General Motors (G.M.), the largest car constructing company of the USA requested for federal aid again. $ 12 billion in loans, which brings the total loan at $ 30 billion. The company needs this last loan to carry it through the biggest reorganization in its history and especially to cover the continuing losses.
G.M. which earned their last profits in 2004 will end 2009 with $14 billion shortfall, but according to the restructuring plan they are going to improve to a $6.6 billion surplus by 2012. The restructuring plan also tells us that the losses will shrink in the next three years, due to savings that will contain cutting 47000 jobs worldwide and closing 14 plants. G.M. also has to negotiate with the United Automobile Workers union and the bondholders to reduce costs further.
C.M. is not only counting on saving but also on a steady recovery in car sales. On the other hand the US vehicle sales this year are on their lowest point in more than 25 years and not many industry analysts share G.M.’s optimism for a recovery.
Not only the union and bondholders are negative about the restructuring plan also Moody’s is, they said there is a 70 percent probability that one or both companies (G.M. and Chrysler) would have to file for bankruptcy protection.
The government is expected to review the plans by the two companies in the next week.
G.M. and Chrysler will face political opposition from some quarters when they try to win the task force with their plans.
I think that the US government has to support G.M. and give them the loan under certain conditions because otherwise everybody loses. All over the world employees lose their work, the government will lose all the loans they have given to G.M.
When the government gives G.M. the loans they asked for, there have to be some conditions. The government has to look close to the financial situation of G.M.
I also think that the government isn’t going to accept that G.M. is closing so many plants and fire so many employees, resulting in a big unemployment. So I think G.M. has to search other methods to save money and reduce costs.
Source: http://www.nytimes.com/2009/02/19/business/19auto.html?ref=economy
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I think that G.M. have to look for other actions to save money. I also wrote something about the high rate of unemployment in my blog last week. Everywhere, you read about people who lose or will lose their job. This situation is really alarming and I hope that G.M. searches for other possibilities for their biggest reorganization ever in its history.
BeantwoordenVerwijderenI think giving financial aid to big companies like General Motors is only a temporary solution. When the company reorganizes they will fire people and then again more and more people will see their income drop very fast. This will cause a lower demand in the American economy; fewer people will consume and buy a car and then again General Motors will experience financial problems.
BeantwoordenVerwijderenInstead of giving financial aid to this company, the government should invest in publics works in order to lower the numbers of unemployed in the United States.
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BeantwoordenVerwijderenI can find me in the reaction of Niels. Whatever the conditions for the loan are, it is always a situation where everybody loses in long term.
BeantwoordenVerwijderenAnd there is also the fact that these measures are unjust in comparison with other companies.
Now, it is almost a gift for bad managment.