BEIJING, June 3 (Xinhua) -- General Motors filed for bankruptcy protection on Monday, a move astonishing the world and raising serious questions about the failure of the once-dominant automaker.

    Besides its excessive expansion of production and neglect in developing energy-saving vehicles, GM also dubiously extended its reach to the financial sector. GM's ambitious financial operations in recent years proved to be a major reason for its collapse.

    Analysts point out, judging from GM's balance sheet, that it's not easy to tell whether the automaker is a bank or a manufacturer. That's because in the past few years GM's auto financial services subsidiaries have become the company's main profit center.

    GM made a profit in 2006 thanks to its financial services subsidiaries'2.9-billion-U.S. dollar gain that came while its manufacturing department continued to lose money. GM's balance sheet surplus created a false image of a healthy operation.

    Such a situation, however, is not exclusive to GM. With plunging domestic market shares, U.S. automakers increasingly rely on financial services for profits.

    These enterprises not only provide various car loan services, they also set up giant financial subsidiaries. The audacious move to explore financial derivatives exposed the companies to grave risks and made them vulnerable to financial meltdowns.

    GM, considered a leading player in innovative financial services, agreed in 2005 to sell as much as 55 billion dollars in auto loans to Bank of America over a five-year period. The move called "a new strategic choice by GM executives _ was expected to reduce contract-breach risks and give the automaker another source of financing.

    However, the "new strategic choice," while bringing liquidity to the company, carried a lot of risk. In 2005 alone, GM's debt for loans and financing reached more than 190 billion dollars.

    The huge debt could prove fatal to GM in a somewhat similar fashion as that of banks caught in the sub-mortgage crisis if the default rate goes up.

    Car loans' low default risk and the financial companies' minor threshold for such loans boosted sales, but for various reasons, the financial success failed to keep GM's manufacturing department out of the red.

    GM reported a record-high production and sale of 9.17 million cars in 2005, yet suffered a huge loss in revenue.

    The expansion of financial service offerings, on one side, brought profits to U.S. automakers, but on the other side, it created hidden dangers for the companies' future development.

    U.S. automakers for a long time lacked the momentum to improve their technology, and innovate, thanks to the fake image of the company's continuous gains that covered the ongoing production losses.

    Therefore, many U.S. auto companies missed the opportunity to improve their traditional power systems, and weakened their ability to join the competition in the new-energy car industry.

    Developing auto financial services to a moderate degree can boost the car industry's sales, and expand internal financing channels. But it can't go so far that it becomes a burden instead of a blessing.

    Sustainable development for the U.S. auto industry will be achieved only by maintaining a balanced development of its different units and keeping a reasonable ratio among its real and fictitious businesses.

Special Report:  Global Financial Crisis