As for the meat and potatoes of the actual proposed restructuring, GM gives a good effort. It projects the U.S. auto industry supporting 12 million new cars in 2009 and 13.5 million in 2010. Not unreasonable. And GM makes the right noises about cost reductions with “wages and benefits fully competitive with Toyota by 2012.”
But the restructuring plan comes up short on the most fundamental question. Will this company actually make money?
…And nowhere in the document does GM lay out, year by year, its own projected market share. This is perhaps the most critical part of any business plan. The kind of thing you learn in the first day of business school.
Turn to Exhibit B-1 — and you find something interesting. It is only in an appendix entry — and not stated explicitly. GM appears to have changed its market share assumption for 2009 GM U.S. volume from 20.6% a year ago to 22.5% today.
In this environment, it seems strange that GM is actually increasing its market share assumptions. And car business is all about volumes.
That points to the real flaw in the GM restructuring plan. The U.S. car industry has been a credit junkie that now has to go cold turkey.
In 2007, GMAC financed about half of GM’s retail car sales, many to customers with weak credit. Today GMAC can’t finance to customers with credit scores under 700. In fact, today GMAC funds only 6% of GM’s retail car sales. No wonder GM sales have fallen off a cliff.
Will that change over the next year?
Ask yourself how long it will take housing to hit a bottom and you’ll understand why the GM restructuring plan ain’t gonna cut it.
Oh, it will work in Washington this week. But by next year, the U.S. taxpayer will be left holding the bag.