Consider that, despite all common sense or simple logic, we Americans actually own a major chunk of GM thanks to the massive bailouts they’ve received courtesy of us.  Thus, it behooves us to keep an eye on our investment, and for some reason, they’re spending like drunken sailors.

No, that’s an insult to the drunken sailors. They’re spending like the government owns them–which, I guess, it DOES.

They’ve recently announced plans, you see, to introduce between seven and ten new models of GM car over the next year.  Sure, this will get them loads of ink in places just like here, and it’ll also get them a lot of word of mouth interest, but it’ll also sink them in the red like nobody’s business.  Introducing even one new model is a pricey endeavor–seven to ten will cost billions.

Like with a “b” billions.

Excuse me if I don’t think this is a horrendous idea–a couple new models, maybe…but that many in that short a time speaks of impatience and desperation.

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GM & Chrysler have released their plans, which as part of the Auto Bailout they were required to do.  They make for interesting reading and also interesting comparison between the two companies.

GM had their plan prepared by consulting company Booze Hamilton. Chrysler went with an in-house team. Whilst you have to appauld the fiscal responsibility this displays on the part of Chrysler the end product doesn’t look good for the company – it appears their in-house team was made up of interns who thought pretty pictures might distract everyone from the bad news the report contained.

GM is more upfront, claiming that even if they make all of their targets they will still need an additiona $7.5bn before 2011 to stay in business.  Either way the future doesn’t look bright for either of these companies.

You can read the plans for yourself here:

GM & Chrysler

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The economic stimulus plan recently passed by Congress received widespread criticism for containing some conditions requiring that only United States steel be used for government-funded infrastructure projects. While Americans debate protectionism and its impact on world trade agreements, French President Nikolas Sarkozy has announced that $8 billion in government loans to French automakers Renault and PSA Peugeot Citroen should be contingent on Peugeot bringing the Czech plant back to France. “If we are to give financial assistance to the auto industry, we don’t want to see another factory being moved to the Czech Republic,” he said, referring to Peugeot Citroen’s seven-year old Czech plant.

As the global economy worsens, other nations are reining in tendencies towards globalization. “The French have signaled that they are willing to do things they know are illegal under E.U. law,” says Katinka Barysch, Deputy Director at the London-based Centre for European Reform. “But if one E.U. country goes down this route, others will feel they have to follow.”

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Although former president George Bush had indicated an intention to appoint a ‘Car Czar’ to oversee reform of the U.S. auto industry, President Barack Obama announced recently that no such overseer will be appointed. Obama instead plans to appoint a governmental task force to investigate how best to help the Detroit Big Three American automakers go through a successful restructuring. 

Secretary of the Treasure Timothy Geithner will be in charge of overseeing the car bailout loans as co-head of the new high-level panel together with White House economic adviser Lawrence Summers. No immediate explanation was given for why the ‘Car Czar’ plan was abandoned. Handing of the auto industry crisis is now in the hands of Obama’s closest financial advisors. Chrysler and GM have until Tuesday, February 17th to submit plans for long term viability to Congress in order to continue to receive bailout loans.

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Just three days before GM and Chrysler must present plans for sustained viability to Congress in order to continue government loans to the ailing industry, talks between GM and the UAW have broken down over the issue of funding retiree health care. At GM, the UAW negotiators walked away from the bargaining table because of differences over how to pay the health care costs of retirees. “It doesn’t seem like the stakeholders are really prepared to give a whole lot,” said independent auto industry analyst Erich Merkle. “It’s a high stakes game of poker right now.” 

In recent months, much attention has been directed at the UAW by both Congress, GM management, and the press, even though the UAW has already made deep cuts and concessions, and even though GM management has not presented a plan yet to produce competitive hybrid or fuel-efficient smaller cars in a such a way as to remain profitable over the coming years. GM has less than three days left to present such a plan.

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GM is under the gun to come up with a plan for viability by next week in order to keep its $13.4 billion in federal bail-out loan money. Recently, in an effort to move the company closer to that goal, GM announced it will cut 10,000 white collar jobs. This is in addition to the massive blue collar layoffs, plant closings, and temporary plant shut downs that have been made over the past year. 

GM offered all of its hourly workers in the U.S. buy outs in 2008. The white collar cuts just announced constitute 14% of the GM white collar work force. “The purpose is to go into the Feb. 17 submission showing we are making progress on our viability plan,” said a G.M. spokesman, Tom Wilkinson. GM was granted $9 billion in December of 2008 and is eligible for $4 billion more if it can prove to Congress it can become profitable in the coming year.

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March 1st is looming as the date when hundreds of U.S. auto suppliers will run out of cash as they begin to feel the effects of the Big Three production slowdowns of December and January. Payments to suppliers from Detroit’s auto makers are on track to fall 70% in March to $2.4 billion from $8.4 billion per month in the fourth quarter after the Big Three all but halted production in January amid skidding sales. Payments are due 45 to 55 days after parts are delivered, which is why the crunch will hit in March.

In 2008, 40 auto supply manufacturers filed for Chapter 11 bankruptcy, and the Motor & Equipment Manufacturers Association is now asking for a $25.5 billion bail-out for the auto-related industry. About a third of all U.S. parts manufacturers are already in financial trouble with another third set to hit the kids in March if nothing is done. Without federal help, many parts manufacturers will be unable to purchase raw materials once the March deadline passes.

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A provision in the stimulus bill currently underway in Congress that would have given Americans $10,000 to trade in any 10-year-old or older automobile on a new, fuel-efficient model has been dropped due to concerns about the growing size of the enormous bill, which at this writing has topped $900 billion. Dubbed “Cash for Clunkers,” the idea, sponsored by Senator Debbie Stabenow from Michigan and Tom Harkin from Iowa, was designed to get people into auto showrooms and also clean up carbon emissions all in one fell swoop.

Buyers would have had to choose among cars that got at least 25 MPG or trucks that got at least 20 MPG, but controversy over the bill itself caused the “Cash for Clunkers” segment to be redlined. Of further concern was the fact that new car dealers would have had to float buyers the $10,000 until it was paid by the Treasury — a tough hurdle in a time of tight credit.

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GMAC, the financial arm of General Motors, announced this week that its global automotive finance business posted a net loss of $1.31 billion in the fourth quarter of 2008, and a loss of $2.07 billion for the entire year. In 2007, GMAC had a net income of $137 million for the fourth quarter of 2007 and a $1.48 billion in profit. GMAC blamed the losses on problems with auto leases, the declining value of financed cars, and credit losses on vehicles (repossessions).

In December of 2008 the U.S. Treasury bought a $5 billion stake in GMAC to keep it afloat. During the fourth quarter of 2008, new vehicle financing through GMAC fell dramatically as Americans lost jobs and the credit crunch hit the industry full force.  Despite the huge losses, GMAC was able to create a 2008 profit on paper by means of a $6 billion federal bailout and an $11.4 billion gain tied to a $21.2 billion debt swap meant to boost capital.

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Ford Motor Company posted a fourth quarter loss of $5.5 billion today. Ford finished 2008 with cash reserves of $13.4 billion and is the only one of the Big Three automakers that has not taken any federal loans.  Ford said it will immediately take $10.1 billion out of its capital reserves because of the state of the economy and the uncertainty in the credit markets.

“Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results,” CEO Alan Mulally said in a statement. Ford’s fourth quarter loss in 2007 was $620 million, making this year’s fourth quarter loss nearly ten times greater. Ford insisted it still has adequate cash reserves to weather 2009 and believes its ‘burn rate’ will slow down as 2009 progresses. Ford says its current cash reserves stand at about $26 billion.

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Chrysler LLC, which is facing a February 17th deadline to justify recent federal bail out money, is demanding another round of cost cuts from its suppliers. The new price cuts would take effect on April 1st and would affect all Chrysler suppliers, and would be in addition to an earlier round of cuts that took effect on January 26th.

Chrysler, which is widely considered to be the shakiest of the Big Three American automakers, has received $4 billion in US government loans and is asking for another $3 billion. To meet bailout conditions, Chrysler stakeholders, investors, executives, employees, dealers, lenders and suppliers are all required to contribute to the company’s cost-cutting efforts and restructuring plan. Suppliers, who have already made significant cuts, feel squeezed by the demands. Chrysler purchasing director Scott Garberding promised to meet with each supplier separately and is offering suppliers an incentive in the form of a 90% share of any cost cutting measures they initiate.

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Italian automaker Fiat, Chrysler LLC’s next best hope for survival, announced today a level of industrial debt three times higher than even its own forecasts then slashed its profit outlook for 2009 by a third. Fiat just this week agreed to acquire a 35% share in Chrysler, a move that was supposed to make Fiat stronger by giving them a broader industrial base and a U.S. market share, and make Chrysler stronger by  giving the ailing U.S. company access to Fiat’s innovative (and smaller) fuel-efficient car platforms.

Now the deal is beginning to look a lot like the last ditch effort to save K-mart by tying it to the struggling Sears Corporation. If you tie two struggling auto makers together do you get one healthy one? That remains to be seen. Fiat’s no-cash bid for Chrylser — in exchange for Fiat giving Chrysler access to its small car technology and platforms — is contingent on Chrysler winning another $3 billion in U.S. government funding. Chrysler already has received $4 billion in such funding.

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Buick, Chevrolet, Cadillac and GMC will soon be the only four brands listed under the GM logo. According to GM North American President Troy Clarke, GM is currently seeking buyers for Saab and Hummer and as part of its agreement under the terms of its recent federal loan bail-out, GM will reduce its brand number to just four.

“We have to re-engineer the way we’re doing business in many regards,” Clarke said. “We’re going to be a smaller company.” Clarke expressed confidence that GM would indeed be able to execute the downsizing plan according to the terms of the loan, and emerge as a successful but very different automobile manufacturer on the other side of the changes. Other planned cuts include reducing the Pontiac line to just six vehicles, eliminating a host of SUV models across all GM brands, and the possible sale or elimination of Saturn, which has not turned a profit since 1993.

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