#OT# more on GM "rescue"

It's actually the 2010 model Camero, although I don't know when it's scheduled to be on the market. Pre-production work is scheduled to start in a few weeks.

This is one of those deals whereby the OEM (GM) actually owns the tooling and sometimes the machines. But those contracts and the financing can be so convoluted that most of us could never figure out how the deals would be settled in court. It looks like everybody is trying to squeeze everybody else, although it's likely that GM's financial troubles are the proximate cause of the whole mess. Either they bled Cadence dry, or something about Cadence's own financing collapsed when GM got into deep trouble, because Cadence had a couple of new plants planned as late as early summer.

-- Ed Huntress

Nine years ago or so when I worked in an automotive interior trim supplier, we got paid when we passed PPAP. I think that meant production part approval process. The result was we had a lot of time and money invested in tooling that ultimately became the property of GM. That process took a long, long, time. GM was never in a hurry to pay.

The tool shops we dealt with figured in to the price the long times it took to get the money from GM. The tool shops got paid after we got paid.

Maybe we were not the sharpest pencils in the cup but when your customer base is so small, the customer tends to have extreme leverage on your business.

The ugly side of this is a lot of companies other than GM are in a very precarious state and when GM goes down, it is going to look like a string of dominos.

Wes

Now that the government has a stake in GMAC, I don't think that's going to happen, at least in the short term. Will this financing ability spur some hard to resist deals on GM models in early 2009?

"Holding hostage" code for "We haven't been paying our bills and they won't let us have our parts or tooling until we do."

Now doubt, not sure about Delaware but Bankruptcy Judge may be able to void the agreement. If they give GM the parts and tooling without paying up to date Cadence gets to go to the back of the GM pay me line. That line valued at about a penny on the dollar as an unsecured debtor.

Tom

"Ed Huntress" wrote in news:4959bf7d$0$14306$ snipped-for-privacy@cv.net:

Yea, you have to buy the GM (or other big 3) tooling at your own expense a year or more in advance, then put together a huge paper trail/red tape/b*s* book and other documentation. Then you have to pay for proving out the tooling/systems/machines/etc. Then maybe a few months to a year after production starts, they send in some "specalists" to audit your documentation and use any technicality or anything else they can to try to get out of paying for anything they possibly can. Then you wait another 45-90 days to get actually paid. So you wind up giving them a loan for about 2 years by the time it's all said and done, and basically you pay them interest (because of what they disallow) for loaning them the money. And by the time you are finally paid (if you are), they are back at the table asking for a 5-10% price reduction on the parts. Great way to treat your suppliers. You'll see more suppliers in this situation in the coming months I'm afraid.....

George,

As you read the responses you have gleaned, maybe you and Ed can understand my hatred for GM and why such a bully should not be bailed out. This has been going on for at least a decade.

Having said that you are learning the magnitude of the problem. Where was government when vendors needed protection? Seriously, I think organized crime has better ethics than GM.

Any bailout better address the vendors. If G/F/C ride this out by gutting the supply base, you will see the bigest abuse of power in your lifetime.

Wes

I hope you don't have the idea that I would defend the way GM manages -- or Ford or Chrysler, for that matter. I reported on the industry for over 25 years and I saw how they bled their supply chain dry. They couldn't run the parts-making on their own, so they shoved all their troubles onto outside suppliers.

The vendors didn't need protection -- how would you protect them, anyway? What they needed was to get into another line of business. Those who have generally have done better. Savvy tier-two and -three vendors have made an extreme effort to diversify. But, with cheap imports to battle for consumer goods, that's been an uphill battle.

Making parts for cars has been one of the few high-volume metalworking segments available, in good times, at least, for a couple of decades. Medical-device manufacturing has been good but the industry is too small. Making parts for off-road equipment, home-and-garden, and so on has also been better than automotive but, again, it wouldn't begin to take up the slack.

I think they'll gut their supply chains and offshore as much parts-making as they can. Now what?

-- Ed Huntress

No Ed, I do not believe you would defend their practices. I know you are a much better man than that. This is more a response to earlier threads where I take the position that the bail out is wrong. FGM's post just have me a canvas to paint a picture of my perspective.

Actually legislation on monopolies should have been brought to bear. Normally we think of monopolies as corporate vs private citizen. It also exists in the world of GM/Ford/Chrysler. Ford or Chrysler may have better ethics, we dealt 55% with GM. Btw, Mazda, a company we ran a couple jobs for was very honorable. They kept asking when they would need to move the tools and let us run them up to the end.

Automotive is a major industry. WWII showed just how important it was to our national defense. I do not want it to die. I would like to see abusive practices curtailed though. Too late for me, but it would help others.

If they gut them, there isn't anyone left to supply. The supplier base as you know has been reduced by GM considerably. Others can pipe up on Ford and Chrysler. We lost our Ford and Chrysler business when we would not cross a line we thought unprofitable.

This is a company that extended credit to Chrysler during their bad timed. What have you done for me lately comes to mind.

There are a lot of hard feelings out there. I'd rather see GM go over the side and see the vendors live to supply the transplants and whatever emerges out of Chapter

1. The former Big 3 earned this fate.

Wes

It's been going on in as a matter of corporate policy for thirty years Wes.

This isn't really an ethics issue. It's a stupidity issue. GM acts on their belief that they ought to wring every bit of advantage they can, and then a little bit more, out of their vendor base and their vendors are convinced that they can't walk away or find other fields to enter.

Niether is accurate and both are completely stupid.

We've already seen the biggest abuse of power in government in our lifetime Wes. GM and Chrysler won't exist as you and I now know them in six months or less. What will remain is the part that really matters, the work force and vendor base.

Shareholders are very unlikely to be forgiving in light of the haircut they have taken and the one they are about to get. You must know that when a corporation files for bankruptcy protection their stock ceases to have any value. Literally. Debt is what you want to have if there is a choice and it's the reason GM couldn't get GMAC bond holders to convert their bonds into shares of stock. They were presented wth a choice between almost nothing and actually nothing as far as they were concerned.

JC

government when

Jose Ignacio Lopez de Arriortua

Former GM purchasing manager. Basically crushed the OEM/supplier trust factor to nada. Wonder boy of manufacturing. Dave

He was just the "best" at it.

JC

FWIW

I have handled bankruptcy and receivership files for tier 1 and tier 2 auto suppliers since the mid 1970's and with only two exceptions they were GM suppliers. In my personal experience GM is one of the most egregious companies I have come across. They pay very slowly, they sometimes don't pay at all (over perceived issues)and if you improve your own in-house process and end up with a cost savings on a GM part they take 1/2 of the savings as a deduction from the purchase price going fwd. (They don't negotiate...they just take it). However, if you are a hard nosed SOB and handle them appropriately, you can make good money.....for a period of time anyway.

IMHO (just my personal thoughts)

The economy would suffer a very major shock if GM were to file, but I think that is the only way the North American Auto sector can revive itself. You can't teach an old dog new tricks and the powers at the big three just don't get it yet. For heaven's sake...look at the model that GM is going to court with Cadence over...a modern day muscle car????

America has the strength and resiliency to survive the turmoil in the short term but could have a problem supporting the arrogance and incompetence in the long term.

By the way, when Cadence filed, they were owed $28,477,179 by GM and $27,049,424 by Chrysler, and Cadence held GM owned tooling at three of it's plants. Maybe the trustee just wants GM to pay their bill???? Cadence was hopelessly insolvent, a two year old start-up from assets acquired from another insolvent "Venture" and run by a group with an apparent track record of failures. Can't really blame this one on GM that receivable is less than 30 days sales.

Keith

But he marked a definite demarcation point. He single-handedly revised the cultural relationship.

-- Ed Huntress

Señor Smoke was the nickname he was known by. Appropriate.

Wes

Well, I see the feds figured out the supplier base is totally screwed and now wants to save them. I guess this is a good sign someone is worrying about the manufacturing base finally.

GM has been screwing over suppliers for 30 years. I personally would like to see GM die and the suppliers survive. Not a chance of that deal since the Obama administration and our Democrat controlled Congress is going to save the UAW at all costs. Even if it doesn't make economic sense.

My perspective is from personal experience. The parent corporation was sued for making asbestos. The costs were ruinous. Eventually the corporation came out of Chapter 11 but the result was that my facility was sold to raise cash to pay people off.

Impossible debt was discharged by the bankruptcy process. The parent lives on and I hope that pension survives past when I can collect. ;)

Well, the new owners of the facility, as I understand it, did not have to keep us on or maintain our pay and benefits. As it is, they did.

One we were on our own, we kept making auto parts while having GM and to some extent others squeezing us like a washrag. We kept things going until the slowdown in about 2000 or so. Then we were screwed.

Sadly for us, GMAC held the paper so when we got in trouble, GMAC looked after GM and our Ford business was run out the door so we could focus on building banks for GM. Another creditor would have likely presented a different scenario.

Anyway, GM is dead, it has to die. 59 billion in the hole. Has not made a profit in years. Maybe someone will pick up a few product lines and move forward but stick a fork in it, this company is done.

Wes