General Motors and Ford

Discussion in 'Economics' started by SouthAmerica, May 4, 2009.

  1. .

    May 4, 2009

    SouthAmerica: The Chrysler bankruptcy filling last week was the first nail on the coffin of the entire automobile industry in the USA.

    If I was going to place a bet regarding the Chrysler bankruptcy I would bet that the bankruptcy will not go according to plan and many problems will appear along the way and most likely the bankruptcy will become a major mess for the auto industry in the USA.

    The result of the Chrysler bankruptcy mess will affect General Motors and Ford in a very negative way.

    At the end of the day the US government will need to nationalize the carcass of what is left behind after the US auto industry meltdown.

    In my opinion the bankruptcy path is a major mistake and I hope the people at the US government are not foolish enough to also push GM into the bankruptcy solution.

    I don’t know anyone who would buy a car from a company that is going through bankruptcy – and there are a thousand reasons to make a case for not buying a car from such a company.

    I know there is some fools out there who say that the bankruptcy of all these American car companies it will not be any different than the bankruptcy that the airline industry went through a few years ago.

    Someone must be a real fool not to grasp the basic difference between these two examples; after an airline comes out of bankruptcy a customer still can fly that airline for example from NY to Florida or California and in this case the transaction involves just a small short-term investment made by this particular customer.

    Now regarding the bankruptcy of a major US automaker in this case the transaction would involve a large long-term investment by that same customer and there is no guarantee that the automaker would be able to survive in the long-term to provide service and parts for their automobile.

    If you want to read more on this subject then go to:

  2. ASav


    I see what you are saying about Chrysler but how are those major negatives for GM and Ford? GM may enter bankruptcy but I think the government already came out to stand behind warranties. Pontiac is being phased out and I'm sure there will be great deals on Pontiacs to get rid of them. The G8 looks like an awesome car. And how is it bad for Ford when one or two of your competitors enters bankruptcy?
  3. new$


    won't GM and C have lower costs and eventually force F into the governments hands?
  4. .

    May 5, 2009

    SouthAmerica: I was in favor of the US government nationalizing the 3 major US auto companies – consolidate the 3 companies into a viable company for the 21st Century and then sell the shares of the new company back into the stock market to the public.

    Part of that government restructuring would include getting rid off most of their pension plans by transferring them to the Pension Benefit Guaranty Corporation (PBGC).

    Regarding their health insurance (an expense that keep going up sky high) I am in favor of a national health insurance system that covers the entire US population – a system similar to Medicare, but a system that covers everybody and not only senior citizens.

    Under a system of government nationalization everybody gets paid including thousands of small companies that supply all kinds of materials and parts for the automaker to be able to build their cars.

    Under bankruptcy Chapter 11 everybody gets screwed since most creditors would receive just a small fraction of the amounts outstanding and that can make the difference and place many suppliers over the edge and drive them out of business. Remember many of these same suppliers sell their products to GM, Ford, Chrysler, and also to the foreign car manufacturers that assemble their cars here in the US.

    It is bad enough that these car companies are reorganizing and they have to close thousands of dealers, and many factories around the United States – that massive reduction in car production in the US already will affect the entire production supply chain in a very negative way and many companies in the production supply chain probably will go out of business.

    The Chrysler bankruptcy Chapter 11 will add further stress into a system that operates on a regular basis with very small profit margins – at the end of the day many of these companies of the production supply chain in the auto industry can’t afford to absorb the kind of losses that these Chapter 11’s are going to throw their way. Many companies of the production supply chain in the auto industry also will go over the edge and they will go out of business or they will end up in Chapter 11.

    If GM also end up in Chapter 11 then it would be just a matter of time for Ford also to end up in Chapter 11 – This Chrysler Bankruptcy Chapter 11 can start a nasty chain reaction and the entire auto industry in the US would become just a massive mess with catastrophic consequences to the entire US economy.

    A very negative stigma is attached to a company that files for protection under the Bankruptcy-Chapter 11.

    Under a process of US government nationalization comes a guarantee that everybody is going to get paid in the production supply chain and production and future services would be guaranteed by the government. Under this alternative the customers can continue buying the products of that particular company because they trust the guarantees given by the US government.


    Last Friday I was reading on The New York Times the front-page story “Chrysler files for Bankruptcy; U.A.W. and Fiat to Take Control”.

    If my understanding of the restructuring is correct then this Chrysler restructuring it is crazy and it does not make sense to me. The article said that under the new plan the U.A.W. through their retirement pension plan would control 55 percent of the common stock of the new restructured company – with the US government controlling 8 percent of the stock, the Canadian government 2 percent, and Fiat 20 percent of the common stock.

    Based on this proposed new set up it seems to me that the main purpose of this new restructured company it will be just to make money to fund the old Chrysler retirement pension plan.

  5. ASav


    Some good points. Interesting thesis.
  6. .

    May 12, 2009

    SouthAmerica: What a bunch of idiots we have running this country.

    What the Obama administration is waiting for to nationalize first General Motors, then Ford?

    Today GM stock is trading as low as $ 1.09 per share and the current market cap of GM is around $ 600 million dollars.

    The US government should not let GM file for bankruptcy.

    I can’t even imagine the damage to the US economy if General Motors is forced to file for chapter-11.

    The damage to the GM brand name will be catastrophic.

    The time for the US government to act it is right now, before this massive mess gets completely out of control and the GM brand name is completely destroyed.

    After the US government nationalizes GM / Ford then they can take their time and restructure it in an orderly way over a certain period of time into a new viable company.

  7. Too late, pal. GM will absolutely declare bankruptcy in a matter of weeks. Top execs sold off a bunch of stock today. This mess is already out of control and GM's brand name is already destroyed.

    As for the government nationalizing GM and Ford and taking their time restructuring it...I think that's a bad idea. I think the restructuring needs to be done quickly and decisevely, which only the bankruptcy court can provide. Time is of the essence in this situation to get as many people back to work as soon as possible.
  8. .
    May 13, 2009

    SouthAmerica: This is insane – I never thought I would see the day that GM stock would be traded like a penny stock.

    Here is today’s trading range for GM stock.

    Day's Range: 1.00 - 1.35

  9. .

    May 30, 2009

    SouthAmerica: I can’t believe that GM is filling for bankruptcy on June 1, 2009.

    Today the General Motors stock traded as low as $ .74 cents per share. GM is a penny stock with a market cap of $ 400 million dollars.

    It is crazy and insane the way they are restructuring this GM bankruptcy.

    Here we have a company with a market cap of $ 400 million dollars and by June 1st, the market cap will be reduced close to zero.

    The US taxpayer will give $ 50 billion dollars to the new GM – my question is: why the American taxpayer will not own 100 percent of GM common stock for that kind of investment?

    I am saddened to see the sudden death of another major symbol of American capitalism.

    The US government is making a major mistake to let GM file for bankruptcy – the US government should instead announce the nationalization of GM.

    The word bankruptcy is a terrible word to be associated with any company, never mind a company such as GM that represents a major symbol of the American economic system.

  10. Anyone know when Ford is bringing a 5 year with an 8 coupon priced at 82 ~ 13% is coming? I'm wondering how that will go.
    #10     May 30, 2009