According to an article in the Star-Telegram, General Motors Corp. lost $6 billion in the first quarter after suffering a 50 percent loss in revenue from slumping car sales.
The article said:
“The concern about bankruptcy is having an impact on our sales,” Young told reporters Thursday morning… Revenue dropped from $42.4 billion to $22.4 billion because of declining sales worldwide, mainly in North America and Europe, the company said.
Although the company cut structural costs by $3 billion, Young said that wasn’t enough to offset plunging revenue. “We cannot cut costs fast enough to offset that revenue loss,” he said. “People are concerned about bankruptcy, and that’s the reason why we want to avoid it if at all possible.”
The article also noted that consumers were concerned about GM filing bankruptcy and failing to honor its warranties. The March 30th warranty guarantee granted by the Obama Administration came too late to save the struggling automaker from massive losses. With the Chrysler bankruptcy only a week, old, consumers are still worried that GM may meet the same fate.
It’s not yet clear how Chrysler has been affected (as far as sales are concerned) by their bankruptcy; but GM’s sales still haven’t rebounded even with the warranty guarantee. The bottom line truth of the matter may simply be that consumers no longer have the cashflow or credit access to invest in a new car and the possibility of a GM bankruptcy is validating their concerns about the overall health of the economy. Also, a Chapter 11 bankruptcy be just what GM needs to recover and get a fresh start.