February 27, 2009 at 4:27 pm

Daniel Howes

Commentary: General Motors choking as global economy gasps

The world may not be enough to keep General Motors Corp. afloat.

As the ailing automaker gutted through a years-long North American restructuring that morphed last fall into pleas for a $30 billion lifeline from the feds, GM's revenue and, especially, profits from China, Latin America and robust growth in Eastern Europe partially offset massive losses back home.

Not anymore.

The foreign strands of GM's safety net, according to its year-end financials Thursday, are fraying quickly, too. Fourth-quarter revenue from Asia -- $2.6 billion -- is less than half what it was a year ago. Latin America ended the quarter $578 million in the red. Production in Europe slid 53.2 percent to 214,000 cars, contributing to a $1.6 billion pre-tax loss in Europe for the year.

GM's Saab Automobile AB is in bankruptcy, ostensibly to recapitalize itself but most likely to die. Its Adam Opel AG unit in Germany wants financial help from an irritated government in Berlin. And GM altogether is seeking $6 billion in aid from foreign governments, none of which is keen to bail out an American behemoth tied to American bankers blamed for the global financial mess.

The simultaneous downturns are harsh reminders that tapping new markets, setting standards in places like China, Russia and the largest markets of Latin America, and selling more vehicles outside the United States than at home don't help much when a) the American market is imploding and b) the rest of the world is following close behind.

Worse, the excesses and perceived excesses of Wall Street, Congress, investors, the Federal Reserve, the Bush administration and homeowners who bought homes they could not afford are inflaming resentments overseas against things American.

That's seldom a boon to sales of consumer products, particularly when the slowdowns deliver such job losses, plant closings and more economic uncertainty as GM's predicament is bringing to places like Sweden, Germany and other parts of Europe.

When GM needs the rest of the world most, a dividend of its savvy expansion into places others are only starting to really exploit, the rest of the world is sputtering. And it doesn't much matter, at least to GM brass angling for more loans from the Treasury, that the slowdown is affecting its rivals, too.

Net-net: GM lost a stunning $30.9 billion for the year, burned another $5.2 billion in cash over the final three months of this year and ended the calendar year with a $45.3 billion debt balance, including the $13.4 billion in bridge loans the automaker already has received from the Treasury.

None of which will bolster the automaker's case to the audience that will matter most to its survival over the next several weeks -- the Obama administration's auto task force, related departments and Republicans in Congress.

The bigger the numbers get, the more they will fuel those (congressional Republicans) arguing for an end to bridge loans and the beginning of a bankruptcy proceeding. So long as the loans stop, to them it doesn't much matter if it's a traditional Chapter 11 (unlikely) or a government-financed process designed to keep GM's massive supply base from collapse.

The biggest obstacles are politics and fear of the unknown effects a GM bankruptcy would have on a weak economy and weaker consumer confidence. In assembling a task force of bureaucrats, academics and the occasional investment banker -- but no auto or manufacturing types -- for his auto task force, President Obama has ensured GM's fate will be subjected to the ponderous meddling of political calculation and special interest lobbying.

How that would expedite a GM workout, instead of complicate and lengthen it, remains to be seen. My guess is that it won't, which is probably the president's intention.

With each passing week and each new financial reckoning -- the Feb. 17 viability plan followed by Thursday's results -- the arc of GM's story is becoming more clear in part because its claims that bankruptcy "is not an option" have all but disappeared.

GM appears less likely to continue wrangling over another set of bridge loans from a quasi-sympathetic White House and more likely to embrace a formal process that mirrors bankruptcy -- minus the "Chapter 11" label.

Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106, dchowes@detnews.com">dchowes@detnews.com or detnews.com/howes. Catch him Fridays with Paul W. Smith on 760-WJR.

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