Can General Motors Recover?
http://www.time.com/time/business/article/0,8599,1820418,00.html
Two months short of the company's 100th anniversary, General Motors
Corp. executives remain defiantly upbeat in the face of a weak economy,
terrible sales and Wall Street speculation that the giant automaker
could ultimately wind up in bankruptcy court if the slump continues.
GM's stock price dropped below $10 this week to its lowest level in 54
years, and down significantly from $43 last autumn after the automaker
had signed a new four-year labor contract with the United Auto Workers
that included significant concessions. JP Morgan said the company has to
raise $10 billion in fresh capital in the next several months. Merrill
Lynch was even less optimistic. "We believe there is potential downside
in the stock below $7 and that bankruptcy is not impossible if the
market continues to deteriorate and significant incremental capital is
not raised," Merrill Lynch analyst John Murphy wrote in a note to
investors.
GM officials dismissed the re****t from Merrill, with the implication
that Merrill — which is itself desperate for cash having lost billions
in the real estate bust — doesn't have the best financial a***en. "We
won't comment on market speculation or the Merrill re****ts
specifically," said GM spokeswoman Renee Ra****d-Merem. She said GM was
not cash short: "We continue to believe the company has sufficient
liquidity and financial flexibility to meet its 2008 funding
requirements, despite lower U.S industry volumes," she said. More than
17,000 blue-collar workers dropped off GM's payroll last week as part of
a buyout of long-term employees, which should help lower costs.
To balance the bad news, GM executives pointed to the overseas market,
where the company is anything but troubled. The company had record sales
in Europe during the first half of the year and posted double-digit
sales gains in Latin America and China, where the company expects to
sell more than a million vehicles again this year, said Mike DiGiovanni,
GM's general director of market analysis. Even the bad news had a
silverish lining: "We actually picked up market share [In North America]
in June," said Mark LaNeve, GM vice president for vehicle sales, service
and marketing. Predictions that Toyota would surpass GM in sales during
June proved inaccurate, as the rival company suffered an even larger
drop in sales than GM.
One of the big issues for auto companies is adequate supply of hybrids,
and GM says it is winning that battle. "Hybrid demand and availability
continues to build, and we're seeing really positive momentum with the
Chevrolet Tahoe and GMC Yukon 2-mode hybrids," LaNeve added. At the same
time, GM is still planning to roll out the Chevrolet Volt, a plug-in
electric vehicle that will run on battery power rather than gasoline, in
late 2010 despite some skepticism about whether the lithium-ion battery
will be ready for the road.
GM also insists it's moving to address trim costs and adjust to the new
reality created by $4/gallon gasoline, including selling its Hummer
brand. GM has also suspended design and engineering work on its next
generation of pickup truck and s****t utility vehicles as it waits to see
how the market will shake out. LaNeve said in a recent interview with
TIME that capital spending was a key reason that Hummer had to go. With
the market ****fting away from trucks, GM felt it did not have enough
resources to sup****t four distinct truck brands, and Hummer's reputation
as a gas-guzzling toy for rich boys couldn't have helped its cause.
--
Civis Romanus Sum
|
