General Motors Corp. reported third-quarter earnings today: a whopping $4.2 billion, or $7.35 per share, excluding special items. But the beleaguered auto manufacturer dropped a bombshell when it disclosed its cash position, which is dangerously low.
The company said its “estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.”
To make matters worse, the company said that in the first half of next year its “estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve.”
GM burned through $6.9 billion of cash last quarter — that’s $75 million per day.
Though GM continues to slash jobs and spending, the outlook is grim. GM brass are actively lobbying the government and lawmakers for added funds to keep the company afloat. Only time will tell if their efforts will be successful.
I was around during the Chrysler/Iacocca days. Some people fled Chrysler products but others bought to help us out. The dealership I managed in Evanston Illinois experienced record profits during that period, but we were an exception, not the rule. I had network news cameras in my face every month as they contrasted our situation with failing Chrysler stores. We were located in an “old money” area of Chicago and weren’t a typical Chrysler Dealership. Floor plan money was sky high in those days. We lost our floor plan source twice in 18 months even though we were solidly profitable. The profit factor alone allowed us to gain floor planning through private banks rather than through Chrysler Credit. In those days a Chrysler Credit auto loan was “limited repurchase” to the dealer. We loved the Chrysler “buy down” and subvention programs because they were full WOR.
The biggest difference I see is that people rallied to the troubled automaker because of the leadership of Iacocca. We now have the entire domestic industry in trouble without a singular leader. In addition, there is a lot less of “us vs them” today which was Iacocca’s message against the Japanese manufacturers. Today, they manufacture most of their U.S. sales in N. America!
David, any company without a strong leader should fail. If what you say is true, that “we now have the entire domestic industry in trouble without a singular leader,” why should “U.S.” automakers — which are about as “American” as Toyota and Honda, by the way — be any different than other companies?
JJ, I am merely contrasting the situation in the 80’s with the current situation. It was one company with a singular leader. In my mind it makes the current situation quite different from back then. The financing package took months to put together with only Chrysler involved.
My only point is that there is no road map to follow as the Chrysler situation in the 80’s cannot be used as template for the current crises in any way that I can see.
Comparing Iacocca with other company leaders is another story. There are degrees of strength. they all have different skill sets. Iacocca’s strength was his charisma. Charisma is difficult to measure. The guys running the car companies today don’t have anyone with his charisma and leadership ability, in my opinion.
We have seen many companies without strong leaders continue on. Before they fail the “leader” usually departs with a golden parachute and are replaced by another. There have been plenty of companies with complete buffoons at the helm that have thrived in spite of themselves.
True enough. We’re square, David.