"GM is a bank that makes cars."

[FRED]

"GM is a bank that makes cars." - Eric Janszen on NPR, Oct. 20, 2008

Two months later...

GMAC - Fed opens door to bailout funds

Top regulator grants bank holding company status to GM's troubled financing arm. Cites turmoil in financial markets.

NEW YORK (CNNMoney.com) -- The Federal Reserve on Wednesday opened the door for GMAC to get federal bailout money by granting the troubled General Motors finance arm status as a bank holding company.

"In light of the unusual and exigent circumstances affecting the financial markets ... the board has determined that emergency conditions exist that justify expeditious action," the Fed said in an order released Wednesday evening. more...

[metalman]

Re: "GM is a bank that makes cars."

"GM is a bank that makes cars." - Eric Janszen on NPR, Oct. 20, 2008

Two months later...

GMAC - Fed opens door to bailout funds

Top regulator grants bank holding company status to GM's troubled financing arm. Cites turmoil in financial markets.

NEW YORK (CNNMoney.com) -- The Federal Reserve on Wednesday opened the door for GMAC to get federal bailout money by granting the troubled General Motors finance arm status as a bank holding company.

"In light of the unusual and exigent circumstances affecting the financial markets ... the board has determined that emergency conditions exist that justify expeditious action," the Fed said in an order released Wednesday evening. more...

it was only ever about gmac and that hedge fund cerberus. gross.

[Mega]

Re: "GM is a bank that makes cars."

Fred/Metalman
I sussed that GM was a bank that used car as credit bait some years ago. When i heard that they then took on credit card debt and other debt i knew they were toast.

I remember discussing this with my father, while Bloomberg was on in the back ground. They then "discussed" it, when Wall st issuning alsorts of BUY recomands!

You know, the more crap they pulled the more People around the World WOKE UP to the fact that Wall St was just one Bloody big con trick.

Gm is Bank................Yes

Oh BTW..............GE is a hedge fund!

Mike

[Glenn Black]

Re: "GM is a bank that makes cars."

GE is a hedge fund? How so?

GE is certainly a bank. Almost half of their revenue comes from FIRE.

Now that GE is trying to sell off its appliance division (GE is N. America's largest appliance manufacturer), they will become even more heavily weighted to banking & FIRE.

[FRED]

Re: "GM is a bank that makes cars."

GE is a hedge fund? How so?

GE is certainly a bank. Almost half of their revenue comes from FIRE.

Now that GE is trying to sell off its appliance division (GE is N. America's largest appliance manufacturer), they will become even more heavily weighted to banking & FIRE.

Do you know how much of GM's and Ford's revenues are derived from auto financing?

[Glenn Black]

Re: "GM is a bank that makes cars."

GM's 2007 Annual Report: http://www.gm.com/corporate/investor...m07ar_full.pdf

For GM, 100% of their profits were GMAC (the bank side of GM) in 2006. The auto side lost money.

For automotive side in 2007, GM's divisions in South America, and SE Asia were profitable, but North America and Europe both lost money, making GM Automotive side combined overall a big loser.

Fortunately, in Nov./06 GM sold 51% of GMAC to a consortium including Cerberus (hedge fund who also owns a big stake in Chrysler), Citigroup, and others. In 2007, GMAC lost its shirt in credit card, residential mortgages, bad car loans, etc.

Combining the simultaneous losses of GMAC and Automotive operations together produced the "perfect storm" for GM's finances and cash flow.

GM has been operating as a cash flow driven company for a number of years. This mode is usually for income trusts, brand new startups, and sick companies. This means that profitability is far less important than the flow of cash through the organization.

After a 100 years in business, GM has no net worth left on its balance sheets. Their depreciated assets are worth less than their liabilities.

If a banker is asked to loan more money, they ask for accounts receivable (ie. cash flow) and a security interest in the company's assets to secure the loan. Previous loans have already tapped all of these assets and revenue streams. There is probably little left to pledge to new loans and lines of credit. Even if credit markets existed, GM wouldn't qualify. Hence, GM commercial debt is junk bond status, and worse; far from investment grade required by pension plans, etc.

Stop paying their bills (ie. a cash flow issue), they have no where to turn, and they are gone, bankrupt.

Of course, washed of all debt through bankruptcy, one might think GM would have a pretty good go of it. Many airlines did it successfully, emerging as a valid competitor through Chapter 11.

Unfortunately, all of the rest of us would be hit by the tsumani created by GM's bankruptcy in the CDO's and CDS' financial markets. The consequences of those shock waves would kill GM again (ie. no customers willing or able to buy new cars). We would probably see the death of GE, AIG, many big banks, and thousands of formally blue chip corporations.

[FRED]

Re: "GM is a bank that makes cars."

For GM, 100% of their profits were FIRE. The auto side lost money.

Ford, I'm not sure.

Is that determinable by reading GM's and Ford's income statements?

[GRG55]

Re: "GM is a bank that makes cars."

"GM is a bank that makes cars." - Eric Janszen on NPR, Oct. 20, 2008

Two months later...

GMAC - Fed opens door to bailout funds

Top regulator grants bank holding company status to GM's troubled financing arm. Cites turmoil in financial markets.

NEW YORK (CNNMoney.com) -- The Federal Reserve on Wednesday opened the door for GMAC to get federal bailout money by granting the troubled General Motors finance arm status as a bank holding company.

"In light of the unusual and exigent circumstances affecting the financial markets ... the board has determined that emergency conditions exist that justify expeditious action," the Fed said in an order released Wednesday evening. more...

Chutzpah Unlimited


Intense lobbying by banks and bankruptcy experts softened a key provision in the auto-bailout bill that would require government loans be repaid ahead of banks and other lenders. But the current language leaves unlcear just who would collect first in the event of a bankruptcy filing--taxpayers or existing creditors. ... The banks prime concern centered around a plan to make the U.S. government's $14 billion in rescue loans senior to other loans. They argued that this clause violated the Fifth Amendment of the U.S. Constitution, which prohibits the taking of private property without 'just compensation'. ... Historically, the only way a secured lender can be forced to take a backseat to another lender is in bankruptcy court, where a judge hears from the secured lenders and determines if those creditors are protected with additional collateral or other measures. ... 'It really sounds like a clear violation of the taking clause in the Constitutuion, to put the government ahead of all the other lenders. To go this route is a treacherous path riddled with all sorts of constitutional issues,' said Don Workman, head of the restructuring practice at the law firm of Baker Hostetler [BH]. ...

...this is a "no-brainer". Either this is an auto bailout bill, or another bank bailout bill.

[Slimprofits]

Re: "GM is a bank that makes cars."

Is that determinable by reading GM's and Ford's income statements?

Searching for something else I landed on this article from Bloomberg.com in 2004:

Last year, the world's No. 1 automaker earned far more profit -- $2.8 billion, or 87.5 percent of the $3.2 billion total -- lending money, writing mortgages and selling securities than it did selling its cars and trucks.

If GMAC were an independent company, it would be the eighth- largest U.S. bank. Ford Motor Credit Co., GMAC's counterpart at Ford Motor Co., would be the 10th-largest U.S. bank if it were an independent company.

Now, GMAC's ability to prop up its parent could be jeopardized because borrowing costs will rise ``at some point,'' says Federal Reserve Chairman Alan Greenspan.

[jk]

Re: "GM is a bank that makes cars."

i disagree re gm. gm is primarily an insurance company with health and pension lines of business. on the side it owns a half interest in a bank [gmac] and a car manufacturing operation. given the liabilities both current and future for its insurance business, gm is fully owned by its employees past and present.

it's also worth noting, as bill gross pointed out a couple of years ago iirc, that the u.s. - with its huge unfunded health and pension liabilities - is essentially gm writ large.

[GRG55]

Re: "GM is a bank that makes cars."

Chutzpah Unlimited


Intense lobbying by banks and bankruptcy experts softened a key provision in the auto-bailout bill that would require government loans be repaid ahead of banks and other lenders. But the current language leaves unlcear just who would collect first in the event of a bankruptcy filing--taxpayers or existing creditors. ... The banks prime concern centered around a plan to make the U.S. government's $14 billion in rescue loans senior to other loans. They argued that this clause violated the Fifth Amendment of the U.S. Constitution, which prohibits the taking of private property without 'just compensation'. ... Historically, the only way a secured lender can be forced to take a backseat to another lender is in bankruptcy court, where a judge hears from the secured lenders and determines if those creditors are protected with additional collateral or other measures. ... 'It really sounds like a clear violation of the taking clause in the Constitutuion, to put the government ahead of all the other lenders. To go this route is a treacherous path riddled with all sorts of constitutional issues,' said Don Workman, head of the restructuring practice at the law firm of Baker Hostetler [BH]. ...

...this is a "no-brainer". Either this is an auto bailout bill, or another bank bailout bill.

No comment could do this headline justice...

And although "The Market" will no doubt express "surprise", I doubt anybody here is...:rolleyes:

GM warns it may be forced into bankruptcy

Thu Mar 5, 2009 7:22am EST

NEW YORK (Reuters) - General Motors has substantial doubt about its ability to continue as a going concern if it fails to stem its losses and generate cash, and it may be forced to file for bankruptcy, the automaker said on Thursday...

[raja]

Re: "GM is a bank that makes cars."

No comment could do this headline justice...

And although "The Market" will no doubt express "surprise", I doubt anybody here is...:rolleyes:

GM warns it may be forced into bankruptcy

Thu Mar 5, 2009 7:22am EST

NEW YORK (Reuters) - General Motors has substantial doubt about its ability to continue as a going concern if it fails to stem its losses and generate cash, and it may be forced to file for bankruptcy, the automaker said on Thursday...

More than 50 years ago, then-General Motors President Charles Wilson reportedly said "What's good for General Motors is good for the country."

Still true today :eek: