GM share price up 40% in the last quarter 2nd best improver of all. UAW would stop any more Holden product into U.S.
Ford More Likely to Default than GM
- Thread starter Vortec_4300
- Start date
- Status
Yup - it's all theoretical...you sir, are the one in lala-land.
![[Cool]](images/icons/cool.gif){kind=icon}
G.M. Is Pressed to Form Alliance With Two Rivals
By MICHELINE MAYNARD
Published: July 1, 2006
DETROIT, June 30 — General Motors' largest shareholder is pressing the troubled American auto giant to speed up its turnaround effort by forming an alliance with two foreign car companies, Nissan and Renault, which would pay $3 billion for a 20 percent stake in G.M.
The company has taken drastic measures in recent months to cut costs, partly in response to prodding from Mr. Kerkorian, who so far has lost money on his 56 million G.M. shares, which represent a 9.9 percent stake.
An alliance with Renault of France and Nissan of Japan offers Mr. Kerkorian an opportunity to enlist the help of Carlos Ghosn, the hard-charging executive who oversees both companies.
Mr. Ghosn, nicknamed "the cost killer," earned his reputation from the swift turnaround he executed earlier this decade Nissan, where he slashed debt, introduced flashy new vehicles and expanded sales in Japan and the United States.
If Nissan and Renault were to team with G.M., the companies could draw from one another's expertise in manufacturing, engineering and product development, Terry Christensen, Mr. Kerkorian's lawyer, said Friday.
"It would be an amazingly important alliance," said Mr. Christensen, who has been involved in the discussions.
G.M., in a statement, said the proposal would be taken under advisement by its board, which held a hastily arranged meeting by conference call on Friday, according to people with knowledge of the board's deliberations.
Investors cheered the prospect of the alliance, sending G.M. shares up $2.35, to $29.79.
Disclosure of Mr. Kerkorian's move came as a shock in Detroit, where auto executives were preparing to take next week off for the industry's annual summer holiday shutdown.
An agreement by the three companies would further reshape the industry, much like the 1998 merger of Daimler-Benz and the Chrysler Corporation, and the arrangement that linked Renault with Nissan in 1999.
It would also add new heft to General Motors. Together the three companies would hold about one-quarter of the global market, compared with 14 percent for Toyota, which some analysts say could pass G.M. as soon as this year to become the top seller.
And it would provide G.M., which lost more than $10 billion last year, with more cash for its turnaround plan.
But there is no certainty that the arrangement will come to pass, especially since it is the brainchild of Mr. Kerkorian, who decided to push the idea after meeting over dinner with Mr. Ghosn (his name rhymes with "phone"). G.M.'s management has also not played an active part in the talks.
Mr. Ghosn could represent possible competition for Mr. Wagoner, who has been under a cloud this year because of the company's dismal financial performance, loss of market share and the bankruptcy at its biggest parts supplier, Delphi.
G.M. directors, most of whom were chosen while Mr. Wagoner was either chief executive or president, issued a statement in support of him this past spring, when his future looked shaky, particularly in the wake of accounting errors that forced G.M. to increase its 2005 loss.
People involved in the discussions said the issue of Mr. Ghosn's role and Mr. Wagoner's future had not yet come up. Though Mr. Wagoner's position is considered solid, Mr. Ghosn's global reputation, and his ease in public, could threaten to overshadow him.
Renault and Nissan said in a statement that their partnership had never been restricted to two companies, and could be expanded further "under the right circumstances and with the appropriate partners."
But, the companies said, "it is necessary that the G.M. board and management fully support this project" before discussions begin. Support from the boards of Nissan and Renault would also be required, they added.
Officials at Mr. Kerkorian's company, Tracinda, said they would like to see a swift agreement to the deal, which could take another six months to win approvals from regulatory agencies.
People with knowledge of G.M.'s thinking, however, said Friday that the company was not likely to be in any rush to give Renault and Nissan an answer.
The company's caution is understandable. G.M. has been stung in the past by alliances, like a deal with Fiat of Italy, which G.M. had to pay Fiat $2 billion to escape, and ventures, now defunct, with Japanese companies like Suzuki and Fuji Heavy Industries, Subaru's parent.
Moreover, the strongest automotive players, like Toyota, Honda and BMW, are independent companies without the complications that such ventures can create.
People with direct knowledge of the matter say the proposal for a 20 percent stake was made by Mr. Ghosn to Mr. Kerkorian at a June 15 dinner in Nashville, where Nissan recently broke ground for a new headquarters building.
The meeting came after weeks of phone calls between Mr. Ghosn and Jerome B. York, an adviser to Mr. Kerkorian who joined the G.M. board in February.
Mr. York, long an admirer of Mr. Ghosn, had first approached him several weeks ago for a get-acquainted session, which was held in London.
In January, Mr. York laid out a plan for accelerating G.M.'s turnaround, including cutting its dividend in half, eliminating lesser-performing brands like Saab, Saturn and Hummer, and reducing salaries for G.M.'s board members, top managers and employees.
In announcing the plan, Mr. York suggested that G.M. embrace the speed and clarity displayed by Mr. Ghosn in his overhaul of Nissan, which was saddled with slow-selling vehicles and $20 billion in debt when he arrived in the fall of 1999.
Mr. Ghosn, for his part, has long wanted to push Renault and Nissan beyond a Eurasian alliance and into the global marketplace.
Although Mr. Ghosn has declined to offer opinions on how G.M. should address its problems, he has told associates that he could return the world's largest automaker to profitability, just as he did with Nissan.
Because the companies would be buying only a minority stake in G.M., they would not be saddled with all of G.M.'s problems, said John Casesa, managing partner of Casesa Strategic Advisers in New York.
Still, he said, "it'd be pretty messy on paper having these three companies in a loose alliance." Even if no deal is concluded, Mr. Casesa interpreted the proposal as a sign that Tracinda would keep the pressure on G.M. to accelerate its overhaul.
But Mr. Christensen says Mr. Kerkorian's goal is to do more to help G.M. than simply make money on his stock, for which he paid an average of $30.10 a share. At Friday's closing price, Mr. Kerkorian has lost $17.3 million on his 56 million shares.
"The value for the shareholders will be there," Mr. Christensen said. "But more importantly, the accomplishment and the strength it would give G.M., and the long-term health it would give G.M., would be a big part of this."
For his part, Mr. Ghosn relishes the opportunity to negotiate such arrangements. In 2003, he put together a Nissan deal in China himself, traveling three times from Tokyo to complete the details.
Mr. Ghosn has seemed destined for some time to emerge in Detroit. Over the years, he has been courted by Ford Motor, which is led by William Clay Ford Jr., the great-grandson of the company's founder.
Likewise, Mr. Kerkorian's advocacy at G.M. was also bound to emerge, given his past moves at Chrysler, where he was the biggest shareholder before it merged with Daimler-Benz.
He began buying Chrysler shares in 1990, becoming a close ally of its chief executive then, Lee A. Iacocca. Five years later, with Mr. Iacocca retired, and Chrysler's stock price lagging, he and Mr. Iacocca started a takeover effort.
It did not prove successful. However, Chrysler agreed to put a Kerkorian representative on the board and to double a stock buyback program.
As for the potential partners, things are particularly bumpy at Nissan, which has posted declines in sales and market share in the United States this year at a time when Asian auto companies have captured a record 40 percent of the market.
More than half the company's staff at its headquarters in California has decided not to move to Nissan's new American headquarters outside Nashville. Meanwhile, Nissan is moving some production and engineering work back to Japan, because of the heavy workload faced by its plants in the United States.
Last year, Mr. Ghosn moved to Paris from Tokyo and is overseeing an overhaul at Renault, where he was an executive before taking charge at Nissan in the fall of 1999.
G.M., for its part, is in the midst of closing all or part of a dozen plants and cutting 30,000 jobs as part of its restructuring effort. On Monday, G.M. said 35,000 of its 113,000 hourly workers had agreed to accept buyouts and retirement incentives to leave the company, more than enough to account for its job cuts.
quote:I hate to say this but, that is exactly the reason GM WILL go out because while they are worried about all that I will have realized that toyota and honda makes a much better vehicle and they just lost there buisness from me and anyone who cares to listen to me and so on and so on. The domestics are making better vehicles only in compairison to other domestic's of the past but still not in the same league as the imports. Just totally stupid reasoning for ******* away loyal customers and that is the bottom line that they are losing sad.
Originally posted by Vortec_4300:quote:As an accountant who audits public companies, I can tell you that ALL companies are run by numbers. Car guys should make the appropriate business case for new models, but in the end the accounting (not the accountants) will trigger decisions that will reflect favorably on Wall Street for that particular reporting period. With pressure to show earnings which reflect or exceed analysts expectations, if I can save $5 per unit on a model that sells 100K units annually, that's $500K that directly hits my bottom line. Additionally, if it is cheaper for me to create a reserve to honor warranty obligations for the repair of an intake gasket, rather than incur the fixed costs of re-engineering that gasket, re-tooling the production line, and switching suppliers, then I would elect that course of action.
Originally posted by 1999nick: GM has been run by the bean counters too long. Car guys should run car companies.
quote:Yeah - awesome numbers. Let's see if I get this right: Stock was once one of the most robust and safe investments. After years of crappy products and mismanagement, stocks tumble into the crapper. Junk-bond status stocks go up 40% and now it's on a roll? Jeez. I guess if your intake gaskets only fail on one side, you're a happy camper? Ask all the guys/gals that had to take a buyout and find new jobs how great they're doing... That was a funny post. Nice try.
Originally posted by sprintman: GM share price up 40% in the last quarter 2nd best improver of all. UAW would stop any more Holden product into U.S.
I find it funny that alot of people will stick up for ford and chevy to the end by bashing the foreign cars with the "patriotism" angle. The same american automakers have been turning a blind eye to the american worker by outsourcing jobs to mexico, canada, etc. Also most of the foreign manufacturers have built plants in the US which flooded the US with many many jobs. The higher quality is not percieved it is a fact. The american companies have failed. A few years ago nissan was in worse shape than ford or chevy is in now. They released products that the public actually wanted and have built themselves up.
Will chevy and ford do it here? If they do fold, one or the other, it will only be in north america. Ford and GM are both powerhouses overseas.
quote:http://news.yahoo.com/s/bw/20060623/bs_bw/b3991047 It looks like Nissan is about back where they started from a few years ago. And from seeing that Nissan is near the bottom in SUV reliability, not only are they failing but it looks like they'll probably beat GM and Ford to default. Kind of makes you wonder where Nissan/Renault gets the notion of buying into GM. A paragraph from the article:
The higher quality is not percieved it is a fact. The american companies have failed. A few years ago nissan was in worse shape than ford or chevy is in now. They released products that the public actually wanted and have built themselves up.
quote:
Also, let's not forget that the last time Nissan tried to do so much, it stumbled. In 2003 it opened a factory in Canton, Miss., to build large pickups, SUVs, and minivans that it had never made before. Ghosn and his team swore building newly minted vehicles in a virgin plant with an upstart workforce and a new chain of suppliers was doable. But quality problems plagued the trucks and the minivan. Consumer Reports rates Nissan's large SUVs among the worst cars on the market for reliability.
quote:Interesting. Are they building that much better cars elsewhere? Are American buyers better informed and more demanding? Or is the real problem public perception as influenced by our fifth column press and CR?
Originally posted by speedtc: snip.... Will chevy and ford do it here? If they do fold, one or the other, it will only be in north america. Ford and GM are both powerhouses overseas.
Go look at a Pontiac GTO in reality a Holden Monaro built in Oz. A much better quality vehicle than anything GM builds in the U.S. The local Fords are even better.
quote:Yikes. And this short-sighted thinking is EXACTLY why folks are leaving a car company. It may be cheaper for the accounting dept but the sour taste in the customer's mouth will last a long long time. [ July 02, 2006, 01:07 AM: Message edited by: njc ]
Originally posted by Vortec_4300: [snip] Additionally, if it is cheaper for me to create a reserve to honor warranty obligations for the repair of an intake gasket, rather than incur the fixed costs of re-engineering that gasket, re-tooling the production line, and switching suppliers, then I would elect that course of action.
quote:Capitalism trumps patriotism.
Originally posted by speedtc: I find it funny that alot of people will stick up for ford and chevy to the end by bashing the foreign cars with the "patriotism" angle. The same american automakers have been turning a blind eye to the american worker by outsourcing jobs to mexico, canada, etc.
quote:You've certainly described how many "manufacturing" companies work today. I think you'll find though that it wasn't always the case. There was a time when companies that built things actually worried more about their products and turning a profit than their stock prices. It was assumed that if they built products and sold them at a profit that their stock would do well, pay dividends, etc. Somewhere along the way a lot of "manufacturers" forgot who they were and what they do. Brilliant
Originally posted by Vortec_4300: The Street cares about one thing - growth. Growth is reflected by earnings. Earnings are predicted, and trading volumes on the Street between the time the predictions are made and the earnings are released are based on those predictions. When a company meets or exceeds the predicted earnings, then things are OK. When a company misses its earnings forecast, then things get nasty. The stock price takes a hit, as institutional investors sell their holdings. Management's compensation is invariably tied to earnings and the corresponding stock price, so the CEO, COO, and CFO all take home smaller bonus packages for that period. Therefore, management will do whatever it takes to hit their projected earnings. The founder of MCI, Bernie Ebbers, would hold meetings with his senior accounting and financial managers to beat them over the head about earnings. As far as he was concerned, the only thing that counted for anything at MCI was meeting Wall Street's expectations FOR FINANCIAL PERFORMANCE. If that meant selling good services and a quality product, fine. If that meant spending money for corporate retreats, team-building efforts, and new-age motivational seminars, that was fine too. If that meant committing fraud, releasing false financial data, and cheating investors with fake information, he didn't want to know about it, but that's what he wanted them to do. Unfortunately for Bernie, he chose the latter. This former Sunday school teacher, who created MCI from a diagram that he drew on a napkin ion an Atlanta diner one evening several decades ago, is serving several decades in prison. For fraud.
![[Roll Eyes]](images/icons/rolleyes.gif){kind=icon}
financiers like Michael Milken helped change everything for us. There just wasn't enough money in building things compared to what could be made by manipulating numbers for no other reason than to boost stock prices. Why just look at how well Ebers did or the people at Enron. And don't forget the dot.coms. Millions of dollars were "made" by dot.coms by producing absolutely nothing of any value. That all worked pretty well right up until the time it didn't. The house of cards that had been built came down for each and every one of them.
Meanwhile, others are still trying to build things and sell them at a profit with an an eye to sales and numbers not just today, but 10 or 20 years down the road. You might want to compare the growth, profitability, and solvency of Toyota or Honda to GM and Ford sometime. In the case of the former two, they know who they are and what they do. They build things and sell them at a profit. In the case of the latter two, we're not sure, but profitable and expected to do well long term certainly wouldn't describe them. They're more like finance, healthcare and retirement providers than manufacturers. They just happen to have this hobby where they build things and as long as it doesn't lose them too many $$ they'll keep doing it...Cousin you own a Dodge correct? Dodge is owned by who?
Scott speaks the truth and the truth hurts. If you build a good product they will come.
I am an American manufacturer and deliver the highest quality products. Can Gm or Ford say that?
It actually is sad, I've had real good luck with ford products, my last ranger was rock solid and my new mustang GT has 10k on it and hasn't been to the dealer yet. Its soo solid and sooo much fun to drive.
I can't even count how many times my last maxima was in the shop. All cars are made pretty decent these days, buy what u like.
Looks like Vortecs theory doesn't sell cars....???? (Article Below) I doubt Ford will ever default....
The F150 has been the best selling vehicle for 23yrs straight....Not just the best selling car or truck.....Best selling vehicle...as far as trucks go it outsells all others by a bunch....Might not stay there with gas prices but that has been a heck of a run to say the least....
I sure like mine...I compared and scrutinized ALL the other trucks....I happen to do that when I spend over 20k..lol....Ford IMO had the best product....Not saying anything against the others, just IMO I found that Ford had the best product for me....My V-8 (5.4) gets almost as good a gas mileage as most V-6's in the truck world....I get over 17MPG mixed driveing...Haven't had any long trips for Hwy miles yet...but I assume it would be in the 20Mpg range...My sons 4-banger 2.5l Dakota gets 18-19 mixed driveing and 23-25 highway.....
Article Snipits off of Drudge....
quote:
US automakers' June sales sag DETROIT (Reuters) - U.S. sales fell for all three big American automakers in June, led by a 26 percent drop at General Motors Corp. (GM), while Japan's Toyota Motor Corp. surged. ---------- Ford's June sales dropped 7 percent and DaimlerChrysler's plunged 13 percent, underscoring the pressure on Detroit automakers at the start of a summer season they are counting on to clear an unsold inventory of 2006 models. -------------- But Nissan has struggled in the U.S market this year, and its June sales tumbled by 19 percent. Nissan's difficulties have included a disruptive move in its headquarters to Nashville, Tennessee, production cuts and an embarrassing recall of some Altima and Sentra sedans due to evidence of engine fires. Rival Honda Motor Co. , which is building a new U.S. assembly plant to keep up with demand, posted flat overall sales in June. Strong sales for its fuel-efficient Fit and Civic models were offset by declines in truck sales and for its Acura luxury line.
Even though we are import car buyers, it is not good news for us as consumers if the Big 3 are in trouble. If one of them folds, then prices will rise for all of us.
The Big 3 do full sized pickups and SUV's very well. They were surviving on this cash cow even though they have a higher cost structure than Toyota/Honda and the Koreans, all of which have newer factories with younger workers than the Big 3. This is parallel to what you see going on in the domestic airline industry (think United versus Southwest).
With gasoline at $3/gallon, the full sized truck strategy is not viable. If gasoline goes to $4/gallon, the ship will sink very fast. The Big 3 are praying for the return of $2/gallon. These high fuel prices affect resale values of the big iron plus financing costs are up so it becomes harder to subsidize leases.
The only way I see GM agreeing to an alliance with Renault/Nissan is if it can be used as a lever to lower wage costs and move production capacity of labor intensive operations to China, Mexico, etc. If GM agrees to this, then I see it as a "Hail Mary" move confirming my suspicion of how dire they see their situation.
The stock has rallied on the hope that a dramatic cost structure reduction will occur. However, even with the stock up 40% to close to $30, it was not very long ago when this stock was trading in the $50 to $60 range.
Isn't Holden kinda saving GM's arse by giving them a RWD chassis for the Camaro and Firebird?
I'd like to personally thank Holden for the Nissan RB30ET motor. Think of it as a big block for your Skyline.
GM, well they need to finish what they started and kill Buick. Think of all the money they would have saved just by not paying Tiger Woods. And they need to start appealing to the coasts as opposed to the midwest states. but that is their market....
Nissan did more than put out cars that people wanted it also did the global platform thing. Before they had too many different cars for different markets. I think they really improved their global brand recognition by making their styling more uniform. Before it changed from market to market.
A decent engine, the VQ, also helped. And the fact that they stuff it in about 50% of their vehicles can't hurt either.
PS. the moving to KY or TN thing is just plain dumb.
And I think Ford needs Jag, Volvo, Land Rover and Aston to give them some prestige. aka the PREMIER Auto Group. And they need Mazda to make sure that these old british marques' vehicles don't run like old British cars. I don't think Ford could pass off "controlled seepage".
They need to just cut bait on Mercury/Lincoln. Make the LS a Crown Vic or a Mazda Millenia and call it a day. Everythiing in the Mercury line has a comparible Ford or mazda product.
I thought the intake gaskets were a one time under warranty fix? Imports usually get you on parts cost, depsite if you go to the dealer or just down to NAPA.
Anyway GM fell behind in the 80/90s. But now, and in the late 90s, with new management (or at least new blood somewhere pumping) is slowly but surely comeing up the ladder again instead of falling down or off it. Concept vehicle ideas are becoming a reality. Just look at what cadillac is becoming, with each model update the interiors are getting better and better. The engines are getting better and better.
GMC is winning quality awards all the time.
Chevy is doing good, the cobalt is selling really well. Camaro's return looks hopeful. Z06 is a world leader in bang for the buck.
Slowly but surely GM will make its way back into the market, Saturn is even going to have something like an Opel Speedster soon.
On the other front, Ford, has brought the Mustand back to what it should be, horses for less, 300HP from a 25k car. The Ford GT was a resounding success.
I think they are getting the idea, and are almost over the hill. You not going to get the guys who hate domestics with a passion, but your going to get the car guys. You might even pick up some of the people who just want a car for transportation only.
- Status
Similar threads
