OT: GM/Chrysler alert

F. George McDuffee · 2008-09-04T01:38:34+00:00

OT but of major importance if you work in the US OEM automotivesector.Unka' George's analysis:ResCap [Residential Capital] is a wholly owned subsidiary of GMAC[General Motors Acceptance Corporation], which up until thecredit implosion had been a major source of positive cash flowfor GMC.ResCap has just announced major layoffs of more than 5,000 peoplebecause of losses of more than 1 billion $US a quarter ==>foreach of the last 7 quarters FOR THAT ONE DIVISION. Anotherwell-known division of GMAC is Diatech Funding.A major worry is the *HIGHLY* convoluted, arcane and incestuousrelationships between/among the former GMC diversions such asDelphi. It is known that GMC remains responsible for verysignificant amounts of Delphi obligations including pensions,thus the creditors may be in the position of trying to guessunder which shell among dozens (if not hundreds) the assets arehiding [assuming there are any]. It appears that at each stagethe borrowed assets were *HIGHLY* "leveraged" so a smallcontraction at the extreme end may well amplify as the financialperturbation propagates back up the tree, as "leverage" works toamplify losses as well as gains. Thus the admitted losses ofmore than 1 billion per quarter may well be leveraged to 10, 20or more billion $s per quarter. Of particular concern is the timing of this announcement as it isonly about 60 days to the US presidential election, and GeneralMotors has historically been a Republican corporation [ e.g.SecDef "Engine Charlie" Wilson]. This indicates the situationmay be far more critical than indicated.On April 3rd 2006, GMC sold a half interest to Cerberus CapitalManagement, which is the hedge fund that owns Chrysler, butremains responsible for much of the debt obligations ["assets"]created before the sale, thus if this is indeed the sound offirst domino falling, a GMAC failure may well take down *BOTH*GMC and Chrysler. Much of GMAC's automotive related "assets"appear to consist of the residual value of leases...

E

Ed Huntress 17 years ago

formatting link

You're oversimplifying this situation, George. Those Ford Fiestas you're talking about are diesels. Diesel cars don't sell in the numbers required to build a plant in the US. If the price of diesel comes down, there may be a market. But only a fool would roll the dice on diesel cars right now, if their entire future depended on the outcome.

There are many problems involved, not the least of which is unstable credit markets that are keeping Ford out of the market for funds to build new plants, as well as to do enough research. What they're asking for is loans.

The US car manufacturers are facing a heap of troubles. But the new CEO, Alan Mulally, probably is the best thing to happen to the company in 50 years. It's too early to tell whether they'll make it but I doubt if you or anyone else could come up with better management right now.

-- Ed Huntress

Vote

J

Jon Anderson 17 years ago

No guts, no glory.... Dang, this car alone could save Ford, especially if GM/Chrysler end up closing their doors. Detroit needs to hire some of Washington DC's political spin meisters to help overcome the aversion to diesel here.

Jon

Vote

M

Martin H. Eastburn 17 years ago

That is odd there are engine plants up north. I see them in my foundry magazine. They might make them cheaper...

When I worked at GM one summer after school, the strike on the rail car threatened to shut down a large plant. GM air freighted engines and transmissions for several weeks. They trucked in the sheet metal and frames...

Mart> Some information about Ford.

formatting link

----== Posted via Pronews.Com - Unlimited-Unrestricted-Secure Usenet News==----

formatting link

The #1 Newsgroup Service in the World! >100,000 Newsgroups

---= - Total Privacy via Encryption =---

Vote

P

paul 17 years ago

formatting link

and meet U.S. emission standards

see a commion thread here?

HTH

Vote

OT: GM/Chrysler alert

Join the Discussion

Didn't find your answer?