GM: It Will Take More Than Cuts To Get Back On Track


For the second time in five weeks, General Motors is making major cuts to give its business the breathing room it needs to hopefully turn things around.

Unlike the last restructuring, five weeks ago, where GM cut truck plants and put HUMMER up for sale, these latest moves are about saving cash as soon as possible.

So the company's suspending the dividend, dropping executive bonuses, axing healthcare benefits for retirees and considering the sale of foreign assets. The goal: raise $15 Billion in liquidity to get GM through 2009. On paper, the moves make sense and should ease concerns the automaker is going bankrupt. In reality, is this the last round of cuts for GM?

I'm not sure. With auto sales depressed by high gas prices, GM needs more then just to reign in costs. It needs the economy and consumer to come back. I'm not talking about a rebound to bring back truck and SUV sales. I'm talking about enough improvement to get people into showrooms for cars and crossovers.

CEO Rick Wagoner told me that they noticed a dramatic drop-off in sales. In June when gas hit $4 a gallon. That may be the tipping point that does severe damage to GM, Ford and Chrysler. In other words, people ain't buying as many cars with gas that high.

This is what worries me about GM. It's been aggressive cutting costs and trying to stave off liquidity fears. But if this economy continues to drag well into 2009, what happens in 2010 for GM? In some ways, the clock is ticking on these guys. They're moving quickly to ease the cash burn, and they won't stop. That's why I wonder if this is the last round of cuts for an automaker struggling to turn things around in an economy that's stalled.