Well I wouldn't want to be an GM executive at this week's shareholder meeting in Wilmington, Delaware. Since the meeting the previous year, GM's bond rating has been cut to "junk" status, share value has dropped to the lowest level in 10 years, and the company's market share has slipped 2.5%. It will be interesting to see of GM has come up with a revival plan and what it contains.
The spin so far has been that gasoline prices don't effect sales of trucks -- GM's highest profit products -- which every adult in this country knows not to be true. Any time the price of something goes up, it creates hesitation among shoppers. GM continues to over produce and under invest in technology. They seem to be ignoring state-side buyer's desire for more fuel-efficient, smaller products, and continue to count on the public continuing to desire huge, gas-guzzling trucks. All of this contrary to the sales data.
This past week GM announced it will offer the employee discount to anyone who wants to buy a GM product. This is consistent with GM deeply discounting vehicles in order to raise cash. While it works during the promotion, it sets GM product pricing expectations among consumers at a much lower level, sacrificing future sales for immediate cash. The big splashy promotions GM is so well known for ultimately diminish the value of the vehicles in the minds of consumers. Again GM sacrifices long-term company stability, for short-term financial gain.
And it is unlikely that shareholders will receive a comprehensive revival plan. GM executives are arrogant and don't easily acknowledge failure. They are also secretive, something necessary in a competitive industry. Perhaps they will hear a reiteration of the need to close plants, shelve models duplicated by their divisions, roll back medical benefits for the autoworkers, and possibly even the closure of a division or two -- there has been mention of closing down Pontiac, Buick and Saab.
Add to this equation Mr. Kirk Kerkorian, the billionaire investor who has offered to purchase 28 million more shares. Kerkorian could provide the cash needed for a turn around, in addition to the $20 billion on-hand at GM and another $18.5 at GMAC. Given that GM's consolidated debt is $291.8 billion, economists believe that slumping sales make it impossible for the company to survive for more than 4 more years.
