GM asks for urgent financial assistance

By Alborz Fallah | November 12th, 2008

With the world in financial turmoil, General Motors is one the companies hit the hardest. Company CEO Rick Wagoner told Automotive News that his company’s financial distress is so dire that it may not survive the period before President-elect Barack Obama takes office in January.

New car sales in the U.S. have slumped to just 11 million units per year, down from 15 million, this has resulted in the old general posting its fifth straight quarterly loss.

In the third quarter of this year GM used $6.9 billion in cash to remain in business. This has brought the company’s cash reserves down to just 16.2 billion. GM needs to maintain at least $11-14 billion in cash reserves at all times.

Speaking about his company’s financial issues, Mr Wagoner said “This is an issue that needs to be addressed urgently,” stating that it’s best to “overshoot, not undershoot” with assistance for the auto industry.

In order to sweeten and hasten the deal GM will offer the U.S. government preferred stock, set limits on executive compensation and focus more on the introduction of fuel-efficient vehicles.

Asked if he will make way for new leadership Mr Wagoner said “I don’t think it’d be a very smart move, I think our job is to make sure we have the best management team to run GM. It’s not clear to me what purpose would be served.”

The GM boss believes that even with help from Washington his company needs “significantly more restructuring” if new car sales don’t improve. GM is hoping annual sales rise up to around 15 million in a few years.

We have to wonder if Carlos Ghosn would be interested in taking up a job at GM?

davie

I doubt the Yankee government would ever allow GM to go under. Still this is a textbook case in how to run a company into the ground…

1 – Bet the company on what US consumers want (stupid big trucks), even though they are the most fickle, ignorant and unreasonable consumers in the world.

2 – All the US unions to bully GM into ludicrous employment contracts which make it impossible for GM to quickly change direction when the SUV’s are suddenly not the flavour of the month

3 – consistently produce poor quality cars for generations and allow the Japanese to build up a perception over 30 years that they do everything but SUV’s so much better than GM.

4 – a perfect storm. Small cars are now in demand but no-one wants to buy a US built one. Unions prevent the company from developing these cars quickly. US consumers now so stuck for cash that they’re not buying cars anyway, even if GM does turn itself around.
WVB

^ agree davie, text book case for future university academics to pour over on how not to run a business empire.
Its time for the US to really take stock of their (and the rest of the world) business models.
You can trace the demise/slow down, what ever you want to call it, of american manufacturing (not just cars) back more than 30 years to the time in the 1950s when the Japanese took W Edwards Demings (and others) business philosophies and ethical management principles on board and left the US floundering.
Maybe korea was also just sitting their at the time just sucking it all up and biding its time.
yestime

I think most of the probs are thay just dont make any nice cars that people wont.Yes thay have a couple cars that we wont but these are low volume modles.Thay just got to learn how t omake good cars not just fuel eficent models.I mean look at most of the crap thay make
http://caradvice.com.au Fourwheelbikie

These are very difficult times. 20/20 hindsight is a wonderful thing. Both Davie and WVB make some good points but how do you forsee a huge market slowdown caused by irresponsible lending? (This lending was pushed by the Democrats.)It was reported that only 1 in 3 GM potential buyers were approved for finance in October. This is a finance problem resulting from the sub prime mortgage disaster that has nothing to do with cars.
Certaintly the likes of Williams Edward Demings, Tom Peters, Walter P Chrysler and Alfred P Sloan amoung others have a lot to teach us. This means looking intelligently at their writings for the first two and their actions for the second two.
To move forward will require some long term planning/philosophies that suit the USA. America is not Japan or Europe.
Let us not forget that it has been the USA that pioneered and developed the practical car for every man. It is also the american auto industry that has pioneered most developments such as anti-lock brakes, electronic fuel injection, hydraulic brakes, disc brakes, electronic engine controls etc, etc.
I hope that the American big three can ride this “perfect storm” or we will be the poorer for their loss.
Andrew

Hypothetically speaking what would happen to Holden if GM were to go under?

And can GM even be allowed to go under, the initial loss of jobs would be devastating, led alone the fall from parts manufacturing and all other associated areas that would suffer from the collapse.

I hope they can turn it around, and fast.
WVB

This is really scary stuff but the global ice age did kill off the dinosaurs so evolution had a chance.
Other press today points to a possible chinese acquisition of GMH with ford going to the Indians.
Btw, 4wheelbikie, didn’t messrs bosch pioneer antilock brakes and EFI?
Still wrong blog for an argument…………
http://caradvice.com.au Fourwheelbikie

WVB, antilock brakes are an aircrsft innovation adapted to cars by Americans as are disc brakes. It is an urban myth re German engineering. The 1971 model Imperial offered 4 wheel anti-lock brakes as an option. In 1971 Mercedes Benz were talking about them not putting them into production cars.
http://caradvice.com.au Fourwheelbikie

Sorry, re EFI, that was Bendix, offered in the fifties as opposed to mechanical fuel injection. Certainly Bosch mechanical fuel injection migrated from aero engines to car engines. I suspect the same was true of Bendix.
http://www.facebook.com/profile.php?id=674330849 lazybones

Amazing, GM needs government aid or they will collapse in 2 months (apparently!). And yes jobs will go to help keep the company afloat. Except Mr Wagoner who will probably maintain his $8.5M (USD) Salary package.

“Btw, 4wheelbikie, didn’t messrs bosch pioneer antilock brakes”

Could be Bosch but I know ABS came from the aviation industry, pioneered in Europe. Not the US car industry.
hmm

Have you seen GM’s share price? there share price commenced its descent from the year 2000. This is a reflection of a poorly run company, failing to remain globaly competitve. Now they need to put the blame on something.(Sub-Prime) So they can be temporarily pulled out of there own self destruction. Can’t help thinking the US government will be throwing good money after bad.

How many other companies from other sectors are going to be lining up for a handouts, anyone else thinking a can of worms?
Eddie

Let’s not forget that GM lost money even during the boom years when credit was cheap and so was petrol. OK, the market downturn will be the hit that could finally send them under. But that company has fundamental flaws that pre-date the credit crisis. They seem to be in complete denial about that. Where’s the analysis of what they did wrong and the plan to fix it? Don’t just blame the economy for everything.
alec

Sometimes it takes a disaster to shake things up before improvements can take place.

Times may be hard now, but the future of automotive will no doubt be brighter as manufacturers strive towards their new goal of efficient and more versatile products.

Short & Long term, the consumer is the winner
silky

Alec, we just left the bright times behind us mate, they still made losses of about 100 billion dollars..I really want to see what they can do in a recession, should be better than the circus
Flying High

This problem is almost certainly a result of the buying publics rightly deserved perception that GM products in general are of low quality.

Its a shame, but its the price GM have to pay for producing so much crap for so long. Fords comeuppance will be the same
Richo

as people have previously stated, the US gov won’t allow GM to go under, however I will say that the US gov will force major restructuring in GM (probably a good thing) and I can see a number of GM’s brands being sold off or shut down all together. The likes of saturn, saab, GMC, hummer, oldsmobile and buick could all be in line to be dropped from the GM empire, and realistically only Saab would be an attractive brand for another company to purchase, the rest i can see just dieing off.

This will reduce GM’s overheads enourmously as well as slashing product development costs and I think it would all be for the better. The days when GM can justify having so many different brands in the one market place are well and truly gone
silky

Hmmm, lets be clear about this, they are not asking, they are begging!
http://integra Conrod

so GM will go under………..so what ? best part is that Holden will go as well……..yipeeeee !!! Gm and Holden build or re-badge crap cars anyway…….big or small. we are in a time of change ….sure the initial shock will be bad but life goes on and the world can only be better for the loss of GM and Holden.
Richo

conrod – maybe you should be the counciler for all of the HUNDREDS OF THOUSANDS of people who work for GM worldwide, just tell them that its not the end of the world that they have lost their jobs, many of them being the only jobs they know how to do. You complete ignoramous
Realcars

Asia will eventually build/design majority of all vehicles as they are motivated by nationalistic pride whereas Western company CEO/BOARDS only have allegiance to their next paycheck with the Germans being the exception.

Within the next 20 years China will be the masters of the world.
Tomas79

People, look up “US car giants’laugh at Aussie suckers’” on news .com .au /bussiness

Realcars you are talking nonsence. The fact is that the asians in general build cars that best suits the asia.
E.g Those little micro trucks and those ultra mini vans…
On the other in japan you get much more street cred if you drive a foreign car, especially one with a steering wheel on the wrong side.
http://integra Conrod

Richo……I am just facing reality. We live in a money money money society……..so obviously (not to you though)there will be up times and down times…..thats how it works. GM goes under then someone who actually knows how to build good cars will take over, survival of the fittest. By the way……who councilled the thousands of horse shoe makers when the car came along? and what about the thousands of people who worked in factories making film for cameras ? Richo….get with the times, you are living in the dark ages mate.
Richo

and i think you have a fundamental lack of understanding of just how big GM is and how many people who be affected by such a callopse. what about all of the sales staff, all of the product suppliers, all of these companies have jobs mate. The flow on effects would be enourmous and quite obviously far beyond your simple comprehension
Andrew M

Im gonna put this out there that GM wasnt so silly in investing in the Daewoo facility.
it could become the strongest part of GM, and i sort of think they intend/intended it to.

GM needs some strength outside of the US economy.
Toyota wont be as affected as bad purely because their empire isnt within the US economy.
Toyota in the US is in no better position, its just that their nest isnt in the US economy.

the same goes for all companies that revolve heavily around the US economy.

the change in the US consumers buying trend was sudden.
not even the might of toyota foresaw it as they were pushing new products into the category that has just fallen only a matter of months ago.
also, what was the #1 seller in the US even after the truck segment took a big fall????
Realcars

That’s right Thomarse69 (had to use it no offence)LOL, Asians revere the German Marques.

Asian makes and German prestige will be the only ones to survive in the long run.

China will rule the world.Success is backed by the Government 100%.

Cherry will be the bogan car of choice.LOL.

America is on the decline unfortunately as is most of the rest of the first world.
Andrew M

as it was suggested earlier, i doubt the indians will continue to buy parts of Ford or GM because they are struggling to keep themselves alive at the moment too

the only really strong place to be right now from an economical point of view is asia
http://caradvise.com.au schah7

I agree Condod do the motoring world a favour General Motors and GO BROKE only to be replaced with something that’s worth owning.
There wont be any job loses as G.M workers will just flick over to these factorys to build far better wheels.
Andrew M

schah7,
sounds all well and good,
but please name this take over manufacturer that isnt feeling the same pinch…….
Elitist

This is a rubbish company that for years were making huge profits off Hummers and gas guzzlers… Now they want help?

I cant wait till Ford and Holden also ask for assistance…
These companies all have one thing in common..No ideas… Just old markets.
Andrew M

Elitist,
you make out as if profit is a dirty word…….
Spitfire

The facts are Elitist, Ford and Holden have been asking for assistance for sixty years and have been getting it.

Just like the now defunct Australian Motor Industries (AMI), Renault, Volkswagon, Leyland, Nissan, Chrysler and Mitsubishi who have in the past built or assembled cars in Australia. That may come as a surprise to some of the young ones who visit this site.
upshift

GM = Global Mess
They have been churning out gas guzzling, unreliable crap for years now with inferior parts made around the world in cheapskate factories with little QA.
You DONT make money selling crap.
http://integra Conrod

yes Richo…as i said in my first comment the initial shock would be bad but it will be better in the long run. These people will eventually be absorbed into other industries or be retired with a redundancy package which will be very good. Richo…..you need to understand life in general……….things are born and things die every day………..its the same in bisiness…….no business can last forever..why cant you grasp this very very simple reality ????
SteveC

What’s with all these stories on car manufacturers asking for financial aid?

My business is also suffering, I’d like to ask for some financial aid from the Government. How does one go about doing this? Surely they’d be more interested in giving me a couple hundred thousand dollars than forking over a couple of million to a dying car manufacturer.

What makes them so special? Businesses rise and fall every day. Adding money into the bank account won’t fix your problems. Maybe look at your management and structure. Spend what little money you have left on some good advice you twats.

SteveC (Yes, this is exactly what I posted about the Indian car industry too).
http://integra Conrod

Richo……..See SteveC’s comment above ? Businesses rise and fall every day ? He can grasp that reality…….why cant you ? GM is like a garden that has had all the good plants overgrown and taken over by weeds. The only solution is to rip it all out and start again……..so hopefully that will happen and GM will die ……..
Andrew M

well it looks like the chinese economy has/is taking a big dive now too.

it will be interesting to see how they deal with it
Frontman

SteveC Says:
November 13th, 2008 at 7:06 am
Actually there are systems in place to assist smallbusiness as well. Centre link and another govt department that I can’t remember right now, have the funds available to you if you can out up a business case.
But on topic,
Why would they give money to these companies??
If the motor industry wen under in the States, then 1 in 10 workers would be unemployed!
On top of that, how many factories do GM & Ford operate outside of the USA? All of those employees would also be out of work. This essentially would cripple the likes of Mexico, Brazil and certain eastern block countries.

Net result? No this isn’t exagerating, is the global would skip reccession and got straight to depression, Not passing Go, Not collecting $200.00.
By all means the respective governments need to put things into perspective, not an assistance plan the likes of what Australia got(fundamentally a political spruik with no benefit to anyone) but a bail out with real clout similar to the Banks. Put parrameters in like PM Brown did (ie no executive payouts, 1/4ing or more of the CEO+ payrolls). Put controls in place to enforce streamlining of production. Ensure that the Auto makers use local product and work forces etc.
Even a simple thing like the US government picking up the outlandish pension plans that were forced upon the big three during the unionistic 70′s & 80′s would actually create a mssive relief to the three manufacturers.
ANyway that about 20 bob’s worth.
http://honda spitfire2

For those old enough to remember , the uk industry died in the 70/80s due to bad management , ie poor quality , unsaleable designs , tossed in with crazy union behaviour .

This is just de ja vu .
Andrew M

exactlly Greeny,

it will certainly be a win win when the market choice lessens and we see a monopoly take hold.
i can see the great deals coming now!!!
even if you dont buy GM products, it is still competition that keeps the other guys honest

you are a genius!!!! Pfffft
BK

Why doesnt everybody in the world buy a brand new vehicle for themselves now and not worry about these car giants for the next 10 years. Im sure everybody can get 10 years or more out of a brand new car. These car giants can close up now and do all there restructuring that are needed. Then they can reopen up when things start lookin better in the world. Simple way to run a business and being more efficient in operating it. Its all about being efficient in lots of ways now.