What Wall Street doesn't want you to know? GM Kiss your @SS GOODBY - "11/16/98 SEC fillings"greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Read it and weep Pollyanna's, this is GM's latest SEC filling. When GM fails, along with the rest of the Fortune 500's , so shall are entire "as we know it" society. I believe throwing in the towel maybe becoming politically correct.
Since the document is of enormous length, I reviewed, pulled out the good stuff "Quoted" and tossed in my [comments]
Enjoy - Matt
If you want to read this document yourself (its long), the Year 2000 section is right below "Cash Flows for GMAC" toward the bottom of the page
11/16/98 GENERAL MOTORS AND SUBSIDERARIES - SEC form 10-Q
"Many computerized systems and microprocessors that are embedded in a variety of products either made or used by GM have the potential for operational problems if they lack the ability to handle the transition to the Year 2000."
[Let's not be politically correct about it - GM will be FUBAR by the little Y2K bug]
"GM has initiated communications and site assessments with its suppliers, its dealers and other third parties in order to assess and reduce the risk that GM's operations could be adversely affected by the failure of these third parties to adequately address the Year 2000 issue."
[How did you ever get yourself into this position GM, come on - 100,000 vendors - you were doomed from the get go]
"Remediation design and execution of a remediation plan, followed by testing for adherence to the design. GM is targeting the end of 1998 for remediation of its critical systems and will continue to address remediation of other systems on a prioritized basis thereafter; unimportant systems have been and will continue to be removed from GM's Year 2000 inventory and will not be remediated. While some critical systems will not be remediated until after the target date, GM believes that it is substantially on track to meet its target."
[Oh &*%$, we missed that one too. Unimportant systems, will not be remediated, will not be remediated until after the target date - trust us were still on track to meet are target. Give up GM, its over]
"Contingency Planning development and execution of plans that narrow the focus on specific areas of significant concern and concentrate resources to address them. GM currently believes that the most reasonably likely worst case scenario is that there will be some localized disruptions of systems that will affect individual business processes, facilities or suppliers for a short time rather than systemic or long-term problems affecting its business operations as a whole."
[Now toss in a glimmer of hope for the pollyanna's]
"Because there is uncertainty as to which activities may be affected and the exact nature of the problems that may arise, GM's contingency planning will focus on minimizing the scope and duration of any disruptions by having sufficient personnel, inventory and other resources in place to permit a flexible, real-time response to specific problems as they may arise at individual locations around the world.
Some of the actions that GM may consider include the deployment of emergency response teams on a regional or local basis and the development of plans for the allocation, stockpiling or re-sourcing of components and materials that may be critical to our continued production."
[I guess the media wouldn't consider GM an alarmist, doomsayer, or raving lunatic now that there stock piling]
"GM's communication with its suppliers is a focused element of the assessment and remediation phases described above. GM is a leading participant in an industry trade association, the Automotive Industry Action Group (AIAG), which has distributed Year 2000 compliance questionnaires as well as numerous awareness and assistance mailings to about half of the 100,000 supplier sites that supply GM throughout the world. Responses to these questionnaires, which were generally sent to GM's principal suppliers, have been received from about half of the supplier sites to which they were sent."
[Did you catch that, GM has 100,000 suppliers, they sent out compliance questionnaires to 50, 000 of there suppliers, and then only got back 25,000 - what the hell happened to the other 75,000 suppliers - if you haven't seen a compliance letter - it generally reads something like this Have you assessed the y2k problem, are you ready, yada-yada-yada * (note if you are not compliant by xxxx date we will be required to drop you as a vendor, sincerely, Richard Head.)
What on earth would make a vendor not fudge the truth on a self reported compliance questionnaire (hell, their getting a great example from the gov't - S.S., DOD, etc.) Or let me guess, GM intends to verify compliance on all 100,000 vendors - if you believe that you probably believe ol Slick Willy actually smokes those cigars.]
"GM incurred approximately $40 million of Year 2000 expense during 1997 and approximately $85 million in the first nine months of 1998. GM currently expects its total Year 2000 expense to be approximately $560 million, with peak spending occurring late in 1998 and early in 1999." [Ah-huh, they will make it, now don't worry you little head off]
This total spending also includes an additional payment of $75 million that GM has agreed to pay to EDS at the end of the first quarter of 2000 if systems remediated by EDS under the Master Service Agreement are capable of continued operation before, on and after January 1, 2000 without causing a significant business disruption that results in a material financial loss to GM due to the millennium change.
[There it is the homerun statement - at boy GM you've dropped the bomb, agree to pay them only after TEOTW - you gotta LOVE IT - Corporate America at it's finest]
"GM does not currently anticipate that it will experience a significant disruption of its business as a result of the Year 2000 issue."
[Now throw in a good closing statement so the pollyanna's will keep throwing money into you sunken corporation - that's it, nice. Have we forgotten anything, oh ya, we still need a good - cover are ass, its not are fault statement! Any one seen Johnny Cochran? Finish it off with the high priced lawyer accepting responsibility for absolutely nothing on this earth and you have yourself a very respectable SEC-(Q-10) Y2K filling, that will fool the pollyanna's evertime.] "However, there is still uncertainty about the broader scope of the Year 2000 issue as it may affect GM and third parties that are critical to GM's operations. For example, lack of readiness by electrical and water utilities, financial institutions, government agencies or other providers of general infrastructure could, in some geographic areas, pose significant impediments to GM's ability to carry on its normal operations in the area or areas so affected. In the event that GM is unable to complete its remedial actions as described above and is unable to implement adequate contingency plans in the event that problems are encountered, there could be a material adverse effect on GM's business, results of operations or financial condition. The foregoing discussion describes the Year 2000 program being implemented by GM and its consolidated subsidiaries other than Hughes. Information about the Year 2000 efforts of Hughes can be found in Exhibit 99. Statements made herein about the implementation of various phases of GM's Year 2000 program, the costs expected to be associated with that program and the results that GM expects to achieve constitute forward-looking information. As noted above, there are many uncertainties involved in the Year 2000 issue, including the extent to which GM will be able to successfully remediate systems and adequately provide for contingencies that may arise, as well as the broader scope of the Year 2000 issues as it may affect third parties that are not controlled by GM.
-- Matt (Butenam1@aol.com), January 20, 1999
While I am making preparations for TEOTWAWKI back to the stone age, I think a comment on the nature of SEC reports is appropriate here. If you're used to reading them for investment purposes, you know that they describe every conceivable problem that might be a risk to investors, including risks that are unlikely to actually occur. Also, the fact the GM has 100,000 suppliers does not mean that each supplier provides a different part. GM is a huge company and surely has a lot of redundancy in the supply chain. They surveyed their "principal" suppliers (getting reponses from half, with no verification, or even any report on what those suppliers said...well, that's not too good). And there really are such things as "unimportant systems"... systems that improve efficiency or profitability enough to justify their cost, but which can easily be done without.
On the other hand, "some critical systems will not be remediated until after the target date"...now there's an interesting comment.
-- Shimrod (email@example.com), January 20, 1999.
"GM incurred approximately $40 million of Year 2000 expense during 1997 and approximately $85 million in the first nine months of 1998. GM currently expects its total Year 2000 expense to be approximately $560 million, with peak spending occurring late in 1998 and early in 1999."
Lets see .. GM has spent $125 million so far and expects to spend a total of $560 million with 1 year left. Typical pattern
-- RD. ->H (firstname.lastname@example.org), January 20, 1999.
It would certainly seem prudent for GM to budget substantial funds well into 2000 and even beyond, since there are bound to be many many problems that weren't complete, didn't work as expected, etc. Yes, they have maybe $425 million left to spend and one year to 01/01/00. We know at least $75 million of that is budgeted for 1Q 2000, and likely a lot more to handle post-rollover problems.
This point is ignored in all our 10Q calculations. Gee, they've only spent 40% as of 4Q99. The assumption is that they will spend the remaining 60% before rollover, and this assumption is false. The press releases may be expressing full confidence, but I suspect the bean counters know better, and have planned for it at the very least as part of the contingency planning. Contingencies there will be, and these cost money.
-- Flint (email@example.com), January 20, 1999.
yes but Flint, this is almost February. They've dicked the dog. Time's up. When the panic begins in the next month or so, good luck keeping the project teams focused on remediation.
-- a (firstname.lastname@example.org), January 20, 1999.
'a', ain't it the truth. But the bean counters are still thinking that if they offer bonuses, all it takes is money. We'll gladly pay you $50,000, or a year's salary, or whatever, lump sum in June 00 if you stick it out, meanwhile it's no vacations, almost death march time, do some tests so we can claim we're in test mode now.
Might even work if things stay mostly up most of the time, and an income means something, there's still stuff to buy and/or still bill collectors in business.
-- Flint (email@example.com), January 20, 1999.
Time has a way of adding irony to a story. Read these two quotes about GM from an article published April 23, 1998...
GM expects to spend $360 to $500 million, most of it this year, to prepare its factories and offices for 2000, The largest automaker spent $44 million on Year 2000 issues in 1997.
"We've got...hundreds of people -- possibly thousands -- working on this," said John Ahearne of GM Information Systems and Services.
But the big Three are confident they will enter the new millennium smoothly. GM, Ford and Chrysler plan to finish debugging by the end of 1998. They'll spend 1999 fine tuning.
-- Kevin (firstname.lastname@example.org), January 20, 1999.
Any reason why I shouldn't assume that all 3 automakers are in the same position? Or ANY automaker for that matter? (I don't believe that having started a year earlier makes any difference, I'd need much stronger proofs.)
So far, we know of Chevron and PECO and several others who are in the same predicament as per their SEC's. We know from their statements that GM was over optimistic in '98, as well as many other such big corporations/utilities. These are proofs that "doomsayers" 12 months ago were right when they said that those rosy statements were over-optimistic PR.
Are there any "polyannas" left on this forum? I don't view Flint as a polyanna anymore, like I did when I first got on here. (Don't know about Paul Davis, haven't come across his posts lately.)
-- Chris (email@example.com), January 20, 1999.
okay, GM's gonna have problems - where are most of their plants these days? The reason I ask is that if we start tracking these sorts of corporate issues to their plant locations, we can begin to get a picture of what communities are going to be hit hardest by the recession...
just a thought, Arlin
-- Arlin H. Adams (firstname.lastname@example.org), January 20, 1999.
Keep in mind that GM has many suppliers in foreign countries, particulary the Pacific rim.
-- Tim (email@example.com), January 20, 1999.
Good summary - somewhat sarcastic, but good. 8<)
Thanks ffor noticing. Did you see the final words down in the summary - consider these, then ask who do you want to invest with:
"However, there is still uncertainty about the broader scope of the Year 2000 issue as it may affect GM and third parties that are critical to GM's operations. For example, lack of readiness by electrical and water utilities, financial institutions, government agencies or other providers of general infrastructure could, in some geographic areas, pose significant impediments to GM's ability to carry on its normal operations in the area or areas so affected. In the event that GM is unable to complete its remedial actions as described above and is unable to implement adequate contingency plans in the event that problems are encountered, there could be a material adverse effect on GM's business, results of operations or financial condition. "
Ouch - honest, blunt and very, very pesimestic. (-1 sp)
-- Robert A. Cook, PE (Kennesaw, GA) (firstname.lastname@example.org), January 21, 1999.