JimD

GM's Condition not improving

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There is no good news here....(March 5, 2009)

GM auditors raise the specter of Chapter 11

By TOM KRISHER

AP Auto Writer

DETROIT — General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan.

The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission.

"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report.

GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

The company faces a March 31 deadline to have signed agreements of concessions from debtholders and the United Auto Workers union to show the government it can become viable again. On Feb. 17 it submitted the restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more U.S. factories.

GM said in its filing that its future depends on successfully executing the plan.

"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," the Detroit-based automaker said in the annual report.

GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year.

"There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.

GM warned last month that its auditors may raise the doubts, and industry analysts said auditors' statements may trigger clauses in some of GM's loans, placing them in default.

But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125 million secured credit facility.

"Consequently, we are not in default of our covenants," the report said. "If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending Dec. 31, 2009, we will have to seek similar amendments or waivers at that time."

GM spokeswoman Julie Gibson said there is no clause in the terms of the government loans that places them in default if the auditors raise doubts about GM's ability to keep operating.

"That was not a condition of the loan. It's not in the agreement," she said.


Jim

Drive your car.

Use your cell phone.

CHOOSE ONE !

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Bankruptcy has been inevitable for many months now. Time to get it over with.

It's too late for Chrysler, but GM has some small chance at survival.

CRAP!

Regards,

Warren


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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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From a WSJ article that I read recently, the course that GM is taking is the least expensive of viable alternatives. If they can achieve the same things without Chapter 11 that they would achieve using Chapter 11, it's the best way to go. However, some changes need to be made at the most fundamental level. See this Snopes post of an email from Knox Machinery in reply to a request to their suppliers that they support the bailout:

Since the UAW has significant ownership and a couple of seats on the Board, cutting the anchor chain to the UAW may be impossible without Chapter 11, and difficult without firing all the existing workers and starting fresh -- which would be most easily done by closing all the UAW plants and opening new ones elsewhere. Anything less is going to leave GM at a disadvantage to those automakers who have done just exactly that. With Chapter 11, they throw all the stock in the trash and replace the Board with a panel of judges, which may be the only way to divest GM of the UAW anchor at this late date.

Even those automakers that don't have UAW plants are having big trouble in today's world. A couple of days ago Toyota and Honda asked the Japanese Government for bailout money. That gives us a data point on the level of efficiency that must be met for viability.


CTS-V_Dashboard.jpg
-- Click Here for CaddyInfo page on "How To" Read Your OBD Codes
-- Click Here for my personal page to download my OBD code list as an Excel file, plus other Cadillac data
-- See my CaddyInfo car blogs: 2011 CTS-V, 1997 ETC
Yes, I was Jims_97_ETC before I changed cars.

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[...] Since the UAW has significant ownership and a couple of seats on the Board, cutting the anchor chain to the UAW may be impossible without Chapter 11, and difficult without firing all the existing workers and starting fresh -- which would be most easily done by closing all the UAW plants and opening new ones elsewhere. Anything less is going to leave GM at a disadvantage to those automakers who have done just exactly that. With Chapter 11, they throw all the stock in the trash and replace the Board with a panel of judges, which may be the only way to divest GM of the UAW anchor at this late date. [...]

Chapter 11 is the only alternative at this point. The UAW has demonstrated it is unwilling to surrender to the market. Personally I don't see the difference between being unemployed at $80/hr and being unemployed at $60/hr, but that's just me.

I'm inclined to think the UAW has been snow-blinded by the government's billions. That dawg won't hunt much longer.

Regards,

Warren


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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In the past the UAW negotiators have been in the position of having to come back to their constituency with something, no matter what the reality of the situation is, and there have been strikes over that. The reality is that the UAW status quo is dead. The taxpayers won't tolerate supporting it indefinitely. You will start to hear Ford and the imports start to squawk too if they try it.

And, there's the point that Obama is no fool and neither are most Congressmen and senators, regardless of political stripe or flavor, and this is all about the survival of the US auto industry, not the unions; if the UAW keeps defining itself as the sole cancer in the liver, there will come a time when there are enough votes for the painful but necessary surgery. It would seem as if the AFL/CIO would try to protect itself from this by accepting the inevitable without the train wreck but I don't see it yet.


CTS-V_Dashboard.jpg
-- Click Here for CaddyInfo page on "How To" Read Your OBD Codes
-- Click Here for my personal page to download my OBD code list as an Excel file, plus other Cadillac data
-- See my CaddyInfo car blogs: 2011 CTS-V, 1997 ETC
Yes, I was Jims_97_ETC before I changed cars.

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[...] The reality is that the UAW status quo is dead. The taxpayers won't tolerate supporting it indefinitely. [...]

Exactly!

There is nothing the UAW leadership can bring to its members that will be acceptable to them.

Bankruptcy . . . the ONLY alternative. :(

Regards,

Warren


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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[...] And, there's the point that Obama is no fool and neither are most Congressmen and senators [...]

Oh really!?!!!


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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Do you remember the Robocop II scene where he has 125 robo-ethics directives programmed, and he can't function rationally? He Mirandized a shattered corpse, his partner pointed that out to him, and he said "I'm ... having ... trouble." Well, think about a politician on TV...


CTS-V_Dashboard.jpg
-- Click Here for CaddyInfo page on "How To" Read Your OBD Codes
-- Click Here for my personal page to download my OBD code list as an Excel file, plus other Cadillac data
-- See my CaddyInfo car blogs: 2011 CTS-V, 1997 ETC
Yes, I was Jims_97_ETC before I changed cars.

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Do you remember the Robocop II scene where he has 125 robo-ethics directives programmed, and he can't function rationally? He Mirandized a shattered corpse, his partner pointed that out to him, and he said "I'm ... having ... trouble." Well, think about a politician on TV...

I don't remember that scene, but it sounds as though you are describing Obama during a teleprompter failure.

Regards,

Warren


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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I'm describing any career politician weighing every nuance of every word while on live TV for implication that may be made which will affect the next election. That makes all of them look dumb. It's part of the rationale of the Founding Fathers in making the Senate term six years instead of two.


CTS-V_Dashboard.jpg
-- Click Here for CaddyInfo page on "How To" Read Your OBD Codes
-- Click Here for my personal page to download my OBD code list as an Excel file, plus other Cadillac data
-- See my CaddyInfo car blogs: 2011 CTS-V, 1997 ETC
Yes, I was Jims_97_ETC before I changed cars.

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I'm describing any career politician weighing every nuance of every word while on live TV for implication that may be made which will affect the next election. That makes all of them look dumb. It's part of the rationale of the Founding Fathers in making the Senate term six years instead of two.

Understood. OBAMA!

Regards,

Warren


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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Let's look, for example, at Continental Airlines. This info is copyrighted and should not be reproduced by moi. Nevertheless, its such a small snippet that I expect I might be forgiven by the publishers.

"At the end of 2008, Continental Airlines (NYSE:

CAL) had approximately $2.6 billion in unrestricted cash

and short-term investments. It lost $464 million (in cash)

in the third quarter of 2008. It lost $327 million (in cash)

in the fourth quarter. By the end of 2008, it had also lost

an additional $415 million courtesy of its fuel-hedging

program. (This money has not yet been paid, as the

futures contract has not yet expired. If fuel prices continue

to fall, still more money will be owed.)

Thus, in the midst of a six-month period during

which Continental’s primary operating cost (oil) fell from

$147 per barrel to $32 per barrel, the company managed

to lose a total of $1.2 billion.

Continental is perfectly hedged. It loses money in all

operating environments. And very shortly, it will run out

of money altogether."

You can find info of this sort at stansberryresearch.com.

GM is just so perfectly hedged. I used to think they were "bullet-proof" by virtue of our government's unwavering willingness to bail them out. I'm no longer so certain.

On their own, GM is $82B in debt. It's been years since they turned a profit. Pray for a miracle. Better still, accept the inevitable.

Regards,

Warren


Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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