The GM webcast trading statement had been signalled less than 24 hours before it was due at the unusually precise time of 11.15am in New York yesterday.
Go deeper with GlobalData
In the half hour before the conference call started, President Bush was on the telly explaining to America why all was well despite the failure of their strangely-named mortgage companies, Freddie Mac and Fannie Mae.
It looked like a set piece: Bush knew that GM was going to be bad. He must want to rehearse the argument that all was under control in the besieged American economy before GM caused a panic.
But it was not quite like that. Clearly GM has got it very tough, but it has a plan and when it described the plan the share price went up a bit from $9 to $10. That’s not to say GM is recognised as a company going places. It was $27 a share at the start of the year. Wall Street values the maker of 15 million cars and trucks a year now at $7bn. The graphic way to give context is to tell you that Harley Davidson, which makes 330,000 bikes a year and some T-shirts, is worth $8bn.
It’s no longer easy to be cross with GM given the energy it has applied to the task of wading out of the swamp. But there is anger. America’s own Forbes magazine yesterday gave space to the case for letting GM go bust. It was the British Leyland argument. On a bigger scale.
It’s true that GM didn’t tackle the rampant union power early enough. It never did tackle the appalling product quality (relative to the Asian offerings) at all. And it never did cotton on soon enough that it was making the wrong stuff. But that does not yet amount to a case for obstructing its recovery and letting it go down.
To be caught making the wrong stuff when the fuel priced doubled and the consumer stopped being able to consume, was as much bad luck as bad management.
GM is the first of the terrible trio to describe the extent of the problem. What it said is not that it knows how to return to profit but that it knows how to raise cash, make operating savings and mortgage assets sufficient to be able to survive any trading condition through to the end of 2009. The details are all in the news piece on just-auto US: GM accountants get axe out again.
GM is not in the cack on its own. Chrysler no longer has a committed parent. In percentage terms it has the worst exposure to the US. It looks extremely vulnerable. Ford has yet to catch up with GM in the emerging markets. Both need to report how they are dealing with revenues more than 25% down year on year in the profitable vehicle segments. Until they do… breath will be bated.
Rob Golding
See also: US: GM accountants get axe out again
