Posts Tagged ‘auto industry’
The Auto Industry – Served
Facing increasing pressure from Congress and the American people, the auto industry is having to start cleaning up its act. It has been given a December deadline to regroup and approach Congress with a detailed plan, one that outlines drastic restructuring and operating measures and one that offers some definitive answers to lawmakers how money from a potential bailout package will be spent.
Below is a poll from OrangeCountyGasPrices.com on consumer reaction locally to the possible government bailout of the American Auto Industry.
And here is a recent commercial from Ford, advertising Employee Pricing programs for customers. The video has a clear message – help us.
“These are the keys to what America needs right now.”
GM Stock Now a Joke
Will there be a Sequel for General Motors Corporation (GM)? Its stock dipped to dangerously low levels today, trading under $3 for a short period before closing at $3.06 for the day. Investors are concerned over the looming possibility of bankruptcy as GM’s cash balance nears below the needed amount to operate month-to-month.
Updated 11/26/08 – with stock chart YTD:
General Motors Corporation’s (GM) stock has seen dropped significantly Year-To-Date (YTD), trading as of press time between $4 and $5 a share, closing at $4.81.
Original Blog Continued -
The cash-strapped company is seeking economic relief from the federal government in the form of an auto-industry bailout package that would assist competitors Ford and Chrysler as well. But with any assistance being put on the back-burner for the time being, GM is having to resort to holding dealership payments, rebates, and sales-incentive packages for a two-week period, delaying dealer payments until December 11th, two weeks further than the November 28th payout date.
GM is not saying how much these delays will save the company, but it proves to be significant enough to solve, at least temporarily, severe cash-flow problems. The three major auto companies hopefully are spending these next couple of weeks reorganizing the company, coming up with the required business plans demanded of Congress before the Big Three meet again for economic aid. These companies can not continue to operate in the same way they have been, it is partly to blame for their respective economic blunders.
After the Congressional hearings held a week ago, and amid stark criticism, GM has put up two of its private jets from a line of several others for sale, in an effort to regain public trust and sympathy as well as to regain capital, in a monetary form. It has laid off over half of its air travel staff and continues looking for other ways to save money. The luxuries that the Big Three executives afford can simply not continue. They are burning away millions in corporate and executive bonuses and benefits, spending far too much on private jets, and not producing greener vehicles that consumers are demanding. The time for change has come and something must be done. Whether or not the auto industry receives any form of economic aid will largely depend on management – are they willing to ditch the operating procedures and corporate fluff that has, in part, brought the demise of the American auto industry? We will find out soon enough.
ReutersVideo reports:
Photo Credit: CarType
Where’s the Responsibility?
Banks, financial institutions, AIG, American Express, and now, the auto industry. What’s being called “The Big Three Bailout,” the major three auto manufacturers have been visiting Washington, pleading Congressional leaders for a share of the bailout which has become a trend of late. How much money are we talking about here? $25 billion shared amongst General Motors (GM), Ford, and Chrysler.
But unlike the $700 billion financial banking bailout that the government began dishing out a couple of months ago, the aid the auto industry is asking for is being met with staunch resistance. Flying in on private company jets, top executives from the top three U.S. auto manufacturers lobbied and begged for economic aid. On the verge of filing for bankruptcy protection, fears are spreading that GM, among the other two companies, is running out of operational capital.
“Our industry … needs a bridge to span the financial chasm that has opened up before us,” General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee.
Wagoner blamed the auto industry’s economic woes not on management failures but on the deepening global financial crisis. And Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be “the least costly alternative” when compared with damage from bankruptcy. The companies are reaching out to its consumer base to put pressure on Congress to grant financial support.
The fear of course is that the collapse of the auto industry, and the financial protection of bankruptcy would have a trickle-down effect on not only the American economy, but on the world economy. With the failure of the auto companies, many supply companies would suffer from a sudden decrease in demand. Job losses at all levels would result. And if these auto companies file for bankruptcy, studies show that consumers, by an overwhelming majority (roughly 80%), would not purchase vehicles from a company in bankruptcy. Fears of insecure warranties top the list of reasons causing this consumer thought.
Failure of the auto industry “would be catastrophic,” Wagoner said, resulting in three million jobs lost within the first year and “economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis.”
Just how much money do these companies have left? And how much money do they need to operate each month? GM CEO Wagoner faced direct questions from Rep. Paul Kanjorski in Congressional hearings.
If Congress does grant a bailout stimulus package to the auto industry in some form, what does this say to other industries and organizations? Is our government becoming a fail-safe bailout group that lends an excuse to mismanaged companies and corporations to seek aid in tough times? That is the fear of many on Capital Hill. Had the auto industry focused more research and resources to bringing more economical and green cars to the market, perhaps they would not be bleeding red so much economically. Toyota and Honda both have faired well in the recent economic downturn.
Can some blame be placed on lavish Union contracts of the auto workers, guaranteeing large portions of wage earnings after retirement or layoff? Can some blame be placed on management and organizational factors of the auto industry? The executives would answer that its the economy, stupid. And in part, it no doubt is. But if a bailout package were to be issued, it in no way can be a blank check. Oversight is essential. Stipulations must be abundant. And responsibility must be present. Good faith loans will not cut it. The government, if leaning towards an auto industry bailout, must make it clear to the auto executives that they must change their business models, and show proven change, in order to be rewarded with government funding, funding that comes with a return expectation.
GM has compiled a video they circulated on the company’s YouTube channel explaining the need for government financial assistance. It’s clear that the American auto industries are deeply intertwined in the American and global economies. The fear of a total failure would result in catastrophic economic fallout’s.
