GM (GM) Tries To Save Itself

GM (GM) will try to save itself again. It may be too late. The company may already be in hospice

The nation’s largest car company is considering dumping thousand of white collar workers and selling or closing some of its brands. GM is has begun to re-evaluate whether it can be profitable in 2010. The answer is almost certainly "no".

According to The Wall Street Journal, "Management may also present the board with options for raising additional cash to help GM make it through the downturn." The paper reports that most brands beyond Cadillac and Chevy are being reviewed for significant changes or elimination.

The potential revolution in how GM manages its brands and costs may come too late, especially for the company’s shareholders. The firm’s stock has already dropped from from a 52-week high of over $40 to $10.

GM’s problems are obvious, but the solutions are not. Shutting down brands by no means insures that the company’s North American operations can make money. GM is still weighed down by having a large percentage of its models in the SUV and pick-up categories. The car company may not be able to change that for a number of quarters. Throughout that period, it is likely to lose billions of dollars.

While GM may be able to repair some of the damage done by its product development and marketing high-margin, high-mileage vehicles, the firm’s stockholders are certainly looking at the price of GM’s shares dropping another 50%. With a market cap of under $6 billion, an infusion of $10 to $15 billion would push GM’s stock price through the floor.

GM’s new plans are a long shot. The damage to shareholder value is a sure thing.

Douglas A. McIntyre