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GM (NYSE: GM) is now walking around Washington making the case that the money the government may offer it will be all it needs, ever. That is highly unlikely, so the reason behind the assertion is a puzzle.
According to Bloomberg, "General Motors Corp. has enough government loans to cover the worst-case scenario it described last month and says it won't need more if the economy holds up." Under the current proposal GM would get $13 billion and GMAC has already gotten $6 billion.
The "if" part is the issue. GM's assumptions are way too optimistic.
Beginning on the cost side, if GM's employees, particularly UAW members, see a pot of money going into the car company, they are unlikely to take deep jobs cuts. The union has already said it has given enough. Creditors are almost certain to look at the infusion from the government as a reason to fight hard to keep their status and get full payment.
Looking at sales, GM still assumes a domestic vehicle market that will drive 12 million units sales a year. Based on December sales numbers, the run-rate for the entire US next year is closer to 10 million. GM may have to offer big incentives to keep its market share, which will push down margins even further.
Dream on.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-07-2009 @ 11:14AM
Detfan said...
Actually GM says that they will not need anymore money even if the downside scenario for 2009 plays out -- 10.5M SAAR, so please get your facts right before you post.
1-08-2009 @ 7:50PM
Patricia Figueroa said...
Your negative comments in this article are very dissapointing to me. My husband is a GM UAW working (25 years) he has been laid off since October. I can assure you that the UAW is not looking at the comment of "We don't need any more money" as a reason not to make yet further concessions to help GM survive. Have you researched in detail the current UAW contract? If you had I'm sure you would see that the UAW and the retirees (UAW and Salaried) have taken significant concessions already. This is not to say they will not consider additional ones to make this company profitable again. It is only common sense that that would be in their best interst. I feel your closing comment "Dream On" is sarcastic and un-called for. Lets hope the American People will be more optimisic than you and get this fine Country back on track.
1-09-2009 @ 10:21AM
mbutchcom said...
Sarcastic is a better or nicer word than I would use . I am so sick of these Toyota driving reporters and wall streets media and GE's tv reporters and all the greed and self serving lies. Why can't they just give us news and leave it alone for a while. I would like to show clips of these fools a year from now on tv and hold these gloom experts accountable.Maybe that would put them in the unemployment line.