DETROIT, Oct. 10, 2008
Source: GM Production Cuts Likely Imminent
Amid Slumping Sales And Stock Price Collapse, Cuts May Be Announced Next Week
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General Motors' stock fell nearly a-third Thursday Oct. 9, 2008, closing at $4.76 a share, the lowest it's been since March of 1950. (Getty)
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The person, who did not want to be identified because the plans are not finalized, said the cuts likely will hit engine, transmission and stamping operations to correspond with a June announcement that GM would close four truck and sport utility vehicle assembly plants.
The closure dates for those plants likely will be accelerated, the person said. GM announced last week that its Moraine, Ohio, SUV factory will close Dec. 23, and it has said it will idle assembly factories in Oshawa, Ontario; Toluca, Mexico; and Janesville, Wis., by 2010.
Chairman and CEO Rick Wagoner said last month that GM would have to make adjustments, particularly in stamping factories.
Is this the beginning of the end of the Big Three?
"It probably is to some extent," observed Csaba Csere, editor in chief of Car & Driver Magazine. "I think most people believe the three Detroit automakers will not survive as independent entities going forward. At least one of them is going to either go down or be consolidated with some other car company."
He told CBS' The Early Show that, "This has been the worst possible year for the car industry. We started off with a soft economy, falling housing prices, people were feeling poor, and so car sales were very slow getting out of the gate this year.
Further cuts could shore up GM's share price, which lost nearly half its value this week, plunging to the lowest level in more than 58 years. The shares fell 31 percent to $4.76 Thursday and dropped to $4 in the first minutes of trading Friday before rebounding to $4.99 by midday.
Industry analysts say closing factories or pulling off shifts will help GM cut costs and preserve cash at a critical time with the company losing billions and burning up cash at an alarming rate.
GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion but has been burning up cash at a pace of more than $1 billion a month.
The company announced a plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing through 2009.
Mark Warnsman, an auto analyst with Calyon Securities, said further production cuts are consistent with what GM and other automakers have been doing all year - cutting factory capacity to match lower sales.
"I think it's a positive sign that GM is biting the bullet," he said. "for GM going forward, they're going to have to use everything available to them."
The drop in GM's share price Thursday was fueled by a statement from Standard & Poor's Ratings Services, which said the "rapidly weakening state" of the global automotive market could push GM's credit further into junk status, making it even tougher to borrow money.
GM issued a statement Friday saying that while it faces "unprecedented challenges" related to the ongoing problems in the financial markets and weakening economies across the globe, it still doesn't consider bankruptcy protection as an option.
"Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive," GM said.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
Add a Comment See all 16 Comments
- How about SMALL, fuel-efficient, hybrid (with plug-in capability) SUVs? It''s not the SUV, per se, that is the problem - it is the grossly excessive size and massively inefficient operation of many that causes problems.
Watch what Honda will be doing with the plug-in CR-Z small SUV in a few years. They''ll sell like crazy! GM and Ford cannot do something similar if they really wanted to?
Anyone who sees a bright future for current-type SUVs is just plain dense... - Reply to this comment
- If Gm actually made cars people want then they would not be in this mess. Only is the last 3 years have their quality been anywhere near to the quality of the Japanese makers. But that is too little too late. They had a chance to blow the Japanese out of the water 20 years ago but chose to make SUVs instead of hybrids and smaller cars. Well now they will pay the price for that blunder
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- Maybe if GM would build cars that people need and not assume what they want might help. GM''s quality continues to be questionable at best. Conducting business as always has hurt GM as well. You don''t give pay raises to top executives when the company is struggling. Here''s a novel idea: take a pay cut when business is hurting and a pay raise when it isn''t!! While we''re at it, how about increasing quality and building cars (not SUVs) that get good gas mileage!
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- SUV = Bailout by the U.S. Government. Capitalism by now belongs in the trash can.
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- Those who would live by the SUV will die by the SUV.
- Reply to this comment
- Our "great" president Reagan encouraged US auto makers to shy away from fuel economy (because it is a bad idea from the not so great president Carter)and build SUVs. All our "patriots" had a good time driving SUVs and job provided through loose investment (S&L scandal for e.g.)
These made Bush Sr. one timer. Now we are paying for those great "party" times - Reply to this comment
- ---"I am buying, buying, buying. I don''t play stocks on the day to day trades. I hold them for years, and this one and Ford are coming back ten fold in two to three years. Thank you, electric car."---
Posted by lochlan
Their financial outlook is really bleak - but I placed an order to buy too and then the market took a turn up and it didn''t go through.
Isn''t GM''s stock low in part because people think it''s going to go bankrupt due to an inability to get credit? Because I don''t see Barack letting the history books write that an American institution collapsed under his watch when he could so easily whip of a multi-billion dollar check and keep his legacy clean.
Plus cultivating the ''bitter'' vote for 2012''ll be top priority in his administration.
If that''s the case, then fears of bankruptcy ought to dissipate, and if the fears dissipate the stock ought to go up - maybe it''ll go down first, but if it goes from $5 to $7 within a year or two, you make more than you would with bonds.
But I''ve got a pretty big tolerance for risk - I don''t gamble anything I''m not willing to lose because you just never know . . . - Reply to this comment
- In other news, GM announces their latest SUV, "The Guzzler," which they say has 8th row seating & gets 10 MPG. "We feel we have our finger on the pulse of the American consumer," Rick Wagoner was quoted as saying.
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- PT Barnum....a sucker is born every minute.
Posted by midvale3
No kidding. This stock only has to go up to $7 and change, and I''m up 50%. Anyway, here in America we have the "too big to fail" policy. - Reply to this comment
- I am buying, buying, buying. I don''''t play stocks on the day to day trades. I hold them for years, and this one and Ford are coming back ten fold in two to three years.
Thank you, electric car.
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Posted by lochlan at 02:42 PM : Oct 10, 2008
PT Barnum....a sucker is born every minute. - Reply to this comment
- "The person" is an anoymous COWARD hiding behind that claim, and "this persons" claims could be totally wrong, but as usual the yellow journalism these days using anonymous sources and people who speak only under condition of anonymidity because they are not "authorised" to realease info or speak to the media- makes you wonder WHY they are not "authorized"
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Posted by newster1 at 01:41 PM : Oct 10, 2008
As usual, shoot the messenger but ignore the message. The big 3 have been lossing money hand over fist for years. This will be the final nail in their coffin and it is NOT the unions that casued this. They have contributed to the issue but it''s the top management putting everything into SUV and trucks and ignoring cars, sending all sourcing overseas which reduced salaries here and eliminated potential customers, quality that was and still is less than Japan, and many other issues that could have been addressed if they (and ALL corporations) looked long term instead of constantly worrying about their stock value and dividend. I do not feel sorry for them, but unfortunatley the ones who will suffer will be the guy carrying the lunch bucket, not the dammn upper management. - Reply to this comment
- I am buying, buying, buying. I don''t play stocks on the day to day trades. I hold them for years, and this one and Ford are coming back ten fold in two to three years.
Thank you, electric car. - Reply to this comment
- Bankruptcy before the end of 2009.
Posted by midvale3 at 01:11 PM : Oct 10, 2008
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I think you may be right midvale3 If this happens, what will happen to Ricky? WIll he have to sell any of his helicopters? Or Maybe one of his Jets? - Reply to this comment
- a person with knowledge of the company''s plans said Friday.
The person, who did not want to be identified because the plans are not finalized,"
"The person" is an anoymous COWARD hiding behind that claim, and "this persons" claims could be totally wrong, but as usual the yellow journalism these days using anonymous sources and people who speak only under condition of anonymidity because they are not "authorised" to realease info or speak to the media- makes you wonder WHY they are not "authorized" - Reply to this comment
- Anyone with vision saw this coming when GM did not learn from VW, then Toyota that the assembly line, AND corporate response had to change with the times...
Instead, management stuck their heads in the sand and refused to do anything meaningful with the company. Focusing on quarterly profits has nothing to do with corporate wellness...
Goodbye, dinosaur... - Reply to this comment
- Bankruptcy before the end of 2009.
- Reply to this comment
