General Motors is in a world of hurt, losing billions of dollars this year due to high fuel prices, a huge drop off in demand for its big trucks and SUVS, and thanks to a lengthy strike by transmission supplier American Axle which ended in May an action which cost GM $2.6 billion. GM’s stock is at a 54 year low and the company’s market share has dropped to its lowest percentage in over eighty years.
Most of GM’s losses are in the North American sector as the company is experiencing record sales in Latin America, Eastern Europe, and in China. Yet, as the home market for the huge automaker, the US must be profitable in order for the company to compete.
On Tuesday, GM officials announced that the company would continue to cut costs in a bid to recover. Thousands of white collar employees will likely lose their jobs, GM has canceled its quarterly stock dividend, and the company will be reducing truck capacity by another 150,000 vehicles annually. General Motors will also slash its advertising budget and it may reduce its participation in motorsports.
In all, the cutbacks are expected to save GM as much as $10 billion while raising $5 billion through selling assets and raising money. Earlier this year GM announced that they are considering selling Hummer, a large truck/SUV brand that has been particularly hit hard as gas prices topped $4 per gallon.
Industry analysts and Wall Street moguls have warned that GM may not have enough cash available to weather a protracted downturn, suggesting that bankruptcy is a possibility. GM has over $23 billion in cash on hand, enough to carry the company through the remainder of this year and says that with the additional $15 billion saved or raised the automaker should have enough to carry its business through 2009.
GM believes that the US market will drop to 14 million vehicles sold, down from 16.1 million predicted at the beginning of 2008. The company is pushing to bring new products to the market including its hybrid Chevrolet Volt, the compact Chevy Cruze, and ramp up production of popular models including the Malibu, yet another Chevrolet model.
(Source: General Motors)