GM Loses $15.5 Billion in Second Quarter

General Motors managed to surprise investors with a $15.5 billion second-quarter net loss, despite its mid-July warning that it would post "a significant second quarter loss."  Analysts believed the word "significant" meant a couple of measly billions, as they were expecting a loss of around $2.62 excluding some items.  GM's actual net loss of $27.33, or $11.21 a share excluding items, could be characterized as significant by an optimist.  I would suggest using the term "catastrophic".  The automaker took $9.1 billion in charges and write-downs in addition to suffering a  steep drop in revenue of 18%.  Both Ford and GM have followed Chrysler's lead in curtailing leases offered on SUVs and trucks.  These recent announcements are meant to stop the bleeding in their lending operations as automakers are taking losses after leases expire and they are stuck with trucks and SUVs that consumers no longer want because refueling costs $100 a pop.  Unfortunately, a consequence of the decision to stop offering leases on trucks and SUVs will be to further reduce sales.  

Can the US auto industry survive this downturn?  Frankly, that is a very tough call and I believe that it can't survive in its current form.  The US consumer is depressed and out of steam.  The days of tapping home equity loans to buy a new car every two years are over.  Getting a lease on a fancy car that you can't afford to buy is no longer an option.  I'm sure our lawmakers are already plotting another economic stimulus package.  No economic stimulus package can change the fundamental problem that the last few years were a financing phenomenon of too much easy credit to too many people who couldn't actually afford it.