GM Expectations

Reuters is reporting that GM seeks to lower expectations.

Let's take a look:

General Motors Corp is seeking to lower expectations ahead of a meeting this week when it will update Wall Street analysts on its financial and business outlook.

The meeting is set for Tuesday at GM's headquarters in Detroit where a morning session will focus on product development and the company's redesigned cars, trucks and sport utility vehicles. That will be followed by an afternoon briefing on financial issues at GM, which lost $2.5 billion in its North American auto business in the first half of the year.

Tom Kowaleski, chief spokesman for the world's largest automaker, said analysts should not expect any earnings forecasts from GM, which were suspended after it posted a stunning $1.1 billion loss in the first quarter.

Is anyone shocked by GM seeking to lower expectations? I am not. The only way GM could lower my expectations would be if GM declared bankruptcy tomorrow. That in fact would be stunning. In the meantime there is still oodles of money for wall street to make by selling GM bonds to an unsuspecting public. Ford is in a similar situation. Obviously GM expectations are still way too high if they need to be “engineered down” once again and so soon.

It’s time to face the facts. The only way GM and Ford can possibly survive is if they can do both of the following:

1. Dump their long term pension benefits on to the Pension Benefit Guarantee Corp before they go under. Note: The PBGC is a federal agency supported 100% by the US taxpayer.
2. Start producing better cars

Personally I doubt that both are likely. Heck, even one of them alone might be next to impossible. Thus, I fully expect both GM and Ford to go bankrupt in due time. This does not mean they go out of business since the airlines are going bankrupt one right after another and they are still operating as well. Likewise I expect similar taxpayer bailouts of GM highly likely.

I do not know about you but my expectations for GM were not lowered one bit by reading that article. However, my timeframe for bankruptcy has indeed moved once notch closer to sooner rather than later.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/