Thursday, February 26, 2009

GM sacrifices to the Money God

Or at least that's what the headline should read.

General Motors lost $31 billion last year, a much greater loss than was expected, largely due to a truly horrific 4th quarter. That shouldn't be surprising to anyone, after Japan posted a more than 10% drop in GDP (annualized) for the same period. But the magnitude of GM's issues is a bit concerning. Consider the following:
Output at GM’s European plants was 53 per cent lower in the fourth quarter than a year earlier

Demand really is plunging. And worse, GM's pension is now underfunded by $12.4 billion, which the US taxpayer is probably going to be on the hook for.

Another bad year like this and it wouldn't be surprising to see $50 billion in cash being devoted to keeping GM afloat. GM's market cap, for comparison's sake, is presently $1.45 billion.


One wonders if there is even a point anymore, and whether we should just go ahead with full-scale nationalization.

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