May 03, 2007

The housing crash will take GM into bankruptcy even quicker

Man, talk about being cursed.

* Make crappy fuel-inefficient cars that nobody wants - check

* Have the yen undervalued making Toyota imports even cheaper - check

* Have the HELOC housing atm loot dry up - check

* Own 50% of subprime-disaster GMAC - check

* Have uncompetitive per-car labor and healthcare costs - check

* Have Iran raise gas prices - check

* Run by monkeys - check

(yes, I'm short GM and wonder why you're not)

Subprime woes bite General Motors

No. 1 U.S. automaker sees gains in auto profits, but earnings fall well short of forecasts following losses in subprime mortgages.

General Motors Thursday reported improved results from its auto operations in the first quarter, but problems in subprime mortgages contributed to earnings that missed Wall Street forecasts by a mile.

The nation's No. 1 automaker said it earned $94 million, or 17 cents a share, excluding items in the quarter, compared with adjusted earnings of $350 million, or 62 cents, a year earlier.

While the company's finance arm GMAC had reported Wednesday afternoon that it had nearly $1 billion in losses on its mortgage business, primarily due to subprime mortgage problems, the analysts' forecasts had all published their estimates well before that announcement.
Subprime mortgages have gotten a lot of attention in recent months and GMAC's significant subprime mortgage business was well documented. But the extent of the loss from that business seemed to catch analysts by surprise.
"Frankly, I don't think that was fully factored in," said GM Chief Financial Officer Fritz Henderson on a conference call with analysts and journalists.


wawawa said...

Why GM's cost for healthcare is $1500/car, and TOYOTA's cost is $200/cars?

Is it because of the Unions?

wawawa said...

Why GM's cost for health care is $1500/car and TOYOTA's cost is $200/car?

Is it because of Union contracts?

RAYNLA said...



Why such a late post bruh?

We were starting to worry about you! I thought Greg Swann found your address or even worse David Leareh...LOL

Good to know you are ok man. Now get back to the BLOG there is a Housingpanic and folks have an Attitude Problem!!!


wawawa said...


I like your bolg.

Why are you screenig your blog?

You do not need to do that. Nothing is absolute, you are not absolutly right and your oppositions are not absolutly right either.

Let the free thinking flow.

Mort said...

Too bad they don't have any more electric cars to crush. It is great fun and would cheer them up greatly. Eat it GM!

Markus Arelius said...

Keith, sorry dude, but you forgot one thing:

The lowest overall quality ratings in the automobile industry for 5 years running - CHECK

The lowest customer satisfaction / sales satisfaction rating behind Toyota, Honda, BMW, Mercedes and Chrysler - CHECK


G said...

So if GM had 1 billion in losses from GMAC, that means Cerberus had 1 billion in losses from GMAC. Many have postulated that a large hedge fund implosion could be the trigger to the crash we know is inevitable. UBS having Dillon Read flop due to losses in mortgage backed securities was the first true crack I've seen. You've got to hand it to these crooks like Cerberus: they really must be masterful at obfuscating huge losses. Want to start taking bets on which hedge fund could be the 2 ton anvil that breaks the camel's back? let's see:

- Cerberus has just lost 1 BIIIIILLLLION dollahs on GMAC.
- Farallon just rescured LEND with a $200 million infusion (of borrowed money I am sure). Why? They had just bought a controlling stake in December! Talk about doubling down on a bad bet! They'd be better off taking that $200 million to Vegas and stuffing it into slot machines.
- JC Flowers just buys Sallie Mae for $25 Billion - and they have over $100 billion in debt - and that's just the debt they are telling us about!

Let's start taking bets on which one of these overleveraged, greedy a-holes is going to have an implosion that makes LTCM look mild in contrast!

Anyone else notice any suspicious hedge fund activity lately?

Batman said...

What's good for GM, is good for America!


Mammoth said...

"* Make crappy fuel-inefficient cars that nobody wants - check"

Don't just blame the unions and manufacturing.

Let's change that to:
"Design and build crappy fuel-inefficient cars that nobody wants - check"

GM needs to do a much better job of verifying their products work, and are durable, before putting them on the market.


keith said...

Been in the midlands of england traveling the past couple of days... back to the crash!

I like talking to cabbies when I travel about housing conditions. I asked on yesterday in mid-north england what the local industry was, what it used to be

after he talked about how they used to make things, and steel, and cotton, which has all died out, he said it's housing that's driving the economy now

So I said - your economy is based on people buying and selling houses from each other - and he said 'yup'. I asked him if rents were up in the past five years and he said - nope, people don't make money here to afford good rent

And there you have it.

Meanwhile, after GM and its suppliers all go belly up, can you imagine how cheap houses in Michigan and Ohio are going to be?


Anonymous said...

If healthcare itself wasn't as a business - if the US had single payer (like Japan and Europe) then their health care costs would be almost insignificant!
It's drug company CEOs, insurance company CEOs, medical sales reps, insurance commisions etc. etc. that are crushing the US economy.

dale earnhardt jr said...

As a devoted gm buyer I am sick and tired of this crooked ceo, wagner.They need to get more small cars out.Fuel will be over 4.00 next year.Toyota sees the writeing on the wall as usual.Does that crook kerkorian still own any gm shares.What a little weasel he is.
Toyota has gm by the balls.Mr wagner will be gone soon.

sinis said...

I feel like others have mentioned that I wish things would speed up! I have been eyeing an area that I like (not new shit boxes) but it seems these crazy fuckers are trying to sell a 120-150K house in 2000 for 300-500K in 2007! They seem to sit forever on the listings. Funny how a lot of the homes have pictures and there is NO FURNITURE in any of them! Leads me to believe they are spec houses. I gave up on low balling similiar homes because it got me no where Anyway, I hope it comes down soon...

g said...

JC Flowers recently bought a $53 Million pad in Manhattan while the average Joe is foreclosing and going bankrupt!

"This is OUUUURRRRR country"

Mass. has frozen foreclosures after an angry mob marched on the governor's mansion! Because after all, it was the government's fault that they took out a stupid loan!

"This is OUUUURRRRR country"

Anonymous said...

GM was dead long before anyone uttered the phrase housing bubble.

Pete said...

>>>They'd be better off taking that $200 million to Vegas and stuffing it into slot machines. <<<

LOL LOL LOL. Not only funny, but profiundly true as well.

Batman said...

Ha, midlands eh? I lived in Loughborough once. How's the bubble in Leicestershire and similar vanilla locales?

Anonymous said...

can houses in Michigan get any cheaper? Median in Detroit is something like $110K.

Frank said...


I just sent a scathing letter to the building manager here that either the mortgage broker jerkoffs down the hall go, or I go. I can't even take conference calls from my office with their yelling and high-fiving each other all day.

I was hoping they'd go broke by now but they're still scamming people apparently.

Anonymous said...

wawawa said...
Why GM's cost for healthcare is $1500/car, and TOYOTA's cost is $200/cars?

Is it because of the Unions?

May 03, 2007 9:37 PM
While not a big GM fan, on this one GM, as well as any american company, just cannot compete with companies from other countries that have socialized medicine. Basically, if the populace is taxed directly for the medical system then its not a line item cost for the corporations that have workers in those countries.

Toyota may have some costs either in the form of matching or just some small kicker policy that covers things the social medical system just does not cover.

Given that fact, UAW workers have a gold plated medical plan that is a leftover from the days when Unions were strong and medicine was not as expensive as it is today. If GM could bring coverage in line with other modern medical coverages (e.g. HMOs that just suck) that would slow the bleeding. But the only way to make them fully competitive is if the US got universal health care.

For now GM just has to use lower quality materials and use manufacturing techniques that are cheaper to offset this additional cost burden their competitors do not have.

Anonymous said...
old moldy mazilo has cashed in $494,469,881 worth of shares in the past 2 years plus his pay package of $48.1 million for 2006 and $72.2 million of option excersizes plus another $119 million in 2005
only about $745,000,000

LeChiffre said...

Years ago (late seventies) I bought a Chevy (new) after tiring of British MG's and Triumphs (too much maintenance). Joe Lucas, Prince of Darkness, was a much better deal than that new POS that Chevy excreted. So here I am nearing 55 and nothing's changed in 30 years.

burn baby burn said...

As GM goes so does the Economy!

Anonymous said...

keep on shorting Keith!

The Truth said...

Below is a chart link to drive home (no pun intended) the point that GM will tumble further as the Housing Bubble continues to unwind.

This is a Weekly Chart from the Week of May 1st 2000 to Present and compares GM and HOV (Hovnanian Homebuilders) to the S&P 500 average over the same time frame.

The single red line is GM, the single green line is the S&P 500 average (the best benchmark for success over time) and the CandleStick Chart above it all is Hov(a very good indicator of the enormous size of the Housing Bubble).

HOV (Hovnanian Homebuilder) was some 2800% Higher than the S&P 500 on The Week of July 18th 2005 (The Peak). GM got involved in this mess and it will get worse for them before it gets better.

The Housing Bubble IS "The Largest Asset Bubble in Our Nations History" and has a long way to go to correct back to the mean. The market always punishes excess.

911 was a message and an attempt to destabilize our economy (and it worked), and our Government sent their own message back by officially creating and confirming the Housing Bubble on Christmas Week 2001. (HOV Week of Dec 24th had an intraday High of $10.85 and Closed at $10.725, both numbers took out the previous High and the Bubble went from there).

It's War!! Prepare Accordingly

Markus Arelius said...

When I lived in West Sussex for a few years, a friend of mine there explained to me the entire home selling process in the UK: I remember that he made it equivalent to a month-long appointment at the local dentist with no anesthetic, which is frightening enough an idea in the UK in case you haven't seen an Austin Powers film.

So I'm surprised to learn that an entire economy can thrive under such a bureaucratic, archaic and solicitor (or lawyer) intense sales exchange.

Regardless, at least these solicitors in the UK, it can be said, are licensed and must follow fiduciary responsibility or else face sanction. Very different from the skills sets seen in the USA, since we are talking about a high number of underqualified realtors with on-the-job or little professional training.

Anonymous said...

Have to post again as Mr. Anonymous like I did with Ford, because I cover GM also.

wawawa asked "Why GM's cost for healthcare is $1500/car, and TOYOTA's cost is $200/car?" Simple --- because GM has hundreds of thousands of retired employees in this country, and Toyota doesn't. Toyota is a relative newcomer. Unions are part of it, in that Toyota already made sure to freeze pensions and cut health care, and they didn't have any union standing in the way. But I can tell you, obviously Toyota employees have far higher morale than GM or Ford employees, so it doesn't really matter.

I listened to the GM earnings call. The way I see it, GM is at a pretty strong point in their product cycle. Keith points out that GMAC hemorraged money from the Rescap business, but it was actually a blessing that GM sold 51% of GMAC last year. Could you imagine GM trying to sell now? Not only would the value of GMAC be severely reduced, lowering the chance of getting a good price for GMAC, but GM would take the full brunt of the Rescap losses.

I expect 2008 to be more challenging for GM. They need big concessions from UAW again, as the contract expires in Sept of this year. I doubt they will get much -- maybe get rid of the Jobs Bank --- that would be a small victory, but not enough for long-term health.

GM will not go bankrupt anytime soon, if at all. They will only break even over the long term, while Toyota will pull in about $10 billion a year.

Paul E. Math said...

Love the 'run by monkeys - check'. I was scrolling right past this one but the monkeys things caught my eye and gave me a good belly laugh. Thanks Keith.

GMAC is just one of the many mistakes this company is making. They've been trying to make good cars - they're just not any good at it.

FL_Bust said...

The housing ATM has run out of money .. gas is at $3 .. milk is up 10% .. game over !!

Katharevousa said...

I think your analysis is a bit off on this one Keith. GM sold half their mortgage business last year for x2 - x3 what is was worth long-term, basically at the height of the bubble. Everyone piled on claiming they were selling they're cash cow. Now they look like the Oracle at Delphi. Perhaps they were reading your blog?

And they put the money to good use, restructuring their operation, trimming cost and developing new models. Right now GM is the only American automaker that's executing and if any of them survive it will be GM.

Alpha_Bear said...

"Why GM's cost for healthcare is $1500/car, and TOYOTA's cost is $200/cars?

Is it because of the Unions?"

Maybe it has more do with privatised healthcare versus socialised healthcare?

Anonymous said...

Why GM's cost for health care is $1500/car and TOYOTA's cost is $200/car?

Sort of---GM used to have many more workers and so is paying retirement medical costs for a totally disproportionate worker base. Toyota, however is expanding so it is the opposite.

Notice that Toyota workers in Japan are also unionized and paid quite substantial wages, with their national health plan, and yet the company is certainly able to support them.

Unions aren't the problem. Medicine is.

Lack of universal medical care is destroying US business.

There is no reason to correlate one's employment with medicine plan. This must be eliminated, for the sake of the economy.

There is no reason to have zillions of insurance companies craft zillions of plans for all sorts of business and jack around their rates.

It's anti true-free market because it makes business hire people based on what *perceived* (often wrong) medical costs they might have rather than how economically productive to the business they are.

It limits people's freedom because they choose their jobs based on their medical history instead of what they want and where they could contribute the most.

Medical underwriting is also BS.

Universal care should be there with allowable factors based only on age (and limited to preclude too much age discrimination), weight and smoking history.

wawawa said...

Go to DRUDGE and vote for Ron Paul.

Anonymous said...

They make wonderful accomodations for the likes of Casey.
I also see that his site is down.

keith said...

GM's assets are lower than their liabilities and they have negative stockholder equity

Add to that a dying product line, the housing crash, and the subprime cash drain

Yup. looking good!

Anonymous said...

The assembly line at GM looks like a bunch of monkeys trying to hump a football.

Sac'to Watcher said...

What happened to IndyMac? Did it's ticker symbol change? Did it go bankrupt?

Anonymous said...

Anonymous Said: (May 4, 2:13am)

'Lack of universal medical care is destroying US business'

An absolutely true statement.

In addition to the rich and corporations, the broken political system in the U.S. is essentially devouring the economy from the inside out, like a worm infesting a rotten apple.

A complete lack of understanding of the larger benefit of universal healthcare to the economy on so many leveles drives the conservative base to vote this issue down at every turn.

Nothing but blind ignorance brings about their pushback to anything that sounds 'socialist'. It drives their dogma while at the same time there is no sense of consequence whatsoever. True theocratic bankruptcy from the word 'go'.

So, while the conservative beliefs add up to little more than failed policies at every turn, the blocking action on universal healthcare leaves our country with focused high-costs on a small base while the rest of the world eats us alive in the competitive marketplace, all in real-time.

Yet, the blank stares predominate and never a clue to why business in this country becomes further at risk by the day.

The pervasive stupidity, conservative rhetoric that never adds up to anything successful and continual policy failures in this country is really what will ultimately bring it down.

This, while everyone stands around with no idea of what the hell is happening or any motivation to do a damned thing about it.

We deserve our fate.

Anonymous said...


Health care is messed up in the US. But what makes you think the federal governmnet running things would be any better. For god's sake man, this is the same federal government that runs social security, FEMA, USCIS (formery INS) and spends $100 on for military hammers. You want this group of people deciding which doctor you should see? Thanks but no thanks.

And this is not a rep/dem issue since both side have fucked things up equally over the past 25 years.

Bob Reno said...

Anonymous said...
can houses in Michigan get any cheaper? Median in Detroit is something like $110K.

May 03, 2007 11:15 PM

Actually, according to a recent article, they are auctioning off houses in detroit for less than the average price of a car ($30k) right now. In some areas, they aren't getting any offers at all.

FL_Bust said...

IndyMac's trying to put a new face to their name by changing their ticker to IMB ..

Anonymous said...

GM's demise is all part of the capitalist plan- older companies with retirees cannot compete with younger companies, lay off their employees and then cancel their retirement plans. Said company then reemerges from bankruptcy with renewed vigor. Need an example, think airlines.

Anonymous said...

PKK (grandmother 63 here)

I've been dreaming of an economic
event and it's spinoffs since age of
almost 3. It was called the Greater
Depression. It seemed to be in place
as a recognizable phenomenon by 2009.

In 1962, I dreamed General Motors
closed it's doors and the social
support network (unemployment,
welfare, I guess food stamps though
they weren't there yet) collapsed
under the weight of massive un-
employment.In the dream I said to
myself, "I guess that would do it",
because the numbers mentioned were
in the 100's of thousands affected
directly or indirectly.

Men were pounding on the doors of I guess the unemployment buildings. Women and children had nothing. Nothing.
I remember the feeling in the dream
of NOTHING. I dreamed I was trying
to feed people, because I had a clue of what was coming.

Watch GM...

Kenduffelsniffenspotzen said...

Anonymous Said: (May 4, 2:13am)
'Lack of universal medical care is destroying US business'

I agree with that statement 100%.

Anonymous said...

Bob Reno said...
Anonymous said...
can houses in Michigan get any cheaper? Median in Detroit is something like $110K.

May 03, 2007 11:15 PM

Actually, according to a recent article, they are auctioning off houses in detroit for less than the average price of a car ($30k) right now. In some areas, they aren't getting any offers at all.

Obviously you don't know what the word median means.

Anonymous said...

"GM's assets are lower than their liabilities and they have negative stockholder equity"

You didn't have to say the last part. It's intuitive after reading the first part.

However, they have $21 billion in cash, and they could borrow at least $30 billion more if they needed to, by securing loans against all of the assets.

They will be around for quite a while, but they will be limping around a lot. You don't necessarily need positive shareholders equity to just need debt investors to knock on your door every so often.