# GM in deep doo-doo



## wayneL (21 November 2005)

> Bankruptcy stalks world's largest carmaker as it reels under cost of healthcare and pensions
> 
> General Motors's woes point to end of decent conditions for US workers
> 
> ...




http://business.guardian.co.uk/story/0,16781,1647003,00.html


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## RichKid (21 November 2005)

> In the US, GM has found it difficult to wean buyers off the profit-eroding incentive deals it first introduced to get sales moving after the terrorist attacks in 2001. Without incentives in October, sales dropped 23%. The company has also been heavily reliant on the sport utility vehicles that generated much of its profits in the 1990s. As petrol prices have risen, sales of the gas-guzzlers have plummeted. In the meantime, GM has been slow to invest in the petrol and electric hybrids that are becoming increasingly popular.
> 
> GM's biggest difficulty is the soaring cost of pension and healthcare liabilities for workers and retirees in the US, which add $3,500 to the price of each vehicle. Unions fear that under bankruptcy, GM could cancel worker contracts to sharply reduce its liabilities, erasing decades of hard-won gains. It insures 1.1 million Americans and healthcare costs this year will be about $5.6bn, up from $4bn four years ago.
> ......
> ...




Just extracted a portion of the article you refer to Wayne.

In terms of the gas guzzlers- American industry had plenty of opportunity to embrace alternative fuels and move away from oil but due to their stubborness (against carbon credits, Kyoto and anything else the oil lobby didn't like, including motor vehicle manufacturers who didn't want emission taxes and the like) they didn't; countries like Japan are into fourth generation+ hybrids and alternate fuel vehicles while the US is only now falling off SUV's (forcibly, due to the oil price and global competition).

Secondly, in terms of those poor workers, if they lose their entitlements we should think very carefully about what may happen to Australians when companies collapse, especially with insolvency law and employment law being subject to Howard govt policies. 

When the good times end the rich are still rich but the poor just get shafted.

It'll be interesting to track the sp chart of GM vs contemporaneous broker reports to see how they match up. As Nick Radge mentions, in his new book, a number of recent corporate collapses in Australia saw analysts loathe recommending a sell until it was way too late (some just said hold all the way through, that's broker code imo for 'sell' or 'we don't know what to think').


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## wayneL (21 November 2005)

Rich,

It's a bad sign huh?


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## RichKid (21 November 2005)

wayneL said:
			
		

> Rich,
> 
> It's a bad sign huh?




Yeah, but these things are complex and most people shy away from financially complex stories, it's only when the emotional side of things gets out that people listen, then the anti-corporates start yelling and the politicians change the debate to show trials (where the most of the rich guys get off- don't get me wrong, nothing wrong with being wealthy but in the big corporations that means you're at the top and you should take responsibility), while slowly and painfully mums and dads lose their daily gruel. 

Where's Michael Moore when you need him? Didn't he do a doco called 'Roger and Me' about a car firm?

Have you heard the cockroach theory? Where there's one there are many- like unexpected bad news from companies- just waiting for more bad stuff now to crawl out.


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## tech/a (23 November 2005)

*Bankruptcy stalks world's largest carmaker as it reels under cost of healthcare and pensions

General Motors's woes point to end of decent conditions for US workers*

Incredible!!!

This never ending push for never ending demands for better EVERYTHING from workers is leaving business in the position where profitability cant happen.

All of a sudden NO JOB---bastard employer!!!

Chinese,Indonesians,Indians rubbing their hands together.

*Where'd you rather go home and spend the weekend??
Its a 2 way street people!!*


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## Milk Man (23 November 2005)

Exactly tech. As soon as I saw what they were getting previous to the pay cuts I knew why GM is in trouble. $25 per hour plus all this pension crap heaped on top. What does a factory worker in Australia get? What does a factory worker in *China* get? No wonder theyre getting killed in the marketplace. That and their new car prices are way cheap compared to Australia.


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## Knobby22 (23 November 2005)

Rubbish.
Blaming the workers for poor management is just a cop out.
The reason GM is going broke is NOT that they provide healthcare to their employees, it is because they are not producing the product that the public want. 

The European car manufacturers have an economy which taxes far more and provides far more holidays and better pay and yet most make money.

I thought you, being in business, would have this basic understanding Tech/A. If you produced lousy low quality houses in outdated designs, paying your workers half their present wage would not save you from going broke.


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## tech/a (23 November 2005)

Not blaming the worker but blaming the COST workers have inccured on business.

They are pricing themselves out of a job.
Its got to be a win win. Companies cant survive on $1.50 profit a year!!!
To be viable in a global market they need capital.
Right now its going where they can create this capital---and thats not the US or most other western societies.

This mentality of I'll stay home if you dont give me X is the real rubbish.
In China where you stay home and get zero there are 1000s who will gladly work for 1/3 rd your wage.

Win win DOEST mean employee sacrificial lambs
It means understand that you need to see the employers side just as you need the employer to see your side.

Removing the health care issue in isolation may not do a great deal--BUT there will always be a straw that breaks the camels back. There are a number of issues that need resolving but can you see unions GIVING ANYTHING to a struggling larger company?

OH management to blame---hmmm I'm sure they would love to here your solution to 1/3rd labour and production costs off shore!
Wrong Product--yeh thats an arguement but still doesnt cover the production cost issue.
Robotics?? well theres a solution!

Unless this *US V THEM* mentallity disappears there will be fewer *THEM*.
*The PROBLEM IS US!!!!!--Which includes THEM!!!!*


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## Smurf1976 (23 November 2005)

The way I see it, GM is a classic case of not moving with the times.

I'm no expert on cars but just thinking about the major developments over the years there aren't too many where GM has done anything but get dragged along kicking and screaming. At least that's my perception as a non-petrol head and it's public perception which counts when you're selling something.

Safety - European manufacturers seem to be the leaders there.
Emissions - Volvo was responsible for a lot of the work there.
Reliability / Build quality - Japanese manufacturers still leave the rest behind.
Fuel - Toyota seem to have the edge there at the moment.

So why, exactly, would GM be selling lots of cars when the competition stacks up better in practically every category that matters to average (non-petrol head) consumers?

SUV's are so 1990's and yet GM still keep pushing them as if cheap fossil fuels were here to stay. The market thinks otherwise and it's time for GM to move on. They've been pushing this engine power output thing ever since they came up with the idea of leaded petrol. Time to face reality that it's not working for them, or their customers, financially and move on. Either that or GM will be the first casualty of a tightening oil market.


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## It's Snake Pliskin (23 November 2005)

tech/a said:
			
		

> Not blaming the worker but blaming the COST workers have inccured on business.
> 
> They are pricing themselves out of a job.
> Its got to be a win win. Companies cant survive on $1.50 profit a year!!!
> ...




The trouble with all BIG companies is the costs of hiring management. They get their millions of dollars but the real workers are blamed for cost problems. Hardly fair don't you think. This grows the seeds of communisim as capitalism will one day die off from the excesses and the inequalities it has bred. 

It is this hard ass management attitude that is destroying communities.

Look at TELSTRA with the coming layoffs. How does that improve service? It doesn't. How does it help society? It doesn't. How does it help running costs? It doesn't. Downsizing downsizes the business potential. The banks worked out that they needed to re-open branches and give a better service.


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## Knobby22 (23 November 2005)

The US has the strongest rules against unions, a very low minimum wage, only 2 weeks holidays a year.
They have great infrastructure, few power problems, good roads.
They are building locally so transport costs are lower and they can react more readily to needs. They have people buying their cars to support the US.

Yet, Toyota is making a killing. Many of their cars for the US market are built in the US, Britain and Japan, hardly low cost manufacturers. ...And yet they are making their best profits ever!!! 

IT IS BAD MANAGEMENT THAT IS KILLING GM.
They could pay all their workers 10c a day and they would still be in trouble.


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## Buster (23 November 2005)

Knobby22 said:
			
		

> Yet, Toyota is making a killing. Many of their cars for the US market are built in the US, Britain and Japan, hardly low cost manufacturers. ...And yet they are making their best profits ever!!!




Knobby,

An interesting fact that I stumbled upon whilst in the Middle East earlier this year.. Australias largest export to Dubai is the humble Toyota Camry!!

No, I am not taking the rinse..

Cheers,

Buster.


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## Knobby22 (23 November 2005)

Says it all, Buster.


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## wayneL (23 November 2005)

Folks,

What does this mean for GMH here?


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## phoenixrising (23 November 2005)

Did anyone see on 60 minutes earlier this year, the story on the Korean ship building? I know not cars, but there was real VISION.
This is the secret I think and is lacking in Aus today, as well as GM to.

They turn out these huge ships every few months with heaps of orders into the future.
So do they get paid cheaply, no the average is US$50k per year.

So where is the visions, the goals for the future, we only seem to be rearranging the deck chairs and not looking at the destination.

Cheers


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## Dan_ (24 November 2005)

wayneL said:
			
		

> Folks,
> 
> What does this mean for GMH here?




Well we walked away from a deal with them due to concerns we were having. I do know that they have cleared out most of the older senior mgt so it's mostly being run by fairly new staff, a steep learning curve as a lot of experience has left the place.

Also lately selling cars at employee rates, not a good sign as they have stock they can't move.

The auto industry is so focused on vehicles sold per year, not profitability.

If you report lower vehicles sales and higher profitability this is seen in a negative light as you should have sold more units for less.

Also a few bigger suppliers have had/have administrators involved with them, so they can't look to them for price reductions. 

Solution is to source overseas but they have been to slow to react


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## mime (24 November 2005)

Not suprising considering asian car companies make better quality cars and charge less.


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## Milk Man (24 November 2005)

mime said:
			
		

> Not suprising considering asian car companies make better quality cars and charge less.




Lets get one thing straight. Asian cars ARE NOT better quality than Australian or American for that matter. Reliability wise- I have worked as an apprentice mechanic and have seen first hand how much running repairs these pieces of plastic crap need. Dont believe me? Ask your local mechanic. Better still ask a taxi driver the pro/con of ford and holden vs japanese plastic. These cars use cheap parts and they break easily. Not to mention how hard most of them are to work on. 

To prove the point of how cheap and nasty they are; there was a recall on a korean make of car because of a weird 'clack clack clack' noise coming from the engine. Number 4 piston was not there! What I thought when I saw them making ships was "My god, I hope these chumps arent making oil tankers". One good thing I noticed was that their upper management werent paid much more than the grunts; not even double from memory.

Theres my rant for the day.


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## mime (24 November 2005)

I heard the one of the Hyundai models recently was voted the best small car and their large cars ranked above rivel models by Holden and Ford.


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## Milk Man (24 November 2005)

mime said:
			
		

> I heard the one of the Hyundai models recently was voted the best small car and their large cars ranked above rivel models by Holden and Ford.




Holden and Ford outsell Hyundai by far and away. The only asian company close is toyota. Thats coz us bogans know our cars. We know whats gonna break and how much its gonna cost to fix. Thats why Americans buy asian cars- they go well with their tofu burger and distilled water.


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## Pot Stirrer (24 November 2005)

Milk Man said:
			
		

> Lets get one thing straight. Asian cars ARE NOT better quality than Australian or American for that matter. Reliability wise- I have worked as an apprentice mechanic and have seen first hand how much running repairs these pieces of plastic crap need. Dont believe me? Ask your local mechanic. Better still ask a taxi driver the pro/con of ford and holden vs japanese plastic. These cars use cheap parts and they break easily. Not to mention how hard most of them are to work on.
> 
> To prove the point of how cheap and nasty they are; there was a recall on a korean make of car because of a weird 'clack clack clack' noise coming from the engine. Number 4 piston was not there! What I thought when I saw them making ships was "My god, I hope these chumps arent making oil tankers". One good thing I noticed was that their upper management werent paid much more than the grunts; not even double from memory.
> 
> Theres my rant for the day.





Although I agree that asian cars are of a lower standard. <deleted>


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## RichKid (24 November 2005)

tech/a said:
			
		

> This never ending push for never ending demands for better EVERYTHING from workers is leaving business in the position where profitability cant happen.
> 
> All of a sudden NO JOB---bastard employer!!!
> 
> ...




Some of the people who make those big demands (as mentioned by other posters here) are those executives on high salaries, too high if the co isn't performing. They also make demands when they leave and get lots of money for it, employees get a rude look and lots of empty promises. Might as well be fair to both ends of the employee spectrum.  Also a company is a separate legal entity, it has its own legal personality, it's mainly there so that people can make demands on the entity while shielding themselves from certain risks, so why should only the weak, vulnerable employees be at the bottom of the heap?

As you mention the Indians, just read an article in a recent Time mag (maybe an old issue from two months ago) about Tata (steel and diversified industries), see how they operate (just do a google) and you'll see they can take care of people and make money and they've done if for many generations.

As for what it'll mean here for GMH--- well I suppose a bit of political pressure may see more subsidies, depends on whose political office hangs in the balance.


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## Knobby22 (24 November 2005)

Well said, RichKid 

And Toyota is expected to be the number one manufacturer of cars this year, beating all other companies including GMH. They are number 1 in Australia already. And it is just rubbish saying GMH and Ford make better quality cars than Honda and Toyota.

I own a Chrysler Neon which my wife wanted. What a lemon. Switches failing, water getting in. Solder joints failing , it just goes on. Always in for expensive repairs.

A friend of mine who lives in the US  bought a Ford, he was very unhappy with it and only buys Euro or Jap now. The car had a dash which said Euro style, what a joke!


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## Smurf1976 (24 November 2005)

Milk Man said:
			
		

> Lets get one thing straight. Asian cars ARE NOT better quality than Australian or American for that matter.



My own car is a Nissan. At work I drive a Ford so I can directly compare.

Suffice to say that I most certainly won't be swapping my Nissan for a Ford for the simple reason that I prefer a vehicle that doesn't need fixing all the time.

Nissan - 5 and a half years old with no problems at all. Only thing that has been replaced apart from the oil etc. are the front wiper blades and tyres. Normal wear and tear items. That's it. Even the battery is still going fine.

Ford - Two vehicles (leased so frequent changeover) over past 3 and a half years. New battery in one after 12 months. New diff after 20,000 km (had to wait two months because "it's a common fault with this model" and they had run out of spares). Brakes needed work after only 30,000km. Seatbelt not retracting properly. Interior panels falling off from day one until I modified the means of attachment. Fan noisy.

Not being a car expert, I just want a car that I can get in and drive without needing to be a mechanic to get from A to B. Nissan meets that criteria as do Toyota, Honda etc. Hence people will keep buying their cars no matter what price incentives Ford and GM offer.


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## Milk Man (24 November 2005)

Im not going to start any fights. I know several mechanics. ALL of them say that Commodores and Falcons dont get too much trouble. Yes, Honda and Toyota are the pick of Jap cars but the major items (engine, transmission, etc) simply dont last as long as commodore and falcon. Yes, neon's are no good; but give me a neon over a kia anyday. Bikes are a different story....


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## Green08 (7 June 2009)

How times have changed and reality real.

I noticed this hasn't been touched since 2005

GM should not have been 'saved', they just delay the inevitable. If you can't see the future changes and your that 'big and famous' then down you go.  It is a level playing field - evolution. Ego is not eternal just a self righteous thought.

Reading posts on other cars. I think it really depends on what you want out of your car. My Nissan Patrol Turbo Diesel Manual is perfect for the country and horse float. My Honda Accord Automatic was exceptional in Sydney.


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## Smurf1976 (7 June 2009)

Smurf1976 said:


> Nissan - 5 and a half years old with no problems at all. Only thing that has been replaced apart from the oil etc. are the front wiper blades and tyres. Normal wear and tear items. That's it. Even the battery is still going fine.
> 
> Ford - Two vehicles (leased so frequent changeover) over past 3 and a half years. New battery in one after 12 months. New diff after 20,000 km (had to wait two months because "it's a common fault with this model" and they had run out of spares). Brakes needed work after only 30,000km. Seatbelt not retracting properly. Interior panels falling off from day one until I modified the means of attachment. Fan noisy.



That was in 2005.

I still have the same Nissan and yes it's needed some work doing - but nothing more than a new battery and I'm about to get some new tyres soon. The car is now 9 years old.

And we've had more leased Fords at work. Mine's not going too badly, unless you count the seat belt retractor needing cleaning regularly (NEVER had that problem in ANY car before) and a couple of interior panels coming loose.

But the other one we have just needed a new exhaust (after only 50,000 km!!!) and has a failing battery which, for some strange reason, the dealer recommended charging rather than replacing. Um, isn't running the car supposed to keep the battery charged? It does on every other car.

So I'm not surprised to see any of the GM / Chrysler / Ford mob go bankrupt. Two down so far. 

Fundamentals win out eventually (though it can take a very long time) and these guys are trying to build a mass market product of mediocre quality using high cost labour. Commonsense says that won't work - either build cheap cars using cheap labour or build higher priced cars with the expensive labour. 

Selling GM etc cars at the price they sell them is a lot of the trouble. They need to be charging more, a lot more, given their cost structure. Trouble is, the cars aren't good enough to be charging a higher price given the competition. They need to either make better cars or make the same cars more cheaply. 

They don't have the quality of Euro / Jap and they don't have the low costs of Korea etc so they're stuck in no man's land. Can't build it cheaply but it has to sell fairly cheap. Economics 101 says that's not going to work for too long.


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