Quote:
Originally Posted by SteveR
Through a bizarre coincidence, I met a guy last night who's an auditor who oversees large corporation financial interactions and we got to talking about GM. He wouldn't tell me if he was involved in the deal, but he was very knowledgeable about the GM deal to the point where he was referencing documents and reports that GM was handing over to the gov. He confirmed the story about GM trading debt for stock options and corporate percentages and went further. He explained that this was a premeditated move on GM's part and the point is to first acquire cash to spend and then to offer virtual stocks in return which requires no actual cash to return to the gov. The move is twofold; it boosts GM's credit and it puts GM in a position to now go get a loan from a bank for even more money, which is exactly what he said GM will do next. This will start the cycle over again. Once GM can't repay the next bank loan, they'll go to the gov for another TARP loan and since the gov now owns an even bigger percentage of the company, they'll be more inclined to hand out another loan, thus giving GM even more cash for free. He also said that once they get the bank loan they'll roll that loaned cash into an account and fudge the books and call that loan money profit and he's predicting GM in Q3 and Q4 of this year will declare a roughly $4-5 billion profit per quarter and that will actually be reflecting the money they got from the loan minus the actual loss they will have that'll be taken out of the loan.
He also went into detail about GM's accounting and operating details. He said that GM is so bloated and inefficient that in order for GM to stay afloat the way they are structured now, they'd have to sell 17 million new cars every year. That's roughly one new car per every fifth household every year. He said now that the gov has a controlling stake in GM, GM is now MORE likely to be inefficient because now the gov has a financial interest in not letting them fail.
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I call ******** on everything.
Starting from the bottom up, the entire MARKET doesnt sell 17 million cars. At its peak, it only reached 15 million in total sales for everyone.
GM's original plan when it asked for money was that they could be profitable selling 20% of the cars @ a GM projected 12-13 million total cars sales a year. The government did not like that, and that was one of the reasons GM had to come back to the table with a revised plan.
I believe the American market only sold in 2009 about 10 million cars, about 2/3's off its peak.
So I think he is pulling numbers out of his ass. GM would most deffinatly be profitable if they sold 17 million cars a year, they would then have at current sales numbers, over 120% market share. 17 million cars is ********, no one will ever sell 17 million cars. If GM, Toyota and Honda combined to form ONE brand, they wouldnt sell 17 million cars.
As for the comment about GM not being able to pay the banks back, thats saying that GM is not going to be making a profit at all.
GM was planning on making a profit as of Jan 1st, 2010 when they made the VEBA contract with the UAW, saving them about 10 billion dollars a year. That was deal was made back in 2007.
GM has cut a many workers, as well as an assload of middle managers. They removed 4 brands and shut down a lot of dealers (some of them fought back and only a few won).
GM will need money and banks to loan them money to move forward, there is no illusion about that. Hell, the banks own the majority stake in Ford now! Ford is making money again right? No one is claiming they are just shifting money around? Their sales numbers are up, and so are GM's, so why would GM not be making money, but Ford is?
Government has no control over the day to day operations or the product planning inside GM. Has it effected some of GM's future products? Im sure some have been tweeked or moved around, but Id say some were due to the fact that they went through BK and have been working on a limited cash flow. I can think of at least 2 programs that have been shelved due to funding while coming up with more affordable and profitable options.
All of GM's new cars will be made for a profit, and they will make sure that the profit margin is there. Its a main reason the Aveo production will be moved to the US, and away from Korea because in the past GM would have to either sell a boat load, or lose money on every one.
I have no qualms about GM still being bloated, but its a massive company with 100 years of garbage still stuck inside. Ed Whitacre has been running through them, trying to find weak spots, and has fired many people.