Former GM Board Member: 'I Told You So'

Kirk Kerkorian's former watchdog on General Motors' (GM) board of directors is apparently dying to say "I told you so" when discussing GM's faulty strategy. Said strategy is currently costing taxpayer billions to keep the zombie car maker on life support. Jerry York however, had little to say about how Tracinda lost boatloads of money in failed investments with both GM and Ford (F) over the past several years. In an interview with Reuters, York had this to say:

"All of the data I've seen on GM would indicate that at the end of the whole operational restructuring, they would have piled up so much debt. In many respects they would be back where they are today," York told Reuters in an interview late last week and published Tuesday.

York, who hightailed it out of GM's BOD after the company refused to submit to Kirk's demands for an alliance with Renault-Nissan (NSANY) is part of the chorus against a full-blown GM bankruptcy.

"It is not inconceivable that the federal government could decide to orchestrate a cram-down, quickie bankruptcy filing," York told Reuters.

He added: "I personally believe it would be deplorably bad to have a company the size of GM go through a normal bankruptcy process at this time. With the unemployment rate being so high, the carnage in the financial markets, it's going to make the markets substantially worse."

"There are no great choices here," he said. "There are only bad choices. The question is what is the least bad choice."

All of this is great, however not surprisingly York does not talk about Tracinda's horrendous timing of getting involved in both GM and F, both investments ending up a massive loss for Kerkorian, which coupled with Kirk's other recent flop in MGM (in which Kirk has personally pledged his shares in order to fund a revolver that was used to buy Ford shares) probably should send a message to Tracinda's owner that it might be time to call it a day on his "stock picking" career.

Comments

[Mister Jimmy:]

ScottyEconomist, you and the entire "OTC and Structured Products" crowd enriched yourselves by mismanaging the retirement savings of millions and churning worthless pieces of financial junk into an economic catastrophe. Don't compound America's disdain for you by referring to others as "mindless drones".

Mar 12 08:35 AM

[Paul Killinger:]

Mr. Jimmy,

I take it from your comments that you don't think very much of Wall Street. Well, I can tell you that most Americans don't hold Detroit in very high regard, either.

I believe it is instructive that the bulk of our new president's appointees own vehicles made by foreign owned manufacturers. Our domestic automakers have a lot of work ahead of them if they're going to survive the public's present perception of their products.

The only thing I know for sure is that name calling and class warfare will lead to the eventual demise of your industry, if not our entire society. There's plenty of blame to go all the way around, and your continued vitriol certainly isn't helping any, much less contributing to the search for viable solutions.

Mar 12 09:18 AM

[Paul Killinger:]

It is true that governments around the world subsidize their domestic automakers in various ways, so it is not unthinkable that we should, too. The trillion dollar question is HOW to best do this, and have them become profitable once more.

I confess I don't know the answers, and I suspect no one else does, either. I do fear the regulations, mandates and other strings that Wahington will attach to their funding may only make things worse, however.

Mar 12 09:34 AM

[Paul Killinger:]

In truth, our federal government's record in the handling of finance is not exactly confidence building.

Mar 12 10:32 AM

[Fred W:]

Yes, Ford did bet the farm...and the bet was placed at the best time. Well done.
Ford's work with the Rocky Mountain Institute is another "bet" that will pay off in 2010.


On Mar 11 10:44 AM ChemEn3 wrote:

> Why is Ford in better shape than GM and DCX? Is it because there
> is some master minds at work there?
>
> Look up "Ford Bets the Farm." Just before the credit markets crashed
> Ford mortgaged everything. They took out huge loans using every
> piece of land,equipment, and factory they had.
>
> Then the credit market collapsed, and GM and DCX could not refinace
> thier debt, while Ford had loads of cash on hand. Because of the
> market collapse, GM and DCX cannot do the same thing Ford did.<br/>
>
> Ford is in good shape cash wise, but they have a boat load of debt
> that will come due soon. I hope they come out ok, but I wouldn't
> bet on it.

Mar 12 10:37 AM

[samwise:]

Sounds like Jerry York and Kirk Kekorian should be in charge of the bailout. They were willing to blow a couple of billion--probably could offer the government some good advice as to how not to do that. More important--wouldn't have invested the money if they didn't believe in the company's success. So what did they see that told them "this company can work"? Of course why get bogged in the details of blowing billions when you're already blowing trillions, right?

Mar 12 10:42 AM

[nyc female...:]

This author is not an expert on the subject. Why don't you get the person who has first hand knowledge. I hope we can improve the quality of authors.
I vote for GM's survival and expect the volt, and other innovative cars to prevail. I rejecttheidaea ofa costly bankrupcy with large legal fees that make the laweyers even wealthier. I expect the bailout money to come through and hope GM seeks veture capital.

Mar 12 11:29 AM

[Fabien Hug:]

You are right. I love American cars and currently my Ford Mustang . German cars are way too expensive (except WV) for what they offer and Japanese, well they are good but their design don't pass the test of time (the only one was the Datsun Z and maybe the Miata).
My Mustang was designed in 1996 and it's still a great pleasure to look at it. It drives like a dog but for little money you can make it run great and after that it's really yours.


On Mar 11 10:40 AM seattle_mike wrote:

> CH11 for GM would be a disastor. For the record, I think GM has
> some sharp cars. Everyone is on the foreign car bandwagon.... at
> least take a look at a GM. Any GAP in quality these days is minimal
> at best. GM is making some great vehicles. Do you really want to
> see them fail? Say adios to our steel industry and part suppliers
> then too. The US will be in grave danger if the automotive industry
> were to fail. Think of prior wars, GM was able to quickly shift
> production to support the war and this nation. We will need the
> assistance of the Big 3 again in the future. You can bet on it.

Mar 12 12:04 PM

[Paul Killinger:]

Sam,

A couple of years ago they asked Warren Buffett why he didn't buy GM, which he could have swung relatively for pocket change. He answered that the problem was their debt and unfunded financial liabilities, which made the idea prohibitively expensive. He didn't see how anyone could make money from such a venture.

One would have to conclude he knew what he was talking about as our entire nation now continues to wrestle with this dilemma.

Mar 12 12:13 PM

[Paul Killinger:]

NYC,

The author of this post may not be as expert as you might like on this subject, but that simply begs the question of WHO IS? I can assure you there are millions of American taxpayers out here who would like the answer to that question.

As for the Volt, you're kidding yourself if you believe this radical new vehicle is going to be a commercial success, much less save its ailing car company. I take no joy in saying this, but there are dozens of sound reasons as to why this is a practical impossibility.

Mar 12 12:24 PM

[notsosmart:]

the arrogance of these co's. is coming home to roost.(private jets to dc to beg for money).see the latest consumer for car listings & ratings.GM wont ever get it.the ceo & bod are just self serving.

Mar 12 12:28 PM

[Paul Killinger:]

Moreover, President Obama would do well to listen to his friend Mr. Buffett today when he tells him about the flaws in his plans for our nation's economy.

Mar 12 12:32 PM

[Paul Killinger:]

Notso,

I believe our friends in Detroit are really trying to turn their ship around, perhaps for the first time in our lifetimes. We'll see how it all comes out presently.

I do have a question about your rant, however. How come when the Detroit 3 fly their jets to Washington it's so unbecoming, while Nancy (Pelosi) and the Governors get a pass when they do the same thing?

Someone needs to explain the logic in that to me.

Mar 12 12:39 PM

[Teutonic Kn...:]

Well, even a wizard and tough guy like Kerkorian couldn't fix them (GM and Ford), best of luck to the Obama regime.

Mar 12 01:11 PM

[Teutonic Kn...:]

And to get out with a huge loss of his in the nick of time too.


On Mar 12 01:11 PM Teutonic Knight wrote:

> Well, even a wizard and tough guy like Kerkorian couldn't fix them
> (GM and Ford), best of luck to the Obama regime.

Mar 12 01:12 PM

[Mister Jimmy:]

notsosmart, the latest Consumer Reports gives its "recommended" ratings to several GM cars and trucks.

Mar 12 01:23 PM

[Mister Jimmy:]

Mr. Killinger, 11 of the top 20 selling vehicles in the USA are still Detroit name plates. That would appear to invalidate your comment that "most Americans don't hold Detroit in very high regard". I assure you, Wall Street would not get the same 55% approval rating right now.

Mar 12 01:25 PM

[Kinabalu:]

<<"It is not inconceivable that the federal government could decide to orchestrate a cram-down, quickie bankruptcy filing," York told Reuters>>

York wasn't the first one with this idea. It's the only logical solution. But it probably won't happen quickly if it's designed in Congress. That's why we need a Car Czar.

Mar 12 02:23 PM

[Mister Jimmy:]

Kinabalu, a GM bankruptcy is not likely. Treasury Secretary Geithner appeared on PBS earlier this week, and aid to the U.S. auto industry was one of the topics of discussion. He said the current challenge facing the industry is partially a result of a larger financial crisis. “The industry is facing just exceptional challenges. Part of the challenges they brought on themselves and part of those challenges are just the function of the fact that we’re facing such a huge collapse in demand around the world and a very difficult financing environment. And what we want to do is figure out what restructuring plan will leave these firms in a position where they’re going to be viable over time without government support.” Geithner said bankruptcy is not the best option for the auto industry right now. “We’re going through a very challenging period in the American economy as a whole, and as the President said and the previous administration said, a disorderly failure of these firms in this economy would cause enormous damage in terms of job loss across a whole range of industries and in a recession like this you have to consider things you would never consider in a more normal economic environment.”

Mar 12 03:04 PM

[jksisco:]

Let's be realistic, BHO is not going to let a business that has a large union labor force go down. Nor is BK an option as the unions would most likely lose major benefits. Don't forget, years ago the Government was instrumental in pushing for increased health benefits to GM wage earners, and, GM, in the past, provided laid-off workers with very high wages during slow downs. As an aside, I have purchased 5 vehicles from GM over the last 15 years and have never had a major problem with any of them and only one was subject to recall, quality is as good if not better than most. Also, the Corvette is one of the premier vehicles produced anywhere.

Mar 12 08:08 PM