Wanna trade places with the Chairman and CEO of GM, Rick Wagoner?
Imagine that this mess is now your problem:
Worries about whether GM has enough cash to survive caused the company’s stock to plunge last week to its lowest level since 1951. On Monday, GM’s battered shares rose 33% or $1.62 to $6.51 in 4 p.m. composite trading on the New York Stock Exchange. A year ago the stock traded for $43.20.
In a move that promises to add pressure to GM’s short-term outlook, GMAC LLC — the lending arm that finances a bulk of buyers purchasing GM vehicles — said Monday that it is taking a more conservative lending stance in financing, limiting purchase contracts to customers with credit scores of 700 and above. The median score of Americans is 720.
In June, GM said it intended to close four truck factories in total, including plants in Oshawa, Ontario, and Toluca, Mexico, as well as the Janesville and Moraine operations. GM was consuming about $1 billion in cash a month in the second quarter. Analysts believe it is burning much more now because of production cutbacks in the third quarter and because the financial crisis has slowed auto sales dramatically.
Buckingham Research analyst Joseph Amaturo estimates GM burned through $5 billion in the third quarter. GM had about $21 billion in cash reserves at the June 30 end of the second quarter. Since it needs a minimum of $11 billion to $14 billion to run its operations, some analysts believe it risks running short of cash within 12 months if does not raise additional financing.
GM hasn’t yet said when it will report third quarter results. The company lost $15.5 billion in the second quarter.
GM used to be the engine that ran the entire economy. But today, we’re watching it die, day by day.
One could make criticisms about the roles of union protectionism, or global markets, or car building, etc., in the ongoing disaster that is GM in today’s economy. And I’d be first in line to make many of those criticisms.
But even with all that, it’s a damn shame.
Millions of people have either worked at these plants, or worked at companies that supplied parts for them, or worked in the offices next to them.
Entire generations of families have lived and died in the towns where these plants and offices were located, by whatever accident placed them there. Places like Janesville, Wisconsin, which I’ve driven through many times.
Millions more people have been able to go to college and break out of the economic straitjacket their fathers worked in for forty or more years, due to the higher wages the unions were able to secure for the largely unskilled labor of their members. Unions have their faults, but helping multiple generations of unskilled laborers afford middle class homes, and send their offspring to college, wasn’t one of them.
GM is a piece of our social history.
But GM’s future — social, financial, or any other kind — isn’t looking too good.
Maybe the company doesn’t deserve to live on; economic math is brutal, and you don’t get credit for trying, like in some of our dippy schools.
Either way, it’s still a damn shame.
Folks of a certain age recall GM products of the 60s and early 70s with fondness. Pontiac GTO and Le Mans. Olds 442. Chevy Camaro and Impala. Many, many others. Big V8 motors + huge interiors + squishy suspensions + cool looks = awesome cars. And gas was like $.35 a gallon in 1970. What’s not to like?
Those days are so over.