Automotive Industry and the economy...

Sorry, didn't mean to insinuate that you had called him that, nor was i calling him that - it's a phrase I heard used by one of my contemporaries, one which I thought was completely off the mark, and indicative of what I'm railing against. That said, your elaboration here couldn't be further from the mark. Wagoner has only been CEO since 2000, and GM has arguably made its best, most reliable, highest quality products by all objective independent measures, as well as some of its subjectively best products, during his tenure. However, these products only started rolling out ca. 2003, which means that GM has had a scant 5 years of behaving their way out of the troubles they behaved their way into for the 35 +/- years before. Same for Ford and same for Chrysler. Do we as a country thumb our nose at the most visible symbol of our nation's manufacturing workforce, and say, "too little, too late?" Or do we as a nation say, "ok, it's a good start... we'll help you out but you've got to show us what you got... and make sure it's the best?"

Wagoner has been, since he took the CEO position, trying to spur GM into action. I daresay that most people couldn't name 3 of the last 5 CEOs of the company... nor Ford, nor Chrysler.

And hey, Chrysler even has one of Toyota's whiz kids mostly running the show these days.

If any small-to-medium company was finally walking the walk instead of just talking the talk and had the plug pulled, the industry in which it operated would be all the poorer for it. I've been in the situation of heading a 3rd generation $25MM/yr company losing about $785k/yr because of an intransigent Teamsters local, antiquated equipment, and unavailable credit. I even had a business plan that would have corrected the losses - 5 holiday days back under 10 years of service, no overtime on Saturdays without full straight time worked during the week, and employee contribution to health insurance with a copay... then, updated leased equipment with warrantys operating more efficiently, and a renovation of a building that was costing a yearly average of $32,000/month to heat. The biggest problem was, I was 16 when I inherited the business, and 20 when I went to the bank for $20MM.

I could have made it work, and the lenders said no.

Wagoner is in a similar situation to what I was in - he learned from GM's past, and he has done everything possible to overcome institutional inertia. Now, in what can charitably be called a crisis, is not the time to lose that momentum.

Of course I didn't mention the timeline, because it's irrelevant to the matter at hand. You could buy options traded out into the future also... and trade them. He can't trade his options. If they expire out of the money now, a year from now, or five years from now they still expire out of the money. They can be issued at the lowest trading price on a certain date... but you have to go back nearly 5 years to see GM trading over $50. It's not like it's going to be trading at $50 tomorrow and his options from the last few years, which would have strike prices between $20 and $40 would suddenly provide some windfall. If he gets $15MM worth of options at ~$1.70-3.01 (lowest recent trading to lowest recent close) and the price goes up to $12, bully for him. He has to come up with $15MM cash to realize that gain, so I won't resent or envy that one bit. He's taking the $1 salary now, and risking everything. Even at $12, the last 8 years of his "compensation" is worthless.

Restricted stock is taxable at issue, and that's how I was examining the tax issue. NQSOs are taxable as income at time of exercise. ISOs are taxable as short or long term capital gains (if any gain) at time of share sale (using LIFO unless otherwise stated).

It's an exercise in analysis, and sharing viewpoints, hopefully learning from one another to some degree. Learning is always worthwhile, IMHO.

I honestly don't know if this loan buys enough time, or forces hands far enough to make a truly lasting effect, or if it's just staving off the inevitable for a moment. I hope that all parties involved, especially the entrenched bureaucracies in the automakers' management that have been resisting change at least as much as labor's representatives have, heed the call and undertake the drastic changes that are needed.

Even if they don't know which changes are going to work, to at least dare to make changes and try a departure from what has failed in the distant past or changed too slowly in the recent past.

Dynamic, not Dinosaur. That should be tattooed on every forearm of every employee in every automaker.


Please forgive me being so long-winded.

Okay Guys,

In total honesty, would you buy a new car or truck this week? They are going cheap. My local Dodge dealer is doing 2 for 1, take them away deals, are you game?

Hi,

No, But I have bought a second hand one to drive on the beach.

Ah K1W1,

Remember its a Dodge, would it make it to the end of the beach?

Dave

Last week I missed picking up a Saab 9-3 TurboX Sport Combi by a day (someone else got it the day I was to put a deposit on it, while I was instead down with the flu). Great deal, that - a slightly hail damaged car, repaired by Saab, and for sale for $28k on a $46k sticker with just 25 miles.

Considering the current incentives, I'm looking also at a Cadillac CTS4 and an Audi A4 Quattro.

I might just support my hometown dealer and buy a Chevy Malibu instead... putting my money where my mouth is... and pick up something more sporting when the weather thaws and my current restoration project is completed.

Hi,

That is why I bought a tried and true Nissan Patrol 4.2 Turbo Diesel. I hope it will get me to the end and back of many beaches.

I have owned one back in the 90's and drove it all over the North of Australia with no major mechanical failures whilst out bush just a few broken and bent things caused by where and how I was driving it.

Was it you that I repaired halfway up a hill out of Daintree, the Nissan's halfshafts were so mangled I had to hacksaw the rear end off and turn it into a FWD , packed with 4 totaly drunk Kiwis. All this from a toolbox packed into a cigarbox on a Suzuki GS 550 cc,two-up.

Oz, 'kin easy, only takes three weeks.

Dave

Keep in mind that OMC then went out of business also, mainly due to the developing costs of the Ficht/E-tec engines and warranty issues in the beginning years. Bombardier now owns the OMC outboard line (evinrude/johnson etc.) but I believe they are only using the Evinrude e-tec namesake

I agree there were two driving forces with the real estate/mortgage bubble but GREED is what created it.

95% of Americans always want to buy more then they can afford. These people bought houses that were bigger and more expensive then they needed and could afford. They then got adjustable rate mortgages because the initial (3yrs or 5yrs) of payments were less then the monthly payments on a 30yr fixed and they couldn't qualify for a loan or "afford" the larger fixed mortgage payments. I have no simpathy for these people that got into an adjustable rate mortgage just so they could buy a house thats $200,000+ more then they could afford. They knew what they were doing when they signed up for an adjustable rate mortgage.

Initially the GREED of the lenders is what caused it, they introduced and pushed all of these non-conforming loans. They introduced interest only's, reverse mortgages, adjustable's with 5yr fixed rates, balloon mortgages. If the borrower cannot afford a fixed rate mortgage payment to qualify, how did these lenders ever think they could afford the adjustable rate payment after it exceeds that of what the fixed rate payment would've been.

Anyways, partially what happened with the auto industry is that many people re-financed back in 2003-2006 and took money out of their house. Many of these people bought cars/suv's/trucks with it cash, same with all of the builder's/construction workers/real estate industry. So the big 3 saw an excess in demand back then and sold too many cars and now these buyers are broke and nobody is buying anything. (The gas prices didn't help either).

GM and Ford really kill the Japanese in the SUV and truck market. How many F-150's do you see on the road compared to a Toyota Tundra. This is where the big 3 make all of their money and between the economy and lack of demand......it's killing them.......The Japanese (as well as others) have really taken the passanger car market away from the big 3. And the only thing recently selling (not by huge numbers) were passanger cars that were very economical.

Thank you all for a very interesting and informative discussion here.

We had better hope that the government does not enact the card check law for unionization. This would allow unionization without having to have an actual confidential voting process. 51% of the employees sign cards and the union is in.

The UAW and others have been lusting after this for a long time. It would make it much easier for them to unionize the non-union auto plants and suppliers. Considering the state of the industry right now, I doubt whether those employees would want to throw their lot in with Detroit, but when things get better they might.

Thank you, CaptJ, for getting back to , uhhh, what was I doing here....
I thought, for the past few pages, that I got lost and was tuned into Wards Automotive as opposed to something associated with boats.
Worse, these threads seem to be devolving into Lefty (them) v. Righty (me)---I'm reminded by that old SNL skit lampooning 'The McLaughlin Hour' with Dan Ackroyd & Jane Curtin: "Jane, you ignorant slut!"---which actually had a modicum of humor.
Entertainment v. "Let me beat you over the head with this factoid."

Lighten up, willya?
Don't make me come up there.
Merry Christmas, all.
Ciao.

Ah, NYCAP123, we are having a regular 'Chamber of Commerce' day here in FLL.
North breeze about 10 knots, 75F, blue skies.
As much as I'd like to see some snow again....

This boat economy, what little there is, has put me in a foul mood leavened only by the cheery thought that at least I'm not having to flog new boats. Marine Max got their shot in the arm, so they and brand H will live to fight another day.

Tough sledding for a while longer, though.

Peace.