GM announced today that it was issuing 16 million shares of stock in exchange for debt, therein lowering their interest rate. A good move for a company with some liquidity problems. A company with it’s credentials has some leeway in how it manages its assets. In this case it sold part of its own stake to lower its interest rates and gain liquidity. I’m told that GM owns a rather large stake in their company, but I haven’t been able to track down the percentages from a trusted source. I’ll post it when I do. Also, GM has stated it is open to other such deals with creditors as well.
With this move they are banking on their future success, and truth be told, it looks fairly decent. I’ve noticed a few Malibus on the streets this past weekend. The car’s have been getting good reviews, and should build up some steam competing against the Accord and Camry in the next year or so; if it weren’t for the recession they would be doing a lot better. The Cruz debuts next year in Europe and 2010 in America as a 2011 model; the Volt goes into full production in 2011, so they are starting to look pretty good on paper.
A lot of their money is being put into the foreign market right now. With the current strength of the dollar on the rise, it looks good for overseas investment, and a lot of production facilities are going up overseas. Percentage wise, GM is expected to shift a majority of it’s business to foreign markets, which probably makes some amount of sense, at least in the short term. However, it’s another one of those stats that I wouldn’t mind checking my sources on.
Also, GM on Tuesday is set to relaunch it’s GMNext site, which should answer quite a few questions about it’s operations going forward. They’ve been fairly forward thinking in their communications with the media…honestly it’s a little desperate, but they need the transparency in order to maintain trust with creditors and the public alike. Thus far I’ve liked how there management has handled the situation. Check out GMNext.com
I found an author interview on American Express’ Open Forum site. The book itself answers the age-old question that small business owners face all the time is, “Why do intelligent people make stupid choices?” It’s a good interview, and I encourage you to check it out.
IBM has issued a statement about practices and standards and how it intends to enforce best practices in information technology within the realm of its influence.
As stated, “IBM’s new standards policy champions the needs of developing nations and the open source community, and places emphasis on intellectual property fairness, consistency, transparency, and standards quality.”
Fishkind says IBM will be judging “how consistent the behavior of standards development organizations are with these ideals will help determine our membership in these groups.” Specifically, IBM complained that “the traditional standards community runs the risk of alienating developing countries” and is giving them the “perception that they are being marginalized or ignored outright, and that rules are being changed on the fly.”
As the world grows larger and information becomes more important on a global scale, standards and practices continue to become more important in the work environment. We’ve seen an increase by the government recently in the enforcement of business standards as well, especially with the development of SOX and GAAP. IBMs statement is just another example of the importance being placed on the accuracy of information in business and technology.
Government $25 billion dollar incentive loan for ailing car companies may be approved by Friday of this week. Detroit right now is holding their breath.
The other day on Dispatch Online, I read an article on how Ford wants to wait until hybrids have picked up mass appeal before it brings it’s own models to market.
“We don’t believe in making cars for hundreds of people or thousands of people,” said Finnegan, marketing manager of hybrid vehicles for Ford. “They have to be affordable to our customers and capable of sustaining millions (of vehicles) in sales volume.”
It’s an interesting strategy coming from a company that has made most of it’s money in the flailing truck market, and has steadily dropped in sales the last few years to companies with more eco-friendly product lines. Still, many cars in their lineup have sold reasonably well, including the Ford Focus, which has been a mainstay in their books since inception. While they’re sales aren’t spectacular, no one is talking bankruptcy either. They’ve also done well with updating their current lineup of vehicles…trucks still dragging behind…with existing eco-friendly technology, which means they are still on par or ahead of competitors such as GM.
Playing a waiting game and conserving money until demand picks up may be a smart move for the company. It’s a little bit of a gamble with new cars such as the Volt and Toyota Hybrid plug-ins coming out. It might not win them the first place medal, but it might just pay off in the end.
Right now the news and media is jumping up and down a lot about the $700 billion dollar bailout of the U.S. banking system. For most people, it seems like a crazy amount of money. To put it in perspective, according to CNN, the U.S. government could give every man woman and child $2300 dollars a piece, 2000 McDonalds apple pies, or buy 6.6 billion barrels of crude oil.
Where the whole thing gets complicated is that $700 billion may not even be enough to save the banking system. With the politicians arguing over whether to nationalize the banking system, it feels a little bit like we’re entering the twilight zone. Russia is supposed to have a nationalized banking system, not us. Which just goes to show how weighty this issue is in a real world context. These banks could litereally fail without continued government support.
As it is, these banks brought it on themselves by providing high risk loans and other services to a public that couldn’t hold up it’s end of the deal. As banks and lending institutions begin to take more risks, it seems like these sorts of problems continue to worsen. As important as banks are to the health of the nation, they need to make better decisions about their corporate lending policies…there just isn’t a better way to say it.
A good friend of mine was on the I-35 Minnesota bridge collapse last year. KARE11 had him on a news cast last night. It’s pretty good to see. Glad you’re alright Justin.
I caught a clip of the News Radio episode Super Karate Monkey Death on Hula the other day. Thinking back to 1997 when I saw the episode first air, I remember thinking it was hilarious, but the reason it’s so fun is because it so deftly pokes fun at the rigid archetypes that the culture hangs on people in the business world, as well as the utter absurdity of business culture at large.
As we’ve seen in recent years: we’ve seen this depicted in Dilbert, in The Office, as well as the new Jerry Seinfeld/Bill Gates ad campaign.
The purpose of the new site is about bringing a topical slant to how big business connects with the culture at large. The site is intended to grow and change over time, and my hope is to form a community there with both common and dissenting opinions.
The origin of the site owes a lot to the growth of this blog in the last few months, and I’m hoping to duplicate that success over their with a series of quick articles that lend themselves to discussion, with the focus of the site being somewhat larger than HenryPhish.
So let me know if you like it…or if you don’t…and we’ll see how it goes.
And commenting on the articles is greatly encouraged…you’ll be required to provide an email address and handle to post a comment, but as always, I don’t use the information except as part of site maintenance.
I read an article yesterday dealing with GM’s corporate restructuring plans in liu of the pending government loan program. According to GM President and Chief Operating Officer Fritz Henderson, the loans wouldn’t alter their current plans to restructure the company. The statement is noteworthy in that it brings up a point of argument that I see a lot on the message boards these days: will GM file Chapter 11?
While this site is not specifically intended to be a numbers site, by design, GM is a large company with over $136 billion dollars in assets. They are a Fortune Global 500 company and are ranked 5 on the short list: Fortune 500. That said, this company brings in a lot of money.
As it sits right now, GM has been restructuring the company for the last three years, with white collar layoffs, plant closings and downsizing, new product development initiatives, improved public relations strategy, foreign market expansion, and with the bid to sell Hummer, a $51 billion dollars loss leader in the last three years, they are showing a strong business sense and a forward looking plan.
Further, in the last year and a half, the company has made a great show of its efforts to open its books and establish greater consistency in its accounting practices. Specifically with the discontinuation of its Employee Discount Program, which made GM’s accounting standards less than stellar in the past. Steps such as these show them as a company of good faith, as well as highlight their attempts to get their house in order.
With the current industrial downtrend, they are losing over $4 billion dollars a quarter in operating costs; a lot of money. Compare that to 1.6 billion a quarter the year before and you see the difference.
A company this size, however, with multiple subsidiaries, has a lot of leeway in when and how they restructure. Assets can be moved around or sold. Processes can be consolidated. Loans can be taken out as well…though the recent failure of banks makes this more difficult.
The government loan program that is mentioned above is also a strong option. With the original intent of the loans being to incentive manufacturers to increase the fuel efficiency of their vehicles 40% by the year 2020. The loans themselves were authorized in last year’s energy bill for $25 billion, but have not been funded yet. To that end, these loans will be available to all car companies as long as they meet certain stipulations, GM included, and should go a long way toward helping car companies navigate a difficult depression in the market.
That said, the purpose of Chapter 11 is to avoid paying creditors and to give the company some leeway to restructure their operations. If they’ve done their job correctly, and up till this point it looks like they have been, they should be able to continue their rebuilding process well into the end of 2009; just in time for the Chevy Cruze to be released in the US, some new technology, and hopefully a turnaround in the economy.
With management making better decisions and beginning to show results with their restructuring plan, it behooves investors to cut them some slack and give GM the time it requires to turn itself back to profitability in the next two to three years.
In conclusion, I’ll leave you with one last article to round out this series.
