Posted on 05/24/2007 4:12:32 AM PDT by Zakeet
Anyone who has spent any time in Detroit recently will tell you it is by all apparent indications a dying city. Crumbling buildings, widespread decay and a population in flight make for a depressing landscape. Detroit's fortunes have always been tied intimately to the fortunes of the U.S. auto industry. So it's hardly surprising that a look at Ford's and General Motors' balance sheets will show just as much decay and devastation as a trip through Detroit's worst slums. The only real question is, Which automaker will declare bankruptcy first?
Let's start with GM. Instead of talking about its autos, I'll just focus on the numbers. Over the past decade, GM's gross profits have declined from $40 billion to $22 billion, while its debt has increased from $199 billion to over $450 billion, all during a period of historically low interest rates.
The low rates won't last forever, though. Just over the past three years, GM's interest expenses have risen 77% from $9 billion to $16 billion and are projected to rise to $18 billion this year. Rates are still very low by historical standards.
[Snip]
The bottom line is, in order for GM to survive, it needs to make rapid, substantial gains in profitability. Of course, this was just as true three years ago as it is today, and the results speak for themselves. Whatever its massive PR machine may say, GM is already effectively bankrupt. All that remains is for the company to admit it.
[Snip]
A visit across town to Ford will do little to improve the gloomy atmosphere. The situation is dire indeed for GM, but Ford is no better off. Ford's balance sheet is overflowing with red ink from unfunded pension and health care obligations.
(Excerpt) Read more at forbes.com ...
Ford and GM are both effectively bankrupt. Whether they end up declaring Chapter 11, or undergo a massive "restructuring" that amounts to the same thing, is hardly material. The only real question is Which will go first?
A rather sobering analysis of the large automakers. Unfortunately for them, it is well reasoned and well written. Anybody following the auto industry and the UAW will find the article an interesting read.
Go ask Walter Reuther’s heirs how things are going. I bet they’ll say the workers need more until the day they shut the doors at the factory.
I’m not sure I would agree with the author about the Detroit’s decline being tied to GM and Ford. Detroit has been in a decline since the 60’s due to liberal welfare type policies and has been ran by Democrats. Why not blame the libs for the decline?
management and union labor, working hand in hand to wreck an entire industry.
Isn’t there a correlation to dieing cities & increasing Muslim Populations?
My guess was that GM would be the first to leave this failing socialist state, but with the sale of Chrystler perhaps this company will go first.
The last poll I saw showed that two-thirds of the citizens like the idea of higher taxes to bail out the state, proving that they haven’t a clue concerning the state and economics. Consequently, tens of thousands of productive citizens are fleeing for greener pastures, leaving the state to a moron communist governor who couldn’t run a kid’s lemonade stand, fascist bureaucrats, countless useful idiots and people collecting welfare from various federal and state programs. You cannot create a vibrant economy in a state with those demographics.
I’m predicting a complete economic collapse in Michigan by the fall, 2008. The only reason Michigan’s unemployment rate will remain below 10% is because tens of thousands are fleeing the state and won’t show up in the unemployment statistics. Unemployment in some northern counties is 20% or higher now. Some of the downtown districts in my area look like depression-era movie sites, with building after building shuttered. The entire landscape surrounding these downtowns is painted with “For Sale” signs.
That’s unfortunate because the productive citizens I knew were creative and willing to risk fortunes establishing businesses and investments in Michigan.
Socialism kills.
I would suppose that a dead city attracts them and not the other way around.
Correlation, yes, but not causation.
I think muslims just like dying, decaying cities here in the US because they remind them of their homelands.
I need to read the whole thread before posting, lol.
Ironic that Dearborn was “Ford City, not Detroit - Detroit was GM and Chrysler country....nonetheless both Detroit and Dearborn are now full of moozies, with Dearborn now looking like a Beirut along with many areas of Detroit itself.
888888888888888888888888888888888888888888888888888888888888
(this Ford fluff piece must have been written years ago)
Ford Motor Company
World Headquarters
Picture of Ford Motor Company World Headquarters The Ford Motor Company became part of the business world on June 16, 1903. On that day, Henry Ford and 11 other partners filed papers of incorporation at the State Capitol in Lansing Michigan. With only $28,000 in cash assets and an over abundance of faith and hope, Henry Ford and his associates started what has become today, one of the world’s largest and most diverse global corporations.
Few other companies are as closely identified with the history of, or the development of America’s industrialization, and no other company in America is as well known throughout the world.
At the time of its incorporation, the Ford Motor Company was a small 10 man operation with headquarters in a converted Detroit wagon factory. Today nearly a century later, the Ford Motor Company is the second-largest producer of cars and trucks in the world and is ranked second on the Fortune 500 list of the largest industrial corporations in the United States.
Worldwide, nearly 350,000 dedicated men and women go to work each day at a Ford Motor Company office, laboratory, or manufacturing facility. Ford products are sold globally through a network of approximately 10,500 dealers in 200 countries and territories. The Ford Motor Company also has an annual sales volume that exceed the gross national products of many of the world’s other industrialized countries.
In Dearborn, Ford is a household word. Many of the Cities residents work directly for the Ford Motor Company or work for other companies that are located in what is referred to as “The Fairlane Development.”
The Ford Motor Land Development Corporation has brought hundreds of new businesses into Dearborn with its 2,360 acre Fairlane Development project. Since 1970 Ford has helped to create thousands of new jobs and has added millions of dollars annually to the City of Dearborn’s payroll.
To date, the Ford Motor Land Development Corporation has developed almost 90% of it’s available property in Dearborn in a strategy that includes; leasing space, build-to-suit, and land sales.
Fairlane also includes the original farmlands around the birthplace and boyhood home of Henry Ford, as well as portions of Mr. Ford’s Fairlane Estate.
http://www.steve-hatfield.com/dfordhq.htm
I was in Detroit in the early 70’s,it was dying then.
The summer of 1967 was Detroit’s death rattle.....during which John Conyers got his start in politics standing on top of a car with a megaphone during the “riots”.....which were, of course, “loot first, burn afterward”.....
The end result will be the same.
This is a good example of what happens when the goose that lays the golden eggs is pecked to death.
Profits shown equals bonuses paid.
sad, but true. Having lived in Michgan for 5 yrs., it was clear to me that the local concept of economics was bass-ackwards from that understood by most of the country. Fifty years of UAW propaganda appeared to have brainwashed most of the people.
Been to Akron lately ?
Hi Caver,
I had to leave our area and go up to Detroit about five years ago on business.
It was, without a doubt, the most depressing thing I have ever seen.
Detroit is a dead city.
It’s just not been given a proper burial.
A bit overly dramatic, a bit of the current increasing market pessimism groupthink, etc., but otherwise accurate enough.
The actual root cause of unionized industry collapse is, of course, the federal government. One need look no further than the National Labor Relations Act (1933) and Wagner Act (1938).
Time to get the killing over, time to finish this mess off.
Yea, I’ve been to the Henry Ford Museum and into Windsor, Canada and the trip there was just scary. The Detroit landscape looked like those photos you’ve seen from Nagasaki and Hiroshima after the nukes. Most definitely depressing. When we started getting close to Detroit, every business and house had bars and bulletproof glass.
“Why the big knife,” we asked. Answer; “Detroit police took my gun permit.”
That would make you want to move far away from Detroit.
Unfunded Pension and Health Care Obligations = Government Health Care is coming, one way or another...
I’ve said it before, I’ll say it again.. when BUSINESS can legitimately make the case that they cannot compete due to private health care costs with labor around the world, government health care will become law, period.
If you want to place blame, all you have to do is. . .
Look for the union label
when you are buying that coat, dress or blouse.Remember somewhere our union’s sewing,
our wages going to feed the kids, and run the house.We work hard, but who’s complaining?
Thanks to the I.L.G. we’re paying our way!So always look for the union label,
it says we’re able to make it in the U.S.A.!
thanks for the ping
“I think muslims just like dying, decaying cities here in the US because they remind them of their homelands.”
I think desperate people sometimes grasp at staws and someone to blame -— and islam provides both.
If you find one, let us know.
Not sure I see the irony. Having lived more than a decade outside of Detroit, and worked three or four years in Dearborn, it was the "moozies" that had the nicest houses, yards, cars, and whatnot . . . certainly compared to the "chrissies" (with the exception of the Chaldeans). That's just a simple fact, no matter how desperately you want the opposite to be true.
And I will tell you this, I worked on the Detroit/Dearborn border . . . there wasn't a single "regular" guy who worked after dark that didn't have a gun in his truck. This was before CCW.
Second, GM will experience a dramatic rise in profitability in about 10 years time. The reason is they are currently paying for a huge retiree class, from back in the days when the company was many times its current size. The pensions and health care expense of all those ex workers - who contribute nothing to present sales - are huge. But they are also temporary - the beneficiaries will simply die off.
The next wave behind them still have overly generous pensions, but are a much smaller cohort because past downsizing moves reduced the number of workers retiring in more recent years. What has been a huge headwind of a growing retiree pool, will become a tailwind due to a shrinking one. This will last 10-25 years.
It is entirely possible that present *shareholders* in GM will fail to benefit from that change. GM is extremely leveraged. The debt holders, and the existing pension stackholders, and the unions through additional demands, might wind up (again) with nearly everything the company can make. But the sales will be there, they will support a huge rentier group (of former employees first of all, lenders second, new owners about last).
Ford is in worse shape. Its car quality is worse, its pensions less fully funded, its past downsizing moves less thorough. But similar benefits will come to them. Perhaps after a formal bankrupcty, however. Remember that bankrupcty will not remotely end these companies, only shift ownership from present stockholders to present bondholders and banks.
I would think that “family” owned business are more “long term goal” oriented. They would fore go a short term profit to invest in updated production equipment, R&D, or hiring a bright new designer or engineer, that will lead to profits down the road.
Publicly owned business, on the other hand, are all about the quarterly profit. If sales were bad during a quarter, the board may decide to sell off one of it’s divisions, or some property holdings, or some infrastructure, just to get the share holders their quarterly dividend check. It doesn’t matter if doing so will cause problems for the company a few years down the road because the board member who made the decision all have their golden parachutes anyways.
What’s the old saying: “GM is just a big bank (GMAC) that just happens to give away cars instead of toaster with each loan a customer takes out.
Fords Gay agenda has put ‘blinders” on Mgmnt.
Democrats and unions were death by a thousand cuts....
Now GM and Ford will cry to The Feds for Corp,Welfare.
and get it.
Perhaps they should stop making cars (their sideline) and become full-time HMO’s for their employees.
Meanwhile Detroit can become the “Islamic Republic of Detroistan.”
When the military wants a new aircraft, they don’t buy from all of the aircraft manufacturers, they test prototypes from each manufacturer, crunch the budget numbers and pick the aircraft that gives the most bang for the buck.
GM should do the same with it’s divisions. GM submits a “request for proposal” to each of it’s divisions for what it want’s, say a mid size sedan. The divisions then make their pitch to GM HQ, which makes the decision of which division prototype will see production.
Winners would be labeled, “The General Motors Breeze by Chevrolet”. In other words, make the various divisions into design houses. Let GM do the manufacturing, engine and platform engineering, and marketing.
The divisions compete against each other, which is always good for the consumer and GM is not stuck selling a Saturn, Chevy, Buick, and Pontiac version of the same butt ugly minivan.
That is in the top 5 of the problem.
Well written, but not well reasoned...I don't know why an attorney would write a financial newsletter, or why anyone would subscribe.
I couldn't get past the first three paragraphs without concluding he knows little if anything about accounting, much less reading a balance sheet. GM and Ford have problems, but they aren't the problems he describes.
You are welcome.
You are now off my auto business ping list.
Their management, or lack thereof, has acted the same way our government is acting now.
Problem Ahead!
Throw money at it!
Appease it!
OOPS!
Heh, heh! We made the problem worse? Golly Gosh! Whodathunkit?
Look somewhere for a bail-out.
Hello NAFTA! = Cheap labor! No more problem here!
Take their stock options and ride off into the sunset and leave the mess for their successors.
Congress facing Social Security and Medicare problems.
Throw money at the geezers already there! Get their votes. Appease them.
OOPS!
Heh, heh! We made it worse. Whodathunkit?
Look for a bail out.
Hello immigrant workers! = Cheap labor and Social Security and Medicare payments to last until they can take their full pensions (voted on by them) and ride off into the sunset and leave the mess for their successors to clean up.
Hi, Sergio. Lots of mass anxiety amongst the UAW represented where I work. The salaried are less self delusive.
We are all temps. Once you relize that...?
ILG was not the UASW.
“Not sure I see the irony.”
That’s only because of the lengths to which you go to live up to your screen-name. It’s religious to you, I think.
Are you always this thin-skinned, or are you simply surprised that someone who is actually familiar with Dearborn and Detroit called you on your BS?
Hardly.....I actually live here. The BS is yours.
Anyone see the connection of what made those Auto Companies great in their days because they were beyond reproach and honorable in their days.
Than came the PC era and simultaneously all these great company was on the road to hell...
Socialism kills and the forcing of PC along with union in the work place also add to that farming out work.
We had a wheel that work was perfect than someone suduce the companies. Aesops Fables are more than just amument it they are a collection of life down through the ages!
Sadly there were generations that never studied these things in school and never recognized how easy to be tricked in life due to ignorance!
Scorpion the Left or Marxist
The Frog is compassionate but naive or gullible
The Scorpion and the Frog
A scorpion and a frog meet on the bank of a stream and the
scorpion asks the frog to carry him across on its back. The
frog asks, “How do I know you won’t sting me?” The scorpion
says, “Because if I do, I will die too.”
The frog is satisfied, and they set out, but in midstream,
the scorpion stings the frog. The frog feels the onset of
paralysis and starts to sink, knowing they both will drown,
but has just enough time to gasp “Why?”
Replies the scorpion: “Its my nature...”
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