GM Is Toast
In desperation, GM has announced it will dump 1,600 domestic dealerships in the short-term, and ultimately eliminate 2,600, reducing its total dealership franchises by more than 40%. This is only part of an array of measures designed to reduce operating costs. More auto assembly plants will be shut down; additional layoffs will be undertaken while remaining employees will see their wages and benefits shrink further. However, in the wake of the financial storm that is wrecking the global economy, these last ditch and desperate stratagems are almost certainly doomed to failure. In the next several weeks GM will file for bankruptcy protection, shed several of its brands, and accelerate the death spiral that it is now locked in. With unemployment surging, not only in the United States but throughout the world where GM has significant market share, and credit essential for auto purchases being denied to consumers-macroeconomic factors that are far more relevant to the auto industry than brand elimination and dealership disposal-the extinction of General Motors as an industrial corporation seems all but certain. Possibly brands such as Cadillac or Chevrolet may survive independently or be absorbed by other auto manufacturers, but the behemoth known as GM is destined for the scrapyard of history.
While Teddy Roosevelt was completing his second term as U.S. president in 1908,the first GM automobile was manufactured. In 1954, General Motors saw its 50 millionth car roll off the Detroit assembly lines, at a time when more than half a million Americans worked for GM. Now, at death’s door, GM has announced that its dwindling workforce will shrink by a further 38%, reaching a planned level of 38,000. That represents a reduction of 93% from the 1954 employment figures!
The financial and political elites who dominate policymaking in America seem unperturbed. They apparently prefer having companies exist that engineer exotic financial derivatives than a manufactured product that is assembled by a skilled, well-compensated workforce. However, even with this melancholy certainty in front of us, I will always imagine a ride in a 1957 Chevrolet convertible as being infinitely more romantic than cruising the lanes on foot with a pocketful of securitized subprime mortgages. So, America, where does the economic road ahead lead us?
Rest in peace, General Motors.