General Motors: Sales and Stock Price Continue to Decline

It should come as no surprise in this economy that US auto sales are down dramatically. General Motors (GM) last week posted a $15.5 billion loss for the most recent quarter (see earnings call transcript).

Fully $9.2 billion of this loss was related to one-time expenses as the company wrote down assets, dealt with restructuring costs and expenses related to ailing Delphi.

For the balance of the loss, General Motors cited plummeting SUV prices and poor sales overall along with corresponding declines in its financing operations as the primary contributors to the loss.

July 2008’s sales for General Motors fell more than 27 percent compared to the same month a year ago (see global sales call transcript). This compares to Ford’s (F) 15 percent year on year sales decline for July.

General Motors’ Workforce Reductions

General Motors had earlier offered buyouts and early retirement to its workers and reported that approximately 19,000 workers had accepted the deal by the deadline of July 1^st. Most of those employees have already left the payroll. With the new losses, General Motors stated that they may be offering a new round of buyouts for hourly workers in the coming months. As the overall economy continues to struggle, though, jobless claims are on the rise. Workers may do well to consider hanging on to the jobs they’ve got as long as they can.

Pain at the Pump Equals Pain for Car Dealers

While month to month results may vary going forward, we would expect auto sales to remain in decline for the rest of this year and substantially all of 2009. For the time being, the automakers are at the mercy of the broader US economy. Automakers are desperately trying to lower their inventories of SUVs and gas-guzzling trucks as these vehicles look to be the hardest hit by soaring gasoline prices. Once again fuel economy is a key concern for American consumers when searching for a new car.

General Motors’ North American sales the most recent quarter were off by 20% or about $10 billion. Outside of North America, however, General Motors sales showed an increase of $1.7 billion.

General Motors Stock Outlook

In addition to this news, remember that GM announced the suspension of its dividend on July 15^th in order to preserve liquidity and increase available cash. As long as fewer Americans are taking a ride in a new General Motors car, the stock looks to continue its own ride downhill. Coming off 52 week highs of over $44/ share, General Motors traded under $10/ share on Monday and now sits at $10.25.

Disclosure: none

Comments

[CLH:]

GM at $10 looks good to me. Gasoline is headed down. I see little downside in GM although it may drag at this price for 6 months. The second biggest car company in the world is not going out of business.

2008 Aug 07 10:46 AM

[casey00001:]

I agree with CLH, but if you want to invest in GM look at (GMS) which is a bond issue sold as a stock symbol. It is still paying a dividend, in reality interest since its a bond. Pays $1.88 per year. They can not cut the dividend/interest payment per the perspectus.

2008 Aug 07 10:49 AM

[Gumby:]

Americans want GM and Ford to go bankrupt! Ask them... "Do you want GM and Ford to go bankrupt, stranger?"

2008 Aug 07 03:42 PM

[UH2L:]

Yes, why do so many Americans want to see Ford and GM go bankrupt. It's really sad and quite stupid as the effect on the economy would be huge. What else do we manufacture in this country? Not much.

2008 Aug 07 04:18 PM

[jimmyyy:]

GM is headed for BK court in 1st quarter of next year unless the Fed steps in to stop it with a bail out plan. It really is not important who wants it, little can be argued to the fact the GM management is responsible for it. 10 a share now, i still see 7.50 in the not so distant future. Unless the FED steps in.

2008 Aug 10 01:32 AM

[miketobias01:]

Please no Feds...... Let GM do there thing. GM has to much on its plate right now. I own stock in GM,and have doubled my total shares in my portfolio of GM if GM goes under well not to much matters anyways we will be in a great depression .

2008 Aug 10 06:13 PM