No more wildly optimistic projections for a rebound.
When GM (GM) submitted its first turnaround plan last year, everyone could see that the carmaker was projecting unrealistically high car sales for 2009 and that a turnaround would not come nearly so quick. But Rick Wagoner & Co. promised Washington that a bankruptcy would be the equivalent of dropping a nuclear bomb on the heartland, and they got their money.
Well, March 31 is the deadline for a new viability plan and it sounds like the carmaker will acknowledge that there won’t be a quick rebound:
FT: Optimism that GM will avoid bankruptcy helped drive its shares up another 12 per cent to $3.36 by midday in New York yesterday, more than double their seven-decade low this month.
But the task force, among others, has questioned assumptions of the two companies’ turnround plans.
GM’s original plan last December was based on it breaking even at US light vehicle sales of 12.5m-13m units a year. That original estimate was lowered to 11.5m-12m in February. GM also reduced its anticipated market share from 20.5 per cent to 20 per cent.
Despite the fact that it’s a money hole, the indication from the administration is that more cash will be forthcoming. This is not the time to try something dicey like a bankruptcy, even a pre-packaged one, it seems.
During his “online townhall” yesterday, the President said: “We will provide them some help… I know that it is not popular to provide help to auto workers — or to auto companies. But my job is to measure the costs of allowing these auto companies just to collapse versus us figuring out — can they come up with a viable plan?”
He did that if they automakers aren’t prepared to make “drastic” changes, then the government would not throw good money after bad. It’s a good sentiment, though we’re sceptical that such changes can be made under the current form. And a lot, obviously, would have to come from the union, which has so far only accepted incremental changes, not drastic ones.