Monday, February 16, 2009

They're baaaaack....

It wasn't a surprise that GM came back to Washington this week to update Congress on their progress. What may be a surprise, is that they are already putting out notice that while they are happy with this $4 billion payment they are going to need more.

"In revamped viability plans taking into account tougher business conditions than expected, GM and its smaller rival Chrysler will make clear they need more government support than the $17.4bn approved in December."

With the economy bleeding 600,000 jobs a month and after passing an $800 billion stimulus to create 4 million jobs, there is no way Washington is going to let a million auto related jobs fade away without some good grandstanding. There will still be pain (particularly at the dealer level or for individual brands), but it might be mitigated by further help from Washington. Again, the US auto industry - US automakers and foreign - was built on an assumption that Americans would buy 15 to 16 million vehicles annually. That number has fallen to a current estimate of 9 - 9.5 million. Good luck trying to adjust your business model to absorb a 45% decline in sales.

On a related note:
Nissan Motor announced plans to reduce working days at its 3 Japanese plants and it may cut wages for some Japanese workers by 20% on production holidays. They are also considering a work-sharing program.

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