GM Tumbles as Deutsche Says It May Become Worthless

[RedEarth]

Source: Bloomberg

Nov. 10 (Bloomberg) -- General Motors Corp. plummeted as much as 31 percent and moved toward its lowest level in 62 years after a Deutsche Bank AG analyst downgraded the shares, saying they may be worthless in a year.

``Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like,'' Deutsche Bank's Rod Lache wrote today in a note. The New York analyst recommended selling the shares and cut his 12-month price target to zero. He previously advised holding the stock.

The decline shows mounting pessimism that a turnaround will succeed at the largest U.S. automaker amid the credit crisis and the worst sales market in at least 15 years. GM is petitioning the U.S. government for aid after saying last week it may not have enough cash to operate this year. A bankruptcy typically wipes out the value of a company's shares.

Barclays Capital and Buckingham Research Group cut their price targets for GM to $1.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aXdq61f3HmOw

[Why Syzygy]

1. Why bail out a car manufacturer when

people do not have money to buy new cars?

[onehandle]

3. Because of the jobs involved. Hundreds of thousands of jobs. nt

[Why Syzygy]

6. How much does their CEO make? nt

[WriteDown]

7. Not enough to bail them out. nt.

[gravity]

9. A couple million

while the company is losing billions each quarter.

[KakistocracyHater]

26. suspiciously more than GM's worth

or so I heard....wherever did they get the money for him?

[Tesha]

23. Let them build trains then. Or repair bridges. But we don't need GM's gas-guzzlers any more. (NT)

[Hugin]

28. GM already builds buses.

and pooling vans.

[TXDemGal]

32. GM *used to* have a division that built diesel locomotives

But they sold it to Berkshire Partners and another private equity group in 2005. Now it's called Electro-Motive Diesel, and it's still located in suburban Chicago.

http://en.wikipedia.org/wiki/Electro-Motive_Diesel

[Tesha]

65. (Thanks; I knew that ;-) )

[sarcasmo]

39. I heard today 2.5 million if you include all of the GM supplier's.

[silverojo]

50. And the fact that GM car owners NEED THE FUCKING REPLACEMENT PARTS

There are a lot of GM cars on the road, which do occasionally need repair, you know...

Oh, yeah...and the JOBS are another consideration.

[WriteDown]

4. Maybe because...

They are the only company even thinking about coming out with a 100% electric car? Or the fact that they employ 100's or thousands of people?

[redstate_democrat]

49. Because we need these jobs. These are unionized work places.

The auto makers have generally been good for families and sustaining the middle class. They are the only thing left really in our industrial economy here in the U.S. They've been struggling trying to compete with auto makers from communist countries with absolutely no labor or environmental regulations. They are already at a disadvantage. We need to help them. We simply cannot afford to lose the industry America created.

[WriteDown]

2. Of course this happens....

Right as the Volt is due to come out. I feel like punching my computer monitor.

[HopeHoops]

5. Think about it - $700B for the financial industry - GM only pays people to MAKE things!

[natrat]

8. but barney frank said giving money to crook bankers would help people

[MilesColtrane]

10. Sorry for the employees, but...

...ever since I got screwed after purchasing an '85 Blazer, I put a curse on GM.

It just took a while to work.

[WriteDown]

11. Glad to know you don't hold a grudge...

Haha.

[okieinpain]

59. funny/not funny. but seriously npr did a story on gm a year ago and

even the employees thought the stuff they were producing was shit.

[madhawk]

12. bye bye

that's what gm gets for killing the electric car. assholes
hawk

[The Stranger]

13. The market at work.

Instead of researching hybrids, like the Japanese, they were marketing gas guzzlers. Then oil skyrocketed. They failed to innovate, and so they fail.

[MessiahRp]

16. In a nutshell that pretty much sums it up

And sums up why so many people think they sort of are reaping what they sowed.

American car manufacturers kept focusing on SUVs and bigger and bigger trucks as if there was some large need for every American to have a pickup truck that was just a shade smaller than a Semi.

Toyota and Honda worked on fuel economy and reliability and that's why they own the market.

Rp

[WriteDown]

18. This isn't what happened at all....

You may want to actually read up on what happened before making these sort of comments.

[MessiahRp]

36. Really? You're going to say that focusing on SUVs and Trucks over hybrids did not help destroy them

The American Auto Industry was not directly impacted by the stubbornness to move forward with hybrid/electric vehicles and that when gas prices kept going up and up and people stopped buying the shit that the US Automakers pedaled, that had zero effect on why their profits are completely in the tank?

Sure there's an economic downturn now but they have been hurting for quite awhile and they were quite unwilling to take their heads out of their asses long enough to see the car buying trend, let alone the impending doom of the economy.

And since SUVs and Trucks apparently did SOOOO great, how are they doing in trying to sell off that Hummer brand huh?

Rp

[WriteDown]

40. Uh....

The Prius wasn't designed for the American market. It was designed for the Japanese market, a market which does not allow the sale of American cars. Toyota and Honda had cars designed such as the Prius, Insight, and XB for the Japanese market(to make MONEY in the Japanese market) and were actually ramping up their truck/SUV production just like everyone else(to MAKE money in the American market). I wonder what would have happened if GM was allowed to sell cars in Japan like we allow Toyota and Honda to sell cars here.

And now of course Toyota leads the world in automotive recalls.

[LanternWaste]

57. Isn't that due in part because the U.S. does not subscribe...

"...was allowed to sell cars in Japan like we allow Toyota and Honda to sell cars here."

Isn't that due in part because the U.S. does not subscribe to the World Forum for Harmonization of Vehicle Regulations, while Japan does subscribe to the U.S. National Highway Traffic Safety Administration regulations?

[WriteDown]

58. Has nothing to do wtih it...

Has to do with Japan's isolationist and xenophobic policies. The US has been far more welcoming of foreign manufacturers and foreign products.

[LanternWaste]

62. From what I understand...

From what I understand, the refusal of the U.S. to subscribe to the WFHVR is part and parcel of the failure of U.S. auto sales of autos produced in the U.S. in much of Oceania and the Pacific Rim. (in addition to the Big Three's attempt to penetrate the Japanese market not with American made cars, but with Mondeos and Opels supplied by their German subsidiaries)

My information coming from 'Notes from Toyota-Land: An American Engineer in Japan' by Darius Mehri & 'Winning in Asia, U.S. Style' by Vinod K. Aggarwal

[NickB79]

41. Chrysler, GM and Ford all had AFFORDABLE 70-mpg hybrids by 2000

For example: http://www.popularmechanics.com/automotive/motorsports/1268751.html?page=2

"DaimlerChrysler officials said that, while the first version of this car, ESX, carried a huge $60,000 cost penalty versus a conventional car and that ESX2 reduced that cost penalty to about $15,000, ESX3 would carry only about a $7500 cost penalty if produced in quantity for sale to the public. That would translate to an MSRP of about $28,500."

More about it here: http://en.wikipedia.org/wiki/PNGV

"On track to achieving its objectives, the program was cancelled in 2001 at the request of the automakers"

It sure as hell sounds like they dumped their fuel-efficiency research to chase after more lucrative SUV and truck sales.

[WriteDown]

48. I remember PNGV...

I notice you fail to point out the criticisms of the program. The US's refusal to embrace diesel has been a huge blunder.

[NickB79]

53. The criticisms were minor. The automakers themselves were the ones that ended the program. NT

[WriteDown]

54. Not sure about that...

the focus on fuel cells was a mistake in my opinion. The FreedomCar program's focus on plug-in hybrids is a better direction.

[okieinpain]

60. don't forget nissan. nt.

[Kolesar]

19. Honda and Toyota developed hybrids to meet air quality regulations, not fuel economy targets...

...within their companies.

[kiranon]

14. Had a large Chevy station wagon and the heater never worked.

Bought the car new and the heater never worked. Was a single young woman then and the dealer just laughed about fixing it. The dealer said he didn't know how to fix the heater. The car had a huge engine and to have a new car without a working heater was ridiculous. Car also developed a rust problem early on around the back window and dealer also wouldn't make good on it. I vowed never to buy a GM car again and I never did. The customer you treat poorly today is the customer you don't have tomorrow. And, my children also do not buy GM products. Toyota, Honda and Ford have been just fine customer service wise but the Ford vehicles had a lot of problems - transmission and other big ticket items. The problem with GM was lack of leadership and not listening to new ideas and not thinking long term but instead caring only about short term profits. Turn GM into making solar panels or only hybrids or electric cars but no bailout if they just continue as they are. It is just throwing money into the wind.

[madmom]

35. Actually this was a problem with the dealer, not with GM. I bought brand new impala a couple years

ago, had problems with it took it back to the dealer. He basically laughed at me too, then I come unglued on him in the show room with about 10 people in it. He kept trying to get me in his office to talk, but I refused. I made my problem known to everyone there. It didn't take long for him to see things my way. GM will fix any problem but only if they know about it, dealers don't want to be bothered after the sale, they got their money so why bother. This particular dealer even asked me if I ever heard the phrase"never trust a car salesman". Oh, BTW, I got all the problems fixed and a free loaner while they worked on it!

edited to add: there are men out there who think women are to dumb to deal with, we must take a stand and but them in their place in cases like this.

[Sgent]

46. This is GM's problem

with QA on their dealers.

[saigon68]

52. OR PUT THIS WAY

The shin you kick today

May--May be connected to the ass you have to kiss tomorrow

[greenman3610]

15. if they fail, Toyota buys them, and life goes on

what's wrong with my logic?

[gravity]

17. All the health care and pension liabilies will disapear

[blue_onyx]

37. It's a simplistic and unrealistic way to look at the situation

If the US auto industry failed, it would have devastating consequences across the country. From the Detroit News:

"Every direct job at an automaker in the United States creates five more jobs. Two of the five are related to suppliers or dealers; the other three are spinoff jobs at businesses where auto industry workers spend their paychecks. The next closest industry to autos is high-tech, where each job creates a total of four, including spinoffs. By contrast, one Wall Street position creates a total of about 2.5 jobs, yet Congress expedited aid to the financial services sector this year."

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081103/AUTO01/811030343

The US auto industry accounts for much of the little manufacturing left in our country. The fact that we make almost nothing is part of our economic problems. If we can give AIG 140 billion then we can certainly give the auto industry 50 billion. I thinks it's important to help these companies and I believe Obama will do so.

[Tektonik]

38. I doubt any firm in the auto industry would touch GM.

[gravity]

43. They would buy if GM files chapter 11

[zeemike]

20. How about this

The US government buys them out and retools the factories to produce a zero emission car that can be afforded by the lower income people.
Fire the management and hire some new engineers if necessary to get the job done.

I know it fly in the face of capitalism but when a system fails us something has to be done.

[WriteDown]

21. You think its that easy?

Maybe in 100 years. Until then, they can buy Chevy Aveo's at under 12K a piece.

[zeemike]

45. What to build an electric car?

GM did that in the 90s, and then crushed them all.

[WriteDown]

47. I was referring to all your requirements put together...

The EV1 was not the solution. Super buggy and super expensive.

[zeemike]

56. I have never understood why

And EV would be more expensive.
The electric motor has one moving part compared to the gas engine with hundreds of moving parts, consumes less material to make and easier to assemble, but it cost MORE?
And it is not like it is new teck because diesel locomotives are driven by electric motors and so are the largest dump trucks, but it some big deal to make a car like that.

[Turbineguy]

22. You wonder what sort of training it takes

to become an stock analyst.

[madrchsod]

30. not much for anyone in Deutsch Bank

almost 35% of the foreclosures around here are from db purchasing bundled loans...

[creeksneakers2]

24. As long as people drive

they'll have to buy cars from somewhere. As long as those cars are made in the US there will be jobs.

The same people won't have them though. Lots or retirees will really be hurt. It would be nice if an intervention could save all those people but GM is asking for an incredibly expensive short term solution with no long range plan for how to ever make a profit. We can't keep bailing out GM forever.

[Realityhack]

42. This is the problem with the 'buy American it saves jobs' mantra.

In the long term it fucking ends jobs.
This is the second time buying American has nearly killed off our auto industry. While other companies desperately innovated to produce suppirior products... the US manufacturers produced sub-par SUV's not seeing the future coming.
Lots of 'forgiven' cars are assembled in US plants.
The sad thing is IMO this is another bailout that we may be forced to make because of the impact on our economy. However IMO the government should take a large stake in the physical assets of the company to secure the loan. Let them produce vehicles the market needs... then buy back the items with a lean on them.

[WriteDown]

44. Once again...

The innovations you speak of were designed for the Japanese market to make money there. The US manufacturers are PROHIBITED from selling there and therefore did not design cars for that market. Toyota and Honda did not "see it coming."

[Realityhack]

64. That is a load of BS.

High fuel economy cars sell well world wide. For years US manufacturers have had trouble because of their failure to innovate that area.
The JDM is relatively small compared to other markets. Furthermore even on the US market hybrid vehicles sold like crazy because corporate fleets wanted the savings LONG before the gas prices skyrocketed.
Furthermore the light trucks that US manufacturers have been pushing so hard are the result of our own import controls (now removed) that prevented foreign manufacturers from competing in that area.
Japanese and European manufacturers were innovating because those cars sold in a wide selection of markets.
The US manufacturers did fail to see what was coming. They didn't see that other companies producing vastly superior vehicles would push them out of the market. The large spike in gas prices was only the last little push.

[vinylsolution]

25. GM is in free-fall....

.... and the workers still refuse to lynch the management.

Incredible.

[amandabeech]

34. The lynch mob will probably be lead by shareholders.

Of course, workers will be welcome!

[excess_3]

27. joyous news ... fewer monster SUVs on the road .n/t

[madrchsod]

29. well there go hundreds of thousands of jobs and billions in income

but i guess the death of general motors is for the greater good. those hundreds of thousands of workers that relied on general motors for income can join the steel workers,appliance makers,textile weavers, in the never ending quest for a decent paying job to feed themselves and families.

yes america, let us rejoice in general motors going out of business....

[semillama]

31. It's not just GM

It trickles down to every company that GM contracted for parts, and to the communities of the workers, and the resulting other jobs lost in those communities when the major employer shuts down and people start moving elsewhere. I've driven through Flint, and it was scary. And the last time I did that was about 15 years ago!

I am in no way a huge fan of how the Big Three have operated over the years, but I'm sure as hell unhappy to see them in this much trouble, too.

[madrchsod]

33. ya..my daughters job could be on the line

she`s 23 and making 13.50 an hour with great benefits..she works for a gm supplier.

there nothing worse than watching the place you used to work being cut up for scrap that will be sent to china or india.

[calmblueocean]

51. I have wondered a little if GM couldn't offer its factories to make cars based on others designs.

Computers are made that way. Apple has Macs manufactured in China by firms which make computers for HP and Toshiba, too. Couldn't car companies run this way?

There are all kinds of startup auto companies out there today, all kinds of new ideas. It would be great if various they could hire out GM workers and GM factories to manufacture their cars. GM employees would get steady work, the market would get lots of bold, innovative competition, and we'd be on our way to a green car revolution.

I don't know if it could be done or not. But it's intriguing to me.

[Pavulon]

55. Kiss your collective

efforts goodbye if it folds up. Airlines did it, employees got fucked, Be careful what your wish for.

[cambie]

61. Who bought all those gas-guzzlers?

We(the people)did. What is a company exec to do when the people won't buy the reasonable product but will snap up all the dual-turbo-suck monsters that we can push out?

[yojon]

63. Who did kill the electric car?

I hate to be responsible for the hare-brained decisions of overpaid execs..

[Canuckistanian]

66. This is why I don't like investing in stocks

Because share prices sometimes bear NO RESEMBLANCE to the ACTUAL WORTH of the stock.

Up or down.

Somebody says something stupid like this - and millions of dollars are lost.

Did the actual VALUE of GM stocks change by 31% today? NO.

It's a giant casino fuelled by rumours, innuendo and voodoo.

[Nihil]

67. I agree that it's a "giant casino" ...

... but sometimes a plummet like that is the result of everyone
realising that the price of a stock like GM has only been held
as high as it was by "rumours, innuendo and voodoo" ... and *they*
didn't want to be left holding the (dead, rotting) baby ... again ...

:shrug: