General Discontent: GM in trouble

Back in the Golden Days where everyone had 4 credit cards and a HELOC on their rapidly-appreciating home, General Motors had it good. People were lining up at the door to have the opportunity to purchase a vehicle they could not afford - on someone else's dime, at interest.

However, as you are well aware as a crafty USA Consumer Tracking reader, the Golden Days of limitless easy credit and living beyond your means are over, certainly for the foreseeable future ... and it's certainly debatable if they'll ever return.

As proof, I submit to you, the current symptoms GM is exhibiting that reveal the dire straits it is in.

Two days before Christmas this year, GM's Moraine truck assembly plant near Dayton Ohio will close its doors permanently. When things were good, nearly 5,000 people derived their bread and butter from the plant. That number has dwindled down to 1,400 at the time this was written, and all 1,400 of those people will be shown the door on December 23rd. Originally, the plan was for a temporary shutdown in December, but obviously, things have gotten so bad that they've decided the plant doesn't serve a purpose anymore.

This plant manufactured, you guessed it, SUVs that nobody is buying. The specific models include Chevy Trailblazer, GMC Envoy and some Saab SUVs. Sales on these units in September 2008 were down 40% YoY.

In addition to the GM plant closure, there is also a considerable amount of collateral damage. Take for example the Jamestown Industries Moraine plant #2. These guys used to prepare and deliver auto parts to the GM plant, and like many other small businesses in and around Dayton, the GM plant was their only customer. Formerly employing 200 people, they're now down to 64, and those people will lose their jobs the day the GM plant closes. Many other businesses in the area are going to have to think real quick about how to salvage their business model now that their customer has evaporated. This does not bode well for Dayton.

GM has cut around 34,000 hourly jobs since 2006. 1,900 other GM layoffs were announced November 10th at stamping and powertrain plants in Michigan.

Although it does not directly apply to the American consumer, it is notable that across the globe in Thailand, GM is also laying of 250 people from and temporarily closing a plant there for two months in December and January. 2,000 people will remain employed at the factory and will receive 75% of their normal pay during the temporary closure.

They're also closing a light truck assembly line in Canada where 10,000 people are employed.

Now that GM has come out in the open about their financial conundrum and asked the US Government to bail them out, their very survival is in question. Clowngress (even the most liberal of them) are asking GM to come up with a better plan than "please give us money, we're important." They want to know how GM plans to use the loan to restructure, regroup and return to viability. I personally do not think that the management at GM knows what they are doing with the company or where to go from here.

Their dividend is being suspended on common stock as well as raises for salaried workers and bonuses for executives. I will not be surprised one bit if GM files for bankruptcy in the next few months.

General Motors is headquartered in Detroit, Michigan.

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