GM’s auditor has reported “substantial doubt” that the company could remain viable without bankruptcy. As we write this on Thursday at noon, GM stock sits at $1.83, and the Dow is down 234 points. The company signaled the warning was coming last week when reporting its staggering $31 billion loss for 2008.
GM plans to keep fighting for $16 billion more (plus the $13.4 it was already awarded that it wants to keep) in bailout funds to survive. And so the cost-cutting begins in earnest:
- 47,000 jobs to go this year
- 14 plants closed by 2012
- Saab, Hummer, and Pontiac sold off, shrunk, or shuttered ASAP (Saab is already in bankruptcy in Sweden)
- GM Europe seeking $4.5 billion in Germany and not getting it.
In regard to the latter point, blogger Angus MacKenzie put it this way:
So there it is: GM’s survival in Europe has nothing to do with the quality of its product (the stylish Opel Insignia is Europe’s 2009 COTY), or the efficiency of its factories (Opel’s Eisenach plant is one of the most efficient in the world). It’s whether the politicians think the cost of GM’s failed European operations putting 300,000 out of work is less than the cost of propping up an automaker in a market where too many automakers have too many factories making too many cars for too few customers.
This is the same story the Obama administration’s auto task force will have to face, plus a prospective cascade of failure among parts suppliers and dealers.
Perhaps it’s time, in the face of this constant drumbeat of bad news, to start thinking and talking seriously about how reconstruction, i.e., bankruptcy, will work for all of the Big Three, since that appears to be the likely outcome.
The portents are all around us. Rick Wagoner is now working for $1 a year. Most ominous, the UAW has so far made no comment. And, in the cruelest blow of all, Chrysler just knocked GM off its perch as Canada’s top-selling carmaker—for the first time since 1949.
More than ever it appears that any bailout will involve bankruptcy, at least for GM. Do you see any alternative?