GM CEO Predicts Bankruptcy
In a letter to shareholders General Motors’ Chairman and CEO Porter Stansberry says he sees light at the end of the tunnel but it is a GM bankruptcy and that a company cannot suffer 40 years of bad decisions, bad ideas, and bad debts and expect to compete with the rest of the world’s automakers.
He says, “what’s killing us is a legacy of debts and obligations we cannot possibly repay.” Stansberry says, “nor do we have any pleasant way to repudiate our promises. The only answer is bankruptcy.” He likens it to promises made under Social Security saying, “we cannot make enough money selling cars to afford the service on our $33 billion debt load, ” and “or the $11 billion we owe in cash pensions. These debts are killing us.” He thinks, “we’ve finally entered the end stage – the death spiral.”
“Given our current burn rate, I estimate we will declare bankruptcy in a little more than three quarters, “he predicted.
Toyota pays workers $43 an hour to make cars in the U. S. but the United Auto Workers demand $67 an hour from GM, Ford and Chrysler. Plus, they make cars that consumers judge to be inferior. Turn out the lights the party is over in Detroit, and Dearborn.
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Comment by Axxel Knutson on 26 November 2008:
GM…PULL THE PLUG, Reset, PLUG BACK IN
Without the THREE U.S. automakers combining into one there is no rationality to bailing out GM. GM’s cash burn is triple the street estimate and has lost all control over its sales, its product development and its future. The executives and the unions have the company hostage to government capital infusion. Bankruptcy is a viable answer that can push off creditors and force unions and management to make concessions that are impossible unless a loaded gun is at their head. There is too much capacity, too many models, too many plants, too many employees producing products that are more easily produced by others. The VW bug was the first indication that the Big Three did not have a clue to the needs and long-term preferences of the U.S. consumer. And today we have a glut of SUV’s that will ultimately have to be sold at a first-ever half-price sale. GM has already built them, they have already paid for them and no one wants them. You need cash, blow them out the door ½ price or less and they are out of inventory and cash hits the balance sheet.
But to infuse GM with cash to keep it afloat without bankruptcy is no answer because next in line will be Ford and Chrysler. These three should be forced to combine and re-form to use their talents and capacity to building something we all need and that is energy independence.
There is one industry that has a payback that cannot be overlooked as a place to re-train and invest and that is in renewable energy. Train those people, insist that the manufacturing capacity of GM be converted to energy and produce, once and for all, a source of energy that once in place CAN NEVER GO UP IN PRICE. In World War II Ford built a massive number of B-24’s in their new Willow Run plant in Ypsilanti. That change in production and product proved that it can be done and Ford did a spectacular job producing that airplane to the considerable consternation to the Nazi war machine. Fast forward to 2008 and our enemy is our own waste and inefficiency; energy independence is crucial to our national safety and we can actually budget part of our national defense budget to this end.
I am not against giving money to GM…but I am against giving them money to build products that have no measurable or important upside to our economy long-term. I am against giving money to GM with Ford looking like that doggie in the window. Force them into solar, wind, wave and nuclear. Support them in their endeavor to re-tool and you got my money. Absent that, you will not get me to suggest giving them, their workers or their bloated retirees belly-aching about their co-pay when millions have no health care a single dime.
The side benefits are obvious: our defense structure is enhanced because we no longer have to depend on a cartel of Bedouins in the Middle-East to determine for us how much oil we are going to use and our environment actually can become healthy in L.A. vs. choking to death sitting in traffic on the five. We put a pin in our energy costs once in for all and bankrupt our dear friends in the middle east forcing them to drive Chevy Cobalts and trade in their Bentleys.
Here is what we said about the Chrysler/GM merger talk=
“Two drunks walking down the street
holding each other up…
until they hit the curb,
then they both fall down”