Current expectations of U.S. sales of cars and trucks are at 12.5 million annually; expectations are down from 16.3 million last year and 15.2 this quarter in 2008. That’s practically the same ditch during the Depression, just a few inches deeper and we’ll be in about same spot. June sales for GM are expected to be down 28 percent, and since their truck lineup is expected to be hit the hardest, the impact on profitability will be greater.
With trucks and SUVs devaluing rapidly, the companies are left with huge write offs on vehicles being returned from lease. Folks who actually like their gas guzzlers don’t have the equity to trade in their old trucks for a new one. We don’t know if that’s a good thing or a bad thing. On the one hand, they are using their older and likely more inefficient gas guzzlers, but at the same time they’re not putting newer heavy weight dinosaurs onto the road.
Unlike Ford, who has Kirk Kerkorian propping them up, GM has no one to set a floor under its price of stock.
GM is burning through cash at an astronomical rate in order to deal with its decline in sales. At in or around $1 billion a month, it is expected that the company will consume as much as $19 billion in cash over the next two years. Since it began the second quarter of 2008 with only $23.9 and needing around half of that just to keep the juices flowing, it's kind of missing one of four legs. GM could borrow against unencumbered assets, it will almost certainly fall behind the other major automakers in the long run.
Our take? The crushing meteor of economics might just leave a hole where GM is right now leaving a poignant mourning keen from their fan base. Toyota has outsold GM in June this year for the first time to become the number one automaker in the U.S. 2008 is shaping up to be the worst year in GM’s history.
via CNN Money