Cars and Drivers

A Lucid Moment At GM (GM)

gm20jpeg20image3GM (GM) management has finally begun to wise up. Even if the government gives it every dime that it asks for and the Administration can bring the UAW and the company’s creditors to their knees, the No.1 US automaker has troubles that can’t be fixed.

As GM puts it new restructuring plan together for the Treasury Department, it is becoming terrifyingly clear that US car sales won’t recover this year. They will be worse than in 2008.

GM has some advantages as it moves deeper into the year. Thousands of blue collar employees are taking company buyouts, That should bring the company’s cost to breakeven in 2009 down.

Press reports say GM has gone back to the drawing board to work on the third version of its restructuring plan since it began the process in January. The view of the future in the new program is grim. It is probably based on the premise that domestic light vehicle sales may be only 10 million this year. GM should probably be considering a number closer to 9.5 million and a further contraction of its market share, but even if it can hold its own, it may not be able to cut enough to make a penny in an increasingly deteriorating environment.

GM will have to go back to the government for more money sometime this year. The only question is how much more it will need.

Douglas A. McIntyre

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