The article is both negative and positive about the prospects for GM. On the one hamd, it states that GM has fomidable problems to overcome. On the other, it notes that auto sales will probably sharply rebound as the economy begins to recover, and the question is which car companies will be in a position to take advantage this pent up demand. The article also discusses the role of Obama's auto task force, which is often ignored in most newspaper articles.
http://www.time.com/time/business/article/0,8599,1888986,00.html/snip
First Things First
Before planning for the future, however, Detroit still has to get through the present. GM has been on life support since Dec. 19, when the outgoing Bush Administration threw it a short-term loan and told the company that it had until March 31 to come up with a plan for its long-term survival. It did — but its strategy was premised on projections that car sales would begin to pick up this year after last year's dismal industry performance, in which sales sank 18%, to 13.2 million units. But the pickup hasn't happened yet, and analysts see the industry's production "run rate" at or below 9 million units. (Read about Detroit's efforts to reinvent itself.)
Even worse, in the eyes of Obama's task force, is that GM was immodest in its assumptions. For instance, GM had forecast a market-share loss of 0.3% per year until 2014. The task force noted that GM has been losing market share at a rate of 0.7% per year for the past 30 years — and GM was planning to drop brands and nameplates. The task force had no reason to think that GM could gain share, and its sales rate proved that point. Industry-wide, March auto sales were down 40% on a seasonally adjusted basis. GM's factory-utilization rate is less than 60%. That's abysmal — the rate needs to be in the 80s for the company to be successful — and it's one reason GM is hemorrhaging cash. "We don't believe the rest of '09 will be strong. We are going to stay soft through the rest of the year," says Lars Luedeman, director of analytics at Grant Thornton, which follows the industry. Dealer inventories are approaching a 100-day supply; 60 days is more typical.
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