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General Motors - Braking to Avoid Oblivion
14th October 2008
It is an iconic business whose deteriorating commercial health cuts deep into the very fabric of the industrial base of the United States. I was listening to one of those early morning business programmes on radio today when a market analyst claimed that the stockmarket capitalisation of General Motors had fallen to its lowest level for fifty years.
GM remains (for the time being) the biggest manufacturing business in the United States is afflicted by persistent losses and the drip drip effect of a declining market share, having been taken over by Toyota Motor Corp in global vehicle sales. It now has less than a quarter of the US new car market contrasted with a half at the turn of the 1980s. Half of its 266,000 employees are producing cars in the USA and GM has car plants in thirty US states connected to more than three thousand other businesses in the supply chain.
But as our charts make clear the stock market valuation of GM has collapsed in recent times, the market capitalisation is barely a fifth of what is was at the same time last year. It is fast-forwarding the closure of SUV and Truck plants in Ohio and Wisconsin and the rumour mills of a merger with perhaps Chrysler or Ford Motor Co will simply not go away.
In the UK, General Motors have temporarily shut down their plant at Luton because of the economic slowdown.
A side note: Notice how steep is the decline in truck production in the United States - the volume of new trucks being manufactured is now almost the same as the number of new passenger car vehicles. The ending of the love affair with trucks is just one reason behind the $15.5bn loss posted by GM in August of this year.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.