GM (GM) Turns From Downsizing To Panic

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GM (GM) has developed the pattern of matching bad news with more bad news. Since the company does still have some bright spots, it may want to balance its public relations act. Its relentlessly negative take on its own prospects has begun to drive all confidence in the company out of the markets.

The largest car company in the US has announced that it will put 5,000 more poor souls out on the streets. These are white-collar workers and The Wall Street Journal estimates that is about 15% of GM’s salaried work force in North America.

GM has the opportunity to do two things to wash some of the nervousness about its prospects down the drain. It is probable the the company is adding people in markets like India, Russia, and China. It could certainly match news of bleeding in it home market with improvement abroad.

Pointing to international progress is simple and a somewhat limited way of saying that GM is not in the process of cutting itself into oblivion.

At some point, and that point will have to be soon, GM needs to take a stand in North America and signal that it will not retreat any further. By doing so, it will have to say that it may loss more money in its home market, but it will not gut its management, product development, and manufacturing ranks to the point that it will have no sails to catch the wind of an economic recovery.

GM is going to have to raise money and that tab could come to better than the $15 billion it has pegged as a fair number. But, the firm needs to reverse the market’s perception that the money will only go to fill a hole dug by falling sales.

GM could say to its shareholders that it is prepared to lose more money short term than it absolutely has to by keeping the capacity to be the No.1 seller of cars in the US now and in the future. Cutting beyond a level which allows it to recover its sales only says that the game is over and GM is still sitting at the table because it has no place else to go

Douglas A. McIntyre.