Another Friday, another bombshell from The General. Yes, once again, GM waits until the markets head-off for the Hamptons before revealing some bad news. Last time, out it was Rick Wagoner's $14.4m annual pay packet– which was good news for Mr. Wagoner and his heirs, bad news for management accountability. This time it's GM's SEC filing re: the cost of the American Axle strike. And there it is: $2.82b. Automotive News [sub] breaks it down this way: "GM estimated that it suffered a $1.8 billion impact in the second quarter alone. That's on top of $800 million from lost production during the first quarter and another $215 million in assistance GM offered to American Axle to finance employee buy-downs and buyouts." Two-hundred-and-fifteen? Hey, what's $15m between friends? Anyway, the total damage makes the cost of the United Auto Workers (UAW) strikes at two GM plants seem like a bargain, at just $200m. Yesterday, we totally missed that Standard & Poor's upped GM to a "B" rating, five levels below investment grade. Reuters reported "The outlook on GM remains negative, meaning a rating cut is still possible. The risk of a downgrade would increase if GM's lower-than-expected U.S. light-vehicle sales through 2009 result in pushing the company's liquidity toward 'undesirable levels,.'" And the next day, a Friday, GM reveals the hit. Huh.
Find Reviews by Make:
Read all comments
Honestly, at this point the numbers are so vast they are lost on me. How any company can sustain this is beyond me. That being said, I guess there’s a difference between an accounting loss and a cash flow loss.
At least we know how the next quarterly earning will be phrased: “Excluding one-time costs…”
NickR said, “How any company can sustain this is beyond me.”
As any accountant can explain, they lose money on every vehicle; it’s the volume that keeps them in business.
Another possibility is that GM is following a brilliant strategic plan drawn up by that famous management expert, Madman Muntz. Hey, don’t laugh–Madman actually made money in the car biz.
Is that because they were not able to add to their inventories of unsold Tahoes and Yukons?
You mean the strike actually cost GM? Hard to believe. And they said 215 million in assistance instead of rounding the number down? Wow.
I wonder if they are including a valuation for the higher warranty costs they plan on incurring when the irate workers return to the line to make those axles.
@Skooter:
Why downplay the HUGE effect that could have on a company? That’s $2.82 billion less they could spend on new products or new facilities or a good marketing campaign.