GM, Ford and risk insurers

Discussion in 'The Intelligence Cell' started by scrofula, Nov 14, 2008.

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  1. Just what is going on here? Business risk insurers have just turned round and said they won't take on any risk relating to Ford or GM. Put simply this means if you are a supplier to such companies, normal practice is to insure against non-payment of an order, but now no-one in the business will take it on. The only alternative in those circumstances is to demand cash up front, which clearly these firms will be hard-pressed to come up with - that or refuse to supply. This will be the kiss of death, not only for the car firms, but to their suppliers too. Not only carmakers either, Dixons group and Woolworths have also been struck the same blow. And where does the blow come from? A business which has been called licenced mugging, was central to the financial meltdown and has been the recipient of public money to help it survive, but clearly doesn't feel any moral obligation to prevent the loss of thousands and thousands of jobs. Want a real recession? This is how you make it. This is the sort of thing governments should enforce responsible action on. There are various names I can think of for these people.
  2. Meanwhile in Russia

    Btw, few days ago I have baught new car (though manufactured in Japan).
  3. And? Sounds like a bloody sensible position to me. Have you seen how much money GM and Ford are pissing away each month due to operating at a loss? We're talking billions and billions here, in the last quarter (just three months of the year) they've both lost two or three billion dollars each and are rapidly running out of cash reserves. Unless they get a bailout from the government fairly soon they'll both have to declare bankruptcy inside of a couple years at the most.

    So why should the risk insurance firms offer insurance on businesses that they know are shaky and more than likely to go under? If I was a shareholder in them I certainly wouldn't want them guaranteeing people who more than likely are going to be defaulting on their debts sometime soon.
  4. In essence I agree with you Brick, but when people start pulling tricks like that, these businesses are going to go irretrievably down the pan right now, not at some time in the future. Given support, not metaphorically kicked in the nuts, they may actually have a chance of survival. Total refusal to back deals with them is economically criminal. Realistically it should be a case of reduced orders from the big firms, thus reduced risk to suppliers and the insurance thugs, but continued business. This is going to lead to zero business all round, and with responsibility could have been avoided. It will be interesting to see what kind of asset strippers step in when they go down, and how much involvement with them those insurance companies have.
  5. I have heard it said that GM has such colossal pension obligations that it is now little more than a pension fund with a sideline in manufacturing motor vehicles.
  6. Tricks? That's an awfully suspicious was of phrasing it. They've simply looked at the reality of the situation and decided that on balance they're much more likely to default on their loans so it would be unprofitable to offer them insurance.

    Bollocks they do. Short of massive government grants that they keep having to repeat every six/twelve months these companies are fucked, the management and unions have run them into the ground. The only way to even possibly turn them around is to declare Chapter 11 bankruptcy and massively restructure by screwing over the unions and ex-employees by slashing what they owe them.

    No it's economic reality. Criminal would be if the insurance companies offered them a policy only for them to default and lose tens if not hundreds of millions of dollars even when everyone can see where it's heading. That would be criminal negligence with their shareholders money.

    Insurance thugs? Well nice to see that you're being honest about you biases at least.

    The problem with reducing production is that a lot of their costs aren't operating costs but fixed costs such as things like pension or benefits payments to past employees that will still be there soaking up all their money even if they didn't produce a single car.

    The best slowing production down would be to drag out their corporate deaths by six months to a year extra. And if they cut orders their suppliers will still have to lay people off, it'd just be that they'd lay off half straight away and the other half in a couple of years rather than keeping full production and laying everyone off in a year. Hardly any benefit to that really.

    Responsibility, whose? Who pray tell has the responsibility for keeping absolutely craptacular corporations in business who have so fucked themselves that they lose hundreds of millions/billions of dollars a month? You seem to be trying to say that for some reason people like the government or insurers owe GM and Ford money to keep going when they've brought it on themselves. This is capitalism, if you can't make a product that enough people want to buy then you should go out of business and shut down.

    More than likely. From what I remember reading decades and decades ago back when times were good they made massive commitments in regards to things like pay, benefits and pensions to keep the unions sweet.

    Since then however they've been steadfastly making the wrong types of products for what customers want thanks to not innovating but sticking to old ideas, quality control has been dicey in places which killed their reputations even when problems were corrected, they've had to upgrade old facilities unlike the Japanese firms who could start from scratch and especially at GM the corporate culture was highly resistant to new ideas or ways of doing things. Throw in that they're tied up with agreements they made to to the unions that make layoffs and plant closures difficult and it's looking pretty hopeless.