Cars and Drivers

GM (GM): No Size Is Right Size, Dividend Or Not

GM’s (GM) problem is that there is no "correct" size for its North American operations. While it is in fine shape overseas, especially in Latin America, Russia, and China, there is no way for the car company to call a bottom to the domestic market. Total vehicle sales in the US could be only 14 million this year, down over 2 million from 2007. Next year will be no better.

GM’s other problem is that retooling the company’s plants and cutting personnel does not get the company into the small and hybrid car business fast enough. Toyota (TM), Honda (HMC), and Nissan already hold the high-ground in this segment. Moving in is not a matter of cutting costs and bring out new products. In places like California, these foreign brands have over 50% of the market already.,

To save cash, GM will cut its dividend. In addition, it plans to raise $15 billion in cash by the end of next year. With a current market cap of $5 billion, the dilution will be tremendous. It also plans to sell about $4 billion in assets.

GM will do what all troubled companies do–fire people. It this case 20% of remaining salaried staff. It may reach the point where it does not have enough marketing and product management staff to effectively run the company.

The war in GM hopes to prevail, in its own market, may no longer be one it can win. If it does have a chance, it will take more than two or three years and $15 billion.

Douglas A. McIntyre

ALERT: Take This Retirement Quiz Now  (Sponsored)

Take the quiz below to get matched with a financial advisor today.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future

Take the retirement quiz right here.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.