GM has reported.
The news is “not good”. Any time a corp risks receiving a “going concern” notice from auditors, something needs to change, and change hard and fast.
So far the change being pursued is more “so-called” creative financing.
In capitalism, creative financing is supposed to actually create something.
If the corp has been styled “as GM goes, so goes America” the news is especially not good.
what can GM do?
;” the company expects to burn through another $14 billion this year as it cuts output to run down inventories of unsold cars.”
The actual issue is the inventory of “serviceable miles” in total usa vehicle population, and the definition of “serviceable.”
If a new car can be said to have a serviceable life of 200,000 miles, and an 89 cavalier with 150,000 miles on the clock can be said to have a serviceable life of 180,000, then that honda is placing a 30,000 miles barrier to title transfer to the new Chevy. If the average driver is rollin up 12k miles a year, and cutting back 5-6% a year as a result of a tight economy, then then that 89 cavalier represents over 30 months of the 2009 being floor planned; or, as GM is deciding it has to do, not being manufactured. That loss of manufacturing contributes (since vehicles are 10% of the American econ) to furthering the odds that hat 89 cavalier will be perceived as being serviceable for 190k miles, now adding another 12 veh months of inventory.
This is a nearly perfect vicious cycle, that the writers of any toxic debenture would be proud of.
That 89 cavalier books at around $1500.
Which means it’s risky to sell and trade up.
The msrp was $9415.
If the feds gave a cert to the owner for $9415, and turned the Cav to tuna cans, that
owner is going to be making, let’s call it,
1/2 a job at gm for 1 year.
He’s going, as a result, to be generating in the neighborhood of $2000 in total tax revenues.
At 10 cents a gallon, $18 billion a year, this can happen??
1.9 million times, generating $3.8 bb in new revenue.
If gasoline levels out @ $2.50 a gal with this added 10 cents in it, can this be “free money”?
TAASTAAFL. But: if the 2004 or later vehicle purchased gets 5% better fuel efficiency by being tighter, newer, younger, then yes, the vehicle owner is 1% ahead cash out of pocket for fuel. And the savings on health care from air quality, better crash resistance and water quality are pure profit.
Quality of life from said air, water, health, safety, becomes an intangible pure profit of the type hyped in VISA commercials.
CAn the USA afford this?
Historically, profit is always affordable.
Originally, this was the meaning of “creative financing.” As Greenspan noted, “capitalism is the art of creative destruction.”
It’s past time for some of that creative destruction, about 10 cents worth.
Posted under business
This post was written by admin on February 27, 2009
