Update: Now GM says it won't have enough cash to keep going through the end of the year. On top of it, merger talks were suspended.
General Motors Corp., seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall ``significantly short'' of the amount needed by the end of June unless the auto market improves or it raises more capital.
The largest U.S. automaker reported a $4.2 billion third- quarter operating loss today and said its available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June. Merger talks with Chrysler LLC were suspended.
This is quite foreboding. I didn't want to put up the potential of GM implosion but it sure looks like it might be on the precipice.
General Motors Corp., hammered by the worst auto market in 25 years, needs U.S. aid because ``time is very short'' to stop its collapse, says Roger Altman, the former Treasury official advising GM in merger talks with Chrysler LLC.
With the government offering a $700 billion rescue for banks, it should have enough to assist GM, Chrysler and Ford Motor Co., Altman, 62, said in an interview. Altman, now chief executive officer of Evercore Partners Inc., helped with the 1979 Chrysler bailout plan as an assistant Treasury secretary.
``The consequences of a collapse by GM or all three would be very severe,'' he said. ``The impact would be widespread,'' with jobs lost by the companies and their suppliers.
Crisis #1
GM is announcing a "major restructuring" tomorrow.
Notice the timing, day after the election. And the immediate cause is likely not the industrial side of the business, but a default by GMAC, the financial arm of the company.
Everyone has been so quick to dismiss the auto industry as a dinosaur deserving to die. But the economic impact of a collapse of the auto industry would be dramatic. And the unemployment produced would be structural in nature, unlikely to be resolved in the short term. Something like 1 in 5 jobs in Indiana, Ohio, and Michigan are tied directly to the auto sector. And of course if GM workers are on the street, they aren't going to be buying things at stores and restaurants. So there's a secondary wave of unemployment the generates a downward spiral.
GM wants to force a merger with Chrysler, so they can get a hold of the $10 billion in cash that Chrysler has on hand in cash. And they want to cut overall auto output by closing down a lot of Chrysler's production to deal with excess production capacity.
And cutting employment through buyouts for Chrysler.
I'm really not sure where Gettlefinger stands on this. He was adamantly against it because of the possibility of job losses.
I know
Regardless of what one thinks of GM management, their constant thrashing of the UAW, outsourcing, replacing engineers with H-1B Visa holders, while firing the Americans and just plain all of it...
if this happens it will cause massively bad reverberations through the economy and assuredly decimate the Midwest.
For those reading this Gettlefinger is a UAW union leader.
(and not it's not the ethnic fish food!)