Monday, November 10, 2008

What a load of crap

I’m hesitant to say Rick Wagoner, CEO of GM, is a liar.


However, over the weekend, on CNBC, he said that the current crisis in Detroit is a direct result of the credit market meltdown.


Give me a break.


Ford and GM burned through nearly $14 BILLION in cash over the last quarter while losing a combined $7.2 billion in financial losses.


To put that in perspective, on paper their revenue was exceeded by their losses by $7.2 billion in the last quarter.  Meanwhile they SPENT $14 billion more than they actually brought in.  Stuff they spent the extra $7b on would have been paying down debt, or retooling factories, or buying out union contracts.  Everything else (including executive compensation) would be included in the profit/loss figure, unless they’re still being forced to cover losses in the pension funds (I think the union took those off the books of the big 2, but I can’t remember).


So, let’s look at the timeline real quick…


The markets “melted down” in October 2008.  The financial sector went into crisis mode in September 2008.  The problem has been looming for some time, possibly since 2006 or sooner, but the chickens hadn’t come home to roost until 2 months ago.  There was no “meltdown”, only dangerous and foolish behavior.


The 3rd quarter ended in September 2008.  Ford and GM were bleeding cash way back in October of 2007 and haven’t made a profit in over a year (I think GM or Ford may have pulled off a profit one month, but was still bleeding cash).    I have a Fortune Magazine from February 2006 discussing GM’s problems and floating the (then unthinkable) idea of bankruptcy.


I think the problems started well before the credit crisis and market meltdown from last month, because if analysts are discussing potential BANKRUPTCY in February 2006, your problems didn’t START in 2006 with the dangerous behavior that led to the ultimate meltdown (a meltdown that never would have happened, by the way, had the basic fundamentals of the economy not been rock solid).


What is GM’s major problem?  Not the credit markets.  Not even the lackluster performance in the stock market (some might say GM and Ford have been quite exceptional in their nosedives to the dark, scary depths they’ve recently found themselves).




Ford and GM sell loans, not cars.  You buy a car from Ford and GM, you buy a car payment.  And nobody is buying their car payments—and not because people can’t get credit, Toyota and Honda are doing just fine comparatively, thank you.


Mismanagement, poor decisions, inability to foresee change, shortsightedness, and a very eager willingness to get into stupid contracts with labor unions who do NOT have the best interest of the company (or employees of that company) in mind, only the interests of the union.  Once again, Toyota and Honda are not having the problems that have beset Ford and GM.  Where did Toyota open their newest plant?  San Antonio.  When was the last factory opened in Michigan?  Yea, I can’t remember either.

The “American” auto industry isn’t doing poorly.  Ford and GM are doing poorly.  Other auto makers (with the exception of Chrysler which isn’t publicly traded and not under the same performance pressures) are doing alright enough to weather this storm.


Please please please, don’t give these fools more money.  Extend a loan to them, sure.  But if they can’t figure out how to build a car that people actually want to buy (maybe they should check out Honda and Toyota) they should go into receivership, executives should be summarily dismissed, and new management brought in across the board.


Enough is enough already.  Quit sucking.  Even Major League Baseball got tired of the Expos sucking and moved them to a different city, maybe the Big 2.5 (Chrysler is more of a .5 than 1) should move to a new city and start playing some serious ball.


Blogger Holden said...

It's always someone else's fault that the big 3 suck. Those guys are masters of excuse.

Are you still running?

9:19 PM  
Blogger Brother Joe said...

No, no... haven't done any running lately. Oddly enough, I find myself wanting to, though. I honestly simply don't have the time.

2:31 PM  

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home