03-05-2005 03:59									#151
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What's bad about this it the ripple effect it will have on the Great Lakes states, which have been supplying GM with raw material and specialty parts for many years. It's the lifeblood of that region and why cities like Detroit and Cleveland have parts that are completely burned out.

I can only imagine what will happen when the rest of the place goes under. That's gotta hurt.

	03-05-2005 11:52									#152
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Ted, I wonder if other companies will buy the plants and continue to produce at least the more popular GM cars. I can hardly imagine a world without a Corvette or a Cadillac.

	03-05-2005 11:56									#153
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I can see that scenario happening.

	04-05-2005 19:23									#154
	Lose 30 kilos (of popups)

Some interesting tidbits from GM's latest 10-k:

Debt has exploded since 2001, increasing from $147 billion to $300 billion.

Pension and other post-retirement obligations exceed $165 billion. $80 billion is pension obligations, $85 billion is other (medical obligations, etc.)

Oh, btw, the total amount of 2004 pension and other post-retirement benefit contributions by all worldwide GM employees was... drumroll... $22 million.

These two items alone explain why GM is a near-$200 billion/year operation that is worth "only" $15 billion.

In regards to the pension issues, I threw together some BS ratios and came up with the following:

... If GM wanted to fully fund their pension obligations this year, they'll have to cough up over $910,000 per North American employee.

... If they wanted to fund it buy increasing car prices, they would have to increase the price on their average model $27,000 - on their entire worldwide fleet!

Also, GM stopped accounting for "goodwill" a couple of years ago. Now "goodwill" has always been one of those accounting items that, to me, has always seemed a little shifty - a means for the accountants to say "We don't know why our stock price is so exceeding our actual valuations - we'll just call it 'goodwill' and book it as that." Regardless, it does exist for many companies and is an actual accounting line item.

Just not for GM. Not anymore.

Last edited by JohnT on 04-05-2005 at 19:30

	04-05-2005 19:53									#155
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Well, well, well... look at who is sniffing around this dog...

http://www.bloomberg.com/apps/news?...=top_world_news

quote: Kerkorian Discloses GM Investment, Plans to Double It (Update7) May 4 (Bloomberg) -- Kirk Kerkorian, the billionaire who tried to take Chrysler Corp. private a decade ago, said he planned to double a previously undisclosed stake in General Motors Corp. to 8.8 percent after a plunge in GM shares this year. Kerkorian's Tracinda Corp. offered $868 million for as many as 28 million GM shares at $31 each, raising his holdings in the Detroit-based automaker to 50 million shares, Tracinda said in a statement today. The purchase is ``solely for investment purposes,'' the Los Angeles-based firm said. GM surged as much as 13 percent, putting it on pace for the biggest gain in 17 years. Kerkorian, 87, who became a billionaire by buying airlines and casinos for less than they turned out to be worth, is investing in GM as its stock market value has fallen to a 13-year low and its share of U.S. auto sales are at the lowest since the 1920s. GM market value fell to $15.7 billion yesterday from $31 billion when Chief Executive Rick Wagoner took over in June 2000. ``He's going to put their feet to the fire like he did Chrysler,'' said John Kornitzer, who manages $5.5 billion at Kornitzer Capital Management in Shawnee Mission Kansas, including GM shares. ``They'll get more lean and efficient. They'll get tougher on the unions. It's good.'' Shares of GM, the world's biggest automaker, have fallen 42 percent in the 12 months through yesterday as profits fell and the Detroit-based automaker lost market share to rivals such as Toyota Motor Corp. GM reported a $1.1 billion loss in the first quarter, its biggest quarterly loss in 13 years, after falling sales prompted it to cut production and spend more on marketing and rebates. Big Shareholder The purchase would make Kerkorian GM's third largest- shareholder, according to data compiled by Bloomberg. Tracinda holds a controlling interest in casino operator MGM Mirage. He is ranked 41st on the Forbes list of the world's wealthiest people, with a net worth estimated at $8.9 billion. GM shares rose $3.47, or 13 percent, to $31.24 at 10:33 a.m. in New York Stock Exchange composite trading. GM spokesman Tom Kowaleski declined to comment. As part of Kerkorian's offer, stockholders will be entitled to keep GM's 50-cent quarterly dividend, which is to be paid next month. On that basis, the offer is a 13.4 percent premium over GM's closing price of $27.77 yesterday, Tracinda said in the statement. Kerkorian first bought shares in Chrysler Corp. in 1990 after the automaker had a third-quarter loss of $214 million. He paid $12.37 a share in December 1990 for his initial 22 million shares, then bought 6 million more shares at $10.13 each on Oct. 10, 1991, as the company headed toward a full-year loss of $795 million. Chrysler Private? He tried to buy all of the automaker in April 1995 for $21 billion. While the effort collapsed when he couldn't line up the financing, he increased his stake and continued to exert pressure on the company, giving his support to the 1998 combination with Stuttgart, Germany-based Daimler-Benz AG. Two years later, Kerkorian sued DaimlerChrysler AG and Chief Executive Officer Juergen Schrempp after Schrempp told the Financial Times he'd planned to take control of Chrysler following a deal that was billed as a merger of equals. Tracinda last month appealed a lower court ruling Kerkorian wasn't duped about the 1998 transaction. Kerkorian faces a 2003 lawsuit from DaimlerChrysler shareholder Donald Johnson claiming Kerkorian wrongfully sold DaimlerChrysler shares after obtaining inside information from a Tracinda employee on the automaker's board. A U.S. District judge in California ruled in August that the suit can go forward. Kerkorian is appealing that ruling. Unions GM, which is negotiating with unions to reduce the $5.6 billion it expects to pay for employee health costs this year, on April 19 abandoned its 2005 profit forecast of as much as $2 per share, excluding some expense, because of uncertainty about the outlook for the year, particularly health care costs. It said it can't project earnings until it resolves the ``health-care cost crisis.'' Tracinda's investment ``indicates to me that the headwinds the company is facing seem to Kerkorian to be short-term in nature,'' said Carol Moreno, an analyst at TCW Group, which has $109 billion in assets, including shares of General Motors. ``I would imagine that he has been in contact with management prior to this, and if anything, it gives the impression that there is value to the stock and that management is on the right track.'' GM's 8.375 percent bonds maturing in 2033 rose about 2 cents to 78 cents on the dollar, yielding 10.9 percent, according to Trace, the bond-price reporting system of the NASD. The bonds have weakened since GM cut its annual profit forecast on March 16, falling to 72 cents last month, an all-time low. The investment ``doesn't solve the problems at GM -- the difficult U.S. market and the difficult problem negotiating with the unions,'' said Roberto Cominotto, a fund manager at Ehinger & Armand von Ernst, AG in Zurich, a private bank that is part of UBS and manages the equivalent of about $16 billion for clients. ``Nothing's changed.''

	04-05-2005 19:56									#156
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Kirk Kerkorian is seeking a 9% share of GM (he currently owns 4%) For those of you who don't know Kirk Kerkorian was formerly the biggest share holder of Chrysler and his tactics of booting existing management at under performing companies often results in big turn arounds. Typically Kerkorian pushes for both labor and management numbers to be cut, mangement pay to be mostly incentive based, and for the target company to invest big time in new product line ups. This could be very good news for GM but bad news for the dirt bags who've run the company into the ground.

http://money.cnn.com/2005/05/04/new...dex.htm?cnn=yes]

	04-05-2005 19:58									#157
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That's the recent spin.

Kerkorian is also a notorious greenmailer, especially in the 80s. He sure didn't do anything for Chrysler, except sell it to the Germans so that he could be relieved (profitably) of his stake.

	04-05-2005 19:58									#158
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Looks like JohnT beat you by 3 minutes Oerdin.

	04-05-2005 20:01									#159
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quote: Originally posted by JohnT Also, GM stopped accounting for "goodwill" a couple of years ago. Now "goodwill" has always been one of those accounting items that, to me, has always seemed a little shifty - a means for the accountants to say "We don't know why our stock price is so exceeding our actual valuations - we'll just call it 'goodwill' and book it as that." Regardless, it does exist for many companies and is an actual accounting line item.

Goodwill means that you've purchased some assets from a company, or purchased a company, and you paid more than they valued the assets on their books.

	04-05-2005 20:02									#160
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That's right. Appreciate it!

	04-05-2005 20:30									#161
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If big companies like GM had half a brain they'd be lobbying Congress for universal health care so costs would be spread out over a larger population. They should also agressively lobby for imports of Canadian, European, and everyone else's medical drugs because the artificially high prices caused by American protectionism are the biggest factor in health care costs. That Republicans wrote laws into the new medicare drug benifit that wouldn't even allow medicare to comparison shop among domestic drug distributors (much less European or Canadian companies) shows how completely corrupt Republicans are as a party. CNN was saying medicare pays alost four times what Walmart pays for the same drugs and it is mostly because medicare must buy at MSRP while NO ONE in the real world pays MSRP.

That's a bit of a side rant but the fed could easily reduce health care costs by providing universal access and by ending the anti-consumer laws along with the anti-foreign protectionist measures the industry lobbiest have constructed. That's what's causing the huge price increases and those costs are killing businesses.

	05-05-2005 01:40									#162
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Kerkorian's stake plus what I heard about Pension Benefit Guarantee taking over GM's pension plans is tempting me to go long on GM.

	05-05-2005 01:59									#163
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Don't companies have to declare bankruptcy vefore they can shift all their pension liability off on to the taxpayer?

	05-05-2005 02:02									#164
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quote: Originally posted by Oerdin If big companies like GM had half a brain they'd be lobbying Congress for universal health care so costs would be spread out over a larger population. They should also agressively lobby for imports of Canadian, European, and everyone else's medical drugs because the artificially high prices caused by American protectionism are the biggest factor in health care costs. That Republicans wrote laws into the new medicare drug benifit that wouldn't even allow medicare to comparison shop among domestic drug distributors (much less European or Canadian companies) shows how completely corrupt Republicans are as a party. CNN was saying medicare pays alost four times what Walmart pays for the same drugs and it is mostly because medicare must buy at MSRP while NO ONE in the real world pays MSRP. That's a bit of a side rant but the fed could easily reduce health care costs by providing universal access and by ending the anti-consumer laws along with the anti-foreign protectionist measures the industry lobbiest have constructed. That's what's causing the huge price increases and those costs are killing businesses.

Oerdin, would make sense if businesses could not offer their employees more than the standard government benefit and if all prior contracts would be voided in favor of the new government program.

	05-05-2005 02:26									#165
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quote: If big companies like GM had half a brain they'd be lobbying Congress for universal health care so costs would be spread out over a larger population.

If companies like GM had half a brain, they'd be lobbying Congress for universal health care so they can wipe $85 billion in obligations off their balance sheet.

	05-05-2005 09:05									#166
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You guys got it all wrong, they should be more like Wal-Mart and figure out how to pawn off their healthcare costs onto public services.

	05-05-2005 18:56									#167
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quote: Originally posted by JohnT quote: If big companies like GM had half a brain they'd be lobbying Congress for universal health care so costs would be spread out over a larger population. If companies like GM had half a brain, they'd be lobbying Congress for universal health care so they can wipe $85 billion in obligations off their balance sheet.

Do you actually think that Congress would declare the private insurance contracts be voided if they enacted basic health care coverage for all?

	05-05-2005 20:38									#168
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quote: Originally posted by JohnT If companies like GM had half a brain, they'd be lobbying Congress for universal health care so they can wipe $85 billion in obligations off their balance sheet.

Yep, that's what I'm talking about. GM alone would save $85 billion. That sounds like something that's good for business.

	05-05-2005 22:59									#169
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About a half trillion dollars in junk, fellas.

quote: S&P cuts GM and Ford to junk status By Bernard Simon in Toronto, Richard Beales, and Aline van Duyn in New York and Ivar Simensen in London Published: May 5 2005 17:49 | Last updated: May 5 2005 17:49 GM logo General Motors and Ford, two of America's industrial icons, saw their credit ratings cut to junk status on Thursday amid doubts over their ability to survive intensifying competition in the car and truck market. Standard & Poor's said the downgrade reflected doubts that the two companies' strategies would overcome their competitive disadvantages. The move, which sent bonds and shares in the two carmarkers sharply lower, highlights the severe difficulties facing US industrial companies saddled with heavy pension and healthcare burdens. More broadly, the downgrade, although anticipated, may signal a tightening of credit conditions after a period of easy borrowing. “When the second and third-biggest corporate borrower in the world goes to junk, it is not just they that have a problem, we all have a probem,” said Gary Jenkins, credit strategist at Deutsche Bank. The debt downgrades could force some investment-grade bond funds to sell their holdings, while the arrival of so much formerly investment-grade debt in the much smaller high-yield market could cause severe disruption. Mr Jenkins added: “There will be exposure everywhere. This is a real test of what the market can take”. S&P said that its most immediate concern was the declining profitability of sport-utility vehicles. SUVs make a disproportionately large contribution to GM's and Ford's profits, but sales, especially of larger models, have plummeted recently. GM is pinning its recovery hopes on a new series of SUVs and pick-up trucks, which are due to be phased in starting in early 2006. The rating agency added that competition could intensify in full-size pickups, which are both companies' only other major source of automotive earnings”. Last month GM revealed a $1.1bn quarterly loss, its biggest since 1992 when the carmaker was on the brink of bankruptcy. Chief executive Rick Wagoner recently took personal responsibility for efforts to turn the company around. On Wednesday shares in GM notched a sharp rally on word that Kirk Kerkorian's Tracinda had offered to increase its stake in GM to 9 per cent. But in early afternoon trading in New York, GM shares fell 5 per cent to $31.17. Ford shares were off 5.6 per cent at $9.59. Referring to Ford, S&P said that “even with extensive efforts to renew its product offerings, (it) continues to lose significant market share in North America. The company has sought to be disciplined in its pricing strategy and selective in its discounting, but it cannot sustain market-share losses indefinitely.” GM was downgraded two notches, from BBB-/A-3 to BB/B-1. Ford was cut to BB+/B-1. Both companies remain on negative outlook. “The downgrade reflects our conclusion that management’s strategies may be ineffective in addressing GM’s competitive disadvantages,” S&P said. “Still, GM should not have any difficulty accommodating near-term cash requirements,” the agency added. GM has about $300bn of outstanding long-term debt, including secured notes, and is one of the biggest borrowers in the corporate bond market. Corporate bond investors have been concerned about the effect of a downgrade to junk status because many investors cannot own junk-rated bonds. Auto manufacturers are among the biggest borrowers in the corporate bond markets. If many investors have to sell their bonds, it could disrupt markets and push yields higher.

	06-05-2005 02:13									#170
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Ouch!

	06-05-2005 02:24									#171
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In 1992, GM and GMAC paper was AAA. That was just 13 years ago.

	06-05-2005 09:08									#172
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Ford bet it's entire future on trucks and SUV's

With the energy shocks, smaller cars are selling like crazy

On top of that, big azz cars just aren't "hip" anymore

I see a brand new Toyota Prius every single day, they're everywhere.

Honda just entered the truck market. Toyota has been killing them with smaller sized pickups.

GM, on the other hand.

Well they just all around suck.

	06-05-2005 09:18									#173
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quote: Originally posted by JohnT In 1992, GM and GMAC paper was AAA. That was just 13 years ago.

Amazing, isn't it?

Lots of little old ladies losing their shirts over this.

	06-05-2005 10:09									#174
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I mean, if the company goes under, what happens to all those pensions?

	06-05-2005 10:46									#175
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PBGC

	06-05-2005 10:48									#176
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Oh okay.

Does the government pay for 100% of what the pensioners are supposed to get?

	06-05-2005 10:53									#177
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Not in most cases, but you would have to have an accountant or lawyer look through all the regs in order to do an adequate analysis of what a GM or Ford employee would get.

	06-05-2005 11:04									#178
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Ted: http://www.pbgc.gov/pt_faq.htm#1

Should answer your basic questions about PBGC. Dan is of obvious mixed emotions about this entity.

	06-05-2005 11:09									#179
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Hmmm.. well according to that link, the max someone can get per year is 45K.

Not bad. But it sounds like a big pay cut for alot of them.

	06-05-2005 11:16									#180
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The big three's management has given away the store when it comes to unions. Ever since the strike GM had a few years back management has been running scared and has given in to basically ever demand the union has made no matter how unreasonable. Paying workers who don't work? That overhead cost is going to kill them.