General Motors executives must wonder whether they will ever be able to wear anything other than the hair shirt.
Bankruptcy was eventually avoided but only after the board had spent several months staring agonisingly into the abyss.
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Then came focus on the European business which has been unprofitable for more years than we can count. There has been a closure but the attention moved away from the destruction of plant-shutdowns and turned to cost-saving and joint venture.
Peugeot was selected as an appropriate partner and GM put some money into the French company.
No sooner was the ink dry on the cheque than recession struck Europe and GM found that it was in double trouble; not just Opel and Vauxhall in trouble but now the investment in PSA looking unwise. The joint working parties will have to work hyper-hard to get the discounts they imagine possible by sharing components and turning the screws on the component suppliers.
The Japan earthquake has blocked out that ray of sunshine. Not only were costs incurred by the disruption to component supply but there was no way that there could be decisive action on component prices when the factories were disabled.
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By GlobalDataDan Ammann, the chief financial officer for GM, said they closed some assembly lines to slow production and keep in line with the falling demand but still had to take a $361m dollar loss in the first quarter.
Dan Akerson, the CEO, said the US business was fine and the international division which includes China was “solidly profitable”. But US$617m was lost in Europe in the first half. The metrics of the business are even less favourable than they were a year ago, he said. And that is “simply not acceptable”.
“We are co-ordinated and we will be relentless.”
Pricing is under pressure and the only reason that price per unit has not fallen is because there has been a fortunate phasing of new models such as the new small car, the Adam.
Seventy per cent of the products are being renewed or refreshed. That stands GM in a strong competitive position. Short-term though, Ammann concedes, there will be a huge launch-cost impact on the P&L.
The Morgan Stanley analyst, Adam Jonas, reckons the second half losses will be worse, possibly as much as $1.4bn. Other analysts are even more bearish than that.
The men in the hair shirts must wonder whether the return to silk and gold cufflinks will ever come.
