• Nov 15, 2008


Soaked in bad news, GM and Ford received yet another dousing when their three big European credit insurers dropped them this week. Euler Hermes, Atradius, and Coface have all refused to write policies for suppliers trading with both automakers. The three giant insurance companies control more than 80 percent of the world's credit insurance (insurance companies typically pull their coverage when a client stops proving insurers with enough information to calculate a credit risk, or their overall risk profile has deteriorated). Without their credit cover, suppliers will be forced to either trade uninsured, cease trading, or ask for payment up front. Supply issues aside, this news only compounds the automaker's problems as it also weakens investor confidence, already completely slumped.

[Source: FT, free subs. req'd]



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  • 31 Comments
      • 6 Years Ago
      Wait.You'll see a move by Barack&Co to bail them out. The unions are their power base.
      I,however cannot see the sense in floating a bloated GM full of overpaid perk-addicted union workers and CEO's for a few months more at the taxpayer expense to face the inevitable.
      They need to restructure and become lean and mean and kick out the union fatcats.
      • 6 Years Ago
      wtf, I know business is business, but why try to kill a company?
        • 6 Years Ago
        Hanoi Jane

        Cobalt? In what numbers? In what country? It didn't make it into top 20 in October. BMW sold more 3-series cars....

        http://www.wsj.com/mdc/public/page/2_3022-autosales.html
        • 6 Years Ago
        Thank you Big Rocket. Now do you care to find the profit numbers for Corsa, Astra, Focus and Fiesta?

        We're not talking about Cobalt or American cars.
        • 6 Years Ago
        I don't know how you can say nobody wants the product. Corsa and Astra are top sellers for Vauxhall.
        • 6 Years Ago
        As well as Focus and Fiesta...
        • 6 Years Ago
        Smegley, you're a conspirator, aren't you...

        EU has no power to pressure world's top three insurers to drop their lucrative (until recently) clients. They make money out of the insurance they provide, once they stop making them or the risk is becoming to high to make profit, they walk away.

        There are insurers who do not insure 18 year old drivers with 300 hp cars, not because they don't want them do have fun and drive, it's just the risk is too high.
        • 6 Years Ago
        Penguin you are right, Cobalt also sells in big numbers. The thing is that these cars are sold either at a loss or at a tiny profit. People want GM and Fords cars, just not at the price GM and Ford want to sell them at.


        • 6 Years Ago
        Might be some backdoor coordinated pressure from the European Union who is protesting the probable bail-out thru the WTO. Gives them some bargaining room. That would be my guess since it all happened from 3 separate companies at once overnight going into a weekend at that.

        But on the other hand, it makes the bail-out that much more likely. Still seems like an odd move since Opel/Vauxhall and Ford have quite large operations in Europe, and are not hurting worse there than the other makers. Could be that this withdrawal of credit insurance is targeted at the north american ops which are legally separate entities - I dont see that above but it seems a likely scenario.
        • 6 Years Ago
        No one is trying to kill they. These are market realities. Making a product no one wants will lead to this. This has been coming since about 2000, slowly GM had to sell asset after asset to raise money, first Huges Electronics then GMAC, TopKick (i am not sure they sold it), Hummer, now there are no more assets to sell, they are not selling cars (at profit) and there's no credit......and country is ABOUT (we are not there yet, the worst is ahead) to enter a recession.

        If the worst is still ahead, and they are already nearly dead, why take a huge risk insuring them?
      • 6 Years Ago
      Goodbye big 3. Hello import!
      • 6 Years Ago

      The end is near!
      Chopper53
      • 6 Years Ago
      It's not like the big three haven't been down this road before. They have put to many engineering blunders out there on the market and then turned thier backs on the customer. DUH! Build it right and they will come and come back, and back... Screw enough of your customers and eventually word gets around. Screw me once shame on me. Screw me twice shame on you. If the majority of the American population is middle class then 25-30k is a lot of money. Build something that will run well before and after the warranty runs out. I haven't seen evidence they can think outside the box much less inside the box. That is what it's all really about not seeing how much cash you can stuff in your pocket. Everyone would like to get rich but I think it matters how you do it. Would you still a beggars donation cup?
      • 6 Years Ago
      Here it comes. This is gonna come to a head before Obama takes office. The big three (especially GM) are about to step off the cliff. What happens here is going to have big implications for decades to come.
      • 6 Years Ago
      How many times have European automakers had to be bailed out? Fiat? Renault (once gov't owned)? They now even asking aid from the EU, and yet no one is complaining or rallying against that. When they're doing well they look down on other companies, but when they're in near financial ruin and collapse, they beg on their knees for dear mercy and everyone is so quick to rescue them and the whole world forgives them for their mistakes. But when America is trying to help its own automakers from collapse (which is a very rare occasion), Europe gets upset because it "feels" automakers should fend for themselves. Europe is the last to talk here. They rescue their own businesses all the time and have extreme laws that protect employees, certain industries and products, without these laws they would've been wiped out by sheer competition and unemployment would be at least twice as what it is now. Note to Europe:
      Leave America alone. Let it take care of its own businesses so that they don't collapse, if they do then chances are it will have a damaging affect to your own economies, industries and businesses. Like it or not, a great deal of global economy revolves around the US economy. Instead of complaining, how about lending a hand to the US and make yourselves useful to this global economic downturn.
        • 6 Years Ago
        Noidor, you need to look past your anti-Americanism for a moment and realize that you're just flat wrong. As much as we emphasize the various pieces there is truly only one economy, and it's a global one. Global leaders realize this, which is why they're all in Washington this weekend trying to prepare a coordinated response to the current crisis. Attitudes like yours are the true danger because it feeds protectionist sentiments in the US and elsewhere. If you really want to try to build an economy without America you may soon have your chance. I guarantee you will not like the result.
        • 6 Years Ago
        Anti-Americanism? Really? Are you a Fox News fan? That's how I come across? Because I merely pointed out what got US into this mess in first place? That makes me Anti-American? That's just beyond stupid! (What goes farther than stupid I wonder...insane?)

        Anyways, I am all for global economy and I hate protectionism, it and central planning (USSR) has never worked period.

        But in global economy there has to be mutual benefit...up to 2007 it was a situation where we were borrowing and were barely paying back - then bubble burst and payments stopped.

        If US wants to be a real global player then its residents have to STOP spending through borrowing, and start SAVING.

        The only sort of borrowing that should happen is borrowing with intent to produce, build, manufacture and export. That is the TRUE global economy. Borrowing to consume has never worked...today's mess is a prime example of this.

        Example of current state...5 men are stranded on an island...jobs are assigned to each man: one to fish, one to hunt, one to build shelter, one cook, and last one to consume. Guess who is the last one? Where is the benefit to the other 4 men if all that they produce is consumed and then there is nothing for them. Shouldn't the 5th man get some work done and contribute something to the overall well-being of all men? Think about this concept on a global scale...true global economy.
        • 6 Years Ago
        Common misconception is that rest of the world needs America so survive and therefore consume and that will prevent worldwide recession. That is total BS.

        America has been a total drag on the worldwide economy, it's been consuming (not producing) purely on basis of borrowed money, and now other countries are seeing that US cannot pay back. I won't get into detailed description of how money circulates worldwide, but again, once China will let its currency rise then REAL demand driven by SAVINGS will pull demand there for leave US in the dust.

        Only way why Americans were able to consume is through extraction of home equity and credit cards, well now they have no access to neither one of those, and very few save. Lastly, those who do save are getting punished because of the irresponsible monetary policy (printing money and lowering rates) where dollar will take a nosedive by end of this year.
        • 6 Years Ago
        Say what? The rest of the world doesn't need America? I assume you mean United States. You say we've long been a drag on the world economy yet you aren't for protectionism. How about this: The US pulls out of the rest of the world economy along with all the aid sent to foreign countries and all our business dealings we have elsewhere. And we kick all foreign businesses out. You want to do business in the US? Become American. Yep, isolationism. We'll stay here and everyone else stay where they are and be done with it. No more drag on the world economy and I'm sure we'll be just fine here in the US.

        Or we all do business together and everyone benefits or falls with the world economy.

        Take your pick. You can't have it both ways
      • 6 Years Ago
      If I remember, the original article stated that the insurers were pulling out of guaranteeing suppliers; I suppose because they see the possible collapse of the American car makers pulling their European subsidiaries down with them. This is not a government sponsored plot, or aimed at damaging America, as some contributors suggest. Indeed, the EU economy depends on its car makers, of whatever provenance, as much as any industrial economy.
      • 6 Years Ago
      Insurance companies have one goal: make money. To suppose they have a hidden agenda of bringing american automotive manufacturers down is just ludicrous.
        • 6 Years Ago
        Hanoi Jane,

        In other news, US are in the recession too. And a deeper one.

        "The OECD said the U.S. economy is likely to post 0.9 per cent negative growth in 2009, Japan will contract by 0.1 per cent and European economies by 0.5 per cent."
        http://www.cbc.ca/world/story/2008/11/13/germany-recession.html

        "The US is expected to contract by 2.8% in the final quarter of this year." OECD predicts 1.0% drop for Eurozone.
        http://news.bbc.co.uk/2/hi/business/7726905.stm
        • 6 Years Ago
        Isn't making money the primary goal of every company in the world?

        I could understand they doing this with Ford and GM in NA, but in Europe?? Come on, Ford and GM are among the best in Europe...
      • 6 Years Ago
      "proving insurers with enough information to calculate a credit risk"

      I believe you meant "providing".
      • 6 Years Ago
      Samurai Jack:

      It really is idiotic to label the guy Anti-American for his comment. It's not because someone has a different opinion than you that you should call someone Anti-American..that's just trash tv talk.
        • 6 Years Ago
        I took it as gloating at Americas issues. Be honest, the rest of the world would collapse and be Americas bitch if we weren't so busy keeping the rest of the world from paying for their own defense Japan, Korea, Germany, I could go on) and if we ever decided to play hardball against unfair trade practices. If the playing field was leveled (the fault of out government for not demanding it) the US would roll right over the rest of the world like a Panzer Division hitting a backwards Polish village.
        • 6 Years Ago
        That's what it read like to me, however I acknowledge that I could be wrong about that. Noidor, you have my apologies.

        The reason it seemed anti-American to me is not because of your comments on savings, which I agree with and have said myself before. It's because of your comments about the rest of the world being able to get on without America. They probably could eventually. But it would not be a very pleasant experience for anyone and it would take decades. And I stand by my comments regarding protectionism.

        Anyway, I again apologize for misreading your comments. I'll do better next time to try to maintain a civil discourse and refrain from using inflammatory labels.
      • 6 Years Ago
      im sure this has to do with the European unions.
        • 6 Years Ago
        It's European Union. Singular.

        You know, like in State of the Union Address, not state of the unions. Both doing terribly, anyway...
        • 6 Years Ago
        Um, what do you call the organizations for factory workers in Germany, France and Spain when you refer to them collectively?

        European unions.

        It's possible that's what he meant.
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