April 27, 2009

GM Cuts Again; Heading for Number 2 (or 3)?

Filed under: Economy,Taxes & Government — Tom @ 10:15 am

This is from a morning CNNMoney.com e-mail:

GM says it will cut another 21,000 jobs, kill Pontiac by 2010, cut more dealerships and restructure debt.

Make that 23,000 jobs — Here are the first two paragraphs of underlying article (12:30 p.m. — The article has since been updated and lengthened significantly):

General Motors announced plans to cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40% of its dealer network in its latest bid to stay out of bankruptcy.

GM also announced an offer to its bondholders to swap $27 billion of the company’s unsecured debt for stock. GM is offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal. The move will greatly dilute the value of GM shares held by current stockholders

Now I’m not going to say the following things are going to happen, because I’m not close enough to the situation, and those who are close enough are probably not going to say anything. (Update: I confirmed earlier today with a person at J.D. Power, who put out a press release on the month’s overall sales through 16 business days last Thursday — down 33% — that they will not go into detail by maker or brand.)

But …. given GM’s 9-week plant closings, given its quick kill of Pontiac, and given that it can’t seem to cut jobs and costs fast enough, I believe that the company’s sales are cratering by even more than they have in previous months. Because of that, the following things that were unimaginable just six months ago, while still long-shots, could actually happen:

  • Toyota will sell more vehicles than GM in April.
  • Ford will sell more vehicles than GM in April.
  • BOTH Toyota and Ford will sell more vehicles than GM in April.
  • If GM manages to sell more vehicles than Toyota, Ford, or both, it may only be because some of the 17,000-plus vehicles President Obama rush-ordered earlier this month got delivered (or perhaps were paid for but not delivered, even though the bean counters would say they shouldn’t be counted as sales).

Yes, it is within the realm of possibility that GM will be Number 2 or 3 in US sales for the month of April. If it doesn’t happen in April, it could easily happen within just a couple of months.

Just look at the trend (Sources — Feb. and March 2009; December 2008):


If a “mere” bailout of GM took Ford and Toyota sales as a percentage of GM’s from the 60s to the 80s, how unreasonable is it to think that Obama’s de facto nationalization might take them to above 100?

We’ll find out shortly.

For those who doubt why this is happening, what other possible reason could there be for the sudden shift? Did GM’s car line or car quality all of a sudden fall apart in three short months?

If any one of the three named possibilities actually comes to pass, or comes anywhere close, it will be drop-dead obvious evidence that the backlash against GM has gone beyond the shunning of it and Chrysler that clearly occurred in January, February, and March after they became bailed-out companies. I believe that President Obama’s de facto nationalization of GM, as evidenced by Rick Wagoner’s resignation “at Obama’s behest,” and Obama’s promise that the government will stand behind GM’s warranty promises, has further alienated much of GM’s remaining customer base, and that the only question that remains is whether it’s a significant minority or a majority of them.

When, if ever, will GM’s decimation under government control become bad enough to convince Obama and Uncle Sam’s car czars that a normal bankruptcy, and an attempt to emerge from bankruptcy as a normal, privately-held, not government-shackled company, is the only rational way out?


UPDATE: From the lengthened CNN article, possible evidence that GM CEO Fritz Henderson is getting us ready for the fall from Numero Uno –

While the cuts will leave GM a much smaller company, Henderson said this does not concern him. He admitted that results at GM have not been acceptable for quite some time.

“I’m much more focused on getting results than being big,” he said.

My guess is that it’s too late for results–just in time for the government and the UAW to reportedly take an 89% stake in the company. Zheesh.

Positivity: Northwoods Youth Is Hero

Filed under: Positivity — Tom @ 6:56 am

From Antigo, Wisconsin:

Submitted: 04/19/2009

ANTIGO – Karl Busse is this year’s Red Cross Youth Hero of the Northwoods, but his mom Ingrid says he is just a normal little boy.

“He is a happy little energetic boy who is just a real sensitive boy, he loves helping people, he loves fire trucks and cars and trains and he’s just a bundle full of energy,” says Ingrid

In 2007 Ingrid Busse developed a seizure disorder. In one week EMS was called to the house three times. So she began teaching Karl to dial 911.

“Then one day I was playing with the kids and then all of the sudden, I started getting this strange feeling, I was going numb from head to toe,” she says.

Before she knew it, Ingrid says, she was paralyzed from head to toe. So Karl stepped in and called 911 just like his mom taught him. He ended up calling three times before the call went through. He also opened the door for the rescue workers and kept a close watch on his little brother Max.

Ingrid says Karl doesn’t remember what happened that day, but he does remember what to do if there’s an emergency. He still knows to dial 911.

And even though Karl loves to help people, his mom says he’s not so sure he wants to be a hero.

“He said, I don’t want to be a hero, I just want to be Karl,” says Ingrid. …..

Go here for the rest of the story.