GM Puts On A Happy Face
01.08.09, 1:45 PM ET
General Motors is changing its tune after receiving billions in bailout dollars from the U.S. government. On Thursday, Chief Executive Rick Wagoner said he is confident about the company's long-term future after claiming for the last few months that the crisis the automakers face will drag the company under.
Wagoner reassured investors that the automaker would keep its head above water without slashing the benefits of its retired employees.
He also said that General Motors was no longer considering a shotgun marriage to Chrysler and further concessions could be wrung from unions, according to TradeTheNews.com. Renewed labor negotiations are to begin next week.
Investors didn’t share his optimism: GM shares sank 4.4%, or 18 cents, to $3.95, on Thursday afternoon, on a day the broad market fell 0.9%. GM’s shares have tumbled 83.1% in the last year as the global economic slowdown has slammed consumers’ confidence and wallets. Automakers have consistently blamed a lack of financing for ailing vehicle sales. (See “Automaker Shares Rev Up, Anticipating Turnaround.”)
It's difficult to smile when unemployment claims are rising, since without jobs consumers will be hard pressed to afford cars. Grim jobless claims data from both Wednesday and Thursday sent ripples of fear through investors, taking a bite out of auto stocks. Ford shares slid 3.7%, or 10 cents, to $2.59, in afternoon trading.
On Wednesday, the ADP National Employment Report indicated the U.S. economy shed a much-higher-than-expected 693,000 nonfarm jobs in December. Economists had forecast 470,000. (See "Investors Spooked By Unemployment Data.") On Thursday, the Labor Department reported that the number of people continuing to seek unemployment benefits soared in the last week by 101,000, to 4.61 million. Analysts were expecting 4.5 million claims. (See "Street Doubts Sunny Weekly Claims Data.")
Meanwhile, investors have been hopeful that a U.S. government bailout of GM and Chrysler announced last month would spur an industry turnaround. (See "Chrysler Isn't Idle While Waiting For Jump Start.") GM has received $4.0 billion from the U.S. Treasury Department and has been promised another $9.4 billion to spur auto financing and keep the company from going under. (See "GMAC Gets A Lifeline.")
But there are strings attached to the government’s loan package. In return for the money, the United Auto Workers union must make concessions and GM must submit a restructuring plan to the government by March 31. GM must also align its hourly wage costs with those of Toyota Motors and Japanese automakers that run nonunion factories in the United States. Wagoner said the hourly wage difference between GM autoworkers and employees at U.S. plants owned by foreign automakers was not as high as the $10 per hour that has been quoted.
GM said on Monday that its car sales in the United States during December had fallen 31.0%. Chrysler's sales had tumbled 53.0%.
LINK:
GM Puts On A Happy Face - Forbes.com
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