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Thread: Running on fumes: GM could soon run out of cash

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    Elite Member celeb_2006's Avatar
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    Exclamation Running on fumes: GM could soon run out of cash

    Very ominous news about the big 3, sad that it has come to this. Even more ominous, looking for government bailouts.

    Running on fumes: GM could soon run out of cash - Yahoo! News

    DETROIT – The American auto industry is running on fumes. General Motors, the nation's largest automaker, warned Friday that it may run out of money by the end of the year after piling up billions in third-quarter losses and burning through cash at an alarming rate. Ford sustained heavy losses, too.
    The situation is so severe, GM has suspended talks to acquire Chrysler and is appealing to the government for help as the slumping economy drags cars sales to their lowest level in a quarter century.
    GM Chairman and CEO Rick Wagoner said the company will "take every action" possible to avoid bankruptcy.
    "We're convinced that the consequences of bankruptcy would be dire," he said, adding that the company would use every source of potential funding. "We need to find a way to get through this, and that's really our focus," he said.
    GM also planned more job cuts, including another 5,500 salaried and factory workers. But company officials cautioned that those measures alone would not be enough and that federal aid is essential.
    Ford saw its cash supply decline rapidly and announced its own job cuts Friday. But it's in better shape because the company borrowed billions of dollars in 2007 by mortgaging its factories. The Dearborn-based manufacturer said it had enough cash to make it through 2010.
    Friday's events called into question the future of Detroit's three automakers and heightened pressure on the government to take action.
    President-elect Barack Obama on Friday indicated that help may be on the way. At a Chicago news conference, he said Congress must pass an economic stimulus measure either before or just after he takes office in January, and he mentioned aid for the auto industry.
    Top executives of General Motors, Ford, Chrysler LLC and the president of the UAW met with Congressional leaders Thursday to discuss some $50 billion more in loans, participants said. The loans would include $25 billion to help the companies withstand the weak economy and another $25 billion for future. The money would be in addition to the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.
    IHS Global Insight analyst George Magliano said the cash problems reported by GM and Ford were worse than experts had thought. And that raised the risk of bankruptcy.
    "It's close," he said about the possibility of one of the U.S. automakers filing for Chapter 11 protection. "Up until now, we knew the cash numbers were tough, but we didn't know how bad."
    Companies that run out of cash generally can sell assets, cut costs or file for Chapter 11 bankruptcy protection to keep creditors at bay while they reorganize.
    GM has said it could fall short of cash needed to operate in the first few months of next year, and Ford has said it has about seven months of money, Magliano noted.
    If GM files for bankruptcy, Fitch Ratings analyst Mark Oline said there is "a very high risk" that it would pull in Ford and Chrysler, too, because GM probably would be forced to discount vehicles deeply to generate cash for creditors, and other automakers would be forced to follow.
    GM said it lost $2.5 billion in the third quarter, but more important, it spent $6.9 billion more than it took in — nearly double the spending rate of the second quarter.
    The news came just hours after Ford announced it had lost $129 million for the quarter. The company burned through $7.7 billion in cash, but said it could keep going through 2009. Ford also said it would cut another 2,260 white-collar workers in North America.
    GM called off talks with Chrysler to concentrate on its own business.

    Privately held Chrysler wouldn't comment on GM's remarks, but said it remains focused on returning to profitability. It also said it will continue to "explore multiple strategic alliances or partnerships."
    GM's cuts included the indefinite layoff of about 3,600 workers beginning early next year as it slows production at 10 assembly plants to match anticipated weaker sales.
    "We are cutting to the bone," said Fritz Henderson, GM's president and chief operating officer. "What we want to try to do is size the business for this kind of volume level ... and frankly, put us in much better shape when the industry improves."
    GM reported a net loss of $4.45 per share during the quarter, compared with a record-setting loss of $39 billion, or $68.85 per share, a year earlier. Its automotive operations saw an adjusted loss of $2.8 billion.
    Revenue fell to $37.9 billion from $43.7 billion.
    The results exceeded Wall Street estimates. Analysts surveyed by Thomson Reuters predicted a loss of $3.70 per share on sales of $39.4 billion.
    The company announced it would bolster its cash reserves by $5 billion by the end of next year through reduction of sales promotions and further production cuts in the first quarter.
    GM will cut capital spending to $4.8 billion from $7.2 billion and delay several vehicle models. But GM said it will continue funding for the Chevrolet Volt electric car and the Chevrolet Cruze, a small fuel-efficient model. Both are due out in 2010.
    GM also suspended its matching contribution for employee 401k plans, and suspended tuition reimbursement. In addition, salaried employees will not receive incentive pay next year for their work in 2008, GM said.
    GM, which has about 123,000 employees in North America, will also cut another 1,900 salaried jobs on top of the 5,100 announced last summer.
    But the cuts and delays may not be enough to keep the company's cash supply from falling dangerously low.
    "GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business," the company said in a news release.
    And the company's cash shortage in the first two quarters of 2009 could fall significantly short of the minimum amount unless industry conditions improve or GM gets government funding, GM said.

    GM shares fell 44 cents, or 9.2 percent, to $4.36 in Friday trading. Ford shares rose 4 cents, or 2 percent, to $2.02.
    ___

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    Elite Member B.C.'s Avatar
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    It is big news here in Detroit. I have a small pension coming from GM and I am hopeful that something can be done for our auto industry. It's sad when you can buy a share from an American manufacturer for less than you can buy a gallon of gas.

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    Elite Member Grimmlok's Avatar
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    Maybe if they didn't sell a shitty product nobody wanted, they would do better.

    Also, maybe if foreign markets would open up to them (cough, JAPAN/China) instead of being ridiculously protectionist, they'd do better.

    But come on.. not even americans buy american anymore. They're crap cars.
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    Elite Member Brookie's Avatar
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    That's the thing - they're not all crap cars. There's some pretty decent American made automobiles out there, but right now - who can get financing to buy one? Who will be extended credit to get a new anything? Toyota and Honda are also pulling in their belts; their sales are down as well.

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    Elite Member Mr. Authority's Avatar
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    It's pretty bleak here in Michigan. Few friends and loved ones lost their jobs or had their pay slashed. Plants closing all over the state (and nation) everywhere. I don't know what the government can do for the industry if the same people who fucked up i nthe first place are still running the Big 3. I don't see any hope in sight.

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    Elite Member qwerty's Avatar
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    My grandfather worked for GM for 40 years in AC Delco Management which provided him and my grandmother with a sweet pension, awesome health insurance and other retirement benefits upon retirement. My grandparents have (thankfully for this matter) passed, but GM retirees must be shitting bricks now. Such a bad situation and so financially devastating not only to the employees but surrounding communities. I'm really upset for a lot of people - working hard is no longer good enough to ensure a secure today and future. It's so depressing.

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    Elite Member L1049's Avatar
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    I'm surprised that Bob Nardelli hasn't run Chrysler into the ground. That guy is a real piece of work.

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    Elite Member qwerty's Avatar
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    ^^He wasn't good for Home Depot either.

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    Elite Member L1049's Avatar
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    Quote Originally Posted by qwerty View Post
    ^^He wasn't good for Home Depot either.
    That's what I'm basing my opinion on. My mother works for Home Depot, and the stories she's been told are unbelievable.

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    Elite Member Jexxifer's Avatar
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    My BIL works for Ford. He has actually only worked about 15 weeks so far this year and has been laid-off the other weeks.

    American-made cars are of comparable quality to the Japanese. The biggest problem with the American-made is they really failed at predicting/planning for the shift to more fuel-efficient and smaller vehicles. Note to Ford: Do you really need to manufacture 6 different SUVs??

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    Elite Member B.C.'s Avatar
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    It will be a sad day for US if any of the big three go bankrupt. Millions of jobs will be lost. An American built car is one of the few things we can buy here in the states made here. I have never owned anything but an American made car so I can't compare my vehicles to the overseas manufacturers but I can say I love my Ford.

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    A*O
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    American cars aren't better/worse than any others in terms of quality. I think the problem lies in the fact that they aren't making the kind of car people want these days. It's not just eco-warriors and hippies who want to give up their gas guzzlers and swap them for smaller more fuel-efficient cars. Toyotas, Hyundais, Hondas etc are popular because they are cheaper to run and in these hard economic times that's important to a lot of people. The US manufacturers need to wake up and give people what they actually want, not what they THINK they want.
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    Elite Member Grimmlok's Avatar
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    Yeah.. tell it to my mother who bought a ford focus and the thing has been nonstop shit since she got it. Oh, same with my friend here in TO.. another ford.. endless problems.

    Tell it to chrysler, and their crap falling to pieces after 3 years. My father rebuilding the transmission every 3 months because it craps out. Having to put a piece of carboard in front of the engine block so it doesn't cool off to the point of seizing going down the highway in the winter.

    Honda: never a problem. EVER.

    Toyota: same thing
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    A*O
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    Yeah well there is that. Mind you, Ford build cars in Oz and they have a pretty good reputation, likewise GM (aka Holden here) but for price and reliability you can't go past the Jap makers.
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    Elite Member L1049's Avatar
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    Quote Originally Posted by A*O View Post
    American cars aren't better/worse than any others in terms of quality.
    Uhh, you may want to rethink that. These following vehicles were going to be exported form China...until the crash tests came in. If Wal-Mart had a car lot, these would be on it:

    The Brilliance BS6:
    [youtube]http://www.youtube.com/watch?v=TFzfPagVhY8&feature=related[/youtube]

    The Brilliance BS6, another view:
    [youtube]http://www.youtube.com/watch?v=Mbe5ILICT4M[/youtube]

    Some van that's probably given away on China's The Price is Right "Congratulations, you've won a death van!":
    [youtube]http://www.youtube.com/watch?v=D827IxEJVS4&feature=related[/youtube]

    And the Chinese Hummer *Disclaimer: when driven on any road that's not straight and paved, the vehicle will blow the fuck up" The Jianglink Landwind:
    [youtube]http://www.youtube.com/watch?v=245NCBsj4Lc[/youtube]

    For the finale, good ol' fashioned American shit, the one and only Ford Pinto *disclaimer: this vehicle will also blow the fuck up"
    [youtube]http://www.youtube.com/watch?v=cFFTa3JzIOA[/youtube]

    Ah, what the hell. One more for good measure:
    [YOUTUBE]http://www.youtube.com/watch?v=cFFTa3JzIOA[/YOUTUBE]



    Ya got to hand it to the Chinese, they made the entire car a crumple zone.

    Do a Youtube search for the Smart car crash test. You'd be surprised at how well that thing comes out. It's like one giant roll cage.
    Last edited by L1049; November 9th, 2008 at 12:43 AM. Reason: Whoring youtube videos.

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