GM Pricing Shift

[Little Brothers]

The word on the street - GM as of Jan.1/06 is pricing their line of vehicles in a one price structure like with their Saturn line to try and get away from all the promo's . Anyone heard this ? Perry

[Rennsport Calgary]

I don't see much choice for them quite frankly....where can you go once the horse has left the barn ?

"Dead cost" assembly plant pricing ???

[mchastek]

The latest that I've heard is that GM is extending their "employee pricing" promo to include some of their 2006 models.

More like "bankruptcy pricing" if you ask me!

[Rennsport Calgary]

Seems like the rumor is true....GM had full page ads in the Calgary Herald this week with subtle wording about value added features....new lower prices across the board...etc...etc....Saturnesc talk frankly.....but no "direct"statement about one price.....yet.

[Mr. Pebble]

GM appears to be in serious trouble. Delphi held up its bankruptcy until the Q4 had started so GM could avoid having to report any liability on Monday. When the Q1 report comes out in January, there will be no way to cover up. Every executive wants to go out a winner and they usually pad the Income Statement and Balance Sheet in their last year to look good on the way out. They have done it before. Let's see how many execs use the last two months to exit from GM and cover their collective butts and cash in their stock options.

I am getting some serious rumblings that both the industry and politicians are in a panic over GM going into Chapter 11, which could come as early as the First Quarter of next year. The UAW appears to be panicking as well, probably giving in to major concessions on health care within the next few weeks.

Unfortunately, health care and legacy costs are not GM's biggest problems and GM will not address them. One, the interest on their debt is pretty much out of their control and is rising rapidly. The GMAC "Smart Notes" which they have been pushing off on unsuspecting investors through brokerage houses have been taken off the market and as they come due, GM will have to replace them with bonds that carry junk bond rates. Some of their regular bonds are already paying 13+% on the markets whcih GM doesn't have to pay but new debt will carry that rate and GM has megabillions in existing bonds coming due every month. Even now, GM would even have a huge negative stockholders equity if they would just take the "funny money" off the asset side of the ledger.


The second problem is cost. GM is horribly inefficient at producing vehicles and the only way they can react is by outsourcing, cutting payments as they chase their suppliers away or force them into bankruptcy, and other ways that temporarily cure the symptoms but encourage the disease. Horribly inefficient at $10 per hour is almost as bad as horribly inefficient at $27 per hour. The Japanese also have their own problems but they are simply better than the Big 3 and see no obligation to be good, just to be better.

Third, GM refuses to address its quality problems. Their problems with brakes and electrical systems are legendary, going back over 20 years, and they refuse to do anything as their customers head for the Toyota dealer for their next purchase. People are fed up with taking their GM cars continuously back to the dealer to be fixed while those who own foreign cars rarely have problems. As of June, my doctor has had his 2003 Suburban in five times this year for electrical problems. He also complained loudly about transmission problems and was told that there was noting wrong with it. In August, the transmission gave out and they refused to fix it because it was out of warranty by then. He will never buy another GM product.

GM also a terrible arrogance that has been a problem for decades. They also treat their salaried employees like garbage and there is this huge resentment of GM among these employees and with morale somewhere between minus infinity and the next worst category, it is hard for even the most loyal of employees (just about all of them) to put their best foot forward every day. Kiss up and step down is the number one corporate philosophy and it is killing GM. Everyone is afraid to make even the simplest of decisions without taking it up the ladder as far as it will go and getting a bad decision for an answer.

But them, GM has always lived off press release puff and a compliant media has blown the horn for them. GM has an Enterprise Value that should scare the socks off any investor with an I.Q. over fifteen, barely one percent of their stock is owned by individual investors (the rest held by insiders and institutions squandering people's 401k money on the stock) and smart investors selling as much as 10% of GM's stock short, anticipating the impending collapse. No doubt, when the roof falls in, GM will fake major surprise but they will be talking to an empty room as even the most naive investors will have gotten the message long ago and hit the road.

The Q3 report coming out Monday will not be good news. The pundits have already greased the skids on an announcement of substantial loss for this quarter and the year. GM may wind up following someone else's advice for the first time ever in eliminating their dividend but only because they have to money to pay it. It's going to be a long Winter for GM, its customers, its employees, suppliers, retirees and its stockholders but not its executives who will float off to prosperity under the huge umbrella called the golden parachute.


GM has be circling the wagons ever tighter for quite a few years but there are few wagons left and they have sold off the wheels and sit motionless in the sand staring forlornly at the track worn down by their competitors headed over the horizon toward the pot of gold called prosperity. Q3 comes out in a little over 24 hours. Brace yourself.

Mr. Pebble