if they are all sharing parts with each other"
Toyota innovated part sharing. It's o.k. to share parts between product lines, it saves money and reduces design and inventory costsÂ…
What is not cool is to do what Ford does with Lincoln Mercury-same car, different brands.
I really hope people understand the consequences of GM failing...
What is not cool is to do what Ford does with Lincoln Mercury-same car, different brands.
I really hope people understand the consequences of GM failing...
detroitr | 07.15.08 - 11:24 am | #
If all they do is change label (and price) - I agree. If they keep say 90% of parts the same & only change 'differentiators' - who cares.
They have to get FAR fewer offerings at far less cost. They need to cut white collar head count by 50% or more, especially at central HQ, and support fewer 'sites'. The only way they do that and compensate the remaining survivors & stockholders is to reduce part & platform options dramatically (that is what drives overhead - options & variety).
They will do it or die.
If they keep say 90% of parts the same & only change 'differentiators' - who cares.
I agree and that was my point. Each division should use the parts bin to develop their own cars under the brand mission. But GM seemed to develop one car and then gave it to the division to customize. That's where the failing strategy began. Think Cadillac Cimmaron, which was a tarted-up Chevy. Develop quality components and then let the divisions design the cars around them and even tweak them.
And, btw, that gets rid of the middle management bloat too. Lean each division down and make it responsible for it's own goals under it's mission. I bet each could shed 50% of its management layers, grow R&D and be profitable if they'd build cars that people wanted in each segment.
Speaking of using parts from the same bin; I once had to replace the heater core in a Ford station wagon. This involves removing the whole dashboard and some things from the engine compartment. There was no consistency at all in the type of fastener used; slot head...philips...torx...metric...sae. Every screw was a different head and a different diameter. A royal pain when you are laying on your back with a flashlight and socket trying to figure out which socket to use. My theory is that the engineers just the cheapest screw for each hole depending on what day of the week it was when they were putting the blueprints together. A total nightmare!
Toyota also works their employees like galley slaves...Google Toyota karoshi engineer and you'll get a bunch of hits with news reports about a Toyota employee who died recently where the Japanese govt ruled officially that he died from overwork.
Most Canadian banks didn't touch the US MBS market.
Interesting Times
The Canadian Dollar and US Dollar are about at par. Here are some links to Canadian RE prices.
Chinese in Vancouver: Vancouver condo prices to grow 21% by 2010: forecast
CREA
Nothing like California, to be sure. But except for New Brunswick Canadian RE doesn't look dirt cheap. And Vancouver looks utterly outrageous. Any Canadians care to comment on the prospects for Canadian banks?
No their car guys are a big part of the problem. I've seen way to many quotes from Lutz, et. al. that transmit the belief that small, efficient vehicles are for "kiddies and europeans" and real Amuricans buy "grown up" (read big and flashy) vehicles.
The catty remarks about the initial Prius are legion. Now they get to shamefacedly license the technology. Kind of a penis-shriveler, huh?
But the positive comments about quality above are true, and as much as I respect somebody who calls himself "cobradriver"'s gearheadedness, you can't dismiss the big-ass pile of statistics that say, yeah a Malibu will work really well out of the box, just like a Toyota.
But this means you really have to stop blaming the unions for assembly quality. I pointed out in another thread that, if you still think there is a big difference between American and Japanese cars, the UAW builds highly-rated cars in transplants. There is no reason to think that assembly-line workers, just because they don't have a union card, don't show up just as hungover and preoccupied with being p&ssed at the spouse/in-laws/local pro football team as the UAW guy.
It's 8-hrs of mind-numbingly boring repetitious tasks that are done by humans because we just can't make machines dextrous enough yet. And you get the type of humans that ain't going to find a better job.
So assembly quality will be no better than the basic design. If things are hard to put together then your average high-school graduate - I don't care if he is an Ed Bundy or some nicely outfitted Japanese worker fresh from morning singing and exercise - is going to regularly muck it up.
But pointing the finger at the underclass never gets old in America, does it? I thought this society was founded to be exactly the opposite of that particular attitude, but we just seem to have figured out how to draw lines between us without the need of pedigree consultation.
Great comments Different Chris, spot-on.
shorter different chris - nowadays they can make "good product" if you define drawing-board-to-showroom, it's on the drawing board where things have gone terribly wrong.
A combination of machismo, cheap gas, and really good marketing chops kept them going, but when the "cheap gas" leg fell off the stool the whole thing toppled.
But this means you really have to stop blaming the unions for assembly quality.
One of my advisors where I got my masters in mfg (sort of a cross btwn ms engineering & mba) used to say...
"If you believe line workers control quality & productivity then you must think there was a proletarian revolution on the factory floor & the whole place is run by 'soviet'... clue for you - that hasn't happened, the workers don't run the factory - MANAGEMENT DOES!"
He would say that over & over when faced with the 'lazy ignorant worker' myth.
Canadian banks:
TD - the only one that didn't touch US MBS
CIBC - this one is the most exposed. Got burned badly with Enron. Played carelessly again.
BMO - had significant exposure, they had some internal problems.
RB and SCOTIA - these two are the best ones. SCOTIA jusy yesterday announced buying E-Trade Canada for $440 mil.
They are all safe from falling in US style.
Canadian gov. has been resisting for long time allowing these banks to merge. Banks believe that would help them become significant players on the world scene. They are all carefully considering potential US acquisitions.
The new GM "smart car"
http://earthfirst.com/wp-content/uploads/2008/07/smart-monster-car.jpg
...what killed GM and all american car companies was too much attention to the financial end of the business and not enough attention to the business of building cars.
-ipodius
I agree with that, but would add something I noticed that's a little more specific: They wait far too long before they redesign an existing model or introduce new ones. So, in essence, when you shop for a domestic vehicle you are often looking at new clones of 7-year old models in many cases. Yawn. They are just lazy, IMO. It was easier to add a lot of extras to turn a truck into a mobile home, and just make money on the extras.