The Wall Street Journal’s Even Newmark takes a look at General Motors’ plea for $ 18 billion of your money:
[T]he restructuring plan comes up short on the most fundamental question. Will this company actually make money? Just look at the details — or what details are lacking.
GM says it plans to focus on only four brands. So why does the number of models only drop from 48 to 40?
GM has 6,600 dealers, which it says it will cut to 4,700 by 2012. Honda has 1,300 dealers. Even Ford has only 4,100 — which it will cut further.
And nowhere in the document does GM lay out, year by year, its own projected market share. This is perhaps the most critical part of any business plan. The kind of thing you learn in the first day of business school.
Turn to Exhibit B-1 — and you find something interesting. It is only in an appendix entry — and not stated explicitly. GM appears to have changed its market share assumption for 2009 GM U.S. volume from 20.6% a year ago to 22.5% today.
In this environment, it seems strange that GM is actually increasing its market share assumptions. And car business is all about volumes.
That points to the real flaw in the GM restructuring plan. The U.S. car industry has been a credit junkie that now has to go cold turkey.
In 2007, GMAC financed about half of GM’s retail car sales, many to customers with weak credit. Today GMAC can’t finance to customers with credit scores under 700. In fact, today GMAC funds only 6% of GM’s retail car sales. No wonder GM sales have fallen off a cliff.
Will that change over the next year?
Ask yourself how long it will take housing to hit a bottom and you’ll understand why the GM restructuring plan ain’t gonna cut it.
Oh, it will work in Washington this week. But by next year, the U.S. taxpayer will be left holding the bag.
To which Robert Farago at The Truth About Cars adds:
Once again. I’ll flag the fact that GM’s for-public-consumption rescue plan makes direct and specific reference of its strategy’s dependence on a federal bailout for GMAC. That’s GM’s once-captive soon-to-be-a-bank finance arm that wrote paper on just one to two percent of GM’s November new vehicle sales. And who owns the majority of GMAC these days? The same peope who own Chrysler. If you want to talk about enabling, here be dragons.
I doubt anyone in Congress will listen, but the arguments against a bailout seem even more apparent than they were two weeks ago.
I pray this bail out works, as a small business we are counting on it!