GM top executive Rick Wagoner gave the company’s response to the continued bad financial news at the June 7 annual stockholders meeting: he announced plans to cut 25,000 jobs from the company’s U.S. manufacturing plants by 2008, and insisted that autoworkers accept reductions in health-care benefits. The loss of jobs represents about 20 percent of GM’s workforce in the United States.

Fitch Ratings announced the move on May 24. Three weeks earlier a similar junk rating was given by Standard & Poor’s (S&P) for both GM and Ford Motor Co., calling into question the viability of some $450 billion worth of bonds issued by the two auto giants.

S&P further declared that GM’s consolidated debt of $292 billion doesn’t even rate among the highest quality of junk. Moody’s Investors Service followed suit, downgrading GM’s bond rating to a level approaching junk status.

These developments “could send a tsunami through the corporate bond market,” noted the Wall Street Journal. GM is the world’s third-largest corporate borrower and one of the biggest issuers of corporate debt.

The dire financial straits of the auto giants are a reflection of the worldwide crisis of overproduction in the manufacture and sale of automobiles. Competition has intensified and profit rates have declined.

In May, sales fell 8 percent for the top five automakers—GM, Ford Motor, DaimlerChrysler, Toyota, and Honda. GM’s sales were down 12.6 percent and Ford’s more than 10 percent compared to last year. GM has a stockpile of some 1.2 million unsold vehicles.

The auto bosses are seeking to resolve their crisis by weakening the unions, eliminating jobs, and pressing for concessions on benefits and wages from the workforce.

General Motors, the world’s biggest automaker, no longer relies primarily on selling cars to generate its revenue. In 2004, 80 percent of GM’s earnings came from the operations of its GMAC financial division. This involved not only offering loans to purchase automobiles, but various other consumer credit operations, insurance plans, and mortgage financing.  
 
 
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