OT: Buying GM Stock, a steal at $2?

[Lil bastard]

The only thing which will save the General and the Pentagram in the long run is a Chptr.11, disolution of the UAW and Job Bank and a restructuring of their Healthcare and Pension programs.

These two companies have annual union payrolls of about $14B. But they have combined contributions to Healthcare of about $60B, and Pension pymnts. of about $14B (or almost 5 times more than actual payroll itself). The Job Bank, setup in the past to resolve a union arbitration, provides that if any UAW employee is permanently laid off, they receive 85% of their former salary for life (with COLAs!!!), regardless if they ever find other work! The Union is NEVER going to make these concessions voluntarily. Under a restructuring, they won't have much choice.

All these costs are either passed to you each time you buy their products, or as has more been the case, stifles their R&D committments. This has been the reason, much more than alleged stodgy thinking in the Boardroom, that has allowed so many foreign car makers to sieze their market share over the years.

[tboyer]

GM Craters! Stopped at 1.71, lost about hundred bucks, the only winner here is Sharebuilder.com :-) Appears that investors are worried that GM may convert a sizeable amount of debt into equity stock, not exactly sure what that means but it doesn't sound good.

[Lil bastard]

Sorry for your news. It could be linked to the fact that SAAB, a GM subsidiary filed today for Bankrupcy Protection. The Market, I believe sees this as just the beginning.

[ekam]

So what made you buy GM stock?

[jmatta]

Originally Posted by tboyer

Appears that investors are worried that GM may convert a sizeable amount of debt into equity stock, not exactly sure what that means but it doesn't sound good.

Converting debt into equity is a fairly common resolution when a troubled company attempts to restructure. The process removes the debt from a company's balance sheet and converts it to net equity, diluting the existing shareholders. In the long run, the original debt holders get fair value as the company becomes profitable in the future. The problem here is there's so much debt, the holders essentially get stake in a company that's going down anyway (% ownership of nothing still equals nothing) and would likely recoup zero.

Obama will likely write the check to GM and it's suppliers to keep the house of cards from collapsing and appease the unions which showed strong support during his candidacy.

[Brucelee]

Originally Posted by jmatta

Converting debt into equity is a fairly common resolution when a troubled company attempts to restructure. The process removes the debt from a company's balance sheet and converts it to net equity, diluting the existing shareholders. In the long run, the original debt holders get fair value as the company becomes profitable in the future. The problem here is there's so much debt, the holders essentially get stake in a company that's going down anyway (% ownership of nothing still equals nothing) and would likely recoup zero.

Obama will likely write the check to GM and it's suppliers to keep the house of cards from collapsing and appease the unions which showed strong support during his candidacy.

Debt holders get preference over shareholders in a liquidation. Hence, most debt guys won't do this. Moreover, even if GM can come out of Chapt 11, I think the equity would be so diliuted, it would be a penny deal for them.

Originally Posted by Lil bastard

All these costs are either passed to you each time you buy their products, or as has more been the case, stifles their R&D committments. This has been the reason, much more than alleged stodgy thinking in the Boardroom, that has allowed so many foreign car makers to sieze their market share over the years.

very well said, lilbastard. The UAW is pushing hard to promote the idea that if GM flies, the car industry, and the United States are dead. Truth is, filing for bankruptcy doesn't end the company. Look at Delta.

If we keep giving GM bailout money, you and I are being forced to pay someone elses retirement fund...and here I was thinking we won the cold war against communism...

[Brucelee]

Reagan must be spinning in his grave!

[Jaxonalden]

You know whats amazing, all this talk about the Unions was known, known by all of us. The old saying, "Never bite the hand that feeds you" well, in the world of the UAW they didn't just bite, they ripped, chewed and swallowed the hand that fed them. And now they should all stave because of that BUT, they have an ace in the hole. A back door that's in place, and all it cost them was their vote! Now Obama is coming to the rescue to pay back the campaign promise for their support. A bailout that will secure the Union's bottom line and then the Automotive Big Two can tank, but not until the Union gets theirs.

And there isn't a damn thing we can do about it.

[Blue-S]

If GM, Ford or Chrysler had the brand equity to charge the absurd prices that Porsche does for cars and service parts, they would be in a better financial position. Just a thought.

As for the UAW jobs bank, that appears to be on the way out. The two-tier wage structure should help to bring the Detroit 3 close to wage parity with the "transplant" manufacturers, as long as they can make the VEBA work. See this:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajeONmi6OjAw&refer=home

[vath2001]

GM forgot how to make money. They have been burning through cash for who knows how long. I would not buy GM stock.. you'll be throwing your money away. They do not have a long or short term plan to "make money".

Actually, the manufacturing is not their problem, its the management of the inventories, the styling options and the logistics. They offer too many cars & trucks, with too many options/colors. How many SUVs does GM offer?

Only recently are they starting to act like a company that's in trouble. Anyone's company that would lose money in a quarter would take immediate action... like Toyota is doing right now. GM has been losing money for who knows how many quarters?

Stay away from GM stock.

[Brucelee]

Originally Posted by vath2001

GM forgot how to make money. They have been burning through cash for who knows how long. I would not buy GM stock.. you'll be throwing your money away. They do not have a long or short term plan to "make money".

Actually, the manufacturing is not their problem, its the management of the inventories, the styling options and the logistics. They offer too many cars & trucks, with too many options/colors. How many SUVs does GM offer?

Only recently are they starting to act like a company that's in trouble. Anyone's company that would lose money in a quarter would take immediate action... like Toyota is doing right now. GM has been losing money for who knows how many quarters?

Stay away from GM stock.

GM's problems are varied and numerous. Certainly, the unions are up there but the obituary has been being written for many years. Too bad, as I like the fact that they build some cars here, provide jobs for many directly and indirectly.

Certainly, current board and CEO are as bad as one gets.

Still, they do have some nice product now and I think Chapter 11 reorg COULD work with new CEO, new union contract etc.

Of course, it would be nice if BO didn't totally kill the rest of the economy. Folks are not buying any kind of car right about now so recovery for a sick company is especially difficult.

In my dreams!

[brp987]

Originally Posted by Fred Demara

If we keep giving GM bailout money, you and I are being forced to pay someone elses retirement fund...and here I was thinking we won the cold war against communism...

If I purchase whatever widget it is that you produce, am I not paying your wage with which you fund your retirement savings? As well as your kids soccer balls, cat food, and even boxster parts? It's just that GM employees have a thing called a pension that you can point to and say Aha! There it is!

Originally Posted by brp987

If I purchase whatever widget it is that you produce, am I not paying your wage with which you fund your retirement savings?

that's the point...the reason GM needs a bailout is because no one was purchasing the "widget". In capitalism, we vote on a companies success with our dollars. Overwhelmingly, Americans, and the world have voted GM out of the car making business. And in a capitalist system, when you file chapter 11, your pension is done. No rights, no wrong, no moral judgements - it's just the set of rules that define a fair market.

When the fed steps in and (against the majority of Americas wishes) MAKES us responsible for GM's success, when they have failed miserably, that is called communism.

[Brucelee]

Originally Posted by Fred Demara

that's the point...the reason GM needs a bailout is because no one was purchasing the "widget". In capitalism, we vote on a companies success with our dollars. Overwhelmingly, Americans, and the world have voted GM out of the car making business. And in a capitalist system, when you file chapter 11, your pension is done. No rights, no wrong, no moral judgements - it's just the set of rules that define a fair market.

When the fed steps in and (against the majority of Americas wishes) MAKES us responsible for GM's success, when they have failed miserably, that is called communism.

One correction. Depending on how GM sets up its pension, chapter 11 may have no long term impact on one's ability to collect a pension. Employers are free to fund pensions in many ways. One way is for them to purchase annuties that are prefunded. Hence, a current pensioner's funds flow may be fine and may come from say, Prudential or Allstate.

Also, some pension funds are moved to the union, who is repsonsible for investments, payouts and the like.

Not sure how the UAW's sets up their pension arrangments.

http://finance.yahoo.com/tech-ticker/article/yftt_103116/What-Happens-if-GM-Goes-Bankrupt-Not-Much?tickers=gm,f

I feel sorry for you if your pension is with GM. I feel sorry for you if you lost your job because GM failed. But if we leverage the US into paying for a company that has a track record of being inept, we'll be setting ourselves up for a new level of inflation and dollar devaluation that will hurt our children, and their children.

So do we suffer now, and remain Capitalists? Or make our children pay later, and become socialists?

Originally Posted by Brucelee

One correction. Depending on how GM sets up its pension, chapter 11 may have no long term impact on one's ability to collect a pension. Employers are free to fund pensions in many ways. One way is for them to purchase annuties that are prefunded. Hence, a current pensioner's funds flow may be fine and may come from say, Prudential or Allstate.

Also, some pension funds are moved to the union, who is repsonsible for investments, payouts and the like.

Not sure how the UAW's sets up their pension arrangments.

[Brucelee]

I don't think anyone here is advocating saving GM or its pensioners. Nor are we suggesting socialism is where we want to go.

The original question was, should I buy GM stock"?

I think we all pretty much said that would be a mistake.

[Jaxonalden]

Originally Posted by Fred Demara

that's the point...the reason GM needs a bailout is because no one was purchasing the "widget". In capitalism, we vote on a companies success with our dollars. Overwhelmingly, Americans, and the world have voted GM out of the car making business. And in a capitalist system, when you file chapter 11, your pension is done. No rights, no wrong, no moral judgements - it's just the set of rules that define a fair market.

When the fed steps in and (against the majority of Americas wishes) MAKES us responsible for GM's success, when they have failed miserably, that is called communism.

The reason Americans aren't buying their "widget's"? Simple, GM has had their arms twisted by the UAW and have been paying their "ransom" for years. That money could have been reinvested back into the company for better R&D and materials to make a better product. Instead they have had to used cheap materials and old technology. Take the throttle body fuel injection for example, GM just stopped using that late 70's early 80's crap while the rest of the world has moved on and accelerated into direct injection. Also, has anyone pushed in on a fender lately? I swear a beer can is thicker!

Why don't I buy American cars? I'm NOT going to pad the pockets of UAW or the workers that really have the golden parachute pensions and benefit packages. As an American I have the freedom to make this choice, thank God.

[brp987]

Originally Posted by Fred Demara

that's the point...the reason GM needs a bailout is because no one was purchasing the "widget". In capitalism, we vote on a companies success with our dollars. Overwhelmingly, Americans, and the world have voted GM out of the car making business.

As I understand it, GM is profitable outside the US. Also, I see lots of GM cars and suv's around. Their bread and butter stuff may be bland, but most people aren't enthusiasts.

Originally Posted by Fred Demara

And in a capitalist system, when you file chapter 11, your pension is done. No rights, no wrong, no moral judgements - it's just the set of rules that define a fair market.

If someone invests their career with the assumption of a pension and that pension is taken away too late for them react, I wouldn't consider that right morally. Practically, the gov ends up assuming the pension, although at lesser value, so you and I end up paying anyway. I'm not a lawyer, but thats my understanding.

Originally Posted by Fred Demara

When the fed steps in and (against the majority of Americas wishes) MAKES us responsible for GM's success, when they have failed miserably, that is called communism.

Hey, I'm on-board with the Peter Schiff thing, but GM is small potatoes compared with the wreckless Wall Street and home=ATM crowd.

[threpwood]

My broker said GM will not go bankrupt in anyway because the stake is too high for Americans. The stock will continue to deplete and can probably reach 1 cent a share. I wonder why USA doesn't nationalized the GM and fired those dumb CEOs?