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It's like watching a beggar with gold jewelery on the street corner...

Quote:] GM Posts $9.6B Loss, Wants More Money From the Feds
GM looks to the government for its latest cash fix


When reports indicated that GM might soon request more cash, many observers puzzled at the news.  Hadn't GM just received a massive $13.4B USD loan from the federal government?  Well, $13.4B USD doesn't last too long when you're losing $9.6B USD a quarter.  That's how much GM lost in the Q4 2008, according to its earnings reports released today.

The struggling automaker has seen its sales plummet to oblivion thanks to the ravaged economy.  And while its Japanese and Korean competitors are able to sustain on a broader world market, GM is largely unable to reach customers in places like Korea or Japan thanks to a variety of conditions, such as lack of dealerships allowed in Japan and tariffs in Korea.  Even its domestic competitor Ford is a bit more fortunate in that it had a larger cash reserve then GM.

To put it concisely -- GM is in deep trouble, and bankruptcy seems more and more like the only option.  GM's Chief Executive Officer, Rick Wagoner, however, refuses to entertain such thoughts and is preparing to ask the treasury for more money.

In total, $1.5B USD of GM's losses come from continuing operations, such as the development of GM's upcoming flagship product, the Chevy Volt.  About $3.7B USD of the losses came from one-time expenses, such as writing down the assets of the struggling Saab and Hummer brands, which GM wants to sell.  It also spent $900M USD on restructuring and capacity changes.  In total the losses put GM $30.9B USD into the red for the year, the second biggest yearly loss in the company's 100-year history. 

John Casesa, a managing partner at consultant Casesa Shapiro Group LLC in New York comments, "The size of the loss matters not only because it impacts what it will cost to restructure the company, but also the kind of bill for which the taxpayer is on the hook.  Conditions in this quarter could not have been worse."

The deciding hour for GM will be when it makes its case to President Obama and his advisors for an estimated additional $16.6B USD in support.  President Obama, while making it clear that survival of the domestic auto industry is a top priority, has recently indicated that bankruptcy for America's Big Three, particularly GM and Chrysler, may be the only way to turn things around.  The alternative, some analysts say is spending anywhere from $100B USD to $200B USD in taxpayer-funded loans, to prop up the industry until it can turn around.

In the short term, GM needs $2B USD more in March or it will run out of cash.  The basic problem is that GM is not selling enough vehicles.  It saw its sales drop 34 percent in Q4 2008 to $30.8B USD.  That big drop exceeded even analysts' very pessimistic predictions.

GM's Wagoner released a carefully worded statement, saying, "We expect these challenging conditions will continue through 2009."

His Chief Financial Officer, Ray Young, added, "We don’t know if we’re going to receive additional government funding.  That’s the reason we objectively put the statement in the press release."

GM owes $12.4B USD to its salary and pension plans, which many retirees across the country depend on for income.  The money from these retirees, who range from retired engineers and draftsmen to plant workers, provides a great deal of cash injection into the consumer market.  Losing that injection would be a major hit to consumer spending.  GM already cut 47,000 jobs last month, amid the tens of thousands it has already cut.

That's not all of GM's problems, though.  In total, it has $62B USD in debt not including government loans.  It hopes to cut it to $33.5B USD this year, but if sales continue to plunge, much of the cuts could simply be to absorb the current losses.  Rod Lache, a Deutsche Bank AG analyst in New York suggests that GM's debt will decrease insignificantly; he estimates it will be at around $60.3B USD at the year's end, excluding government loans.

I think the government should let GM die.... no amount of handouts from the government is going to stem the losses in the long run. Time to file for chapter 11 and force a re-org.

Maybe GM should be allowed to die, but the repurcussions would be mind blasting.

Can you picture yourself as a retiree with no pension?

With the US government handing out $$$ like candy, it is highly unlikely they won't come to GM's aid.

meford4u,Feb 26 2009, 01:08 PM Wrote:Can you picture yourself as a retiree with no pension?
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This is a commensurate example of being responsible for your own retirement funds, at least in part.

As for GM, only one thing comes to mind:

meford4u,Feb 26 2009, 01:08 PM Wrote:Maybe GM should be allowed to die, but the repurcussions would be mind blasting.

Can you picture yourself as a retiree with no pension?

With the US government handing out $$$ like candy, it is highly unlikely they won't come to GM's aid.
[right][snapback]281732[/snapback][/right]

A retiree without their GM pension big difference there, they would still get whatever state / federal pension they would otherwise be entitled to.

Not to say that the loss of the GM pension income wouldn't be devestating to the economy as a whole, because it will be.

NefCanuck

NOS2Go4Me,Feb 26 2009, 01:39 PM Wrote:

meford4u,Feb 26 2009, 01:08 PM Wrote:Can you picture yourself as a retiree with no pension?
[right][snapback]281732[/snapback][/right]

This is a commensurate example of being responsible for your own retirement funds, at least in part.

As for GM, only one thing comes to mind:


[right][snapback]281736[/snapback][/right]

Dumb statement Adam.

Why, why would an individual have an RRSP when their company pension, old age security and CPP amounts to them paying back their old age security and CPP if they had an RRDP and forced into withdrawls at age 75? That doesn't make sense.

So why would I have RRSP's? I don't.

Why? My wife and I both have incomes and retirees pensions that would have us paying back excessive amounts of income taxes once we reach the age of 75. Our CPP and 65+ pensions from the government would have to be returned as our income would not justify such a pension. Having paid into the pension funds over the last 30+ years(when I retire) I want to get something back for my money.

So why have RRSP?

I realize most of you are long from thinking about retiring, but the RRSP route is not as lucritive as most think. Ask a retiree who will retire in your financial position. I did and I have benefitted greatly from the advice. The banks want you to invest and pay later. Pay now and reap the rewards of investments outside an RRSP.

See, I have funds on "both sides of the fence". We have a DCPP here at work (staff-paid with company match) that is protected and then I have a RRSP as well, plus a self-directed savings account that I will be flipping into a TFSA shortly (great for immediate-needs liquidity if you really need it).

So, because you've paid into CPP over the years you want every dollar back? Don't you think that's a little bit of a pipedream?

Do you max out your dental and other benefits each year because you've paid into them? CPP and EI are just taxes that get earmarked for specific gov't services, nothing more. To qualify for pay-out under those services, you must have essentially "paid your taxes" over a set period of time.

Sorry man, we're from totally different schools of thought. I really don't see how you can have an investment plan that will allow you to live comfortably off just OAP and CPP and a little bit more. I'm watching how my grandmother (83 years old) lives right now with a mix of RRIF, OAP and CPP as well as some leftovers from her days as an insurance specialist at Confed before they were bought out. She's comfortable and to my knowledge she isn't paying excessive taxes.

Like I said, I'd love to hear how you're working this little shell game with the gov't.

What I meant was you should have direction over your own funds. I control where my outside-the-company funds go (CDN equity, money market, bonds, mixed funds, etc) and where the rest go. If you're trusting other people blindly with your funds, you're more trusting than I am by far.