Friday, 5 December 2008

The spectre of bankrupcy looms at GM

(By Richard Holway) The unthinkable is now being thought. The Radio4 Today programme carried a report about President Bush saying that it didn’t want to “throw good money after bad” by agreeing a mega support package for GM (and other US car manufacturers) If such a support package is not forthcoming GM will run out of cash – possibly before Christmas.

Any IT historian will know that EDS was created by Ross Perot in 1962 and was bought by GM in 1984. GM spun it off as an independent company again in 1996. GM therefore used to be both EDS’ largest shareholder and customer. Only a few months ago EDS was very proudly trumpeting the new deals it had won from GM and ended its release with the words “EDS now expects $1.2b - $1.4b in annualised revenues from GM over the next 5 years”.

But, of course, that’s not the half of it. EDS is now wholly owned by HP. If you include EDS, HP’s own service and product offering to GM, HP represents c$5b or one third of GM’s $15b annual technology budget.

Of course, even if the very worst happened, GM would be broken up and sold by the administrators to other parties – all of which would need ongoing IT support if only in the short/handover stage. Even if GM survives, its ability to embark on increased IT spend is going to be somewhat curtailed. Whatever happens, GM’s perilous state is not good news for HP, EDS and all the other IT companies which count GM as a major customer.

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