If GM really went under/durable goods

[VaSteve]

Like everyone else, I have been following this. So what did/would happen if "GM" went under? They say it would pull down the industry....would it pull it down forever? Certainly we are seeing too much capacity for the world., but if GM went under those suppliers would still have to make stuff for existing GM cars (to keep them running) and would have to make Honda and Ford stuff for the cars that would be built to take their place. Assuming GM shut the factories and stopped producing, wouldn't we see an uptick in the parts needed since Ford/Honda, etc wouldn't be able to fill that capacity immediately. Sorta like Cuba running their old 1950's cars.
Sure many of the dealers are going to take a bath, or sell alternate products.

On a related front, who NEEDS a new car? Assuming your car runs, do you NEED a new car? This is an interesting question on a board where we're keeping 25 year old cars alive. But those cars have soul and there's no substitute. So where do new cars go? People that WANT new cars, rental fleets, etc. While there is a glut of stuff out there build because we want it, what number of cars are sold to replace those that rust into the ground or are crashed out of service.

Anyone have the facts on any of this?

[the]

What do you mean by "went under?"

You mean like just closed the doors, burned all the factories down, and went away?

[Jim Richards]

Originally Posted by the

You mean like just closed the doors, burned all the factories down, and went away?

Please, don't toy with us.

[YTNUKLR]

Well, I assume other car companies would buy up its plant and equipment, the property would be sold, and of course, the Chinese are very interested in purchasing GM's brand copyrights (for example, they picked up "Oldsmobile" when the time limitations expired).

Currently GM's market cap is $2.4 Billion. Surely its entire durable-goods enterprise is worth more than that, in the event of a Chapter 11 BK. They do have $45B in debt...

[aap1966]

Britian used to have a vibrant "indigenous" car industry post WWII. Now the biggest English owned car company is Morgan, followed by Bristol.
GM and Chrysler will probably disappear (at least in their current form) and that will cause massive disruption to the American auto industry, but it will survive, just in a very altered form, and healthier than it is now.
I have heard that already, the foreign "transplants" (Honda, BMW, Toyota, etc) build more cars on US soil than the "Big 3" anyway--(correct / flame me if I've got that fact wrong!)

Don't believe me? What would have been the British response in 1946 if you said that in 2 generations Bentley and Rolls Royce would be German owned?

Please don't mistake this post for schenfraude, I'm trying to be objective.

[jyl]

Originally Posted by YTNUKLR

Well, I assume other car companies would buy up its plant and equipment, the property would be sold, and of course, the Chinese are very interested in purchasing GM's brand copyrights (for example, they picked up "Oldsmobile" when the time limitations expired).

Currently GM's market cap is $2.4 Billion. Surely its entire durable-goods enterprise is worth more than that, in the event of a Chapter 11 BK. They do have $45B in debt...

Why would any other car company buy GM's plant and equipment? There is a surplus of production capacity, manufacturers are idling plants not expanding them. GM's lines are designed to make GM's designs, and are not flexible.

The property isn't worth spit, relative to GM's size. GM was looking at selling its entire HQ property, that was only going to bring in a few hundred million.

They have $45BN in debt. But also $60BN in payables, versus only $9BN in receivables. So total financial obligations are really more like $96BN.

Those payables are mostly owned to parts suppliers. GM has been stretching terms on them. A lot of the parts suppliers are financially weak, some are already in BK. If they don't receive $60BN that they are counting on, how many survive? Ford and Chrysler, and even Toyota and Honda to some degree, depend on many of the same suppliers.

Parts for repairing/maintaining existing cars is a tiny business, relative to parts for new cars. The vast majority of the parts on your new car will never be replaced for the life of the car.

[VaSteve]

Originally Posted by the

What do you mean by "went under?"

You mean like just closed the doors, burned all the factories down, and went away?

Well they keep saying they are going under....Stopped building cars I guess.

[VaSteve]

Originally Posted by jyl

Why would any other car company buy GM's plant and equipment? There is a surplus of production capacity, manufacturers are idling plants not expanding them. GM's lines are designed to make GM's designs, and are not flexible.

Please explain as they are able to change designs every two years. Need to reconfigure equipment to do that. The wheel installer robot certainly could install a wheel on a different kind of car...maybe not build a solar panel or a wind turbine....

Originally Posted by jyl

Parts for repairing/maintaining existing cars is a tiny business, relative to parts for new cars. The vast majority of the parts on your new car will never be replaced for the life of the car.

Yes, good point, but if no (or significantly less) new cars were being produced there would be SOME market for stuff that you couldn't get. I guess it would a REALLY long time to need certain parts that you couldn't get off a parts car.

[jyl]

Originally Posted by VaSteve

Please explain as they are able to change designs every two years. Need to reconfigure equipment to do that. The wheel installer robot certainly could install a wheel on a different kind of car...maybe not build a solar panel or a wind turbine....




Yes, good point, but if no (or significantly less) new cars were being produced there would be SOME market for stuff that you couldn't get. I guess it would a REALLY long time to need certain parts that you couldn't get off a parts car.

Read for example

http://money.cnn.com/magazines/fortune/fortune_archive/2004/02/09/360102/index.htm
http://www.greensburgdailynews.com/honda/local_story_051095915.html

Multiple car models, and the assembly line to make them, and the logistics system supporting the assembly line, are designed together. The bodies are designed so that the same set of robots can fit and weld them together, the robots are designed to use particular pins and holding points common to all the bodies, etc. To make Camrys or Accords in a GM plant, Toyota or Honda would essentially have to tear out and discard most of the GM line and equipment. Unless the GM robots/equipment happened to be the same as the Toyota robots, which seems unlikely.

I guess that a fraction of one percent of the parts in a new car ever get replaced. So that supports how big of a parts industry - a fraction of one percent of today's . . . gonna be a bummer to be the company that makes dashboard assemblies, firewalls, floorpans, waiting for the 1 whacko a year who decides to replace the dashboard, firewall, or floorpan on their Malibu . . .

[VaSteve]

LOL, I didn't say it wasn't going to hurt a little bit and the dashboard factory will have to gear up to making something else, but isn't manufacturing ... manufacturing?

Aside from the cost/trouble of retooling the machinery, don't these things need people to operate them?

Maybe I'm underthinking it. If you can operate the machine that makes/installs Malibu floorpans couldn't you learn to make/install Camry floorpans when it was time to do that?

[jyl]

In the long run other car makers will divide up Detroit's share. There will be fewer choices, less competition, and all the profit from the US car market will flow overseas.

[VaSteve]

Originally Posted by jyl

In the long run other car makers will divide up Detroit's share. There will be fewer choices, less competition, and all the profit from the US car market will flow overseas.

Yes, all of that. I agree. And it's a damn shame. But, the supposed reason they are here in DC is to beg for money to help protect the people, the workers.

Plenty of Americans work for companies with overseas headquarters.


It's a mess for certain.

[dd74]

Originally Posted by VaSteve

On a related front, who NEEDS a new car? Assuming your car runs, do you NEED a new car? This is an interesting question on a board where we're keeping 25 year old cars alive. But those cars have soul and there's no substitute. So where do new cars go? People that WANT new cars, rental fleets, etc. While there is a glut of stuff out there build because we want it, what number of cars are sold to replace those that rust into the ground or are crashed out of service.

People who use their vehicles for work "need" new ones for several reasons, the work and tax purposes not withstanding.

The rest of us, I'm not so sure. Maybe we need "new" out of pride, vanity, etc.

The lawyer who lives across the street bought a two-year-old Mercedes E550 with AMG bits and pieces. Cost him around $30K, and the car is practically "new." At least it looks new.

Still - we do have to look past "us," and consider "them;" those who build these cars. If GM does go under, many individuals will be out of work. I couldn't care two damns about the corporate side or even the cars themselves.

[VaSteve]

I agree, but where does that leave us? It's a slippery slope. What says that those people NEED to work in THAT factory? Human beings are infinitely adaptable.... Transferable skills will transfer.would the money spent on this be better spent on training for jobs of the future?

I recently took a job (as a professional) in a place where one of my direct reports told me that most of the people on the team wouldn't be able to survive outside the organization...despite being professionals themselves. They have let their skills atrophy.

In college, I was working as an accounting clerk in a company doing a re-org. Just before I graduated, they left go of about fifteen 20-year vets. People who had been with the company for their whole career. They had to set them up with job training and stuff like that. They couldn't leverage their skills to get into another company....at that pay I guess. Since I knew that no company was going to take care of me, I knew that I needed to ensure my skills are always sharp.


This is a tough jam....I'm glad it's not my problem to solve.

[VincentVega]

I'm not old enough to know and havent found an answer yet, but didnt England go through something very similar ~30 yrs ago? Not a large in market cap or units produced, but I wonder if value to the GDP was similar.

If GM goes under, who is going to make transmissions for practically every van and truck?

I wonder if it makes sense for Chrysler to fold, would that help GM and Ford? Or, would it cause the collapse of enough suppliers to cause them to die too?

[VaSteve]

Originally Posted by Chris Martin

If GM goes under, who is going to make transmissions for practically every van and truck?

See that's what I'm saying... If we got no more Cobalts tomorrow, there would still be markets for design services, manufacturing, shipping. The companies wouldn't look like GM currently does, but certain things would still exist. It'd have to.

Same with the banks (but different). So we're in this giant mess and the banks keep merging and getting larger, creating new problems down the road. Why not give the cash to small banks? That money will get out on the street to get the economy going. This is for a different thread however.

[djmcmath]

The problem with the auto workers is two-fold:
1 - They have what they believe is a skill -- be it installing a door panel or supervising a robot that welds in a floor pan, or whatever. But there's really no skill involved there that couldn't be taught to the average monkey in an afternoon. The "skill" is completely useless, in terms of leveraging into anything else. There's no reason to go to Detroit to track down out-of-work assembly line workers, because the world at large has a glut of people who have the basic skills necessary to do that kind of work.

2 - They believe that they are entitled to $30/hr for their "skill." They are absolutely retrainable -- the world needs landscapers, ditch-diggers, and janitors. But these are people who have been born into a world where unskilled uneducated labor gets nigh on 6 figures and a full benefits package.

So if GM "goes under," per se, they'd restructure to create an organization that would support the necessary bits -- building transmissions, doing design work, whatever portions of the business that can remain viable in The Real World. Who knows -- they might even still build cars, just not on the scale that they do now. Everyone else would be faced with the reality that they need to find another job or starve to death. Or, in the United Socialists of America, get used to living on welfare.

Dan

[VaSteve]

I would so love a job supervising a robot. It would be so much easier than my current job supervising people.

[Porsche_monkey]

The down-side that not many people think of is the 'down-stream' bankruptcy. G.M. owes a lot of parts manufacturers a lot of money. That debt will never be paid off if the go into bankruptcy protection, and a lot of suppliers will fold. It's not just G.M., it double, or triple those numbers, maybe even worse.

[Zef]

Originally Posted by VaSteve

Well they keep saying they are going under....Stopped building cars I guess.

It would be a fu****g good thing.