Oct. 10 (Bloomberg) -- General Motors Corp., the world's biggest carmaker, was cut to ``sell'' from ``neutral'' by Banc of America after the bankruptcy filing of former unit Delphi Corp. raised the chance GM may seek court protection as well. Banc of American analyst Ronald Tadross today increased his odds of GM filing for bankruptcy to 30 percent from 10 percent and lowered his target share price to $18 from $32. If Tadross thinks there is a 30% chance of bankruptcy, then why the $18 target? Is this the post bankruptcy value? I hardly think so.
Delphi Chief Sees GM Bankruptcy Without Wage U-Turn (Update3) Oct. 11 (Bloomberg) -- Delphi Corp. Chief Executive Officer Steve Miller said General Motors Corp., his biggest customer, will have to file for bankruptcy if it can't wrest wage and benefit concessions from the United Auto Workers union during their next contract talks. Miller took Delphi, the largest U.S. auto-parts supplier, into bankruptcy after he couldn't get financial aid from GM and was unable to persuade the UAW to cut pay for long-time workers by as much as 64 percent to as little as $10 an hour. ``If GM comes out of 2007 with a labor agreement that looks like what today's agreement is, they are inevitably headed toward Chapter 11,'' Miller said in an interview yesterday. Three days after filing the biggest manufacturing bankruptcy in U.S. history, Miller, 63, outlined what he described as a pivotal point for U.S. industrial society. Delphi's dilemma is ``simply a flashpoint and a test case'' for this crisis, said Miller, who has steered auto companies, steelmakers and airlines through bankruptcies over the past two decades. The very existence of GM, Ford Motor Co. and many Detroit- area auto suppliers is threatened by the steady increase in wages, health-care costs and pensions that the United Auto Workers union has won for its members since 1947, he said. Retirement costs were manageable when workers retired at age 65 and died five years later; they're debilitating to companies when workers retire at 50 and live 40 more years, Miller said. Labor Concessions Miller, who became Delphi's CEO on July 1, said he doesn't expect GM and Ford to go bankrupt after 2007 contract talks, predicting the UAW will accept fewer jobs and smaller wages and benefits. The alternative, he said, would be for the UAW to cripple GM and Ford, where most of its highest-paid members work. Miller also said that Delphi workers can save their pension plans if they agree to work for about one-third of their current pay. Two days before the filing, union leaders said Delphi wanted to reduce production workers' pay by as much as 64 percent, to as little as $10 an hour. He called on government, labor and business leaders to collaborate on creating a ``new deal'' on health care that wouldn't concentrate both costs and risks on individual companies, particularly when workers themselves are opting to switch employers more frequently. Who Will Buy Cars? ``High wages didn't just drop out of the sky,'' said Harley Shaiken, a labor professor at the University of California at Berkeley. They reflected ``companies that made a lot of money while they were paying them. The fundamental question is still who's going to buy the cars. If autoworkers can't do it, who exactly is going to have the purchasing power to promote demand- led growth?'' GM shares, which sank $2.81, or 10 percent, in U.S. trading yesterday, rose 42 cents, or 1.6 percent, to $25.90 today in Germany. Delphi shares, after declining 79 cents in the U.S., or 71 percent, gained 10 cents, or 30 percent, to 43 cents in Germany. The extra yield, or spread, investors demand to hold GM's 8.375 percent bonds in euros maturing in July 2033 rather than comparable government securities, widened 29 basis points, or 0.29 percentage point, to 794 basis points, according to Fortis Bank, as of 9:26 a.m. London time. The spread has widened from 577 basis points at the end of July. The annual cost of insuring $10 million of GM debt rose $45,000 to $925,000 today, according to Deutsche Bank prices, the highest since May 26, according to Bloomberg data. Still Negotiating Separately, GM and the UAW are still negotiating on the automaker's demand that blue-collar workers make out-of-pocket health-care payments closer to those of salaried workers. GM believes it has a legal right to cut health care for retirees without the union's consent, but still hopes the union will agree, Miller said. Salaried workers at GM pay 27 percent of the cost of their health-insurance costs, compared with 7 percent for UAW members, said Toni Simonetti, a GM spokeswoman. Simonetti declined to comment on 2007 contract talks. She confirmed that GM is still talking to the UAW about trimming health costs. ``Our strong preference is to do so cooperatively with the union, but we need to get this done one way or the other,'' she said. ``Speculation on what may or may not happen with our UAW contract is way premature,'' said Jon Pepper, a Ford spokesman. The Right Idea GM had the right idea when it spun off Delphi in 1999, Miller said. The automaker had reduced its labor and wage costs while seeding a new company with ``sophisticated technologies'' to keep new products flowing to the automaker. Problems arose as a decline in GM's North American production reduced revenue, leaving Delphi unable to cover the high union wages it inherited from the automaker. GM, having cut production, couldn't take back excess workers from Delphi as planned. That left Delphi saddled with 4,000 idled workers that it had to pay under contract. Delphi's bankruptcy stems from ``the fundamental problems that have crippled the domestic auto industry: an inflexible and uncompetitively expensive labor union, along with a toxic relationship between automaker and supplier,'' said Credit Suisse First Boston analyst Chris Ceraso said in a research note. GM, Ford and DaimlerChrysler AG's Chrysler unit, the three biggest U.S. carmakers can no longer cover ``premium wages'' because they are being undercut by the Asian and European rivals that are paying workers less in their U.S. plants, Miller said. ``There is now such a critical mass with non-traditional automakers in North America,'' Miller said. ``The Big Three no longer have the pricing power, and the pricing power is being set by the low-cost producers. ``This is what happened in steel and airlines and what is happening now before your eyes in the automotive industry,'' said Miller, who has helped lead Bethlehem Steel Corp. and United Airlines parent UAL Corp. through Chapter 11 restructurings. To the Streets UAW members are ``resigned'' that they are going to have to take some cutbacks, said Al Benchich, president of UAW Local 909 at a GM transmission factory in Warren, Michigan. They won't agree to let the company cut everything. ``People fought and died to win the benefits and wages that we've gotten over the years,'' said Benchich. ``It wasn't just handed to us. So now we'll probably have to take to the streets again to keep what we've won or get it back.'' Miller said if Delphi workers strike, their plants will risk being shut. Rick Wagoner, GM's chief executive, has been negotiating with the UAW to lower health-care costs and retiree benefits. Those costs, GM says, add more than $1,500 to the cost of every car and truck sold in the U.S. GM Cuts In June, Wagoner announced the company would eliminate 25,000 jobs, or 17 percent of the company's workforce, by 2008 and close an unspecified number of plants. The automaker also plans to buy more parts in lower-wage paying countries to reduce costs. Negotiations aimed at a reorganization plan filed voluntarily with the bankruptcy judge could include bonuses to encourage long-time Delphi workers to retire, quit or accept lower pay, Miller said. These ``buyouts'' would enable Delphi to hire a new workforce starting at $14 an hour, and in turn, save both Delphi and GM money. GM will have to decide whether the savings would be sufficient for the company to help pay for Delphi's buyouts, Miller said. Asked to compare his situation to Wagoner's, Miller said: ``My problem is more urgent; Rick's problem is more serious.'' http://www.bloomberg.com/apps/news?pid=10000103&sid=ae.htNGLuXFc&refer=us
$65/hour in total compensation! RM-that ain't nothin, from GM's 2004 Annual Report: "Worldwide employment (In thousands) 2004 2003 2002 GMNA 181 190 198 GME 61 62 66 GMLAAM 29 23 24 GMAP 15 14 11 GMAC 34 32 32 Other 4 5 7 Total employees 324 326 338 Worldwide payrolls (in billions) $÷21.5 $÷20.9 $÷20.4 U.S. hourly payrolls (in billions) (1) $÷÷8.7 $÷÷8.9 $÷÷9.1 Average labor cost per active hour worked U.S. hourly (2) $73.73 $78.39 $62.7 This is a table so the number may not jump out at you, but GM reported its 2004 hourly labor costs to be: $73.73 per hour, making those guys at Delphi look like pikers. DS
Thursday October 27, 6:09 pm ET By David N. Goodman, Associated Press Writer GM Shares Tumble After SEC Subpoenas Documents on Delphi, Other Probes DETROIT (AP) -- General Motors Corp. shares fell almost 7 percent late Thursday, the day after the company said it received a Securities and Exchange Commission subpoena for documents about its dealings with parts maker Delphi Corp. and other matters. GM, the world's largest automaker, announced the SEC actions in a public filing Wednesday. GM shares fell $1.98, or 6.8 percent, to close at $27.19 Thursday on the New York Stock Exchange. The stock has traded between $24.67 and $40.82 over the past year. In its filing, GM said it was cooperating with the SEC "in connection with investigations reported by the media concerning pension and other post-employment benefits ... and certain transactions between General Motors and Delphi." GM said in the filing that it would have no further comment. DaimlerChrysler AG revealed in an SEC filing this week that the SEC has subpoenaed information about the way the company calculates pension benefits for North American employees. DaimlerChrysler said the request was connected to an investigation of accounting issues at GM that began in October 2004, and that Ford Motor Co. also has been subpoenaed. GM said the SEC subpoenas covered "various matters involving GM that it has under investigation (including) GM's recovery of recall costs from suppliers and supplier price reductions or credits." The SEC is probing "any obligation GM may have to fund pension and (post-employment benefit) costs in connection with Delphi's proceedings under Chapter 11" bankruptcy protection, GM said. Troy-based Delphi, the largest U.S. auto supplier and a former GM subsidiary, filed for bankruptcy protection Oct. 8. GM said it also has received SEC and federal grand jury subpoenas involving its General Motors Acceptance Corp. financing arm as part of "industry wide investigations into practices in the insurance industry relating to loss mitigation insurance." GM said it was cooperating with all of the investigations.
GM to restate 2001 financial statements Wednesday November 9, 9:31 pm ET By Jui Chakravorty DETROIT (Reuters) - General Motors Corp. (NYSE:GM - News) on Wednesday said it will restate its financial statements for 2001 because they were overstated by about $300 million to $400 million. Accounting errors led to the wrong figures for net income from continuing operations, which were overstated by about 25 to 35 percent, the world's largest auto maker said in a filing with the Securities and Exchange Commission. GM has been conducting an internal review of credits received from suppliers and its accounting treatment of them from 2000 to 2005. "This issue is one of the matters that is also being investigated by the SEC," GM said. GM said the review shows that the auto maker erroneously recognized some supplier credits as income in the year in which they were received rather than in the future periods to which they were attributable. The car maker said it expects its restatement of financial statements for 2001 to have a material impact to the results previously reported for that year. GM, which has lost about $3 billion this year, is grappling with high health care costs, foreign competitors cutting into its market share and stalled sales of its profitable sport utility vehicles amid rising gasoline prices. GM's main parts supplier -- Delphi Corp. (Other OTCPHIQ.PK - News) -- filed for bankruptcy in October, and GM could face up to $12 billion in liabilities at Delphi. GM shares earlier in the day fell to their lowest point in 13 years amid increasing concerns the auto maker has underfunded its pension plans and that workers at Delphi could go on strike. GM in its filing also said it will restate financial statements for periods after 2001 that may be affected by the erroneous accounting. "However, the effect of any such restatement in subsequent periods is expected to be immaterial to those financial statements," the company said. The auto giant said it expects to complete the review before it files its annual report for 2005. GM said in its filing on Wednesday that it restated its second-quarter 2005 results to reflect the appropriate value of its investment in Fuji Heavy Industries Ltd. (Tokyo:7270.T - News). GM had said in October that it would make the restatement. Concerns raised by the Securities and Exchange Commission also prompted the auto maker to reclassify cash flows for the year ended December 31, 2004. The amounts for the six months ended June 30, 2004 have been reclassified to be consistent with the six months ended June 30, 2005, GM said. The Audit Committee of the Board of Directors has warned investors they should no longer rely on GM's previously filed financial statements for 2001, or the related auditors' reports after that year, due to the likelihood of a material restatement of the results. GM shares closed at $24.63, down $1.24 or 4.79 percent, in Wednesday trade on the New York Stock Exchange.
GM General Motors posts largest % decline in the Dow today, falling 5.6% to lowest levels in over a decade (21.36 -1.26) -Update-
If a company has a market cap of 12 billion and will soon be transfered another 12 billion in liabilities thanks to Delphi, how much is that company worth?
GM bankruptcy possible: S&P Monday December 12, 7:16 pm ET By Dena Aubin NEW YORK (Reuters) - A bankruptcy by General Motors Corp. (NYSE:GM - News) is not "far-fetched" if present trends at the company persist, Standard & Poor's said on Monday, shortly after cutting world's largest automaker's ratings deeper into junk territory. http://biz.yahoo.com/rb/051212/autos_gm_sandp.html?.v=4
Auto Sales Slow in Dec. Despite Discounts Monday December 19, 5:27 pm ET By Dee-Ann Durbin, AP Auto Writer Analysts Say Auto Sales Off to Slow Start in December, Despite Holiday Discounts DETROIT (AP) -- Auto sales got off to a slow start in December, and early numbers indicate U.S. automakers continued to lose market share to Asian rivals despite holiday discounts, auto analysts said Monday. Overall U.S. sales were down 14 percent in the first 11 days of December compared with this time last year, according to the Power Information Network, a division of the marketing research and consulting firm J.D. Power and Associates. Every major automaker except BMW AG saw sales decline. Automakers plan to release their full December results Jan. 4. Bob Schnorbus, chief economist of global forecasting at J.D. Power, cautioned that December 2004 was an exceptionally strong month, making comparisons to this year difficult. Year-end incentives fueled last year's blockbuster sales, but this year, those incentives packed less punch because of the popular employee-discount programs that were offered all summer. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group saw their sales rise to near-record highs in July when they let customers pay the employee price, but their sales plummeted in October after the discounts ended. Asian automakers have seen fewer fluctuations because they didn't offer employee discounts. Perhaps the most discouraging news for U.S. automakers is that they continued to lose market share in early December despite launching a new round of discounts last month. Chrysler is offering free gas and extended warranties, while GM and Ford are posting no-haggle prices on their vehicles. Asian automakers also are offering deals, although they generally spend far less on incentives. The Big Three U.S. automakers had a combined U.S. market share of 50.1 percent in the first 11 days of December, compared with 53.6 percent at this time last year. South Korean automaker Hyundai Motor Co. also was losing share, while Japanese automaker Nissan Motor Co.'s sales were flat, the Power Information Network said. Toyota Motor Corp. and Honda Motor Co. saw their combined U.S. market share increase to 28.9 percent, from 26 percent last year. Himanshu Patel, an auto analyst with JPMorgan Chase & Co., said that while this December looks weak compared with last year, it will be an improvement over October and November as the hangover from the employee-discount deals continues to wear off. He also predicted GM's market share will see an uptick in the first part of 2006 as new vehicles hit the market. "We expect Big Three year-over-year sales declines to continue, but at a slower pace than in recent months," Patel wrote in a note to investors. GM shares were down 84 cents, or nearly 4 percent, to close at $21.05 on the New York Stock Exchange. Ford shares were down 7 cents to close at $8.23, and DaimlerChrysler shares were up 14 cents to close at $51.08.
GM General Motors setting new multi year low after taking out Nov 17 low of 20.60 (20.40 -0.63) -Technical-