WHY GM will blow up...

Discussion in 'Stocks' started by Trend Fader, Nov 9, 2005.

  1. The stock is trading at 20x debt. GM has mind boggling $285bil in debt.

    As the shares get lower liquidity becomes an issue. The company will be forced to either be bailed out by gov.. split the company into various units and be sold off.. or just file for BK and go through a multi year reorganization.

    Here is the reality.. the US consumer is tired, no more cash back and no financing cheap money car deals, interest rates will continue to soar....

    Horrible backdrop for GM.

  2. Cuspis


    I'll add one more thing, GM has bet their entire near term future on SUV's and trucks. What timing! Their internal economists forecast oil to return to the 30-40 range.

    The US govt had better not bail them out!
  3. I don't think the government should bail them out, they have no sustainable competitive advantage. They (GM/Ford) need to take down the UAW, but it is going to be a HUGE mess with all of the retirees' pension out-the-door. My guess is that somone will come in and force them to sell off GMAC, dividend the $$$ LIKE WE JUST SAW, and railroad them into a MASSIVE BK.

    They have a book value of about $38-39/share so I can't see investors letting that go to waste. :)
  4. bighog

    bighog Guest

    Why is there a "NEED TO TAKE DOWN THE UAW"?

    Will the cars be cheaper? Will they be better or worse? Will you feel better if there were no unions at all? Where are GM's workers wages etc compared to Toyotas, BMW, Volkswagen?

    Are the Mercedes cars really cheap because they are made in a non-union plant in Alabama? If not, then why not?

    If and when the big bad American companies succeed in trampling over workers and retires pensions and trash their health care and have them working for third world wages will you feel better?

    I guess maybe you think all problems are caused by others high wages and they are making it hard for you, Correct?

    Do you relish in hoping this country is to become a two class society? Those that want it all, and those that must get nothing? Do you want to build a fence around your house?

    This self greed is really sad, it is ok to stiff the other guy so you get a little more, is that want you want?

    Here is an idea, have the vehicals for the Army etc made in china and shipped directly to Irag and where ever else the dog catcher of a President gets us in further trouble with the rest of the world. We are the laughing joke of the world as it is.
  5. bighog

    bighog Guest

    How about this scenario: The USA loses all manufacturing to cheap foreign labor as all American workers decided they were NOT" gonna take it anymore with dirt bag wages, no healthcare, no bennies etc. Since the USA has no more workers the only thing left would be a Powerful military (until the money ran out).

    The problem with that scenario is the troops would be empowered to demand more wages etc or else they would join a union or do a coup.... :D
  6. The greed of the unions by refusing to negotiate earlier on their pension and benefits is what has created this massive SYSTEMIC competitive disadvantage for them.

    This has nothing to do with any greed you might perceive me to harbour. GM/Ford going into BK is about trying to maintain the long-term economic viability of our economy. By NOT going into BK we are only going to make MORE pension and health-care promises to people and postpone a necessary evil.

    The fallout will be ugly...I am not paid to come up with the solution, so I haven't given much thought to what a feasible solution might be.

    Unions were formed because of poor working conditions, not to define international labor wages...

    Don't hate the messenger...BUT, I could be wrong too! Either way, we have a huge problem that the market is not going to like.
  7. bighog

    bighog Guest

    Well, then the USA will be at a comparative advantage relative to the other carmakers etc since the USA has "NO" national healthcare. Could this be the plan?

    Certainly companies want to junk healthcare plans for their workers, throw in pensions also (defined benefit plans) and dump some other benefits like sick days, less vacation time. (euro workers get much more time off than the USA worker)

    Do you think it is time for a "NATIONAL" healthcare plan? If other countries which have national plans are they at a disadvantage to us?

    Wages are not the "CAUSE" of most companies problems, wages are a cost of doing business. Car companies are an excellent example, it is not the wages they are complaining about, it is the legacy costs. Well, those costs are a disappearing cost relative to the continuing operation of the business. Robots do not need to collect a pension, but the workers legacy costs they replaced should have been cost accounted. The big shots are just using these costs to stiff the newer workers and complain to the government for help.

    Double standard, as you see today with the oil companies, they are gouging, but leave us alone, we are having fun...:eek:

    Look the world automobile market is very competitive, the USA car makers are crying foul and using the worker as the scapegoat.

    Why should it be that everyone thinks we should lower our wages? That idea was perpetuated from the boardrooms not from the halls of Congress, certainly not from the factory floor.

    Greed, the next quarterly report, overpaid corp executives, shareholders, these are a few of the "CAUSES" not the workers.

    China used their comparative advantage to their good will, more power to them. The fools in this world labor has been the USA, we are giving away the farm.

    I fail to see where any prices were "LOWERED" from a factory moving to China etc. The cheaper wages go right to the lower line, not to the consumer. They say different but that is the real gist of the lowering of wages.

    We are becoming a third world country as others come up at our expense. When was the last time you heard a CEO say: We are moving our factory to China so the Chinese people can catch up to the USA in opportunities, wages benefits etc?

    So maybe i am missing something, should i go to a showroom and see how cheap a BMW is?.......

    Nothing personal to anyone, please realize that, i am just sick of the American public swallowing the propaganda of our workers being the cause of the problems. They are not, it is the overpaid, beatoffs in the executive chairs.
  8. Star


    Here is even more bad news I just saw.

    GM overstated 2001 profit by up to $400M
    By Shawn Langlois, MarketWatch
    Last Update: 6:32 PM ET Nov. 9, 2005

    SAN FRANCISCO (MarketWatch) -- General Motors on Wednesday said it overstated 2001 profit by as much as $400 million.

    The announcement capped another rough day for the world's largest automaker, which saw its shares touch on 13-year lows amid renewed fears of a strike at Delphi Corp. (DPHIQ:

    Closed down $1.23, or 4.8%, at $24.63.

    The Detroit giant said it will restate results for 2001 to reflect an income overstatement of between $300 million and $400 million, or up 25% to 35%, and will also correct subsequent years as necessary.

    GM added, however, the effect of the restatements in the years after 2001 is expected to be immaterial.

    "The review to date indicates that GM 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 company said in a Securities and Exchange Commission filing.

    The review is ongoing, according to the company, and no final conclusions have been reached.

    GM said it expects to complete the review, which relates to pension obligations and business dealings with bankrupt Delphi, and take the appropriate action before filing its 2005 annual report.

    The Securities and Exchange Commission issued subpoenas last month as part of an investigation of GM's pension obligations and its dealings with Delphi. See earlier story.

  9. nitro


    GM went lower today has nothing to do with the above news. It went lower on Fitch downgrading it's debt two more notches.

    Yesterday .50 of the downdraft was because it went ex-div. The rest was stock weakness.

  10. THe lower the stock goes.. the more liquidity it loses and more absurd the debt to equity becomes....

    Companies with that much debt are not able to stand on their 2 feet for long... eventually the whole house of cards crumbles.
    #10     Nov 9, 2005