GM Headed For Bankruptcy Again? Long, Excellent Article in Forbes

[doggin94it]

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.

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.


It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.
GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.


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.


To help understand why GM keeps losing market share, let’s look at the saga of the Chevy Malibu.


The Malibu is GM’s entry in the automobile market’s “D-Segment”. The D-Segment comprises mid-size, popularly priced, family sedans, like the Toyota Camry and the Honda Accord. The D-Segment accounted for 14.7% of the total U.S. vehicle market in 2011, and 21.3% during the first 7 months of 2012.


Because the D-Segment is the highest volume single vehicle class in the U.S., and the U.S. is GM’s home market, it is difficult to imagine how GM could survive long term unless it can profitably develop, manufacture, and market a vehicle that can hold its own in the D-Segment. This is true not only because of the revenue potential of the D-Segment, but also because of what an also-ran Malibu would say about GM’s ability to execute at this time in its history.


GM is in the process of introducing a totally redesigned 2013 Chevy Malibu. It will compete in the D-Segment with, among others, the following: the Ford Fusion (totally redesigned for 2013); the Honda Accord (totally redesigned for 2013); the Hyundai Sonata (totally redesigned for 2011); the Nissan Altima (totally redesigned for 2013); the Toyota Camry (refreshed for 2013); and the Volkswagen Passat (totally redesigned for 2012).


Automobile technology is progressing so fast that the best vehicle in a given segment is usually just the newest design in that segment. Accordingly, if a car company comes out with a new, completely redesigned vehicle, it had better be superior to the older models being offered by its competitors. If it is not, the company will spend the next five years (the usual time between major redesigns in this segment) losing market share and/or offering costly “incentives” to “move the metal”.

It's broken into 4 pages - go read it.

http://www.forbes.com/sites/louiswoo...kruptcy-again/

That would be a disaster for the economy.

[Winstonbiggs]

Anyone whose paying attention recognizes GM still doesn't make a decent product. Having Japan off line with no cars in inventory in much of the world gave a temporary boost to sales and earnings. That's over.

Chrysler has better product then GM right now.

[Frequent Flyer]

Thanks, I saved it to my hard drive. I'll respond after I've had time to read it.

[Bonhomme Richard]

Can't we just bail them out again?

[Warfish]

GM should have been permitted to follow the normal course of event, and go bankrupt as has occured to innumerable numebrs of failed bloated broken businesses in the past.

Instead, we broke the rules (not following normal bankruptcy law or processes), protected the Union (political) interests over the investors (legal/fiscal) interests, propped up a dead old broken ineffective business with public funding, and created a much larger potential problem when inevitably the "new" GM ends the same way the old GM did, in failure.

It is not the free market that is the problem, it's when a command economy (i.e. the Federal Govt.) trumps the free market, and tries to make the market do what it thinks we should, as dictated by them, that these failings occur.

[AlwaysGreenAlwaysWhite]

Originally Posted by Warfish

GM should have been permitted to follow the normal course of event, and go bankrupt as has occured to innumerable numebrs of failed bloated broken businesses in the past.

Instead, we broke the rules (not following normal bankruptcy law or processes), protected the Union (political) interests over the investors (legal/fiscal) interests, propped up a dead old broken ineffective business with public funding, and created a much larger potential problem when inevitably the "new" GM ends the same way the old GM did, in failure.

It is not the free market that is the problem, it's when a command economy (i.e. the Federal Govt.) trumps the free market, and tries to make the market do what it thinks we should, as dictated by them, that these failings occur.

Hey bro, didn't you know that the few hundred billion dollars wasted on failed companies in the Obama presidency is just a drop in the bucket compared to the irrational war(s) started under Bush's presidency?

Hundreds of billions? Pfft... I'm talking trillions... Lots more zeroes... Be afraid of that ever happening again... We're lucky we're only wasting hundreds of billions on failed companies... We're far better off now than we were...

Come on bro...

[southparkcpa]

Originally Posted by AlwaysGreenAlwaysWhite

Hey bro, didn't you know that the few hundred billion dollars wasted on failed companies in the Obama presidency is just a drop in the bucket compared to the irrational war(s) started under Bush's presidency?

Hundreds of billions? Pfft... I'm talking trillions... Lots more zeroes... Be afraid of that ever happening again... We're lucky we're only wasting hundreds of billions on failed companies... We're far better off now than we were...

Come on bro...

Think of it as the post office in Detroit. The government is afraid to let normal economics come into play as wages will be driven to market wages and the layoffs will affect the voting block.

This theory holds true with much of government, if not all. It is overstaffed 10 to 20 percent as the employees run for the door at 5pm.

[Jetworks]

GM could save themselves a lot of money simply by eliminating GMC. Everything GMC markets is duplicated by Chevrolet. Now, decades ago GMC actually mattered as the "truck division" of GM, but that hasn't been the case for a very long time as the products are mirrored across its sister company.

I still believe a big mistake was eliminating the mid-size SUV platform and trying to migrate their customers to an inferior crossover. That cost them market share to Ford and Jeep, to say nothing of the foreign automakers.

[Warfish]

Originally Posted by southparkcpa

This theory holds true with much of government, if not all. It is overstaffed 10 to 20 percent as the employees run for the door at 5pm.

Much? Maybe.

But I assure you, not all.

[MnJetFan]

Did the union pocket the money? This time let them go belly up!

[WestCoastOffensive]

thx doggin and thx to AGAW for the perspective...I'd get busy designing cars the Chinese want, just so we can get that stock up there where it belongs...

[WestCoastOffensive]

Good points, wco. I'd add that GM must get back to using all the IROC/Firebird/GTO mythology available; design a sub-D class 4 dorr for the 28-40 year olds starting a family but needing some "patina'd", real heart-pull type of nostalgic images and technology...GM has to grab that secret sauce and use it with everything they have. The bridge up ahead is OUT. Last chance.

[PlumberKhan]

Originally Posted by Frequent Flyer

Thanks, I saved it to my hard drive.

LMFAO!!!

Saved it to your hard drive???

[southparkcpa]

Originally Posted by Warfish

Much? Maybe.

But I assure you, not all.

much does not equal all.

[DDNYjets]

They sell an inferior product. Their cars are ugly as sin. They pay their workers (total compensation) a ransom.

[adb280z]

Originally Posted by Winstonbiggs

Anyone whose paying attention recognizes GM still doesn't make a decent product. Having Japan off line with no cars in inventory in much of the world gave a temporary boost to sales and earnings. That's over.

Chrysler has better product then GM right now.

I liked the Malibu rental car a lot more than the 2010 Altima I have as my company car.

[Winstonbiggs]

Originally Posted by adb280z

I liked the Malibu rental car a lot more than the 2010 Altima I have as my company car.

Had a Malibu rental car for 2 months last year and a 2012 Altima for a month. While I wouldn't buy either car I was very surprised at how crappy a drive the Malibu was. They were both 2012's and the Altima was a far better drive. Unfortunately for both Nissan and GM, there are far better cars that compete with both of them.

[Frequent Flyer]

They can't compete, the stock is in the tank--- stockholders can sell now and take a huge loss, or hold on until it is worthless--- and the 5 year future trajectory is bankruptcy--- again.

sound about right?

[palmetto defender]

Originally Posted by AlwaysGreenAlwaysWhite

Hey bro, didn't you know that the few hundred billion dollars wasted on failed companies in the Obama presidency is just a drop in the bucket compared to the irrational war(s) started under Bush's presidency?

Hundreds of billions? Pfft... I'm talking trillions... Lots more zeroes... Be afraid of that ever happening again... We're lucky we're only wasting hundreds of billions on failed companies... We're far better off now than we were...

Come on bro...

Irrational wars? Hey, no problem. C'mon and crash planes into some of our buildings. No problem. We won't fight back. Nope, it costs money.
That's Afghanistan. Iraq? Hey, sometimes you just have to go and kill people to show you still can. Senseless, but necessary.

[quantum]

Originally Posted by AlwaysGreenAlwaysWhite

Hey bro, didn't you know that the few hundred billion dollars wasted on failed companies in the Obama presidency is just a drop in the bucket compared to the irrational war(s) started under Bush's presidency?

Hundreds of billions? Pfft... I'm talking trillions... Lots more zeroes... Be afraid of that ever happening again... We're lucky we're only wasting hundreds of billions on failed companies... We're far better off now than we were...

Come on bro...

I was on the beach in SC last week. Did PK start hacking accounts?!