Auto woes

General Motors loses US$8.6B in 2005

Struggling General Motors has reported a 2005 loss of US$8.6 billion, dragged down by huge restructuring charges and weak results at its North American operations. The loss amounted to $15.13 per share, compared to net income of $2.8B, or $4.92 a share in the same year-ago period. The company said its full-year revenue slipped slightly to $192.6B, compared to $193.5B in 2004. "2005 was one of the most difficult years in GM's history, driven by poor performance in North America," company chairman and ceo Rick Wagoner said in a release. "It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed – our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue." Wagoner also said the results were adversely affected by parts-maker Delphi's bankruptcy-protection filing. In November, GM announced it would close or cut back 12 North American facilities, including two in Ontario, and slash 30,000 jobs as part of its plan to return to profitability. In the fourth quarter alone, GM lost $4.8B, or $8.45 a share. In the same period last year, the company lost $99 million, or 18 cents a share. GM's sales for the quarter slipped to $51.2B from $51.4B a year earlier.

In other news, billionaire investor Kirk Kerkorian is acquiring 12 million shares of GM stock, matching the number of shares he sold in December, a federal regulatory filing showed on Wednesday. Kerkorian's private equity firm, Tracinda, bought five million shares of GM stock on Monday for an average purchase price of $21.40, or approximately $107M, it said in a filing with the US Securities and Exchange Commission. On Tuesday, Tracinda agreed to purchase an additional seven million GM shares in a private transaction for $22.25 per share, or approximately $155.8M. Those purchases would boost Kerkorian's stake in the world's largest automaker to 9.9%, the same as it was before Tracinda sold 12 million shares in December. Tracinda said at the time that it sold the shares so that it could end its fiscal year with a capital loss, making it eligible for certain US federal and California income tax breaks. But it left open the possibility of reacquiring shares, and it waited only a short time after so-called wash rules lapsed. Federal tax rules prohibit a taxpayer from claiming a loss on the sale of stock if replacement shares are acquired within 30 days.
(CBC, Calgary Herald 060126)

Of course things get more difficult the fatter and lazier you get. Of the fat and lazy, GM has been the fattest and laziest of them all. I guess you tend to lose motivation to stay relevant when you have a cash cow like the SUV market to rely on. Oh wait, that was fickle, unsustainable, and destructive -- what a big surprise, they've already fallen out of favour with the general public! How did this happen? Why didn't we see the signs? Help us jebus! You morons. Way to let the market pass you by, losers.

GM, Ford woes could bite Chrysler next

While its Detroit rivals struggle with falling US sales, deep losses and plant closing announcements, everything seems to be going well for Chrysler Group. But some experts say that the problems that have bitten General Motors and Ford so hard could be just around the corner for the North American unit of DaimlerChrysler. Company executives concede the company's economic outlook is closer to that of its Detroit rivals than its Japanese competitors. At first blush, everything seems to be fine at Chrysler. It saw US sales increase 4.4% in 2005; GM and Ford both had sales fall almost 5%. It has an investment grade credit rating; GM and Ford have been downgraded to junk bond status and their executives have been forced to repeatedly answer questions about whether bankruptcy lies ahead. Perhaps most importantly, Chrysler Group made US$1.3 billion in the first three quarters of 2005, while GM lost $1.6B from its North American automotive operations during the same period, excluding special items. Ford lost $1.6B on a pre-tax basis, excluding special items, on its North American auto operations in 2005.

But DaimlerChrysler's credit rating is only a couple of steps above junk bond status itself. And some analysts raise questions about the strength of both its profits and its sales. "They're not making anywhere near the money they need to be making," said David Cole, chairman of the Center for Automotive Research, who points to issues such as retiree health care costs and limited flexibility for its factories to switch between products. "The only reason we're not talking more about them is because they don't have as serious a problem as GM or Ford." The experts say that the problems at GM and Ford could show up at Chrysler relatively quickly if its sales slump even slightly. And some question whether Chrysler's sales and product line-up are nearly as strong as they appear. "The weakness of Ford and GM has kept the microscope off of Chrysler," said Walter McManus, director of the Office for the Study of Automotive Transportation at the University of Michigan. "But they're also lagging the Japanese how fast they are getting new product out. Their product portfolio is not adequate. The 300 was a hit but the downside of the hot niche product, they have a short shelf life." Cole added that DaimlerChrysler leadership is aware of the challenges it faces and he still believes that it should be able to avoid the financial situation now facing GM and Ford. He points to the announcement this week that DaimlerChrysler will trim 6,000 white collar jobs, mostly in Europe, as proof that company management is working on its challenges. But Cole said that the sudden onset of the problems at GM and Ford in 2005 shows how fast fortunes can change in the industry today. "They're not home free," said Cole. "They've been a little separated from the recent pain, but not by very much. It [a financial crisis at Chrysler] is a very major concern for the top executives there."
(CNN 060125)

Message from GM and Ford to DaimlerChrysler: "If we're going down, we're taking you with us!"

The auto industry and housing market will be falling into full-fledged tailspin very soon. The housing boom is anticipated to be off by as much as 10% in 2006. Too bad the entire North American economy is propped up by these two sectors. Woe is us.

Bush balks at auto bailouts

US President Bush says General Motors and Ford should develop “a product that's relevant” rather than look to Washington for help with their heavy pension obligations, and hinted he would take a dim view of a government bailout if the struggling auto makers sought one. In an Oval Office interview, Bush said his administration has discussed the development of new fuel technologies with the nation's top two auto makers, which might make them more competitive, but that he has had no talks about the companies' finances. Asked whether he had spoken to GM chairman and ceo Rick Wagoner or Ford chairman and ceo Bill Ford, Bush replied: “Not about their balance sheets.” He added: “And I haven't been asked by any automobile manufacturer about a bailout.”

In discussing the auto companies' woes, Bush suggested his sympathies lie more with the workers who are displaced or unsettled by a changing corporate environment. On the subject of ballooning pension expenses, which are part of Detroit's problems, Bush called on GM, Ford and the airline industry to think twice before backing away from their promises to pay in full. “That's not how the market works and that's not corporate responsibility as I see it,” he said. “I'm very firm on seeing to it that this government hold people to account.” While neither GM nor Ford has sought to pass on pension obligations, a few airlines have. After filing for bankruptcy protection, UAL's United Airlines and US Airways Group dumped nearly US$10-billion in unfunded pension obligations on the Pension Benefit Guaranty Corp., the federal insurer of private sector traditional pension plans. Northwest Airlines and Delta Air Lines, which are currently operating in Chapter 11, have said they haven't decided whether they will ask the court to shift their pension plans to the PBGC. Additionally, Bush said his administration would focus on ways to retrain laid-off employees. “This is going to be a very troubling time for workers and their families,” Bush said, adding that companies had an obligation to assist employees they cut loose.
(Globe and Mail 060126)

How come corporations can rescind on their obligations to their employees when in trouble (like agreed-upon pension contracts, etc.)? Isn't this essentially out-and-out theft? Fuckin' corporations. They've single-handedly in their sociopathic mania short-sightedness and greed destroyed the world.