As GM goes, so goes America, the old line went. Today, you would hope not. The company’s prospects look bleak.
On Thursday, General Motors said it made a net loss of $30.9 billion in 2008.
The 100-year-old company, which was dethroned as the world’s largest automaker by Toyota, plans to cut 47,000 jobs, including 21,000 in the United States. It will close five more US plants and sell its Swedish subsidiary Saab. (A report on Sunday said the German Opel unit would be spun off.)
GM, which has already received $13.4 billion in loans from the US government, says it needs an additional $16.6 billion to stave off bankruptcy. (It has also asked for $6 billion from the governments of Canada, Germany, Sweden, the United Kingdom and Thailand. In India, GM says its expansion plans are on track.)
The company faces tough political currents, the Detroit Free Press noted. “It’s not going to play well, and it won’t play well in particular ... with the Republicans,” Sheldon Stone, a restructuring expert, told the paper.
GM may draw hope from a statement by President Barack Obama. “The nation that invented the automobile cannot walk away from it,” he said in his address to Congress.
While it is true that GM and the other two Detroit automakers are saddled with higher labour costs and larger health and pension bills than Japanese rivals, they have also lost touch with the market, analysts say. A report in the Detroit News captured the problem.
Of the eight members named so far to Obama’s auto industry task force, the 10 senior policy aides who will assist them and a special adviser, only three own American cars, the paper discovered. (And one owns an American motorcycle — a Harley-Davidson.)
Treasury Secretary Tim Geithner and Obama’s economic adviser Larry Summers, who are co-chairs of the task force, both own foreign cars (an Acura and a Mazda, respectively).
There’s a caveat: some of them don’t own any car. Cabinet officials usually get government vehicles. Obama used to own a Chrysler 300C sedan but traded it in for a more fuel-efficient Ford Escape hybrid during the election campaign, the News said. Now, of course, he uses a specially made SUV. The News said Vice President Joe Biden owns a 1967 Chevrolet Corvette, a wedding present from his father, who was sales manager at a car dealership.