It's probably an indication of how bad things are in the auto industry when General Motors
The problem -- or the benefit, depending on how you look at it -- is that truck inventories remain high. Sales of GM trucks fell 20% in February.
Automakers recognize revenue for their cars and trucks when the vehicle rolls off the assembly line, not when you drive it off the lot. That's why GM CEO Rick Wagoner can say the first quarter will look bad but the underlying business remains unchanged. The trucks sitting on dealers' lots have already been accounted for in the books. If the company can reduce that inventory now, it'll write off the quarter as a bad one but can then focus on selling its new trucks beginning in Q2. When the strike ends and production begins anew, GM's "sales" are going to look robust.
Yet it's also why GM is in so much trouble. It will need to replenish that stock, but it doesn't mean that people are actually buying the trucks. GM may very well find itself in the same situation it was in before the strike. Moreover, General Motors had already reduced its year-over-year production goals for the second quarter by about 9% to 672,000 trucks.
GM can afford to play this game only so long. Toyota
However, the damage is already spilling over to GM's other suppliers. Lear
One Deutsche Bank analyst has pegged the cost of a three-month strike at American Axle at $3.5 billion worth of cash flow to GM. A company that reported a massive loss of $38.7 billion for 2007 can ill afford to be cavalier about what's happening at American Axle.
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