On July 15th Financial Week reported GM to cut jobs, bonuses, and dividend to stave off fears over bankruptcy.



General Motors today said it will improve its finances through 2009 by laying off salaried workers, making more cuts in truck production, suspending its dividend and borrowing at least $2 billion as it rides out its worst U.S. sales in a decade.



In total, the automaker said it expects to improve its cash position by $15 billion through the end of 2009.



"We are responding aggressively to the challenges of today's U.S. auto market," CEO Rick Wagoner said in a statement. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix.



"Today's actions, combined with those of the past several years, position us not only to survive this tough period in the U.S. but to come out of it as a lean, strong and successful company."



GM said at the end of the first quarter 2008 it had liquidity of $23.9 billion, with access to an additional $7 billion in credit. While GM contends it has enough liquidity through 2008, it said the actions announced today will cushion it against a prolonged U.S. downturn.

Wagoner Is Disingenuous

General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.



The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.



Presidential candidate and presumptive Republican nominee Sen. John McCain today gave his support to the proposal.



"Our auto companies are rising to the challenge building the next generation of American cars, but are doing so in times when credit conditions cripple the funding for the facilities and technologies to take the steps to the future," he said in an e- mailed statement.



"We should fund it and take action that will assist Detroit and its suppliers in making it through this difficult time of transition," he said in the statement.

My Comment

"This is a horrible idea, another transfer of funds to failed ventures," said David Littmann, senior economist for the Mackinac Center for Public Policy in Midland, Michigan, which describes itself as a supporter of free-market ideals. "If this were a good idea, the market would price the debt accordingly and give them the money."



"We've seen these kinds of bailouts for the financial companies, why not the automakers?" said Aaron Bragman, a Troy, Michigan-based auto analyst for Global Insight Inc. "The big problem is that a lot of people in Washington don't see a value in the U.S. auto industry because they have a foreign plant in their district that is doing just fine."

Aaron Bragman vs. David Littmann