GM's 'Tank on Empty' – Aftermath or Economic Indicator

General Motors Chief Operating Officer Fritz Henderson said the automaker expected to receive a delayed U.S. government loan payment in the next several days that it needs to avoid running out of cash.GM received an initial $4 billion in emergency funding from the U.S. Treasury on December 31 and had expected to receive its next $5.4-billion payment from the government last Friday.
Mr. Henderson said GM had ruled out a voluntary bankruptcy filing because of the risks that it presents to sales, but could be forced into bankruptcy in a hypothetical case if the U.S. government were to withdraw its pledged financial support.
The U.S. government has pledged to loan $13.4 billion to GM for three years provided that it demonstrates that it has a plan to pay back the loans and become viable. Under the program, GM faces a February 17 deadline to show its progress.
Allegedly the biggest name in car manufacturing the world over, General Motors’ feared and anticipated ‘demise’ may well be one of the biggest blows to the world economy, esp. as it happens to be an integral part of the US taxation backbone (which is one of the reasons for the bailout approval).
Now to the question- what do we learn from it? Is it just another act of fate, bound to happen, one way or the other; or does it hint at a global shift in economic indicators, whereby oil-run economies and derivative manufacturing businesses shall no longer stay in the limelight.
If this is the case, then which industry sphere shall be the next big thing on our planet, thereby stimulating symbiosis with the worlds failing economies. If not, then how do we foresee a revival of this mutilated business sphere. Please state your answers with supportive facts/rationale.
Ref. link:
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090121/REUTERS/901219983/0/1008



3 Comments

  • It means only that there is excess capacity in the production of automobiles, something that has been the case for many years, and which was foreseen many years before that. The current economic difficulties have simply brought that situation to its full fruition.
    As to where we go from here: automakers who have focused tightly on market segments they could dominate in such a way as to avoid having to discount their prices (BMW, Honda and Toyota) have done very well, and those without a lot of legacy costs have done OK (Mercedes and Hyundai and Nissan and Subaru and Kia and Suzuki) … Mitsubishi focused too much on high volume and easy credit, while Jag/Rover let its product line age (except for the Stunning LR3 and the new S-Type and XK). VW was too busy partying in the executive suite and lacked focus in its offerings, Isuzu was simply lame.
    There are markets such as China and GM brands (such as Buick in China) that have done well. GM has a long way to go in fixing itself, but if it sharpens its focus and ups its quality it can make it through this situation. They need a real Carlos Ghosn type though … Lutz is great as far as he goes, but he’s the product side and they’ve screwed up on the business side.

  • GM’s troubles are entirely of its own making.
    It arrogantly fails to innovate, and is grossly
    mismanaged, from the Board on down.

  • Probably more of an issue than shift from oil economies, which are not yet dead, firms like GM are being punished by excesses of credit and debt based economies. All their peers are also suffering, and there will be consolidations and liquidations, While early predictions are that 2009 will be a major year of contraction for automotive and truck sales, even in a recovery, with some pent up demand, there is a several million units per year over capacity in US production, in such an environment, all the details of design and performance as perceived by the markets matter in maintaining a position…. one of the hardest situations in war is a retreat, this applies to business as well.
    On a different front, of labor management, and entitlements, it appears that managment has been playing a “can you make the kings horse sing” and here near the end of the time period, the horse still doesn’t sing. Putting off dealing with retirement obligations and other aspects of current crisis are putting many firms in a no win situation, they can not steal capital from the pensions anymore, they have obligations, the shift to defined contribution forms are faltering.

Leave a Reply to Les DeGroff Cancel reply