It's hard to tell whether General Motors (NYSE:GM) has just stalled or is careering toward a wall.
Whichever is occurring, the company, in a program that CEO Rick Wagoner calls "a plan to win," rather than simply to survive, is undertaking some draconian measures to try to fend off the automotive grim reaper. And it's all taking place against a backdrop of U.S. auto sales that have plummeted amid skyrocketing gasoline prices.
With its fortunes in tatters, the company announced on Tuesday that it will cut its number of salaried workers, its production, and its dividend. It'll also borrow $2 billion to $3 billion as it tries to weather the downturn in the U.S. market. The ultimate objective is to raise about $15 billion, an amount it hopes will sop up losses and reverse the fortunes of its North American operations.
The company will cut its truck production by 300,000 units, double the expectation of just a month ago. And it'll trim the ranks of its 40,000 salaried employees, mostly through initiatives. The objective there is to lop about 20% from salary costs in the U.S. and Canada.
GM isn't, of course, the only car company that's making draconian changes in the face of a near-market crash in the U.S. Only Honda (NYSE:HMC) and Hyundai of the bigger carmakers reported that their sales grew last month, and for Honda, it was by only a single percentage point. Last week, Toyota (NYSE:TM), which is gaining steam on GM and Ford (NYSE:F) for global car sales supremacy, announced that it would shut down U.S. truck and SUV production and begin making its Prius hybrid here.
Sales of the Prius fell by 34% in June at precisely the time that buyers are looking for more efficient vehicles. The culprit? Toyota failed to keep up with demand for the vehicle, which gets about 46 miles to the gallon. So you have to wonder why the company is just now starting to turn out the model in our country.
As for GM, whether it's Bear Stearns, an IndyMac, or potentially other formerly strong U.S. institutions, we now seem to be living in a time when downward slides are awfully hard to reverse. So good luck to Wagoner and his minions. But Fools, there are lots better places for your shekels than the shares of automakers that suddenly seem unbelievably cheap.
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