Is GM already on track to go bankrupt, again?

posted at 12:36 pm on August 16, 2012 by Erika Johnsen

And I quote:

“When the American auto industry was on the brink of collapse, more than one million jobs at stake, Gov. Romney said, ‘let’s let Detroit go bankrupt.’ I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back. And GM’s number one…”

That was just last week, during one of President Obama’s campaign stops in Colorado. President Obama can often be heard these days touting the ostensible success of his auto-industry bailouts in rescuing the industry, while scolding Mitt Romney for his oh-so-callous prescription to merely allow Detroit to go bankrupt. Yes, because quelle horreur that any company that employs a relatively large number of people should be forced to compete based on free-market signals rather than being coddled by the political whimsy of federal assistance. Federal bailouts are a product of short-term thinking that rewards and perpetuates poor decision-making — allowing a company to go bankrupt might cause pain in the short-term, but in the long-term leads to economic growth and efficiency.

President Obama claims he’d like to do the same in every manufacturing industry, not just the auto industry — because GM is number one again! …Apparently, under Obamanomics, this is what “success” looks like, reports Forbes:

President Obama is proud of his bailout of General Motors.  That’s good, because, if he wins a second term, he is probably going to have to bail GM out again.  The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company.  It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday.  This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion. …

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market.  For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011.  With a loss of market share comes a loss of relative cost-competitiveness.  There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.

And unexpectedly, of course, this is all costing the taxpayer quite a bit more than the Obama administration originally thought. Unusual, right?

But, in a report sent to Congress, the White House raised to $25.1 billion the amount it said it cannot now expect to recover – primarily by selling off the remaining 26% stake it still holds in GM.  The previous quarterly estimate was $21.7 billion. On the other hand, the latest figure is about 45% less than the $44 billion the Obama Administration had once predicted.

But hey, who could’ve seen this coming? No, really, I mean it — who?

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for on Tuesday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed. …

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course – the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check. …

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs.


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Dunno…Ford has union employees and they seem to be doing fine. I suspect that GM has lousy management. That being said, from what I gather a lot of these plant employees are paid waaaaay more than what they should for what they do and that has to hurt GM’s solvency. But, that should be between the unions and the management and everyone else should stay out of it.

Dr. ZhivBlago on August 16, 2012 at 4:59 PM

It is clear Brayam never read the Forbes article.

CW on August 16, 2012 at 4:58 PM

It is also clear he doesn’t have a dime of his own money directly invested in Government Motors stock.

farsighted on August 16, 2012 at 5:01 PM

Will GM be able to turn itself around, and save American taxpayers from losing $26.5 billion on Obama’s bailout?

“Peanuts” says Brayam.

You clearly know less about this than you seem to think – but then that’s typical for libs.
You still haven’t answered an earlier question – How do you make a profit on a car that costs $250K to make but sells for only $40K? Come on – show us how much you know.

dentarthurdent on August 16, 2012 at 4:53 PM

What no answer? Tell me too Brayam about how C4C was great for America when it cost Americans over 20 k per car?

I knows. Math es hard.

CW on August 16, 2012 at 5:01 PM

Then you must be an enthusiastic investor in Government Motors.

How many shares of GM do you directly own and what percentage of your portfolio do they represent. When did you buy them and at what price?

farsighted on August 16, 2012 at 4:41 PM

YA sure. bayam is just trying to justify anything and everything Obummer the messiah does. No way she would actually invest in something like that.

The GM situation is actually fairly painful for me, as I’ve been a GM guy for a long time. I’ve owned 3 Camaros, a Chevy van, a Pontiac G6, a Chevy C10 pickup, and an 03 Avalanche (all pre-gubmint motors). My oldest son and I trade off driving the Avalanche and 74 Camaro, and my youngest son drives the G6. And I really want a new Camaro – but I won’t buy a new one or invest in the company while it’s Gubmint Motors.

dentarthurdent on August 16, 2012 at 5:08 PM

And we better hope Obama is gone by then, or else he’ll take the thing over and run it like Amtrack and we’ll truly have crappy government produced cars rammed down our throats like the “good old days” of the Soviet Union.

wildcat72 on August 16, 2012 at 1:05 PM

Point of order – we already have crappy government-produced cars being rammed down our throats. For those of you who didn’t finish reading the multi-page Forbes piece, Car and Driver found the 2013 Chevrolet Malibu Eco sorely lacking against its (non-hybrid) competition. In fact, C/D coudln’t find a non-Eco version of the Malibu to test.

Steve Eggleston on August 16, 2012 at 5:10 PM

Sorry to hear you don’t know much about the industry.
 
bayam on August 16, 2012 at 4:44 PM

 
Speaking of, why don’t you respond when your ideological statement is proven false?

rogerb on August 16, 2012 at 5:12 PM

It is clear Brayam never read the Forbes article.

CW on August 16, 2012 at 4:58 PM

Yes I read the article and its laughable. At least it has a catchy headline to inflame the right.

As I noted before – Malibu sales did plummet in the last quarter. Funny how the writer failed to point out that buyers were awaiting the release of the completely new and redesigned 2013 Malibu (other than Eco model). The car has been one of GM’s best sellers and very successful in the D segment. One deadpan auto review isn’t a window to the future.

It’s also hard to understand how such an objective observer could overlook GM’s 40% increase in sales of compacts and subcompacts.

Chrysler is doing so well that he couldn’t possibly dedicate a page to its post-bailout success.

bayam on August 16, 2012 at 5:16 PM

Speaking of, why don’t you respond when your ideological statement is proven false?

rogerb on August 16, 2012 at 5:12 PM

Because bayam is the stereotype libtard troll – all lies, projection and narcissism – no facts, subtance, logic or reason.

dentarthurdent on August 16, 2012 at 5:18 PM

So where is the bailout for American Airlines???

Didn’t ALPA (the pilots union), TWU (baggage handlers), APFA (flight attendants) not give enough to Obama?

KenInIL on August 16, 2012 at 5:18 PM

Yes I read the article and its laughable.

bayam on August 16, 2012 at 5:16 PM

Sure it is . You didn’t read it .

And that is how you argue your response? Pretty lame.

**

Weirdly you ignore RogerB and Farsighted…Hmmm

CW on August 16, 2012 at 5:23 PM

As for whether Obama would bail out GM again, I’ll repeat what I said on Howard Portnoy’s Greenroom piece:

It depends on whether the second collapse happens before or after the end of 2014. That is when GM’s restriction on its ability to buy back the preferred stock (paying 9% annually) currently held by the UAW ends.

For the record, I see a second Chrysler bankruptcy as more likely. Indeed, so did the Obama administration, as the UAW got a senior secured loan instead of unsecured preferred stock in addition to common-stock ownership stakes.

Steve Eggleston on August 16, 2012 at 5:24 PM

Speaking of, why don’t you respond when your ideological statement is proven false?

rogerb on August 16, 2012 at 5:12 PM

Crickets.

CW on August 16, 2012 at 5:24 PM

So where is the bailout for American Airlines???

Didn’t ALPA (the pilots union), TWU (baggage handlers), APFA (flight attendants) not give enough to Obama?

KenInIL on August 16, 2012 at 5:18 PM

You answered your own question.

Steve Eggleston on August 16, 2012 at 5:24 PM

Chrysler is doing so well that he couldn’t possibly dedicate a page to its post-bailout success.

bayam on August 16, 2012 at 5:16 PM

Chrysler is majority owned by a foreign car company (Fiat), has made big money on trucks and performance retro styled cars, and has NOT jumped into the hybrid market. In fact they are refusing to build hybrids until the US DOE gives them a big laon/handout to do so.
Do you see a difference in their post bailout path from GM’s?
Oh sorry – you don’t know much about the industry, do you?

dentarthurdent on August 16, 2012 at 5:25 PM

Chrysler is doing so well that he couldn’t possibly dedicate a page to its post-bailout success.

bayam on August 16, 2012 at 5:16 PM

Yay corporate welfare!!!

CW on August 16, 2012 at 5:26 PM

Yes I read the article and its laughable.

bayam on August 16, 2012 at 5:16 PM

That’s libtalk for “did not agree with DNC talking points”.

dentarthurdent on August 16, 2012 at 5:26 PM

So where is the bailout for American Airlines???

Didn’t ALPA (the pilots union), TWU (baggage handlers), APFA (flight attendants) not give enough to Obama?

KenInIL on August 16, 2012 at 5:18 PM

In a Marxist society these unions will have no say whatsoever. They need to wake up and realize that. In a Socialist or Corporate (Fascist) system it is the state that sets wages and benefits, and from what I’ve seen it’s not anything to aspire to. Negotiating for more this and that is one thing…that’s part of doing business including labor

But they need to get a clue and realize that their employers aren’t going to put up with too much—they’ll just close down everything, bail out and either retire or go on to another company. That, too, is part of free enterprise-cutting your losses when necessary and weighing gain vs. aggravation.

Dr. ZhivBlago on August 16, 2012 at 5:29 PM

It is clear Brayam never read the Forbes article.

CW on August 16, 2012 at 4:58 PM

Yes I read the article and its laughable. At least it has a catchy headline to inflame the right.
bayam on August 16, 2012 at 5:16 PM

So Wall street analysts are infallible – except for the Wall Street analysts that built and work for Forbes magazine?
Typical libtard logic.

dentarthurdent on August 16, 2012 at 5:31 PM

Yes I read the article and its laughable. At least it has a catchy headline to inflame the right.
bayam on August 16, 2012 at 5:16 PM

Maybe…but tell me you wouldn’t be down with this if a Republican were president? Pleez.

If Romney wins, then all of these economic disasters will suddenly matter.

Dr. ZhivBlago on August 16, 2012 at 5:34 PM

Chrysler is majority owned by a foreign car company (Fiat), has made big money on trucks and performance retro styled cars, and has NOT jumped into the hybrid market. In fact they are refusing to build hybrids until the US DOE gives them a big laon/handout to do so.
Do you see a difference in their post bailout path from GM’s?
Oh sorry – you don’t know much about the industry, do you?

dentarthurdent on August 16, 2012 at 5:25 PM

Actually, it’s another big loan. The first DOE “clean car” loan was essentially a refinancing of Fiat’s portion of the TARP bailout of Chrysler.

Oh, and bayam, if Chrysler was doing so well, why isn’t the UAW demanding Fiat let it cash out? After all, anything beyond roughly $5 billion earned from the sale of the UAW’s stake in Chrysler goes to Fiat (which bought the Treausury’s rights to the “excessive” profits for $60 million and the Canaidians’ rights to same for $15 million).

Steve Eggleston on August 16, 2012 at 5:37 PM

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.-Forbes

Yes the facts just scream success.Brayams a nutjob.

CW on August 16, 2012 at 5:38 PM

So Wall street analysts are infallible – except for the Wall Street analysts that built and work for Forbes magazine?

That clown isn’t a Wall Street analyst. There’s no substantive review of GM finances.

1 bad review of 1 hybrid car = bankruptcy

Brilliant. Let’s not even wait to see how the non-hybrid models are received, a vastly better looking car than the current Malibu.

And based on forward-looking earnings estimates, GM really looks like it’s headed for failure.
http://finance.yahoo.com/q/ae?s=GM+Analyst+Estimates

And I really want a new Camaro

Have you test driven the current Camaro? Maybe it’s a terrible car that you’d hate.

bayam on August 16, 2012 at 5:40 PM

Chrysler’s foreign ownership….and its American bailout…

success!!

///

How do the brayams define failure?

CW on August 16, 2012 at 5:42 PM

Brayam doubles down on the lame response to the writer’s points all the ignoring the challenges of RogerB and farsighted.

CW on August 16, 2012 at 5:43 PM

* all the while ignoring….

CW on August 16, 2012 at 5:44 PM

And based on forward-looking earnings estimates, GM really looks like it’s headed for failure.
bayam on August 16, 2012 at 5:40 PM

Either you forgot the sarc tag or you’re contradicting yourself again.
But again – how often are analysts actually correct? How many times have actual earnings reports NOT met projections for major companies?

1 bad review of 1 hybrid car = bankruptcy

Again – how do you make a profit on a car that costs $250K to make but sells for $40K? You still haven’t answered that simple math question.

dentarthurdent on August 16, 2012 at 5:50 PM

Again – how do you make a profit on a car that costs $250K to make but sells for $40K? You still haven’t answered that simple math question.

dentarthurdent on August 16, 2012 at 5:50 PM

Crickets.

CW on August 16, 2012 at 5:51 PM

Despite all the interference with the auto industry by the government, I still find myself liking many of the vehicles in the GM line up the last few years.

Many of these things were in development or already done before 2008, so it isn’t a direct result of Obama bossing them around like the Chevy Volt is. Really, who could be a self respecting gear head and pay more money for a boring electric sedan than a brand new 426 horsepower Camaro SS?

The Corvette line is impressive as well. I have always liked Corvettes. The current models are a tremendous bargain in the performance car market. The aluminum block LS series of V8 engines are really great power plants. Hard to beat those for the power, reliability and cost.

Cadillac is really making strides as well. They took the CTS-V sedan to the Nurburgring track in Germany and set the world record for a production sedan, beating Mercedes AMG, BMW M series, and Audi on their own turf. The Corvette ZR1, with 638 supercharged horsepower out of the box, set a world record time in it’s class as well, outperforming some exotic cars that cost 2 or 3 times as much.

I like the GMC Sierra full size pick up too.

It’s not all bad at GM. If they can get out from under this current situation and get back to making cars we want instead of what DC tells them we ought to want, things will get better.

Brian1972 on August 16, 2012 at 5:53 PM

Sorry to hear you don’t know much about the industry.
 
bayam on August 16, 2012 at 4:44 PM

 
Speaking of, why don’t you respond when your ideological statement is proven false?
 
rogerb on August 16, 2012 at 5:12 PM

 
Crickets.
 
CW on August 16, 2012 at 5:24 PM

 
Brayam doubles down on the lame response to the writer’s points all the ignoring the challenges of RogerB and farsighted.
 
CW on August 16, 2012 at 5:43 PM

 
Don’t misunderstand. I can certainly see an advantage in that sort of ideologically-driven life. If something doesn’t fit you ignore it, and if something needs changing to fit your worldview then you make it up.
 
We saw it again upthread with bayam’s Malibu statement.
 

“It’s a far more exciting car to drive than the Toyota or Honda models”.

 
Car and Driver on the 2013 model:
 

In certain aspects, and for undiscerning buyers, the Malibu 2.5 can satisfy. It’s quiet in everyday use and offers decent power, but its handling doesn’t inspire driver confidence, and the interior packaging is disappointing. Substituting a different engine does not address most of the issues that pushed the Malibu Eco down the scorecard in its comparison test.

 
(Sorry to hear you don’t know much about the industry.)
 
 
Faith-based, religious fundamentalism. Nothing more.

rogerb on August 16, 2012 at 5:55 PM

bayam on August 16, 2012 at 5:40 PM

You’re right…this just Screams success!!!!!

Auto Bailout Legacy: GM’s European Nightmare

http://nlpc.org/stories/2012/08/16/auto-bailout-legacy-gms-european-nightmare

Since GM’s IPO almost two years ago, the broader S&P 500 has gone up about 30%. During that period, Ford shares have gone down about 15%, Toyota up about 15%, Honda up about 5%, Nissan up about 35%, Hyundai up about 60% and Volkswagen up about 85%. Make no mistake; GM is vastly underperforming the industry, despite an influx of approximately $50 billion of taxpayer funds. In addition to US taxpayers anteing up, Canada put in over $10 billion and GM was relieved of about $28 billion of bondholder obligations as UAW claims were protected. That’s an improvement of almost $90 billion to the balance sheet and the company still lags the competition!

…..even all the outsourcing Obama has done cannot overcome the failure of leadership and idiocy that has been Obama’s “bailout”…

“FORWARD!!!!!”

Baxter Greene on August 16, 2012 at 5:58 PM

Again – how do you make a profit on a car that costs $250K to make but sells for $40K? You still haven’t answered that simple math question.

You can email the CEO of Nissan or Bob Lutz and help them understand why accepting losses on new product development and marketing is a mistake, since you’re convinced it’s such a simple issue.

But again – how often are analysts actually correct? How many times have actual earnings reports NOT met projections for major companies?

I didn’t know we were talking about missing an earnings estimate but rather the likelihood that a company with projected earnings in the billions of dollars would enter bankruptcy. Slight difference.

After all, anything beyond roughly $5 billion earned from the sale of the UAW’s stake in Chrysler goes to Fiat

I don’t know anything about the decision making behind holding or selling that stake. And I don’t really care about unions either.

Unfortunately, the US hasn’t seen a new automaker emerge outside of the electric category- not even in right to work states in the south where there’s a large pool of trained autoworkers. For now it’s either Detroit or nothing.

bayam on August 16, 2012 at 6:02 PM

Corporate welfare rocks !!

-Brayam

CW on August 16, 2012 at 6:04 PM

I don’t know anything

bayam on August 16, 2012 at 6:02 P

Yeh we know.

CW on August 16, 2012 at 6:05 PM

You can email the CEO of Nissan or Bob Lutz and help them understand why accepting losses on new product development and marketing is a mistake, since you’re convinced it’s such a simple issue.

bayam on August 16, 2012 at 6:02 PM

You’re simplistic naive response is so full of delicious irony. Thanks for the chuckle.

CW on August 16, 2012 at 6:06 PM

Baxter Greene on August 16, 2012 at 5:58 PM

Obviously you don’t understand the industry /bayam

dentarthurdent on August 16, 2012 at 6:07 PM

Car and Driver on the 2013 model…

Faith-based, religious fundamentalism. Nothing more.

rogerb on August 16, 2012 at 5:55 PM

It’s great to see you focus on reviews of a single car. Clearly if GM releases a car deadpanned by Car and Driver, the company will fail.

Yes, 40% growth in compact and subcompacts is meaningless. Sales in China are meaningless. Go back to the review of a single car.

Of course, if the Honda Civic or new Prius get bad reviews, that should be ignored? Or hold on, does this mean that Honda and Toyota are going bankrupt! Brilliant.

bayam on August 16, 2012 at 6:11 PM

Since GM’s IPO almost two years ago, the broader S&P 500 has gone up about 30%. During that period, Ford shares have gone down about 15%, Toyota up about 15%, Honda up about 5%, Nissan up about 35%, Hyundai up about 60% and Volkswagen up about 85%. Make no mistake; GM is vastly underperforming the industry, despite an influx of approximately $50 billion of taxpayer funds. In addition to US taxpayers anteing up, Canada put in over $10 billion and GM was relieved of about $28 billion of bondholder obligations as UAW claims were protected. That’s an improvement of almost $90 billion to the balance sheet and the company still lags the competition!

Baxter Greene on August 16, 2012 at 5:58 PM

Worth repeating. And the part they did not explicitly say is…

GM’s stock is down 37% from its November 2010 IPO price of $33

farsighted on August 16, 2012 at 6:12 PM

I think maybe if we were to say what actually happened in the bailout, we can see exactly why bankruptcy looms. Obama did NOT bail out GM, no he bailed out the Unions. Bond holders took it in the shorts, white collar workers are still taking it in the shorts.

If the Obama’s would have just let the company sort out their own problems via chapter 11, the co would be on sound financial footing. The unions would have had to renagociate contracts for both active and retired members. Obama could not allow that for one second.

jainphx on August 16, 2012 at 6:13 PM

You can email the CEO of Nissan or Bob Lutz and help them understand why accepting losses on new product development and marketing is a mistake, since you’re convinced it’s such a simple issue.
 
bayam on August 16, 2012 at 6:02 PM

 
Hey, remember when pre-bailout GM cancelled the Solstice/Sky because they were losing $10K per car?
 
Good times, good times.

rogerb on August 16, 2012 at 6:13 PM

Old/busted:
 

Funny thing that the writer didn’t point out that buyers were awaiting the release of the new Malibu… It’s a far more exciting car to drive than the Toyota or Honda models
 
bayam on August 16, 2012 at 4:44 PM

 
New hour-later hotness:
 

It’s great to see you focus on reviews of a single car.
 
bayam on August 16, 2012 at 6:11 PM

rogerb on August 16, 2012 at 6:17 PM

Dont blame me. I drive an American car.

Charger baby!

Politricks on August 16, 2012 at 6:18 PM

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion. …

This is reeks of some kind of money-laundering operation. I’m just not devious enough to figure out how it works.

Now I’m swinging back to the idea that Obama is just a plain ol’ crook who uses Marxism as a cover.

Dr. ZhivBlago on August 16, 2012 at 6:18 PM

bayam on August 16, 2012 at 4:32 PM

GM is losing real value – burning through real assets at a rate of over a Billion per year, and converting what assets it has to inventory and receivables. This would be great IF it had reasonable prospects to sell its products after the government money spigot shuts off.

But take a look at the internals, and note that the “Income available to Common” has DROPPED by $1 Billion in just one year. TRANSLATION: If GM gets ahold of any significant new money, the “real owners” (government and the union with the now-even-more-under-funded pension-by-another-Billion-since-last-year) will snarf* it all up. Traditional stockholders (this means YOU) will end up with nothing (again).

And look at the Assets: Do you really believe that a huge lot full of VOLTS and other things consumers have shown little interest in will be worth a plugged nickel in 2012 when a sane Administration cancels the government purchases? The Balance Sheet says so, but…

You really need to learn to read these things. As mentioned in my previous posts, some important data is missing from the glitzy MSM propaganda articles which claim “profitability”. I still advise you to avoid giving any money to those selling swampland or stocks….particularly if they claim that GM is a good investment.

* NOTE: “snarf” is a technical term which describes the consequences of letting Democrats near your wallet.

landlines on August 16, 2012 at 6:18 PM

The Co. was paying more retired employees than working members. The health care for the unions was keeping them in the red. The cost to make one car broken down showed that 90% of cost was to union payroll.

Who or what could stay in business with built in losses.

jainphx on August 16, 2012 at 6:18 PM

Obama bossing them around like the Chevy Volt is

Do you really have to go there?

http://www.forbes.com/sites/boblutz/2012/03/12/the-chevy-volt-bill-oreilly-and-the-postmans-butt/

Hey, remember when pre-bailout GM cancelled the Solstice/Sky because they were losing $10K per car?

It would be more constructive to see conservatives stop whining and start building high growth companies. Why hasn’t there been a new American automaker born in the south from the self-proclaimed experts on capitalism? Why don’t conservatives start innovating (beyond Bob Lutz). If your actions only lived up to your pretentious talk.

bayam on August 16, 2012 at 6:20 PM

bayam=== If you can’t answer your own question, why are you arguing with people that can?

jainphx on August 16, 2012 at 6:23 PM

You can email the CEO of Nissan or Bob Lutz and help them understand why accepting losses on new product development and marketing is a mistake, since you’re convinced it’s such a simple issue.
bayam on August 16, 2012 at 6:02 PM

You still can’t answer a simple math question can you? All you’re capable of doing is side-stepping and trying to change the subject.
Not only are they losig money on making the Volts, they still can’tsell them even at the tremendous loss tey’re taking.

The price we pay for any car – or any product at all for that matter – includes the “amortized” cost of research and development and marketing. But when you actually add that cost to the price and you can’t sell the car for that price, you’re going to lose money – and eventually go bankrupt.
You seem to believe in the idiotic “we lose money on each sale, but make up for it in volume” – just like the Dem’s “we have to borrow and spend more money to get out of debt”. That doesn’t work in the real world – no matter how many unicarn farts you throw at it.

And BTW – I’m an engineer with 29 years experience across systems operations, design, lifetime total cost of ownership analysis, cost-benefit analysis, system testing, business development, and program management. And I actually work on cars myself – up to and including hand building engines and driving the cars I put them in.
How about you Miss Highandmighty?

dentarthurdent on August 16, 2012 at 6:24 PM

Why hasn’t there been…
If your actions only lived up to your pretentious talk.
 
bayam on August 16, 2012 at 6:20 PM

 
There’s the attempt at changing the subject, folks. Don’t fall for it.
 
Abandoning the thread is next.

rogerb on August 16, 2012 at 6:24 PM

GM is losing real value – burning through real assets at a rate of over a Billion per year, and converting what assets it has to inventory and receivables.

It’s odd how UBS Securities and other analysts with a fundamental understanding of the auto industry and deep finance expertise are reaching completely different conclusions. But I’m sure you’re right.

Old/busted

I don’t have current model Malibu sales as evidence, so it’s an impossible point to argue, although that’s your preferred approach. But I give you credit for going back and reading my posts, although it’s slightly creepy.

bayam on August 16, 2012 at 6:26 PM

Someone explain to me with all the government laws on employers treatment of employees, why are there still unions? Osha EEOC etc.

jainphx on August 16, 2012 at 6:26 PM

From the post by Joann Muller on Forbes staff, saying that GM’s problems are not that big:

Let’s review the problem areas:
•Europe: GM lost $400 million in the second quarter, $1.6 billion in the past four quarters. European auto sales have shriveled up amid economic uncertainty and the sovereign debt crisis. Like Ford, which recently said it will lose $1 billion this year in Europe, GM needs a massive restructuring to reduce factory capacity and eliminate jobs to meet the new realities there. GM is no doubt kicking itself for hanging on to its Opel unit back in 2009 when it had a chance to sell controlling interest to Canada’s Magna International. Back then, the board feared GM would lose critical engineering expertise in passenger cars, but lately it’s relying more and more on its Korean subsidiary for that. That’s all water under the bridge now, of course, so Akerson has to do what he can to fix it. Frustrated with the pace of change, he recently ousted GM’s European boss. It’s fitting, perhaps, that the man who convinced the board to keep Opel, Vice Chairman Steve Girsky, is now assigned to fix it. GM says a plan is coming this fall.

•North America: GM lost 1.7 points of market share in the second quarter, but that’s largely due to the recovery of Toyota and other Japanese makers from the disasters in 2011. Its market share in 2010 and 2011 was artificially inflated because its competitors were on the ropes. Remember, after bankruptcy, GM got rid of four brands so comparing its pre-bankruptcy share to current share is unfair. Basing an argument for bankruptcy on U.S. market share trends is not logical anyway. Ford Motor has lost market share, too. What matters in both cases is whether the companies can match their production to current demand and generate solid profits while doing it. GM’s EBIT margin in North America for the second quarter was 8.6%. Ford’s was 10.2%. Clearly, it still has some room for improvement.

•Pensions: This has been a noose around GM’s neck for years, but the company is finally taking real steps to address it. In June, GM said it will offer 42,000 white-collar retirees in the U.S. a lump-sum payment in lieu of their monthly pension check and will transfer pension responsibility for 76,000 others to a group annuity plan managed by Prudential Insurance. The company has yet to announce the results of the offer, but this is at least a step in the right direction.

•Global costs: GM has been trying for years to knit together its vast, disjointed engineering operations into an efficient global operation so that it can become more efficient. Akerson named a relative unknown, Mary Barra, as senior vice president of global vehicle development, to tackle that bureaucracy. She believes there’s still at least $1 billion worth of waste that can be squeezed out of GM’s global engineering operations.

But there’s also a lot going right at GM, and that’s worth acknowledging.

•GM is in an enviable position in China, where it has 13.8 percent market share and continues to invest for a market that is expected to sell 30 million cars and trucks a year, twice what the U.S. sells.

•In the U.S., GM and the UAW have a strong relationship where they tackle problems together rather than butting heads as in the past. Today, GM’s labor costs are just about on par with its Japanese competitors in America.

•GM’s vehicles are more competitive than in the past. Cadillac, GMC and Chevrolet quality all ranked above average on the recent J.D. Power Initial Quality Study.

IMO, I see nothing but hard numbers in the problem side and none on the good side.

itsspideyman on August 16, 2012 at 6:27 PM

For what a new car would cost, something like this could be built to enjoy every day without all the babysitting from DC built in.

1970 Chevelle

A modern 505hp LS7 aluminum V8, aftermarket suspension and brakes, interior custom done to suit your needs and tastes.

The best of both worlds, a classic body with fully modern hardware.

I am increasingly attracted to this option as opposed to buying a new car from any of the brands.

Brian1972 on August 16, 2012 at 6:27 PM

But I give you credit for going back and reading my posts, although it’s slightly creepy.
 
bayam on August 16, 2012 at 6:26 PM

 
The quote from this thread.
 
The quote from this thread that we’ve both been participating in since you posted it.
 
The quote from just over an hour ago.
 

it’s slightly creepy

 
That’s hilarious.

rogerb on August 16, 2012 at 6:32 PM

And BTW – I’m an engineer with 29 years experience across systems operations, design, lifetime total cost of ownership analysis, cost-benefit analysis, system testing, business development, and program management.

Great, send your resume to Elon Musk and you might find yourself working at SpaceX for someone who’s building the next generation of great American companies.

Are you telling me that under no circumstances should companies accept losses in order to enter new markets or categories? Do I really need to cite examples of successful companies pursuing such a strategy to an expert like yourself?

Was the Nissan Leaf just as foolish? Do you think that Toyota made a profit on the first generation of Prius cars?

bayam on August 16, 2012 at 6:32 PM

rogerb on August 16, 2012 at 6:17 PM

I think the new Malibu only excites spinach-boy because it comes with that ‘big government’ smell.

slickwillie2001 on August 16, 2012 at 6:33 PM

Let me summarize what people investing their own money and the money of clients who expect a return in their investment think about Government Motors and other major auto manufacturers.

Since GM’s IPO almost two years ago…

S&P 500 — up 30%
Ford — down 15%
Toyota — up 15%
Honda — up 5%
Nissan — up 35%
Hyundai — up 60%
Volkswagen — up 85%
Government Motors — down 37%

I bet the people that bought IPO shares from the government are not very happy with their investment.

farsighted on August 16, 2012 at 6:33 PM

I have to take a pass on ANY greedy-UAW company, even if it’s Ford. I consider that if I buy a Ford, or Chrysler or Government Motors car or truck, some of my hard-earned money eventually ends up in President Jackass McChoomer’s campaign fund, and I just can’t have that.

Best buy for those who love our country, -a foreign manufacturer that builds the vehicle you buy in the USA.

slickwillie2001 on August 16, 2012 at 6:37 PM

its your friendly commisar here to reeducate you on doubleplusgood marxism.

tom daschle concerned on August 16, 2012 at 6:40 PM

Best buy for those who love our country, -a foreign manufacturer that builds the vehicle you buy in the USA.

slickwillie2001 on August 16, 2012 at 6:37 PM

Yes, send those profits back to your masters in Asia and socialist Germany. The US is better off as the source of cheap labor for foreign manufacturing powers.

bayam on August 16, 2012 at 6:43 PM

raised to $25.1 billion the amount it said it cannot now expect to recover

Should this be “can now expect to recover”? (Still down to $25 Bil from $44 Bil originally “promised”)

Empiricist on August 16, 2012 at 6:43 PM

Are you telling me that under no circumstances should companies accept losses in order to enter new markets or categories? Do I really need to cite examples of successful companies pursuing such a strategy to an expert like yourself?

Was the Nissan Leaf just as foolish? Do you think that Toyota made a profit on the first generation of Prius cars?

bayam on August 16, 2012 at 6:32 PM

The answer is….if they don’t have a product that can ultimately make a profit… NO.

There is no model that shows the Chevy Volt making such a profit. It costs GM approximately $40,000 to manufacture a Volt. The MSRP on a Volt is around $31,000, not including the rebate. This means that GM looses $9,000 for every purchase.

But this is only if they sell the Volt. The average income of individuals who have bought the Volt is $175,000. It simply costs too much for the middle-income individual to consider purchasing.

The average price of a Volt will not drop any time soon. Batteries for the Volt cost $10,000 and are made out of rare earths much in demand now. They are found mostly in China and cause damage to the environment when they are harvested. There may come a point where China simply cuts off shipment or raises the price (supply and demand).

Demand only occurs if consumers have both the desire and the means to purchase a product. Where there is no means, there is no demand.

GM could make good cars that consumers want while investing in more research to improve the technology, ultmately building the true electric car. Instead they are making a car that costs too much, and trying to sell to people who don’t want it.

itsspideyman on August 16, 2012 at 6:48 PM

Great, send your resume to Elon Musk and you might find yourself working at SpaceX for someone who’s building the next generation of great American companies.

Are you telling me that under no circumstances should companies accept losses in order to enter new markets or categories? Do I really need to cite examples of successful companies pursuing such a strategy to an expert like yourself?

Was the Nissan Leaf just as foolish? Do you think that Toyota made a profit on the first generation of Prius cars?

bayam on August 16, 2012 at 6:32 PM

I work for someone else already. Just pointing out some of my background relevant to this discussion. So what’s your expertise in any of this discussion where you claim to know it all and the rest of us are just total idiots?

There’s a difference between not recouping ALL costs in the intiial run or not making much profit – and losing big money on a product. Toyota did not require government subsidies for their Prius – like GM does for the Volt. And Toyota does make an actual profit on the Prius, although very small (single digits) – but it’s still an actual profit. On the other hand, by cutting production costs, Honda is making a 15% gross profit on their Insight. All while GM loses $210K of taxpayer money on every Prius. Do you see any differences there?

But then I wouldn’t buy a hybrid or electric car anyway as the total cost of ownership equation fails.

dentarthurdent on August 16, 2012 at 6:49 PM

Best buy for those who love our country, -a foreign manufacturer that builds the vehicle you buy in the USA.

slickwillie2001 on August 16, 2012 at 6:37 PM

Several years ago I read an article that analyzed where the parts used to build autos assembled in the US were manufactured.

In both US branded autos and in Japanese branded autos the breakdown was roughly 50% in the US and 50% outside of the US.

It seems Government Motors outsources the manufacture of 50% of the parts it uses to build “American” branded cars. And it means the Japanese companies purchase 50% of the parts they use from US manufacturers.

So the only differences between the two when considering foreign and domestic labor is that the final assembly of GM cars is by union workers and the Japanese cars assembled in the US are not.

Things may have changed since that article, but I doubt they have changed significantly.

farsighted on August 16, 2012 at 6:51 PM

Yes, send those profits back to your masters in Asia and socialist Germany. The US is better off as the source of cheap labor for foreign manufacturing powers.

bayam on August 16, 2012 at 6:43 PM

Whose masters? You do understand your lib/socialist party holds those countries as having the ideal political and economic systems that they want the US to copy? Are you that clueless about your own hypocrisy?

dentarthurdent on August 16, 2012 at 6:52 PM

But hey, who could’ve seen this coming? No, really, I mean it — who?
.
excerpt: Erika Johnsen

.
All of the sober, clear-thinking Americans who pay attention to this sort of thing.

That’s almost everybody at Hotair.com (with notable exceptions), right?

listens2glenn on August 16, 2012 at 6:53 PM

Yes, send those profits back to your masters in Asia and socialist Germany. The US is better off as the source of cheap labor for foreign manufacturing powers.

bayam on August 16, 2012 at 6:43 PM

The most regrettable part of the whole model is that foreign investment is taking advantage of American workers because the UAW will never give up the hold on American autmobile manufacturers. Nissan, Kia, Hyundai, Honda, Volkswagen, BMW, and Mercedes-Benz all build cars in the United States, using American workers. These provide average wages of $28.00 an hour, with benefits pushing the package to $40/hour.

I don’t like the fact our money goes overseas. But without these companies to employ Americans, there are no extra jobs.

itsspideyman on August 16, 2012 at 6:54 PM

Several years ago I read an article that analyzed where the parts used to build autos assembled in the US were manufactured.

In both US branded autos and in Japanese branded autos the breakdown was roughly 50% in the US and 50% outside of the US.

It seems Government Motors outsources the manufacture of 50% of the parts it uses to build “American” branded cars. And it means the Japanese companies purchase 50% of the parts they use from US manufacturers.
farsighted on August 16, 2012 at 6:51 PM

My Chevy Avalanche was assembled in Mexico, and a very large portion of the parts are NOT US origin.
My wife’s Toyota RAv4 was assembled in the US with a high percentage of US parts.
Go figure.

dentarthurdent on August 16, 2012 at 6:56 PM

are you that silly? did you even read the post above and erika’s link to romney’s piece in NYT, back then, clearly showing he opposed the bailout. Ryan did vote for it, Romney opposed it and anyways he wasn’t in any position of power to weigh on the matter other than in an opinion-piece.

jimver on August 16, 2012 at 2:57 PM

He opposed the method, not the action. Then later, when he was running for the nomination he said that what he did at Bain was the same as what Obama, apparently successfully in Romney’s eyes at the time, did. Romney, like so many other progressives is on every side of the issue. He has statements that work for one group and statements that work for others. Gullible people fall for things like this. Ignorant morons fall for things like this. Informed discerning people actually look at everything and are able to see patterns that show the truth.

astonerii on August 16, 2012 at 6:58 PM

Yes, send those profits back to your masters in Asia and socialist Germany. The US is better off as the source of cheap labor for foreign manufacturing powers.

bayam on August 16, 2012 at 6:43 PM

So you don’t want foreign companies to invest in the US and employ American workers? Gee that makes a lot of sense.
You do realize that Americans can buy stock in those foreign companies don’t you? Which means the profits come back here to those Americans who are capable of seeing a good investment.

dentarthurdent on August 16, 2012 at 6:59 PM

Gotta protect those Union dues paying workers or how else would Democrats ever win an election without Union money backing them? You don’t even have to be pro or anti-Union to feel that way. Without big Unions, Democrats would have a hard time winning a national election again.

Yakko77 on August 16, 2012 at 7:00 PM

Gotta go folks – it’s been fun – but the carpool awaits.

dentarthurdent on August 16, 2012 at 7:00 PM

I don’t like the fact our money goes overseas. But without these companies to employ Americans, there are no extra jobs.

itsspideyman on August 16, 2012 at 6:54 PM

There is nothing stopping Americans from buying shares in Nissan, Kia, Hyundai, Honda, Volkswagen, BMW, and Mercedes-Benz and in so doing benefiting from the profits.

Hell, even the UAW pension manager might be able do that, I think. That is, unless Dear Leader has prohibited it as a condition of his takeover of their companies, or something.

farsighted on August 16, 2012 at 7:02 PM

You do realize that Americans can buy stock in those foreign companies don’t you? Which means the profits come back here to those Americans who are capable of seeing a good investment.

dentarthurdent on August 16, 2012 at 6:59 PM

You beat me to it.

farsighted on August 16, 2012 at 7:04 PM

Abolish the Environmental Protection Agency.

That’ll allow the companies to build vehicles the way they know we the consumers want our cars built.
This by itself would bring consumers back to American-made vehicles, and stop the bankrupting of our auto manufacturers.

And UAW members wouldn’t have to lose their jobs.

And we here at Hotair could stop arguing with bayam over it.

(oh dear Lord, I started two sentences with “and”)
: O

listens2glenn on August 16, 2012 at 7:13 PM

Yes, send those profits back to your masters in Asia and socialist Germany. The US is better off as the source of cheap labor for foreign manufacturing powers.

bayam on August 16, 2012 at 6:43 PM

The most regrettable part of the whole model is that foreign investment is taking advantage of American workers because the UAW will never give up the hold on American autmobile manufacturers. Nissan, Kia, Hyundai, Honda, Volkswagen, BMW, and Mercedes-Benz all build cars in the United States, using American workers. These provide average wages of $28.00 an hour, with benefits pushing the package to $40/hour.

I don’t like the fact our money goes overseas. But without these companies to employ Americans, there are no extra jobs.

itsspideyman on August 16, 2012 at 6:54 PM

Ignore the goofy talking points. As others have since pointed out, a portion of profits go to stockholders, who can be anywhere in the world. You and I could own stock in any of them. Your company’s pension fund might own those stocks.

Re investment, much of an auto manufacturer’s investments go into countries outside their home nation. When is the last time GM or Chrysler or Ford built a new plant in the USA? Now how about Toyota, BMW, Mercedes, Kia, Honda, etc?

Where are GM and Chrysler building new plants?

slickwillie2001 on August 16, 2012 at 7:21 PM

Several years ago I read an article that analyzed where the parts used to build autos assembled in the US were manufactured.

In both US branded autos and in Japanese branded autos the breakdown was roughly 50% in the US and 50% outside of the US.

It seems Government Motors outsources the manufacture of 50% of the parts it uses to build “American” branded cars. And it means the Japanese companies purchase 50% of the parts they use from US manufacturers.

farsighted on August 16, 2012 at 6:51 PM

The latest I see on which cars mean US jobs:

Here’s the list of the top 2011 model-year vehicles on Cars.com’s list, and their percentage of domestic parts:

1. Toyota Camry: 80%.
2. Honda Accord: 80%.
3. Chevrolet Malibu: 75%.
4. Ford Explorer: 85%.
5. Honda Odyssey: 75%.
6. Toyota Sienna: 75%.
7. Jeep Wrangler: 78% for 2-door, 79% for 4-door.
8. Chevrolet Traverse: 75%.
9. Toyota Tundra: 80%.
10. GMC Acadia: 75%.

This is a moving target btw. Some manufacturers make engines for example in multiple countries, and one month your car might have an engine made in X and the next month Y. The point is, UAW-made cars and trucks are not necessarily more ‘American’.

slickwillie2001 on August 16, 2012 at 7:35 PM

Here’s the list of the top 2011 model-year vehicles on Cars.com’s list, and their percentage of domestic parts:

… The point is, UAW-made cars and trucks are not necessarily more ‘American’.

slickwillie2001 on August 16, 2012 at 7:35 PM

Thanks for the info.

Things have changed a lot since the article I read, apparently more years ago than I thought.

And things have changed for the better for US parts manufacturers.

When talking about autos the “buy American” slogan means little more than “support the UAW”.

farsighted on August 16, 2012 at 8:12 PM

Brayam says

Corporate Welfare is awesome and we win when we bail out companies that are owned by foreigners …yay!!!!!

/

CW on August 16, 2012 at 8:59 PM

Paul Ryan better rush back to Congress so he can vote yea on another auto bailout.

Oh I forgot that we are supposed to completely ignore his Yea voting record when it comes to the bailouts, TARP, No Child Left Behind, the expansion of Medicare, the Bush-era budget deficits, etc., etc., etc.

Nothing to see here- just continue being obtuse.

kkune on August 16, 2012 at 9:37 PM

What BAyam also fails to note is that for all the increase in compact cars, GM makes no money – they lose money on every one they sell if you allocate all fixed costs across the portfolio. But hey, you can make it up on volume.

Zomcon JEM on August 16, 2012 at 11:38 PM

Strategic Thinking

You are GM. You have a “cost” of $250,000 per Volt and sell at $40,000 or so.

You turn a “profit” by collecting information on how to survive the future CAFE standards. The Volt might give you know-how and some priceless intellectual property value with very green technology running on the street. It also kept the new Gov’t masters proud.

Look up CAFE if you don’t know what that is.

The EPA is planning to raise the average to 54.5 MPG. And they are looking for public support since crackpots like me are giving officials grief.

Why is 50+ MPG bad? This will not only kill off any full size trucks and SUVs but wreak havoc on the whole product line of a firm like GM. The consideration of safety issues is mind boggling.

The arrogance and acrimony in many of the posts makes no sense.

IlikedAUH2O on August 17, 2012 at 1:10 AM

Paul Ryan better rush back to Congress so he can vote yea on another auto bailout.

Oh I forgot that we are supposed to completely ignore his Yea voting record when it comes to the bailouts, TARP, No Child Left Behind, the expansion of Medicare, the Bush-era budget deficits, etc., etc., etc.

Nothing to see here- just continue being obtuse.

kkune on August 16, 2012 at 9:37 PM

Ryan is better than Obama, but I laugh at those who demonize Obama and yet try to paint a rosy picture of Ryan.

V-rod on August 17, 2012 at 2:37 AM

Why hasn’t there been…
 
bayam on August 16, 2012 at 6:20 PM

 

There’s the attempt at changing the subject, folks. Don’t fall for it.
 
Abandoning the thread is next.
 
rogerb on August 16, 2012 at 6:24 PM

rogerb on August 17, 2012 at 6:42 AM

Point of order – we already have crappy government-produced cars being rammed down our throats.

Steve Eggleston

Then buy a car manufactured overseas funded/subsidized by foreign governments. All have been/are/were. Check the safety aspects of American vehicles. Top notch. Insurance Institute for Highway Safety rates ALL Buick/GMC products as “Good”, the top rating.

Got that champ?.Good. GFY, Steve. Blow me b!tch.

DevilsPrinciple on August 17, 2012 at 7:42 AM

Ryan is better than Obama, but I laugh at those who demonize Obama and yet try to paint a rosy picture of Ryan.

V-rod on August 17, 2012 at 2:37 AM

I do as well. But it is the same dynamic. Like Democratic voters who idolize Obama as some kind of light bringer savior with no evidence he could do any such thing, Republicans have become just as ignorantly stupid imagining Romney as a conservative that can run the economy from the white house and Ryan as the man with the plan to allow Americans to continue to live off the wealth of the future generations until they themselves are dead and those future generations are guaranteed to be slaves to those who hold the debt.

astonerii on August 17, 2012 at 8:30 AM

GM upper management has been in the crapper for years. About 20 years ago GM was looking for ways to save money in production. Their answer? DEMAND cost reductions from their supply chain. Across the board they demanded cost reductions. If suppliers failed to meet reductions, GM would drop them as a supplier.

The result? Suppliers, afraid of losing an account the size of GM, chose to find ways to reduce cost. As you may know, when you are selling to a large OEM, you are selling on a very thin margin to begin with. Because of this, many suppliers chose the route of using less expensive components.

As an example, plastics suppliers used cheaper materials in items such as the plastic knobs on radios, climate control knobs, etc. In doing such, everything looked fine on a new car, but 2 years later, the plastics were cracking and generally disintegrating. If you owned a GM built in the 90′s, you’re probably familiar with this issue. And this was just in the plastics on the car.

Most people aren’t real impressed with a car that starts falling apart after 2 years.

Major Nuisance on August 17, 2012 at 9:06 AM

The CAFE note above is actually a very good point. GM’s troubles really began with the federal CAFE law. And of course the federal CAFE law also results in killing people who otherwise would still be alive and kicking. For a country who has the potential to become a net exporter of NG and Oil, why does CAFE still exist?

Zomcon JEM on August 17, 2012 at 9:30 AM

Just a suggestion on avoiding backruptcy. Do what you can to avoid giving $600 million to English soccer teams!

curved space on August 17, 2012 at 8:51 PM

bayam, you do realize of course you made enough comments here to put a down payment on that new Porsche the one Google guy has been eying up, right?

Bmore on August 17, 2012 at 9:21 PM

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