General Motors‘ (NYSE:GM) 100th year in business is “one of the most wrenching in its long history”, said Bernard Simon in the FT. The company has been in the red for the past three years and lost $589m in the first quarter of 2008 alone.
Against the backdrop of a fall in total US vehicle sales of 11% year-on-year in May, with full-size pickups down 36% and gas-guzzling SUVs down a whopping 42%, the firm plans to close four north American pickup and SUV factories. This is on top of having already laid off a quarter of its US shop floor workers so far this year, said Anthony Currie on Breakingviews.
“For the last 20 years pickups and sports utilities have more than made up for all the losses on other vehicles,” said John Casesa of Casesa Shapiro on Bloomberg.com. But almost overnight, with fuel at $4 a gallon, once popular and profitable monstrosities such as the GM Hummer, estimated to offer just 15 miles per gallon, have lost their appeal.
As the FT’s Lex put it, “companies like GM now face a less extreme version of the storm the airlines are caught in”. The upshot, said Currie, is that the company will need to persuade investors to stump up a lot more cash soon, or GM will once again “be stalked by the threat of bankruptcy”.