The media’s failure to get ahead of The Big Two Point Five’s swan dive from grace is a source of constant amusement. The press’ collective reluctance to investigate the truth behind the automakers’ plight delivers endless wonder. But Motown media’s “eternal sunshine of the big ass automaker” shtick just plain rankles. In “Detroit Can Ride Out These Strange Days,” Free Press columnist Tom Walsh told his readers to hold fast and be of good cheer. ”These are nutty and painful times for Detroit's auto industry. But they are times for resolve, not for panic.” Hey Tom; are you sure about that?
Tom’s sure, and here’s why: “The most formidable challenge, the one so many in the global auto industry are obsessing about, is Toyota. Indeed, the Toyota monster is the underlying reason for GM's stock price drop after Wednesday's good-news earning report.” And there I was thinking that GM’s stock price drop was the “dump” part of Merrill analyst John Murphy’s “pump and dump” strategy. Or perhaps that GM’s sinking stock price had something to do with GM’s cash burn, employee-related liabilities, bloated dealer network and/or less-than-thrilling product portfolio. Nah; it’s all about ToMoCo.
At least Mr. Walsh is realistic about GM’s future prospects, in a denial-oriented, pay no attention to that man behind the curtain kinda of way. “GM is by no means in safe harbor… But whatever the short-term hiccups, Wagoner and Henderson and the rest of GM's management team are taking a disciplined approach to their issues. Costs are way down, revenue-per-vehicle-sold is up, and they handled the Renault-Nissan alliance issue smartly.”
Short term hiccups? You mean, like sinking market share and billions wiped from the corporate ledger? A disciplined approach meaning… the guys aren’t heading off for the links every Wednesday? Or an endless cycle of “no we won’t yes we will no we won’t” on discounts and spiffs? Sure, revenue-per-vehicle is up, but the company is still losing money. And if Walsh thinks GM handled the Nissan merger “smartly,” let’s hope he means quickly instead of intelligently. The really intelligent thing to do: an independent review of the deal (i.e. not putting the man in charge in charge).
Anyway, despite Tom’s stricture to chill, the facts about GM’s predicament are pretty nerve-racking. In the third financial quarter, GM’s cash position declined by $2.5b. (Short-term liquidity now stands at $20.4b.) Cash flow from its automotive operations– including restructuring costs– was a negative $5.1b. During the quarter, GM turned $2b of short term VEBA funds into cash and scored a $500m dividend from its GMAC financing arm. At the same time, GM forked-over $2.5b to GMAC to cover the “buy down” of its Zero Percent sale; a figure that includes additional loan loss reserves to cover deadbeats. Uh-oh.
As we warned, the Anyone With A Pulse sale boosted GM’s sales and reduced inventory– and hit GM’s cash flow like a Silverado driving into a wall. Sure, GM will receive another cash flow boost when its new pickup trucks arrive at dealers over the next several months, just as it did when the GMT900 SUVs rolled onto dealer lots. But The General’s bottom line remains the same: GM can’t generate cash from its automotive operations. That’s got to be stressful.
Oh, GM also tapped into its secured credit line this summer-– supposedly to “test the mechanics of the line.” In fact, GM needed the additional liquidity to cover payables during plant shutdowns. The amount of the drawdown is [strangely enough] unknown. The borrowed funds were repaid during the quarter. But it was still a completely unprecedented maneuver. Feeling nervous yet?
CEO Rick Wagoner’s claim that GM’s cost cutting will save $9b annually will actually save the company about $5b in cash. Meanwhile, GM says it needs $400m to cover the deal over at bankrupt parts supplier Delphi in the fourth quarter of ’06, and will then pay Delphi around $100m per year for an “undefined period.” GM is also set to make a $1b contribution to the DC-VEBA in 2007, as per the health care “concessions” made by the UAW earlier this year. Without the proceeds of the GMAC sale… fuhgeddaboutit. Ready to freak?
Actually, panic is a highly evolved behavior. When an animal is trapped and fighting for its life, when it’s tried the logical escape route (fleeing) or last-ditch strategy (fighting), all that’s left are illogical and random actions (a.k.a. panic). By the same token, when a carmaker is trapped (heading for oblivion), when it’s tried the logical escape route (downsizing) or last ditch strategy (“bold” new products), all that’s left are illogical and random actions (filing for bankruptcy, merger, leaving the biz Studebaker-style, triggering a union strike, etc.). Of course, you can’t predict chaos (or its aftermath). But you’d think one of Detroit’s auto hacks would at least, you know, try.
Maybe Mr. Walsh is afraid of the messenger being shot.
Or maybe Mr. Walsh possesses the blame-placing abilities of an entitlement-minded school girl or a Marxist college professor.
So if GM sells off further assets will that be akin to an animal chewing off a leg if its trapped? I thought the handling of the proposed merger was particularly stupid and heavy handed. If Wagoner and his team at GM were right then they simply should have let an independent review occur. They would have nothing to fear and the facts would have backed them up. I don’t know if GM will go belly up or not but Wagoner and crew need to go. They represent the philosophy and attitude that GM is run for the benefit of manangement and screw what ever the shareholders (owners) think.
Why the imbedded picture of a Ford drag-car? What’s the symbolism?
Well, there goes Farago again with his “your ugly and your mother dresses you funny” argument. You are not telling us anything that GM doesn’t acknowledge (it’s all in the 10-K) and that hasn’t been dissected up one side and down the other by scores of financial analysts. No one is “freaking” at the consequences of not selling GMAC, Wagoner himself has been saying repeatedly it’s a critical part of the turnaround (and if it doesn’t happen, he WILL be gone, and no one will be surprised).
The New York Times’ Michelene Maynard loathes the big 2.5’s business model even more than you, but her most recent comment on the subject (from the 10/29 edition) goes as follows:
“During the past, awful year for Detroit, industry executives and experts have been puzzling through what will become of General Motors, Ford Motor and the Chrysler Group. One potential future consists of total disaster, with the Detroit automakers vanquished by their Asian and European rivals. This is an option that only those with a doomsday complex really believe, given the Detroit companies’ billions in cash and broad infrastructure. Another potential outcome is that the Big Three vanquish the competition to again rule American roads, a prospect that has faded in 30 years of fighting the imports and is even more improbable now that foreign companies hold nearly half of the market.
A third option, much more likely than the others, is for G.M., Ford and Chrysler to adapt to a new American market that in many ways resembles Europe’s: a fragmented bazaar that has little in common with the mass-production ethos of Detroit’s first century. In this new American market, it is very hard to profitably support enough different brands and models to guarantee ”a car for every purse and purpose,” which Alfred P. Sloan, as G.M.’s president, declared to be the company’s mission in the 1920s. ”
Start working on that doomsday complex, Mr. F. This blog would be much more interesting if we were debating potential outcomes and solutions rather than spewing hyperbole.
Wow! Not making money from selling cars and taking out in house loans against the house!?!?
It gives new definition of the saying robbing Peter to pay Paul. More like Robbing Rick to pay Rick.
Optimism is nice but often misleading.
Captain T: The third option is wondrous, but the point is they are making NO progess towards achieving that goal. Still too many brands, too many models, too many dealers, too much emphasis on long production run truck profits. RF may sound like a broken record at this point, but then so is the leadership of GM. (Incidently, if RW was the final approver for the dash of the Impala, he should not merely be fired, but drawn and quartered. THAT is a good indication of how far from success GM truly is.)
“This blog would be much more interesting if we were debating potential outcomes and solutions rather than spewing hyperbole.”
I think it’s been done. Lots of times.
1) trim the overhead. Healthcare, pension, jobs bank, overpaid union employees, useless white collars, bloated redundant departments, you name it.
2) build new, refresh existing products that are better, not just on par, not just as good as the competition’s last years product. The ‘conquest sales’ at this point will involve re-gaining former customers.
3) for those things to happen you probably have to cut the organization at the top (=beheading) wagoneer and friends. Because whatever they’ve been doing is keeping their head safe and worm in their ass, barely acknowledging there may be a problem, and throwing a lot “more of the same” thing at it.
Can you really blame RF for being negative?
In the light of the crappy hole GM burried itself (and that dumb detroit free press article) you can’t blame him for being realistic.
A few inter-related topics (make a good car, low cash, too much inventory, etc.) are mentioned in todays Christian Science Monitor:
http://www.csmonitor.com/2006/1030/p01s02-usec.html
M
Just because a company has “billions in cash and broad infrastructure” , doesn’t mean it’s fail-proof. Remember Eastern Air Lines? Pan-Am? Bethlehem Steel? US Steel?
Looking at the numbers, GM’s cash burn is too large to sustain long-term. The key item is “negative cash flow from automotive operations”, at $5Bln. GM may be huge, but no one can cover negative cash flows of this magnitutde. You can borrow against the crown jewels, but eventually, you gotta have cash to operate. Accounting gimmicks may show the company as profitable. but cash is king.
And GM’s running out of it.
And the larger issue is that this has a death-spiral effect. Less money to develop and improve current models means that GM falls farther and farther behind the competition, meaning it’ll take even larger amounts of cash to catch up, much less pass, its rivals.
And just as telling, the articles talk about how “The most formidable challenge, the one so many in the global auto industry are obsessing about, is Toyota…”
In just 20 years, maybe 3 or 4 product cycles, the automotive world has turned on its head. GM has gone from being the company everyone else had to deal with and respond to, to today’s world, where GM has to dance to Toyota’s tune.
Toyota relentlessly improved the product, relentlessly chased quality, and relentlessly stalked and overhauled their rivals. They’re generating cash faster than GM is burning it, which means the gap will only widen with time.
If GM is to survive, it must abandon all pretense of the idea that we can return to the old days. Nostalgia might be good when you’re designing the new Camaro, but it’s a killer when you’re running a buggy-whip company.
McAllister: Thanks for the link. The bad news for GM: the slow down in the housing market. This is the sector that fuels the demand for the pickups that GM says it's counting on for its turnaround. Zarba: One of my correspondents said all this commotion is like changing shoes during a marathon. The competition just gets further and further away. Oh, and I know this DW contains info from the last one. I just wanted to highlight the cash burn problem and put some meat on those bones.
As the Michelene Maynard quote Captain Tungsten posted says “A third option, much more likely than the others, is for G.M., Ford and Chrysler to adapt to a new American market that in many ways resembles Europe’s: a fragmented bazaar that has little in common with the mass-production ethos of Detroit’s first century.”
The question is if they can move to this type of business model without Chapter 11. The fact is, even with blockbuster products in every segment, the margins will be much lower than even the recent past. Current healthcare, pension liabilities, labor and overhead, increased competition in trucks and SUV’s + decreasing demand, etc. make it very hard for the Big 2.5 to profit from vehicles in NA. Even if the domestics had reacted immediately to the changing market, they would have been challenged to keep up with the changes to say the least. Now they are way behind and still not making significant headway.
RF: Doesn’t the slow down in the housing market also affect GMAC’s mortgage revenue? How much of their income is based in the housing market?
“a fragmented bazaar that has little in common with the mass-production ethos of Detroit’s first century” -Michelene Maynard as told by Captain Tungsten
What evidence of this market climate being popular in the US does she have. Toytas 450,000 Camry’s and Ford’s 1M+ F-body trucks don’t seem to indicate a fragmented market full of small[er] volume niche vehicle products. GM doesn’t need many small successes; it needs one big success in each of the 10 or 12 major vehicle segments. Those segments can support 4 brands (Chevy, Pontiac, GMC, Cady). Anything more and you e competing with yourself.
Maybe I need to read the rest of her column…or get the address of her local cool-aid stand.
One big success in 10 or 12 vehicle segments? Good luck with that, especially as GM has over 120 products on the go, and it takes serious cash to chase that grail.
It’s a never ending struggle. How to sell cars every day, every year. It’s a hard sell considering the price.
Even the demand for these will be nil: http://www.1957chevybody.com/
I drove by a GM dealer earlier today when i was downstate, and there were big signs all over the lawn and the lot and the building proclaiming that this month is “TRUCK MONTH!”. Geez, I wonder if they’re desparate to get those GMT’s out the door or what.
rtz
Thank you so much for the link.If only we could build a car like that again. 57 Chevy rag top with a mid 80s frame and drive train.I don’t want wake up from this dream.
I am a HUGE fan of retro mods. You want a chaos theory? How about GM simply turns back the clock and releases all its cars from the 50’s with modern tech?
The point of bringing up the Maynard quote is that the doomsday scenario referred to here is not a widely held view, even by other GM critics.
Cliff G: Yes they are.
tms1999: to your points:
1) Doing it. I can link you to several articles if you like. Doing enough, fast enough? There is the question.
2) Of course, the question is how do you do it when your resources are stretched thin. The current strategy is common global platforms and engineering them all over the world. Once again, the question is will it get products cranked out fast enough. But it isn’t business as usual. Again, can provide links if you are interested.
Mcallister: Nice link. The current track of the economy will compress the timeline of whatever happens.
Zarba: First of all, U.S. Steel is still a strong competitor and a profitable company, competing well in the global market (with facilities in Slovakia and Serbia, as well as the U.S.) And Bethlehem Steel went Chapter 11, and was purchased by International Steel Group, and now is a part of Mittal Steel, worlds largest steel group. And, all the facilities that were still operating when they went 11 are still operating. Their research labs were consolidated into the Inland Steel labs in E. Chicago, which are now the labs for Mittal Steel USA. Their products and technology live on, and they have reached new agreements with their unions. Hardly a doomsday event for the company (though the residents of Allentown PA may argue that point…)
I guess what I find irritating is that folks here seem content to listen to RF scream “GM SUCKS!” and respond with a mighty “YOU DAMN STRAIGHT THEY DO!” It’s just not that simple.
Take the maligned truck business, it moves a million units a year, you think there is no value there, it’s just going to dry up and go away? So, do you have to break the company up to extract the value or can you not afford to do that because it still supports the car side. And the car side is developing products that make it the fastest growing carmaker in China, do you think there is no value there? Chinese folks would MUCH rather drive Buicks than Toyotas…hard to believe but true. And you have factories and manufacturing processes that are the most efficient in the world….they HAVE to be to have any chance at competing given the labor cost situation, you think there is no value there? Add Ford and Chrysler to that and you still have half the NA market up for grabs…not even Toyota can expand to fill that vacuum very quickly.
Whoever cracks the nut of extracting the intrinsic value within GM (and Ford and Chrysler), whether it is the current management, or some outside force that comes to power is going to make huge buckets of money. Let’s talk about who that might be and how it might come to pass(so I can figure out whose stock to buy….)
One big success in 10 or 12 vehicle segments? Good luck with that, especially as GM has over 120 products on the go, and it takes serious cash to chase that grail.
Well, the Silverado/Sierra GMT pickups (one of their most profitable lines, I might add) have made up 650,000 of GM’s 3.14 million sales YTD. That’s 20% of their volume and near 30% of their revenue. And this is a ‘bad’ truck year.
Add the Tahoe/Yukon/Sub/Escalade/Avalanche/H2 (351K YTD) to the truck totals (all GMT-based) and you have 985K units YTD and that’s over one third their total volume and over 40% of their revenue.
GM’s ‘serious cash’ is made or lost on GMT trucks (11 product lines counting Hummer H2). They could do ‘okay’ on their other ~70 products (there are less than 80 GM product lines -including Saab’s) and still make or lose fortunes based on big trucks.
Toyota is no different. They’ve sold 341K Camrys, and 653K total Camry derivatives (Camry, Highlander, Prius, ES, RX) out of their 1.93 million units YTD. That’s over one third. Toyota’s ‘serious cash’ is generated right there.
To put it in perspective, Tundra and Sequoia have accounted for only 117K units YTD. All of Toyota’s trucks (incl Lexus) totals 810K YTD.
GM’s trucks total 1.79 million YTD. GM sells TWICE as many trucks as Toyota. And again, that’s during a ‘bad’ truck year.
GM hopes every month is truck month, without it their ‘cash burn’ only gets worse.
Ok here I go again
I have a solution to GM’s crappy mess
pure and simple… dump the health care onto the Gov’t
with an estimated 7 billion dollars going to health care in 2007… you gotta wonder where this moneys gonna come from??? Plus every other G8 country in the world has Government paid health care… why is the US different?
DUMP that 7 billlion dollar ball and chain on the Govt or go bust!!!! Does Toyota pay for their employee health care??? I DON’T THINK SO!!!!
Businessweek had a similar article about GM’s drive into quicksand in their latest issue, again going over the numbers in depth:
http://www.businessweek.com/autos/content/oct2006/bw20061026_856936.htm?chan=autos_autos+index+page_news
One of their comments about the 3rd quarter $5 billion cash burn is that it’s not clear when it’s going to end. Yikes!
someone tell toyota to cut model cycles down by like 2 years! or i’m starting a toyota death watch. haha.
i’m waiting for the next gen camry already, and impatient for the new sequioa and highlander. highlander’s seats are so firm they make my butt numb.
oh my. on that christian monitor science link, they said the caliber was a hot model going for 22k. you could buy an alligator gucci bag and an hermes watch, WALK to work and look much classier. hahaha.
or just buy a used volvo wagon or subaru instead!
Are you a taxpayer cykickspy ?
You do realize that the gubmint gets its money by stealing it from all of us right ?
Or do you just want Amerika to be yet another high tax/cost – low wage Socialist dump enhabited by envy-ridden, gimme-gimme beggars/brats ?
@ Tungsten.
The fact that GM trucks sell in China is not going to save GM – but it’s a healthy thing that they have staked a bet there.
It’s all about brand value and perceived brand energy. In the West, GM is perceived as having very little left, due to the general mismanagement of the brands under its stewardship. In China, where Japan is considered a historical enemy and a present-day rival for resources, an American alternative is preferred, also as a badge of rebellion against the “Communist” rulers.
GM and Ford’s touch of darkness is such that they even manage to ruin brands of long standing in short order, as has happened with Saab and Jaguar.
The reason why we respond positively to rtz’s posting of the 1957 Chevy is because it ignites a spark of recognition of what US brands once where.
All that uniqueness has been whittled off the “platforms” and the customers aren’t taking it anymore.
Which means they are going down a few paths:
1. Buying a parity car, i.e. one that is manufactured to an acceptable standard, is offered at a fair price and seems to promise a positive after-sales experience. Such cars are sold on the back of financial incentives, not through brand cachet.
GM has descended to this category.
2. Being willing to pay increments of premium prices for actual premium value, as judged by the customer, his peers and those who are in the know.
GM is barely hanging on in this category with a few of its cars, and those in the know perceive them to be also rans. And it’s perception that counts. GM can only counter it with reality, and so far what we have seen from the company is short on that.
Financial incentives actually erode your position in this category.
3. Super premium car experiences that arise from a combination of intrinsic product excellence and brand perception.
Name one GM brand that belongs in this category…
You can’t. Which means that GM has lost sight of the importance of premium excellence in creating brand awareness and strength.
GM thought there was a “way” at the bottom of the barrel, where customers would accept cycles old leftovers and drive home pleased with the financial incentive.
GM has tried to bluster its customers into thinking the company still had the drive and skill to place cars in the super premium category, but you have to get stock out on the road, not just on Lutz’ blog and in the car shows as concept cars.
GM may survive, but it’s trying to do so from the worst position imaginable, from the bottom of the barrel, with no positives to their name.
Meanwhile, its chief competitors are healthily running away with lock-stock-and-barrel.
Or do you just want Amerika to be yet another high tax/cost – low wage Socialist dump enhabited by envy-ridden, gimme-gimme beggars/brats ?
Living in the Netherlands, where earning good money and getting good grades is frowned upon, where there’s a progressive income tax rate up to 52%, where on top of that people with low(er) incomes get subsidized on everything and “luxury” goods like cars are taxed beyond believe, in other words living in communism, I can tell you that health care still can’t be assured to everyone. Not to mention, you often don’t get the best care for a disease because the 2nd best care is that much cheaper. Everybody is still complaining.
I tend to think that even most “wealthy” countries aren’t profitable enough to supply everyone with decent health care.
About the envy-ridden beggars though, I don’t think there are more of them here (or in other “social” countries) then in any other country. It’s just more frustrating because people pay an awful lot of taxes respective to their income, give up their pools, give up buying their children a racing carreer, all for the sake of these characters and still they are hating on you.
Farago: “I am a HUGE fan of retro mods”.
One word:
Tailfins.
I beleive that the reason that the new t-bird failed was cause it didn’t have any.
Luther:
“Are you a taxpayer cykickspy ?
You do realize that the gubmint gets its money by stealing it from all of us right ?”
yes, I like everyone else am a taxpayer, but you are missing the point. I stated that GM is going to be spending an estimated 7 billion ( $ 7,000,000,000 ) on health care next year. They clearly can not afford this… this could be profit if the US Govt paid for health care like every other G8 country in the world… and as far as the Gov’t not having money for health care…. maybe they should pull out of Iraq and save the umpteen billion dollars a year they are wasting….. otherwise GM could move all their factories over seas and jobs would be lost…. hmmmmm which is worse???
Just remember for every 1 job at GM…. 8 jobs are created in the auto parts sector… so if GM goes down…. multiply the number of loss jobs by 8
HAVE A NICE DAY!!!!
And another thing…. Does Toyota pay healthcare costs… GM needs to be competitive… sorry if this bursts any bubbles!
America… what a nice place to visit!
cykickspy, you have no idea what you are asking for. You need to be very careful about what you wish for (i.e. socialized medicine) because – you might get it.
I’ve lived in the UK (where there is socialized medicine) and the care (that being a very optimistic euphamism) SUCKS.
I came home on vacation one time, had a bicycle accident, cut my outer wrist – bad scar. Hurt for 12 months or more. Once I got back “home” to the UK, I asked the doctor to fix it. He said “specialist” (i.e. plastic surgeon). Took TWELVE MONTHS to see the specialist, and this was a relatively minor thing.
People die waiting on stuff, in socialized medicine countries. This is not to say our system is perfect – it is far from it – but oh my goodness, you have no frickin’ idea how bad it can get. You have never walked through British hospital wards (private rooms? Hah!) built in the 1800’s, have you?
The truth of the situation vis-a-vis GM, though, is that these executives and this UAW made an agreement, and by gosh, at some point it will be a tipping point where it is no longer financially viable or sustainable (I mean, it probably is already there, but both parties to the sham are playing “hear no evil, see no evil, speak no evil, and shoving their heads into the sand, to mix metaphors).
So yeah, we taxpayers will – as always – get the shaft and end up paying for the GM promises.
I say – jail the UAW execs AND the GM execs on account of it. Not to mention Ford, which will surely go down the same Chapter 11 or Chapter 7 path to hell.
As for health care, I would be willing to bet, dear sir, that Toyota do put towards health benefits for their employees in the United States. Simply put, all good employers do. The difference is, “realistic health care” (i.e. what 95% of employers provide) vs. “UAW health care” (i.e. paying for almost everything including viagara for the working stiffs to sell on the black market – if you’ll pardon the pun).
Of course toyota and nissan, and honda all pay health care costs. It’s jut that they got here recently and have few retirees in their systems. With constant US growth, they are hiring many more than they are retiring a great situation to be in. They also have total flexibility in their plants, they pay you a good wage but they decide the work rules. ie. you may have to clean up your work area and even change lights bulbs around your space. Try that at Ford, gm or chrysler. If they can speed up the line through better mfg. methods they do it, etc. If flexibility is the hallmark for the future, the Asians have it from the modern plants with multi model adaptability, to full control over their plant’s operations. This is where the profits keep going to stay ahead. I heard the word blockbusters need’t for GM, well toyota doesn’t have any blockbusters just solid incremental performers. They don’t need the new camry to selll 50% more this year, they will settle for 5% over the already commanding lead they enjoy. It is this from the top looking down strategy that keeps the Asians from being dethroned by weakened obsolete domestic companies.
cykickspy: “…Does Toyota pay healthcare costs… GM needs to be competitive… sorry if this bursts any bubbles!…..if the US Govt paid for health care like every other G8 country in the world…….. otherwise GM could move all their factories over seas and jobs would be lost…. hmmmmm which is worse”
Let me guess you work for GM or Ford. I make that assumption because of your rhetorical question. Almost everyone not working for Ford or GM if given the choice of subsidizing the healthcare costs of GM and Ford or having those jobs outsourced, will not choose to subsidize those costs in taxes. Also as to whether Toyota pays healthcare costs, your kidding right? Just because most people don’t have gold plated health care coverage does not mean that their employer does not have healthcare costs. However, most employers do not have the healthcare benefits with virtually little or no cost to the retirees that the big 2.5 retirees enjoy. My parents both had what most people would call generous retirement packages from their government jobs, generous penisions cost of living adjustments etc What they did not have was healthcare coverage in retirement. Thats what medicare is for. A private insurance medical supplement was purchased by them to cover what medicare did not cover. Sorry if GM or Ford won’t pick up the tab then solution is for the workers to pick up more of the cost which is what most of us have to do.
I think that GM should move all their factories out of the US… let the UAW deal with that!
thats about 350,000 GM jobs lost
plus about 2,800,000 jobs lost from part suppliers
how many communities will be ruined?
how many families will be ruined?
how many jobs will be lost from small business’s in those communities.
etc, etc…. its like playing dominoes!!
but we can all relax because G. Bush is gonna fix this mess.. yeah right!
some of you guys dont get it… its like you hope GM fails… but at what cost? I hear the R word (recession)
Every time the GM outlook looks a little better the argument that GM is doomed looses a little more traction. At some point the “all negative” perspective makes pointing out true GM mistakes difficult and less believable.
Wrap your head around this: GM total sales in USA 1999: 5.02 million 2000: 4.95 million 2001: 4.91 million 2002: 4.86 million 2003: 4.76 million 2004: 4.71 million 2005: 4.52 million 2006: 4.1 – 4.2 million This at the same time that Toyota's sales have been climbing. In fact, no matter how you look at it this thing– market share, revenues, cash burn or increasing competition– GM is on a slippery slope to nowhere. If The General can pull off the sale of GMAC to Cerberus, THEN the outlook will look a little better. For a while. How great is that?
Just out of curiosity do ya have the total sales world wide for GM since 1999? and do a side by side with toyota!!!
Hey, glad you asked! (only back to 2001, though)
GM
2005: 8,260,576
2004: 8,362,947
2003: 8,013,899
2002: 8,074,437
2001: 8,106,785
Toyota:
2005: 7,321,686
2004: 6,847,441
2003: 6,228,201
2002: 5,691,585
2001: 5,497,369
I think the jump in GM in 2004 was from the GMDAT acquisition.
No question Toyota is growing, but remember that GM has been global for a long time, and Toyota’s been entering many new markets (and will continue to do so). Their growth is breathtaking….and risky (by their own admission). However, their growth is not coming out of GM’s hide. And GM’s footprint is becoming less NA-centric as time goes on.
GM will shrink to make room for competition. But as it get’s smaller things become more efficient and perhaps can focus on product development you all desire.
Making lots of cars is hard. Toyota is finding that out with the Scion door-slam air bag deployment. Toyota should slow down and take a deep breath or it will be just like GM. Also upping truck production is really cocky move against the F150 and T900. Truck owners are as loyal to their brand as small car owners are loyal to theirs.
The first sentence of this article says it all for me. The continuing decline of the big 2.5 should be headline news.
It amazes me how few people I meet are even aware of this phenomenon. Whatever the reason, I am sure the 2.5 are glad their embarrassing ineptitude is not constantly examined and their rivals likely prefer to keep their enviable success muted.
GM’s global operations won’t save them if they can’t turn NA around.
Anyone got ToMoCo’s NA figures for this time period? I’ll root around…
I really think that China is the next big market… with over 1 billion people it is so huge and they are growing up as a nation as one would say. I really feel that GM has a good chance at dominating that market and Toyota will do dismal at best. Someone in this post said something like “Chinese rather drive a buick than a toyota”, this is true and I think GM and Ford could really capitalize on this market if played right… but that is the question… Will Wagoner play it right?????
All this talk about how well GM and others are doing in China is all fine and good except we all must remember one salient fact.
None of these Chinese companies is wholly owned by non-Chinese. The Chinese government demands at least a 50% local ownership.
GM (and also VW’s) partner is Shanghai motors, which just brought out the rebadged Rovers as “Roewe” since Ford grabbed the Rover brand from BMW (solely to keep it out of the hands of the Chinese, and spending money it hardly could spare).
Face it. If (or, when) GM and Ford North American operations fail, their worldwide operations will likewise collapse.
Yes, it is safe to say there will be a recession. Or perhaps, a recession (coming, if you read any gold-bug information online), will actually CAUSE the big 2 to die. Which will mean a deeper recession.
On a cheerier note, has anyone else seen the news that Toyota plan to add two more plants in North America? One in the midwestern US, the other locale undecided.
RF, you asked:
North American sales:
2006: GM 3.14M Toyota 1.93M (Year to Date)
2005: GM 4.45M Toyota 2.26M
2004: GM 4.66M Toyota 2.06M
2003: GM 4.72M Toyota 1.87M
2002: GM 4.82M Toyota 1.76M
2001: GM 4.86M Toyota 1.74M
Here is a little more information.
http://www.autooninfo.info/NAEd200610B3HugeInventories.htm
Also, this is kind of “illuminating”
http://www.autooninfo.info/NAEd200609MoodysSPCutFordDebt.htm
GM sells a lot of Buicks in China, more than they sell in the U.S.
http://www.buick.com.cn
Way I see it, GM will import cars to the U.S. from other markets and leave truck/SUV production in the U.S.
GM is doing well globally because they do not have to contend with the UAW outside the U.S. which means they can be much more product-centric.
I lived in Europe and drove both Fords and Opels (GM Europe). They were wonderful cars to drive. TTAC as I recall liked the Saturn Aura which is an Opel Vectra in Europe built on an older Epsilon platform. Cant wait for the Saturn (Opel) Astra. It will drive wonderfully no doubt.
If you want good reviews on driving dynamics:
http://www.autozine.org
Thats something i don’t understand is why the european cars for both Ford and GM weren’t brought over sooner, having moved here its a no brainer that they should have been here long ago, in europe we’ve been forseeing your problems and couldnt understand why you guys werent prepared to accept cars that can get over 40mpg standard?!!!! I used to get near 70mpg in my 1.4 tdi. can you imagine seeing those figures everytime you do a road trip?
Wrap your head around this:
GM total sales in USA
2006: 4.1 – 4.2 million
Well hey, look at the bright side: sales can’t keep declining by .4 million per year, forever.
Only for about 10 years!
If (or, when) GM and Ford North American operations fail, their worldwide operations will likewise collapse. Yes, it is safe to say there will be a recession.
That’s a myth. First, there’d be no sudden collapse, there are still too many billions of cash on hand. It would take time for crunch time to arrive, and we’ll all see it coming. Second, the US eats 17 million cars a year, of which half are made by US automakers (approx). The market needs those 8.5 million cars they supply — that would be an incredibly enormous vacuum if the Big 2.5 simply shuttered operations. It would be IMPOSSIBLE for the rest of the world’s automakers to fill the void — the capacity doesn’t exist.
Which is why that simply won’t happen. They’re NOT too big to fail, but the market demand is too big to ignore. Worst case scenario is something like Toyota buys the plants or the company of one, Honda the other, Daimler keeps plugging away with help from someone if needed.
If an abrupt collapse were on hand, Governments would ultimately do whatever’s needed (ie, bless a foreign takeover, loan guarantees to somebody) to save most of the the production in some way — but not save the companies themselves. Someone will step up to feed the market, and they will need most of the existing capacity and most of the workers.
Rapid changes may then commence, the UAW may disappear, whatever — but in no case will US automaker productive capacity simply shut down overnight. Not possible.
Thats something i don’t understand is why the european cars for both Ford and GM weren’t brought over sooner
The UAW wouldn’t let them !
Although that has changed due to “survival pressures”
When I lived in Europe I came back to the U.S. on business and rented a Ford Taurus. As soon as I drove out of the airport I thought the car had a broken suspension. I took it back and the rental clerk gave me another Taurus with less than 1000 miles on the clock. It drove the same. It occured to me at that point as to why Americans cant drive. Sloppy cars make for sloppy drivers.
On GM and Fords part those european cars should have been brought over sooner, its a scandalous they werent and a real arrogancy on both their parts (and probably a few other companies too) to think that their US products were much better. People should be held accountable for that. I hope the US will get to savour these products, if not take a little trip to europe and try some of these cars and tell the big 3 to pull their finger out, as your gas price increases, a more euro way of thinking and acceptance of smaller cars will continue. Its just a shame that when the sh!t hits the fan that people finally open their eyes. I just hope they haven’t been sleep walking for too long. For everyones sakes.
For the above point about sloppy cars=sloppy drivers, since living here its been like driving with the French, especially in michigan, jeeeeeeeeez.
great article
your data is skewed.. i checked
GM total Global sales
2005 9.17 million vehicles
Mine came from Ward’s Automotive, where did yours come from? Most times, these discrepancies come from what counts as a “light vehicle”
having said that i like your number better!
We tend to keep talking about declining market share, then about the ‘help’ GM gets from dumping cars on the fleet market. However, I believe if you dig a little deeper you will see a couple of things at work here. First, if you exclude the fleet car market (which we all know is low/no profit), then GM has been holding its RETAIL market share pretty steady at around 22% for the past year or two. It’s overall market share has dropped mainly due to them backing off the FLEET market. That fact alone showed up in the financial statements compared to Ford and Chrysler. Ford’s retail sales are off about 2% this year compared to last, and Chrysler is off about the same amount vs. last year. So, with fewer profitable sales and reduced volume, these guys got clobbered. GM, on the other hand, did increase revenue on lower sales volume — indicating they sold cars at a higher per unit average revenue, reflecting less reliance on the fleet market. This I believe is a good thing for GM. As long as they can hold onto the retail market and stop its decline (which they appear to be doing), they have a chance to survive and grow in the future.
So, when we say ‘shrinking market share’, we need to carefully define the term or the results can be vastly mis-interpreted……………after all, they still have “more” of it than Toyota by over 4% at the RETAIL level.
mine came from this article:
http://www.globalinsight.com/SDA/SDADetail6484.htm
it also discusses the decline in fleet sales by GM and what that does to their overall profit
also a search on google came up with the same number on different websites.
Maybe this juxtaposition is it:
“The press’ collective reluctance to investigate the truth behind the automakers’ plight delivers endless wonder. But Motown media’s “eternal sunshine of the big ass automaker” shtick just plain rankles.”
The domestic auto industry’s *geographic* retreat has caused
the Big 3’s problems to be seen increasingly as a Detroit Problem by politicians who Aren’t Being Asked For A Bailout
so many times that one suspects the repeated public Not Asking is a form of Asking.
National media simply don’t cover the domestic auto industry
in the same depth they did in the past because issues
related to that industry are seen as regional. They do cover
it, but the depth and degree seems different than in the
past.
For people outside what _Detroit News_ columnist Dan
Howes once termed “Fortress Midwest” who remain
interested, finding the Detroit media on the web is really
the only option. But Detroit’s media have never had more
than a regional basis of coverage – coverage that suffered
back in the 1980s (when I was living in MI) with the merger
of the _Free Press_ and the _News_. Regional media reflect
the needs of their communities, and the Detroit area needs
a light at the end of the tunnel. Any non-auto answers
are long-term, but to channel Keynes, how do you get to
the long term? Whether the Big 2.5 has such a light is a
major theme of the “Death Watch” series – as such, I think
an author of such a series has to expect to be frustrated by
the Detroit media.
The trend is as ominous as it is obvious.
Go back in time and look at the monthly auto (i.e. excluding light truck) sales in the United Stares and track absolute units sold by GM, Ford, DaimlerChrysler and Toyota. Watch Toyota continue to narrow the gap with all three until it routinely exceeds Ford and DaimlerChrysler and can reasonably be projected to soon eclipse GM, at first sporadically and then consistently.
Now go back and do the same exercise for light trucks, realizing that in this category Toyota is where it was at in cars two decades ago. The gap is (currently) yawning. Now assume that Toyota will replicate in trucks what it did in cars.
Rick Wagoner et. al. looked (and continue to look) the other way for at least 15 years until they were/are in extemis with regard to generating profitable auto sales in the US. He/they are doing the same thing in the incipient stages of erosion of their cash cow truck share.
To quote that emminent auto industry expert, Yogi Berra, “It’s deja vu all over again.”
I drove by a GM dealer earlier today when i was downstate, and there were big signs all over the lawn and the lot and the building proclaiming that this month is “TRUCK MONTH!”. Geez, I wonder if they’re desparate to get those GMT’s out the door or what.
That is called “advertising”. You may notice this on your television from time to time. If they have televisions “upstate”.
“Geez, I wonder if they’re desparate to get those GMT’s out the door or what. ”
No, I don’t think so. I interviewed several GM dealers in my area and they pretty much said they want to keep the trucks as decoration for their dealerships.