General Motors, still the world’s largest car manufacturer by unit sales, has lost £1.1billion ($2billion) more than it expected to last year. Its total losses for 2005 were just over £6billion ($10.6billion).
According to GM, the increase is due to higher costs from restructuring, and its enormous pension liabilities. Its plans to cut 30,000 jobs over the next three years and close several factories may not be enough, and even they have had their price tag rewritten in the wrong direction: up by $300million to $1.7billion.
Rather than abating, the troubling news has mounted for GM following the bankruptcy of car parts supplier Delphi last year. GM is liable for the pension and healthcare costs of Delphi’s former workers. Revising its estimate of exposure to Delphi-related costs upwards to $5.5billion before tax, GM said that liability could exceed $12billion.
Whether the measures taken by GM so far - negotiating with the powerful United Auto Workers union, whose contract with the firm ends in 2007, capping the healthcare benefits of retirees, cutting pay for its directors and halving the dividend – will be sufficient to see GM survive, let alone thrive, remains to be seen.