New Economy Shocker: GM Loses $15.5 Billion In Quarter
In the latest bit of news that would have been absolutely unimaginable a decade ago, General Motors has announced that it has reported a $15.5 billion quarterly loss — yet another sign of the deteriorating economy and how high oil prices have dramatically changed the American public’s car-buying habits:
The General Motors Corporation reported a stunning second-quarter loss of $15.5 billion on Friday because of a dramatic decline in United States sales and charges for job cuts, plant closings and the falling value of trucks and sport utility vehicles.
G.M., the largest American automaker, said it lost $6.3 billion on operations in the quarter that ended June 30, and its worldwide revenues fell 18 percent.
But the company’s overall loss was inflated by $9.1 billion in special charges that included $3.3 billion for buyouts of hourly workers and $2.8 billion related to the bankruptcy filing of its former parts unit, the Delphi Corporation.
The dismal earnings reflected the impact of steadily falling vehicles sales in the overall United States market, and a huge shift by consumers away from the trucks and S.U.V.’s that were once G.M.’s most profitable vehicles.
The Detroit Free Press’ Tom Walsh asks if things could get worse for GM, outlining how the corporation has faced a perfect storm:
Lots of bad things have to happen to suffer a total loss that large, and that’s exactly what transpired:
• As gasoline prices soared in April and May, sales of large SUVs and pickup trucks tanked, causing GM sales in North America to fall by $10 billion, or 33% from year-ago levels.
• A 12-week strike at American Axle & Manufacturing also cut into sales, and GM helped the Detroit supplier end the strike by helping to cover the cost employee buyouts. Result: a $197 million charge against GM earnings.
• Other charges include a $3.3 billion hit for the cost of GM’s own buyout programs to reduce its head count; a $2.8 billion reserve for costs related to the Delphi Corp. bankruptcy; a $1.3 billion drop in the value of GM’s 49% interest in the GMAC financing unit; and $340 million in accounting changes due the recent contract settlement with the Canadian Auto Workers union.
The good news for GM, if we can call it that, is that most of the special charges against profits were not immediate drains on the company’s cash.
But in the larger picture, the bottom line is this:
Every day, another shoe is dropping in the economy.
And the sound you hear sounds like the entire stock of a shoe store falling to the floor…
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17 Responses to “New Economy Shocker: GM Loses $15.5 Billion In Quarter”
Of course, the green netroots will probably get excited about this since the apparent objective of their policy proposals is to close down all manufacturing in the U.S. except for handmade art items.
I wonder what the U.S. will be like without any domestic car manufacturers and only one domestic airline?
Meanwhile CONGRESS voted to recess for the summer while Automakers collapse around us and people who have good paying jobs with them lose their jobs.
Barak Obama's solution………..Properly inflate your tires.
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GM and the other US automakers have resisted efforts by the government to require higher fuel efficiencies. That high price of gas is high and shaky economy has made their vehicles less attractive than foreign competitors' vehicles. For GM and the other automakers it was always “bigger and brasher” and never about environmental responsibility or even a solid long range vision to produce cars that consumers want. It comes as no surprise that they are being taken down a couple pegs.
“Barak Obama's solution………..Properly inflate your tires.”
That's not Obama's full solution and you know it. But if you have a car then maintenance is important to keep it running smoothly and efficiently. It's something most of us were taught before we could even drive and yet it's something many Americans don't do well.
Would you rather have Obama say something like, “If you drive, then you need to take responsibility for the upkeep of your car”?
I like Obama's gentle reminder- and if it saves folks money, then don't knock it.
These automobile manufacturers have long ignored the reality of a scarce supply of fuel. It bit them in the ass in the 1970s, and now it's biting them in the ass again. Genius.
They deserve to go out of business.
Actually, GM has gone along with CAFE standards. Part of the problem, as the Free Press mentions, is the giant amounts the UAW has managed to procure for the oppressed masses, oops, workers at the GM & other US auto plants.
Back in my leftie days, I used to work for COPE, the UAW's political arm, and have seen how aggressive bargaining helped gradually erode GM's position vis-a-vis Toyota & Honda & EU automakers. Unions are among the reason that GM has a gigantic problem facing it at the moment.
Obama is shallow & ridiculous. Keeping tires inflated will not offset a drill ban offshore. It isn't a Dukakis-in-a-tank moment, but his auto maintenance tips are verging towards the edge of political satire leading to a tipping point where suddenly the American people snaps out of its mesmerized state of mind & rejects Obama straight-out.
Are governors Schwarzenegger and Crist also shallow and ridiculous for suggesting the same thing, along with the automakers themselves?
Or would you rather they all just jumped on the McCain bandwagon of more drilling and tax breaks for oil companies at the expense of our infrastructure and environment?
How ironic. GM announces record losses and the entity (BigOil) that coerced and bribed them into recalling their best hope for a bright financial future, production of electric and hybrid cars, has announced the highest quarterly profits in history.
This, while we dip into our kids' college funds and in some cases, milk money, to put gas in our tanks..(I've actually done this recently, had to decide between buying milk at the end of July or put gas in the tank to get to the doctor. I am one of the better off in my little community..)
If I was GM, I'd ferret out who made the decision to forcibly recall their best bet for the future back in 2000 and leave them smashed in piles in the desert. One woman was handcuffed for resisting the forcible siezure of her property: the GM electric car she bought and paid for that worked perfectly, sitting in her driveway.
Truth is stranger than fiction.
I think BigOil should be forced to compensate GM shareholders if it can be found they used undue influence to affect the financial future of GM back in 2000. Don't worry GM officials, if you can demonstrate BigOil coercion back then I think you'll find a jury or a government panel sympathetic to your having caved to their pressure.. Shareholders, find who caved in, roll a head or two and maybe recover your company's losses? Why should taxpayers and shareholders pay at the pump and for bailouts when BigOil is so obviously behind it all?
That's what I and millions of others are wondering..
Cosidering that General Motors spent the 90's sellling Geo Metro, it is hard to argue that they did not support fuel efficient models. However, the American people did not like the car and from what I understood, GM did not make any money selling them.
As pointed out above, GM has to make money selling cars to there is no money to fund the benefits that the autoworkers want. Senator obama does not seemed to have learned the lesson that for there to be employees, there has to be employers.
The GM Volt was leased, it wasn't her property. But finding out the reasons why they refused to renew the leases and why it's taken almost 10 years for a new version would be nice to know.
BTW, how do you get the quote thing to work?
Who thought this was going to be a “Shocker” though? GM & Ford has been hurting for a few years now. They weren't quick enough to see the changes in fuel prices were going to the auto industry. I don' t see how that's completely the fault of UAW though.
In what other events have leased cars been forcibly recalled in whole and en masse?
The reason the entire cars were recalled wasn't because people didn't like them or weren't satisfied with them. Obviously if a woman was risking handcuffs to keep hers why force her to give it up? The PR would've been much better for GM if they'd let her keep it and brag to her friends about how much she loved GM instead of interview with the press about how maniacal the company is…
No..
There's another reason why they were recalled: Simply because their existence on the highways was the beginning of the end for gashogs. And that's something BigOil didn't want happening in 2000. So at BigOil's command, GM invested heavily in gashogs (see Hummers). Now because they did that…directly because they did that…they are going bankrupt.
We all make mistakes. But when getting to the bottom of the mistakes it's best to look at the root instead of the dandelion tops.
“Cosidering that General Motors spent the 90's sellling Geo Metro, it is hard to argue that they did not support fuel efficient models. However, the American people did not like the car and from what I understood, GM did not make any money selling them.”
Lol, not to harp on the obvious but that was then, this is now. Gas is well over $4/gallon and GM has not changed its strategy. The price of gas has been skyrocketing for years.
Did anyone watch the NBA post season? I did and here is what I saw. A GM commercial EVERY commercial break, and EVERY one was for an SUV of some type. Its not liberals and their green freak policies driving GM under, its GM's stiff necked business plan.
So folks didn't like the Geo Metro. That wasn't because of fuel efficiency. Folks didn't like the Geo because it wasn't a good car.
Out of all the choices of gas guzzlers some sell better than others. So why give up on fuel efficient vehicles just because one model isn't well received?
GM was going downhill along with the rest of the Big Three since the 1980s. (Any visit back then to California, the center of car culture in the USA, would have shown them the future. They were too insular and stuck on the obsolete protected-market-and-overpaid-UAW model to bother with things like modern styling as well as correcting their business model.) Yes, the current economy is such that even Toyota is offering buyouts to some of its employees in Tennessee, where the vital US auto industry is. But it's still not an excuse to blame Bush or rush to retool for smaller vehicles, only to risk getting burned again once fuel prices go down again. Nobody here can claim honestly that This Time It's Different. Smarter would be to look medium term at retooling to a slight extent but move now to import and sell here the small cars that GM and the rest of the Big Three already sell in Europe. Even the dippy environmentalist governments in California and the Northeast can get sensible and allow sales of modern Diesel automobiles.
Keeping tires inflated, something none of us need to be told, is like telling us to war sweaters and turn down the thermostat in winter — quite Carter-like as well as silly and annoying. It's also a variant of “Let Them Eat Cake.”
“Cosidering that General Motors spent the 90's sellling Geo Metro”
What's funny is that the short-haired Saturn-driver-like models in the ads for that car would be stereotypical Obama voters now.
To the tune of Al Jerreau: “Zoo-bee-doo-bah-wah Ge-o Me-tro, zoo-bee-do-bah-way Ge-o Priz-m…”
“I wonder what the U.S. will be like without any domestic car manufacturers and only one domestic airline?”
The greenies will clamor to have it nationalized and provide “free” or subsidized air travel to everyone but the Evil Rich, who will be taxed to pay for the subsidies.