GM LOSSES FORCE MASSIVE JOB CUTS
Hit on US economy expected to be vast
The timing could not have been worse for the already-struggling retail industry.
Troubled car maker GM has really put the cat among the Christmas season pigeons.
Reporting the biggest loss in business history at US$105 billion, eclipsing IBM’s record-breaking US$5 billion loss in 1992, Time Warner’s US$98 billion loss in 2002 and GM’s own massive US$39 billion deficit in 2007.
US car makers have cut more than 400,000 jobs since 2000 and expect to have to cut another 100,000 as a result of this continued financial decline. Morgan Stanley believes this could be the final straw that plummets the US economy into a consumer-led recession.
GM’s troubles are in some way ‘the canary in the coal mine’ for a US auto industry that is being increasingly marginalized by Asian manufacturers, especially in booming Eastern markets. Having already lost the initiative in alternate fuel vehicles, the industry is trying to stay relevant to changing global consumer appetites.
Some analysts are blaming the 2007 sub-prime debacle for these ‘house of cards’ effects on the auto industry. The increasing unemployment numbers will certainly see more downward pressure on house prices as the newly-unemployed auto industry workers try to sell their houses to supplement their cash flow.
The problem is that buyers are few and in many cases house prices have dropped lower than the amounts owing on the mortgage.
Links to related stories
- GM records second-biggest loss in US corporate history with $39bn deficit - Guardian, 8 November 2007
- AOL Time Warner reports $100 billion loss, largest in US corporate history, dumps AOL from name - CFO Magazine, 30 January 2003
- IBM posts $5.46 billion loss for 4Q; 1992's deficit is biggest in American corporate history - New York Times, 20 January 1993
- MindBullet: THE HOUSE-PRICE BUBBLE BURSTS (Dateline: 11 December 2007, Published: 19 May 2005)
- MindBullet: USA SPLITS INTO THREE (Dateline: 16 January 2009, Published: 19 February 2004)
- MindBullet: THE LAST VW ROLLS OFF THE WOLFSBURG PRODUCTION LINE (Dateline: 19 December 2011, Published: 06 October 2005)
Warning: Hazardous thinking at work
Despite appearances to the contrary, Futureworld cannot and does not predict the future. Our Mindbullets scenarios are fictitious and designed purely to explore possible futures, challenge and stimulate strategic thinking. Use these at your own risk. Any reference to actual people, entities or events is entirely allegorical. Copyright Futureworld International Limited. Reproduction or distribution permitted only with recognition of Copyright and the inclusion of this disclaimer.