GM adds to carmakers’ woes as shares close at 60-year low

In the wake of the economic downturn, the automotive industry has suffered and the latest company adding to the industry’s woes is US car group, General Motors (GM), who saw its shares close at a 60-year low yesterday.

Shares in the firm fell 23% to $3.36 after Barclays Capital said the group may need extra funds and the stock may fall as the company battles to improve its fortunes.

As with other carmakers, the Detroit-based company has experienced a fall in sales and said it would axe 1,900 factory jobs in addition to the 3,600 cuts announced last Friday.

Fellow carmaker, Chrysler announced it is to axe 1,825 jobs in the US last month.

Also on Friday, GM reported a $4.2 billion (£2.7 billion) quarterly loss and warned that its cash levels could fall below what is required to operate its business by the end of the year, if the US economy doesn’t pick up and it doesn’t receive financial assistance from the Government.

Meanwhile, yesterday it revealed that it was unsure about the future of the mortgage division at its GMAC financial arm, which has been affected by a sharp increase in bad debt.

Last month, President George W. Bush signed legislation that provides GM, Chrysler and Ford access to a $25 billion (£14 billion) loan to help them develop new technology, including less polluting cars.

However, the three carmakers are pressing for an extra $50 billion loan to help them survive the challenging economy.

In related news, Honda Motor, which is Japan’s second-largest carmaker, recently announced a 41% fall in three-month profits, due to falling sales and the strengthening yen. Honda added that car production is to be cut at its plant at Swindon in the UK.

Meanwhile, Peugeot recently said it will cut its 2008 profitability outlook and commence huge cuts in production.

GKN, the automotive and aeroplane parts manufacturer, is reducing its workforce by 1,400 jobs and is to cut factory production time. At least 500 jobs have already gone in the US while a further 900 globally will go by the end of the year.

Story link: GM adds to carmakers’ woes as shares close at 60-year low