GM Loses $6 Billion in First Financial Quarter, Burns $10.2 Billion Cash

Robert Farago
by Robert Farago

GM is auguring-in for its date with a bankruptcy judge, burning [your] cash, shedding share and losing money as it goes. The latest ding: the company reports that it’s lost $6 billion in the first financial quarter. That’s almost double last year’s Q1 results ($3.3 billion). Revenues sank 47 percent ($22.4 billion from $42.4 billion). As always, there’s a lot of waffle in the official press release: “GM’s automotive results in the first quarter of 2009 were driven by a revenue decline in all regions, due in part [in part?] to a depressed global industry. In addition, GM’s results were impacted by unfavorable foreign currency exchange and mark-to-market commodity hedging versus the year-ago quarter. However, these losses were partially offset by a significant structural cost improvement of $3.1 billion when compared to the first quarter of 2008.” But the bottom line is clear: the federally-funded automaker’s house is on fire and so far from profitable it’s not even in the same solar system. GM CEO Fritz “Wagoner Clone” Henderson reckons he knows how to plot a course for the Milky Way.

“This is a defining moment in the history of General Motors, and we are committed to our Plan, which we believe will lead to a stable and sustainable operating structure with a strong balance sheet,” Henderson’s PR lackey wrote. “Our goal is to fix this business once and for all to position ourselves to win in the long-term. That will be achieved by putting the customer first in all we do, focusing on fewer, stronger brands and developing great products that lead in design, technology, quality and fuel efficiency.”

Robert Farago
Robert Farago

More by Robert Farago

Comments
Join the conversation
4 of 27 comments
  • Wsn Wsn on May 07, 2009
    Phil Ressler : May 7th, 2009 at 11:56 am It’s just a business that needs encompassing minds to sort it out. Titanic effort, yes. Worth doing, yes. Impossible, no. ------------------------------------------ Theoretically, it's possible to turn around a car company. It's not like to create anti-gravity. But then, the right plan would negatively impact the interest of UAW Obama and Co. For instance, if a loser wants to improve, what better way than to look at how a winner is doing it? Toyota/Honda transplants don't have a union. Disassemble UAW at GM would be a positive first step. But will that happen? So, it's impossible.
  • Jpcavanaugh Jpcavanaugh on May 07, 2009

    Phil Ressler: No amount of money will do what you suggest. I have long argued that GM could MAYBE be saved with an infusion of new management, someone who is a leader, preferably with some turnaround experience. But THERE IS NOBODY NEW at this company. These guys have worked all their lives at the world's largest industrial corporation. Most of these guys came to work there when the company had a market share of 45-50 percent. This company has had 35 years of chances to build better cars. If Chrysler or Ford had been run by these people, this culture and this management structure, they would have been gone by 1982. I am still unable to come up with an example of a major industrial turnaround that worked without massive new blood at the top of the organization. Won't work here either.

  • Mikey Mikey on May 07, 2009

    Phil..Please forward your resume to President Obama for the CEO position.Buickman has marketing sewn up.Find a place for PCH 101,we need his smarts.Pay RF an obscene amount of money to write car reviews.Hey I'll sign up for labour relations rep.You don't even have to pay me,well....maybe a new Corvette once a year...and don't forget my pension check.

  • Phil Ressler Phil Ressler on May 07, 2009
    There is no ‘will to win’ There is nothing left to save. We’re all doomed. So, it’s impossible. No amount of money will do what you suggest. THERE IS NOBODY NEW at this company. A man walks up to a horse in a bar. “Why the long face?” Geeze Louise, the pessimism here…. There were few organizations as hidebound as IBM in 1992 and yet, a former tobacco company CEO purged a relatively thin layer of naysayers and guided the rest to a turnaround that returned the company to profitability on a sustained basis while ceding relative sector influence to relatively Young Turks like Microsoft and Sun. OK, there wasn’t the UAW to deal with but really, folks, this idea that judicious purging isn’t possible, that new imaginative leadership doesn’t exist, that no one would want the challenge is balderdash. It’s not the lack of will to win internally that’s holding back the reconstruction effort at GM, it’s lack of will to prevail on the part of the collective entities in charge, including now the Federal government and the American consumer. The window of acceptability for large taxpayer-financed infusions of working capital is a priceless opportunity to reconstitute GM and banish the bulk of the old practices and habits long criticized and documented here and elsewhere. We just have to muster the stones to put major money on the line; find, recruit and hold accountable the fresh executive talent pool to rebuild and purge recalcitrants deeper in the organization. Instill a performance culture, make the best deal possible with the UAW or break it. The key is to put enough cash in the company to make bigger bets on product kills and approvals, union deals, employee hardball, dealer cooperation and buy time to reframe GM in the minds of its customers. What GM lacks is not a reason for helplessness; the deficiencies are reason to get serious about holistically repairing the company and rebuilding its market. There is, even in truncated form, an *army* of people there to implement a layered strategy of tactical fixes possible *this year*, revamp of processes and decisionmaking going forward, and driving an extended product development plan that reflects the actual talent and imagination already extant in the company. But this army has to be LED. A GM that is even marginally on the mend will also become attractive to automotive talent employed elsewhere. The most capable people tend to like a challenge. But only a hard core of turnaround folks enjoy climbing on board while the ship is still taking on water. Change the trend line even in the slightest, and talent will come to GM, if it has a management culture imaginative, smart and skilled people want to work for. $100Bn, even $150Bn is small money to do this, if it succeeds and it’s not endangerment money if it doesn’t. Now the truth is, while Fritz looks to be another finance nebbish, we don’t know how good he’d be if he were adequately financed. This cash dribble of a few Billion at a time is the worst of all possible approaches. Tranch a financing and your management can’t see beyond a couple of months. If we’re going to fund and float GM for salvation, we have to give them enough money to lift their eyes and operate for a future. If it were my job, I’d even buy my own car. From a GM dealer no less. Phil
Next