Auto Stocks Continue Plummet, GM Talks of More Cuts
October 10, 2008
By Bill Visnic
After a week of intense battering, General Motors Corp. and Ford Motor Co. stock prices on Friday were at least standing their ground against a still-plummeting U.S. stock market. The problem is, that ground is practically below sea level.
After seeing its stock price plunge some 50 percent since the beginning of October and with the sub-$5 price hovering around 1950s levels, reports swirled Friday that GM is preparing another round of production cutbacks and possible plant closures. GM moved earlier this year to chop some 300,000 units of truck production from its manufacturing schedule and accelerated the shutdown plans of its SUV assembly plant in Moraine, Ohio.
The week also saw GM maneuvering to arrange a mortgage-leaseback deal for its downtown Detroit headquarters in an effort to raise cash. Earlier this year, GM paid $626 million to take full ownership of the Renaissance Center headquarters after extensively remodeling and leasing the building for many years.
Now, bankruptcy rumors have begun anew.
GM released a statement saying bankruptcy "is not an option GM is considering. It would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive."
Ford, meanwhile, paddled to keep its stock price above the $1-and-something level, teetering Friday around the $2 mark and with some 100 million shares trading by early afternoon. Ford's stock had been more than $8 as recently as mid-May and was near $15 at the beginning of 2006.
Congress approved some $25 billion in loans to GM, Ford and Chrysler LLC to invest in new fuel-efficient technologies and retool plants to make vehicles to take advantage of those innovations. But it is not certain when those funds will begin to become available, and the money is not to be used to fund continuing operations.
Ford's sales slid 31.8 percent last month, worst of the domestic automakers and surpassed among the Big Six automakers only by Nissan Motor Co. Ltd.'s 34.2 percent dive. At less than 117,000 units sold, September was the lowest-volume month the company has endured in six years, causing the same kind of cashflow concerns in Dearborn as analysts fear for GM.
Posted by Bill Visnic at 10:41 AM under Business , Companies , Ford , GM | Comments (1) | digg this | Seed Newsvine
There is a silver lining in all of this.
In 1953, the last time GM stock was this low, the Corvette was introduced. Development of the iconic "small block chevy" V8 was under way, as well as the redesign of the entire GM line up including trucks; arguably Harley Earl's best work. Would they be perceived as too advanced, not accepted by the public, like the Chrysler Airflow?
By December 1954 as these new, modern 55's were being introduced, GM stock was up by about a third to nearly $10/share. This despite ongoing problems with E.I. DuPont, and CEO Charles Wilson leaving the company to become Secretary of Defense.
A lot has happened since then, to be sure. GM closed up 2.73% today at $4.89. With ensuing inflation, that's still less than a foot-long sub. We wonder (I wonder, anyway) will the Cruze be a hit like the Malibu? Will the Volt work? Can GM hang in there, until the economy sorts itself out and these new, modern models are introduced? I think the 1953 GM movers & shakers were as anxious as today's about committing so many scarce resources.
Lastly, will either presidential candidate nominate Richard Wagoner for Secretary of Defense?
Posted by: fulcrumb | October 10, 2008 at 6:31 PM