It did not take a story in The Wall Street Journal to let Wall St. know that it would be a hard year for GM (GM) and its peers in the US. Perhaps the piece did crystallize the situation.

GM sold off almost 5% today, moving well below $20. Word is that many analysts now expect domestic vehicle sales to be well below 15 million this year, perhaps dropping to 14.5 million. In 2007, the figure was 16.1 million.

GM and Ford (F) are now likely to have to raise money. GM still has problems with its former parts unit, Delphi, which is coming out of bankruptcy, someday, maybe. GMAC, which is now majority owned by troubled hedge fund Cerberus, has difficulties with its real estate portfolio and it car lending business is not likely to weather the current credit period well.

At the top of the list of problems is the fact that GM’s robust overseas operations cannot out-run the disintegration of its business in the US. It is like trying to out-distance your shadow.

GM may be able to cut deeper into costs in its American business, but the time will come when it will lose its capacity to keep its market share above 25%. It simply won’t have the production ability.

Sad as it may seem, GM could become a large niche manufacturer in its domestic business.

Douglas A. McIntyre

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