Discuss Detroit Archives - January 2008 Ford stock lowest since '85, GM lowest since '06 Previous Next
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Livernoisyard
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Username: Livernoisyard

Post Number: 5512
Registered: 10-2004
Posted on Thursday, March 13, 2008 - 8:20 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Why is it that some of the worst news to hit Detroit gets avoided on DY like the plague or if it's "just a cycle?"

When these two companies fail, there won't be that much left to this area. What would possibly fill in for the eventuality of these two companies going down, much like the once mighty US consumer electronics industry vanishing during the 1970s?

Answer, nothing much. Foreign companies will buy whatever they want and, most likely, move it out of here.

Freep story

Taken together, the total market capitalization of Ford (~$12 billion) and GM (~$11 billion) combined is just over $23 billion.

Nissan, OTOH, is worth $36 billion, Honda is worth $53 billion, Daimler $84 billion, and Toyota $190 billion. BTW, bankrupt Delphi (once the 51st US corporation in capitalization) is worth $68 MILLION.
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J_to_the_jeremy
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Username: J_to_the_jeremy

Post Number: 47
Registered: 03-2007
Posted on Thursday, March 13, 2008 - 8:24 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Health care is growing fast in the region, and unless I'm mistaken, is the fastest growing sector. It could surpass the car companies soon.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5513
Registered: 10-2004
Posted on Thursday, March 13, 2008 - 8:47 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Still, it costs money to pay for health care. And that would have to come out of the private sector somehow. Unless you're some kind of socialist, and you believe in free lunches...
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Mwilbert
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Username: Mwilbert

Post Number: 128
Registered: 11-2007
Posted on Saturday, March 15, 2008 - 12:22 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Because it isn't really news?

However if you want a gloomy forecast, here's mine:

There's going to be a nasty national recession, which will be even worse in Michigan.

The local auto industry will continue to shrink.

With the recession upon us and gas prices at unprecedented levels, Chrysler will almost certainly disappear this year--not sure whether it will be before or after they go bankrupt.

Ford and GM could go bankrupt. The current financial problems may put the last nails in the coffins, as a lot of marginal buyers aren't going to be able to get car loans anymore.

Health care jobs are no replacement for auto industry jobs, because cars bring money into the region (sold all over the country), while health care is provided almost entirely to local residents.

Detroit's fiscal problems will probably drive it into receivership, although I think they will probably come up with enough budget tricks to avoid it this year. When they have to start dropping assessments in earnest I imagine the game is up. I actually don't think this is all bad, because it would probably allow some needed reforms of city government.

With jobs disappearing, the region's population shrinks significantly. More abandonment problems both in the city and suburbs.

Now I personally think that this will be the darkness before the dawn, but it is going to be really dark, and probably for a number of years.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5522
Registered: 10-2004
Posted on Saturday, March 15, 2008 - 12:45 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I felt pretty much all along that those events could or would occur before 2010. However, before bellying up, one or more of the Detroit Three might be purchased. But with the legacy costs hovering like a Sword of Damocles, it'll be cheaper for any foreign firm to purchase their assets in bankruptcy court instead of purchasing the assets along with any annoying liabilities before reorganization. Severstal NA only purchased the assets of Rouge Industries, AFAIK.

As to receivership, that's probably the only means to get rid of the corruption here due to the overall lack of common sense among its electorate, enabling the corruption to continue for as long as it has already.
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East_detroit
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Username: East_detroit

Post Number: 1567
Registered: 11-2003
Posted on Saturday, March 15, 2008 - 1:54 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

These two companies aren't going to fail.
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Crumbled_pavement
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Username: Crumbled_pavement

Post Number: 261
Registered: 08-2007
Posted on Saturday, March 15, 2008 - 3:03 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Says who?
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Gravitymachine
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Username: Gravitymachine

Post Number: 2003
Registered: 05-2005
Posted on Saturday, March 15, 2008 - 7:50 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

yay , my 401k is in the toilet!
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Detroitsfirstson
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Username: Detroitsfirstson

Post Number: 53
Registered: 01-2007
Posted on Saturday, March 15, 2008 - 7:54 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

These companies aren't going to fail. Chrysler may but Ford and GM are far from that. A companies stock price has just as much to do with a popularity contest as it does with the fundamentals.

GM is selling just as many cars a Toyota and blowing Nissan and Honda out of the water. Ford isn't far off the beating path either. They both have great model lines and are learning how to make "cars" again.

The companies are fine and when they are the flavor of the month again on Wall Street, you will see it reflected in their stock price. They are getting their cost structure under control and are even talking about HIRING in 09 at the lower wage structure that they have worked out with the UAW.

If you want to bet against GM and F, I will take that action all day long.
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Iheartthed
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Username: Iheartthed

Post Number: 2848
Registered: 04-2006
Posted on Saturday, March 15, 2008 - 8:08 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

Why is it that some of the worst news to hit Detroit gets avoided on DY like the plague or if it's "just a cycle?"



Well, in this instance, the news with Ford and GM is very much tied to the national economy. Analysts revised expectations (downwards) on earnings this year for pretty much all automakers, domestic or foreign. This was in light of new reports of national consumer confidence shrinking, as well as credit worries.

The bigger story is that yesterday one of the nation's largest investment banks almost went under.
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Lowell
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Username: Lowell

Post Number: 4620
Registered: 10-2003
Posted on Saturday, March 15, 2008 - 12:03 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Sounds like a good time to buy those stocks. Soon they will have their buyout costs behind them, new labor contracts that will drop the cost per car $1000 and a rising swell of support for corporate [witness yesterday's bail out of Bear Stearns] and trade protectionism will bring them back for another rise. Should McCain win, all bets are off however but I think that unlikely at the moment.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 1047
Registered: 01-2005
Posted on Saturday, March 15, 2008 - 2:06 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

"GM is selling just as many cars as Toyota and blowing Nissan and Honda out of the water. Ford isn't far off the beaten path either."

Well, now, that may be true but the problem is they lose money on every car they build. Are they supposed to make that up on volume?

Lowell, I'm not sure how you think the Dems will help when it appears that their major interest in the automotive business is to raise CAFE standards and corporate taxes (assuming the car companies will ever again have any taxable income.)
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Club_boss
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Username: Club_boss

Post Number: 332
Registered: 12-2006
Posted on Saturday, March 15, 2008 - 2:34 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I want to say $17.50 (or is $18.50) would be a 25 year low for GM.
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Jrvass
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Username: Jrvass

Post Number: 520
Registered: 01-2007
Posted on Saturday, March 15, 2008 - 2:35 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

3rdWC...

Corporations don't pay taxes. The consumers of their products pay higher prices to cover the higher taxes.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 1048
Registered: 01-2005
Posted on Saturday, March 15, 2008 - 3:23 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Jrvass: Glad you're not my CPA. I'd be in jail.

Corporations that don't make any money, such as our car companies, don't pay taxes, so it's accurate to state SOME corporation don't pay taxes. That's not a good thing, by the way.

From your comment, it appears you believe that corporations that do pay taxes can automatically pass along the cost of those taxes to their customers. (Surely you jest.) And, if you're a Democrat, as I somehow think you may be, try to influence your candidates to come out for for the elimination of all corporate taxes in an effort to help consumers who will thereafter no longer have to pay them.
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Mwilbert
Member
Username: Mwilbert

Post Number: 129
Registered: 11-2007
Posted on Saturday, March 15, 2008 - 3:57 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

It is possible Ford and GM can avoid bankruptcy, but if we have a serious recession, I doubt it. I don't know if you have looked at their balance sheets, but as of the end of 2007, GM has current liabilities greater than current assets, and tangible net assets of negative $37 billion. That doesn't mean it can't survive, but it doesn't have much margin for error, and GM is error-prone.

The main reason GM took that enormous accounting loss last quarter was because they had to write off the value of their tax losses because their accountants don't believe they will ever be able to use the losses, because they don't expect GM to ever make any taxable income that they could use the previous losses to offset. That isn't exactly a good sign.

On a different topic, no one knows who pays corporate taxes--it has been a topic of considerable debate, and is analytically difficult to figure out.

In general, it has to be split between consumers and shareholders, because there isn't anyone else. In more competitive markets, shareholders probably pay more, in less competitive ones the taxes probably fall more on the consumers, but it is hard to know what the actual split is.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5524
Registered: 10-2004
Posted on Saturday, March 15, 2008 - 4:12 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The really major repercussion resulting from the demise of the Detroit Three will obviously be felt upon the 5000 to 6000 or so of the US Tiers still remaining in business. They still employ about seven times the manufacturing jobs as there are assembly jobs.

Without any major US firms left, expect more of the Tiers to fold--especially those doing services directly for the Detroit Three.
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Mwilbert
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Username: Mwilbert

Post Number: 131
Registered: 11-2007
Posted on Saturday, March 15, 2008 - 5:27 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Just because Ford and GM go bankrupt doesn't mean they won't exist. They'll be reorganized, and afterwards they may even be profitable--wiping out tens (maybe hundreds) of billions of dollars of debt can do wonders for profitability. The common shareholders would be wiped out, but the suppliers would still probably be supplying them.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5528
Registered: 10-2004
Posted on Saturday, March 15, 2008 - 5:31 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Or their assets sold and carted away... out of Michigan, and their remnants may still be profitable for some other firms elsewhere. Their remaining in SE Michigan is not assured in any reorganization.
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Fmstack
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Username: Fmstack

Post Number: 49
Registered: 06-2007
Posted on Saturday, March 15, 2008 - 6:11 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I kinda think that raising CAFE standards would ultimately result in better sales for the American automakers. Adam Smith's disembodied ghost hand will push the Big Three in that direction eventually, it's just I think that without a hearty helping shove from the legislature they won't focus on sane cars until after they go totally bankrupt.
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Mwilbert
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Username: Mwilbert

Post Number: 132
Registered: 11-2007
Posted on Saturday, March 15, 2008 - 7:09 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

If tougher CAFE standards had been put into effect 15 years ago, the Detroit automakers would almost surely be better off now.

The new CAFE standards are completely irrelevant. The price of gas is going to be high enough that consumer demand will force average mileage past what is required by the CAFE standards. I don't really understand what planet the people who are complaining about these standards are living on. Probably one with more oil.
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Lowell
Board Administrator
Username: Lowell

Post Number: 4623
Registered: 10-2003
Posted on Sunday, March 16, 2008 - 12:44 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

This action may have quietly done as much to bring Nixon as did Watergate...

The National Maximum Speed Law (in the United States) was a provision of the 1974 Emergency Highway Energy Conservation Act that capped all speed limits at 55 mph (90 km/h). This cap was intended to conserve gasoline in response to the 1973 oil crisis. This law was modified in the late 1980s to allow 65 mph (105 km/h) limits. In 1995 it was repealed, returning the power of setting speed limits to the states.

It is time again to think dramatically about conservation first.

As for CAFE, I think its targets should be doubled.

There is going to be pain, but not as much as if we continue on the current aimless path that sends hundreds of billions to buy oil from people who hate us. Add to that double or triple that amount in our taxes dollars that are needed to fight wars for it.

And look at the mess we are in today.

What would the trillion dollars wasted in Iraq have done if applied to R & D in conservation and alternate energy sources?
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Jrvass
Member
Username: Jrvass

Post Number: 522
Registered: 01-2007
Posted on Sunday, March 16, 2008 - 12:55 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Why not drill for & refine our own oil?
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Sknutson
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Username: Sknutson

Post Number: 1087
Registered: 03-2004
Posted on Sunday, March 16, 2008 - 12:58 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Perhaps, Jrvass, its because we only have a tiny fraction of what we need.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5534
Registered: 10-2004
Posted on Sunday, March 16, 2008 - 1:33 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Doesn't the Canadian oil shale make up the planet's greatest known reserves, at present?

One advantage of using up the reserves in the Middle East is that in time that will tend to make those Middle East nations less wealthy upon their crude's depletion and, thus, be less able to have much control over the remaining reserves elsewhere.
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Ladyinabag
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Username: Ladyinabag

Post Number: 464
Registered: 03-2007
Posted on Sunday, March 16, 2008 - 3:47 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

It is just as simple as when the economy gets bad people stop buying cars. It is just as simple as whenever a Republican gets into office, the economy gets bad. The solution....vote Democrat. I swear to God, Americans have short-term memory loss. The Republicans are money-grubbing war mongers, and the Democrats care more for the domestic problems of the U.S. Plain and simple.

(Message edited by Ladyinabag on March 16, 2008)
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Gene
Member
Username: Gene

Post Number: 88
Registered: 10-2006
Posted on Sunday, March 16, 2008 - 8:57 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:
It is just as simple as when the economy gets bad people stop buying cars. It is just as simple as whenever a Republican gets into office, the economy gets bad. The solution....vote Democrat. I swear to God, Americans have short-term memory loss. The Republicans are money-grubbing war mongers, and the Democrats care more for the domestic problems of the U.S. Plain and simple.

Guess you forgot about the Carter years.

Brilliant statement though where did you get your degree in Economics from?
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Mwilbert
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Username: Mwilbert

Post Number: 134
Registered: 11-2007
Posted on Sunday, March 16, 2008 - 9:04 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I think there may be more Venezuelan (very) heavy crude than Canadian tar sands, but it doesn't matter. You can't produce them fast enough to make a big difference in the overall oil supply, as the production of conventional oil is already falling. Even including the tar sands production already occurring, world oil production is basically flat.

We aren't going to run out of oil, we just aren't going to be able to afford to use as much of it as we do now. Democrats or Republicans, we aren't going to use as much oil. That's not the end of the world, but it makes the new CAFE standards irrelevant.
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Iheartthed
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Username: Iheartthed

Post Number: 2849
Registered: 04-2006
Posted on Sunday, March 16, 2008 - 9:13 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Canada is our largest supplier. Saudi Arabia has the largest reserve.
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Livernoisyard
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Username: Livernoisyard

Post Number: 5537
Registered: 10-2004
Posted on Sunday, March 16, 2008 - 9:40 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

Canada is our largest supplier. Saudi Arabia has the largest reserve.

Saudi Arabian sour crude is the petroleum equivalent of low-hanging fruit. But the petroleum (~1.7 trillion bbl) in the Canadian tar sands is greater than that of Saudi Arabia. But, it's more difficult to extract. The total known reserves in the Mid East, coincidentally, is also approximately 1.7 trillion bbl of petroleum.

An even greater reserve of petroleum is contained in US oil shale (kerogen, at 1.5 to 2.6 trillion bbl petroleum), and smaller amounts are located elsewhere on the planet.
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Fmstack
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Username: Fmstack

Post Number: 52
Registered: 06-2007
Posted on Sunday, March 16, 2008 - 6:03 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

When considering Canadian tar shale, you also have to account for the energy costs -- and the just plain costs -- involved in extracting it. I recall hearing that up in Alberta there's a proposed new nuclear plant just to run shale extraction.

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