The dog ate my homework and my Corvette

Here is a link to the Obama’s team, “Path to Viability for GM and  Chrysler.”  

http://graphics8.nytimes.com/packages/pdf/business/20090330-gm-chrysler-fact-sheet.pdf 

I would encourage all of you to spend a few minutes and read the document.  I also need someone who is far smarter than me to tell me something good about this report. 

Also in the those who don’t learn from history are doomed to repeat it I offer the following article:

http://www.american.com/archive/2009/march-2009/small-car-big-shadow

As you can expect I do have a few observations on the Obama Car report, as you knew I would.

First, since the day the first spoon-cooked hypodermic filled bailout was injected into GM and Chrysler they new they had a deadline to put together plans on how they were going to return to financial viability.  The deal was, here is the hypo, enjoy it for a few days and then get your shit together and let us know how you’re going to extricate yourself from this mess.  Seems the hypo filled with the spoon-cooked bailout was too much a good thing. 

Based on the Obama report, “The plans submitted by GM and Chrysler on February 17, 2009 did not establish a credible path to viability. In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources. Each will have a set period of time and an adequate amount of working capital to establish a new strategy for long-term economic viability.”

Basically, they totally fucked up the homework assignment they were given. 

First step should be to terminate the employment of every executive and Union leader who had ANY, I repeat ANY responsibility in putting together the plans in response to the government.  This includes the board of directors at both companies.

In the next paragraph the report says that even though the GM plan is not viable the Administration is confident that with more fundamental restructuring (or in my term – layoffs) GM will emerge from this process a stronger more competitive business. 

And then they say, I paraphrase, that since the CEO has resigned we’ll give you 60 more days of funding to develop a more aggressive restructuring plan and credible strategy to implement such a plan.  WHAT THE FUCK!  So basically someone in the Obama camp had a hard on for this Wagoner dude and said, we’ll give you 60 days of funding if you whack him.  Sounds like a contract hit to me. 

What makes anyone feel confident that in 60 days GM will all of a sudden have a plan that is viable?  This is like me not doing my homework and then having the teacher say, it’s ok, take it home and do it again and here is $100 go have a good time tonight. 

When are the folks at GM and Chrysler going to take this seriously?  Why do we think they can get it right the second time and who the fuck did our government have working on this path to viability, the Bush team?  

As far as Chrysler goes – if they don’t complete the partnership with FIAT – they are fucked.

An interesting paragraph that should scare every vendor of GM and Chrysler is found at the bottom of page 1.  We’re talking the B word – yep, that same B word the Obama folks said we would never let happen,

While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start. Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way. Unlike a liquidation, where a company is broken up and sold off, or a conventional bankruptcy, where a company can get mired in litigation for several years, a structured bankruptcy process – if needed here – would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success while they keep making cars and providing jobs in our economy.”

Here, according to the path to viability is how GM is going to turn it around:

First significant restructuring at the corporate level then the following from the report:

Sustainable profitability: A viable GM should be able to generate meaningful positive free cash flow in a normalized business environment, generate net free cash flow over the course of a business cycle and invest capital in research and development and capital expenditures sufficient to maintain or enhance its competitive position while also earning an adequate return on its capital.

 

A healthy balance sheet: The restructuring must substantially reduce GM’s outstanding debt and existing liabilities to a level where they are consistent with both its normalized cash flow and the cyclical nature of its business. Given the deterioration in the auto market since late last year, this will require substantially greater balance sheet concessions than those called for in the existing loan agreements.

 

More aggressive operational restructuring: The restructuring plan must rapidly achieve full competitiveness with foreign transplants and more aggressively implement significant manufacturing, headcount, brand, nameplate and retail network restructurings.

 

Technology leadership: The new GM will have a significant focus on developing high fuel-efficiency cars that have broad consumer appeal because they are cost-effective, have good performance and are reliable, durable and safe.

 

Wow.  I am not a Wharton Business school grad even though I did work with a few….wicked smart peeps.  However, I have stayed at a Holiday Inn so that qualifies me to comment on the above.

Cash flow, healthy balance sheet, aggressive restructuring, technology investment.  That’s the best we could come up with?  No shit business management 101.  

I love the term unsustainable liabilities and positive free cash flow.  If you find a bag of money on the street is that considered positive free cash flow.

So based on the above GM will most likely: get a lot more hypo’s of taxpayer cake, declare some form of bankruptcy (wink,wink), close a few plants, layoff some people and tell us now that the Tahoe hybrid gets 22 mpg.

At some point is anyone going to talk about getting together with the Unions to get some labor concessions in the arena of wages and benefits.  I have a question – if GM and Chrysler went completely out of business what would the Unions do, never mind their constituency.

 

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