General Motors Corporation is in trouble lately. It’s market share in the United States is at a 25-year all time low. Sales are down 26% this month compared to October last year.
The troubled car maker, which is the world’s largest automobile manufacturers posted it’s fourth consecutive quarterly loss on Monday. It’s total loss in North America alone has been more thna USD 4.5 billion this year.
An internal GM sales report for the chicago area says that from 1-12 October 2005, 576 Chevrolet makes were sold. Most Buick, Pontiac, and GMC dealers had zero sales. Total sales was only 12% of the company’s monthly sales goals.
A quote from the owner of one of the dealers, Gilmour Ford-Chrysler owner Allan Gilmour – “There are no sales. We have done reasonably well in used cars, but there are litreally no sales.” The dealership would normally sell 50 vehicles a month, but could only manage seven vehicles this month. Another dealer, Dennis Doerge of Loren Buick-Pontiac says “It’s the worst I’ve seen in 30 years. It is just awful. It is horrendous! The consumers are scared to death to buy. They need a reason to come in, and General Motors is not doing a thing right now.”
Analysts say that customers are waiting for the next big pricing program like employee discounts. Dwindling sales isn’t the only problem for General Motors. It’s main parts supplier Delphi has gone bankrupt. General Motors is suffering from bloated pensions, astronomical health care costs, tough worker unions and high fuel costs. The Delphi bankruptcy could hold General Motors liable for up to USD 11 billion worth of retiree health premiums and worker pensions.
University of Maryland business professor Peter Morici even predicts GM is on a path to bankruptcy within five years. Banc of America auto analyst Ronald Tadross has said GM should consider bankruptcy protection. Bob Hoffman, another critic has posted an interesting entry on his blog on why GM should consider bankruptcy protection. He says GM should enter bankruptcy, reorganize and exit financially stronger, with better management.
General Motors CEO knows about what all the analysts are saying though, and issued a statement on Wednesday that the company is not considering bankruptcy as a way to solve it’s financial troubles as they think it’s not a good option. He says, “when you’re buying a car it’s a very different thing. It’s a massive financial commitment. You expect to own it for a long time, and bankruptcy is something that’s going to have an impact in the consumer’s mind.”
Second largest automaker in the world Ford is also going down the same dark path. It posted a net loss of USD$ 284 million compared to a profit of USD$ 266 million last year.