In the long run, GM is dead

Rick Wagoner, GM's CEO, announced today a series of actions GM was taking to adapt to the changing North American environment. CNN Money is deeply unimpressed.

* Wagoner expects GM's U.S. market share to level off at 21%, this despite removing about one million units of light truck capacity. A couple of years ago, Wagoner expected GM to be cruising at 30% market share. Given GM's ability to stabilize sales in the past, 21% is surprisingly optimistic.

* Wagoner expects oil to prices to remain in the range of $130 to $150 between now and the end of 2009. A couple of months ago, that would seem outrageous. But since oil prices seem capable of violating the laws of gravity and growing to the sky, even $150 sounds more hopeful than realistic.

* Wagoner expects to improve working capital by $2 billion by tightening up operations, notably by reducing in raw materials, work-in-progress, and finished goods inventory. This is the Detroit equivalent of balancing the federal budget by cutting pork barrel spending. If it was so easy to do, why hasn't it been done already?

The author called it addressing the symptoms but not the underlying causes.

Long run, GM is dead. It won't go as spectacularly as the US financial system, but it will go.

That will really be a net positive for the nation. The auto companies and the unions have long stalled better fuel standards and long insisted on foisting monster trucks off. The country is paying for that now in a very real way. The environment has long been paying for that in terms of global warming.

At least one of the Big 3 should. That will reduce overcapacity and reduce their now disproportionate political clout. In 10+ years, I would hope that someone has to go into bankruptcy and liquidate. It doesn't really matter which of company goes, and I'm not equipped to speculate on who's most likely to go.

This will not be pleasant for the state of Michigan, which is still heavily dependent on the auto industry. But it has to happen. Anyway, all we really need is for oil prices to stay high, which demand from China and India will do, and for business conditions to keep changing. The auto industry has refused to adapt in the past, so that should be the nail in someone's coffin.