About three years ago, GM CEO Rick Wagoner made a critical decision about his company’s products. Rather than radically revamp The General's full-sized SUV’s or divert serious time, energy and money into small car development, Rabid Rick decreed that GM should rush through a “refresh” of their current Tahoe, Yukon, Suburban and Escalade. At the precise moment that these new[ish] four-speed gas guzzlers arrived, safety, environmental and fuel prices whacked the genre. Strangely, both pundits and PR flacks were nonplussed. These things are good. They’ll sell. How wrong can you be? Oh, I’m sorry. Didn’t you hear? The GMT900’s are a flop.
Perhaps you remember the hoopla surrounding the GMT900’s. I do. And I remember the scorn, derision and invective aimed at this website when we declared GM’s new[ish] SUV’s a mediocre misallocation of effort. Well read ‘em and weep. Some 120k full-size GMT900 SUV’s are out there, somewhere, waiting for customers willing to pay $5k or more below list. The Chevrolet Tahoe, for example, currently lingers on dealer lots for 77 days. Many of these are ’06 models. Hence GM’s decision to halt GMT900 production in January for two weeks. After that they’ll reduce throughput by over ten percent.
When the GMT900’s debuted, GM Car Czar Bob Lutz confidently predicted that his employer’s new[ish] behemoths would capture a profitable slice of the diminishing pie. So far this year, the SUV market has contracted by 24%. In that time, GMT-900 SUV sales fell 16.9%. (Toyota's large SUV sales fell 23.7%, but we're only talking about the difference between 40k and 30k units.) Meanwhile, overall, GM's light truck sales sank 11.6%, while Toyota's climbed by 12%. So… great landing, wrong airport.
And now Maximum Bob has become maxim Bob: the poster child for that old saw about repeating your mistakes 'cause you were busy dreaming of flying combat jets against the Ruskies when you should have been paying attention in history class. This time out, Maximum Bob’s telling the world that the automaker’s GMT900-based pickup trucks– upon which his boss said The General’s recovery depends– will rack up over a million sales this year, and more next.
Yes, the same man who tut-tutted the demise of the full-size SUV two days before Hurricane Katrina decimated the Gulf region’s gasoline production predicts that “pickups will pick up” a few hours before the Fed warned that the U.S. housing market faces a “substantial” cold spell. A significant housing slowdown is the pickup truck equivalent of a category five hurricane. And The Vice Chairman of Global Product Development still can’t see it coming.
Now don’t get to thinking Maximum Bob is spinning a tale to bolster his beleaguered troops/GM’s stock price. This man is deluded past the point of crazy-like-a-fox credibility. To wit: when pressed on the impact of the deep discounts offered on pickups produced by The Blue Oval and the Dodge Boys, Maximum Bob admitted "This level of discounting on the pickups is uncharted territory… But the good news is that incentives of $7,000 to $8,000 a vehicle is not sustainable.”
Huh? Is Maxi Bob saying his competitors are about to go under? Or that they’ll come to their senses, stop discounting and use their unsold vehicles for artificial reefs? OK, so what about next year’s debut of the new Toyota Tundra? Surely, that's going to put the hurt on GM’s pickup truck margins. “The Tundra will take share, but [it] will steal from the older Tundra and from the Tacoma," Lutz said. "I don't think we'll see that much switching from American truck owners to the Tundra." Now that’s what I call confidence! Or, more accurately, complacency!
Even if the Silverado and Sierra somehow manage to cling to their current volumes in a collapsing market, the General’s margins are about to get hammered. Neither Ford nor Dodge can afford to surrender market share; they’ll do are doing will continue to do whatever it takes to keep the pickup pipeline flowing. And Toyota didn’t build that truck plant down in Texas just for show. If they have to slice prices to move the metal, they can surely afford to do so. And by God they will.
This, folks, is Rick’s bad. Instead of holding off and building game changers– vehicles that can recover lost ground with undeniable, unassailable superiority, GM’s CEO thought it best to get the new shit out the door as fast as possible, regardless of its ability to wow the non-faithful.
One wonders what would have happened if Rabid Rick Wagoner had sat down with his execs and said “Build me a truck that gets 25mpg in the city, feels like an Audi inside, tows more than anyone else and outlasts Ron Jeremy. I don’t care if you have to stick a hybrid synergy drive under the hood. I don't care if we make a plug nickel. Just do it.” Or, alternatively, "Lutz, you're fired."
It’s a race to the bottom and the first one to declare bankruptcy and break the UAW wins. As for product, GM products do not inspire, excite, or build confidence like the competition. the desperation in their ads and price drops shows through.
Sorry to say RF but GM holds over 40 percent of the US YTD market for pick ups and that percentage is getting higher with the new 900 series out there… man they are a nice piece of machinary…. that aside.. I believe your topic this week does not quite belong in a Deathwatch but hey thats only my opinion… or is it?
GS650G:
It’s all relative. The direct mail postcard (postcard!) from Chrysler reeks of desperation.
Ford inviting journalists to take a peek up their skirt (“Really, there’s something nice here!”) seems desperate too.
Mr. Farago,
Nice article. The timing of the SUV and truck releases couldn’t have been worse. What kind of market share loss has GM suffered YTD? What kind of market share loss had GM pickups suffered YTD? Just curious as to how bad the situation is… and how deluded Mr. Lutz is…
Just helped my buddy negotiate $12,000 off of sticker on a 2500 Ram. I almost (not quite) felt sorry for the dealer.
Ford product is dated, Dodge is dated plus have way too many vehicles sitting around. There’s no way the incentive pressure lets up.
The Tundra can’t help. The housing market doesn’t help. 100,000 layoffs at the Big 2.5 doesn’t help. I haven’t looked that close at the new GM trucks, but I doubt they have the right stuff to go against the tide.
Cykickspy wrote:
“GM holds over 40 percent of the US YTD market for pick ups and that percentage is getting higher with the new 900 series out there… man they are a nice piece of machinary”
People will keep on selling these garbo-barges. Both the pick-up & SUV. I road in one about a month and a half ago. Living in Lansing, MI I have several friends that I bowl & watch football with. Many of these folks work for GM.
They really feel that this product is market competitive.
I always ask… Where is the Toyota Prius killer??? The guy said that “It is tiny” It did not seem tiny when we test drove it.
GM needs to hit growing markets.
Such as compact Hybird–NOT SUV or midsize Hybrid. A Civic Hyrbid/Prius killer, 50 MPG starting at $19,999.
And they would have to have the volume and capacity to make 300,000 a year.
That would be your market share recovery.
But what do I know. I drive a Nissan with an antiwar sticker on the bumper.
New full sized GM trucks are being hyper-advertised “from $11,900” locally. C’mon, even the Chinese couldn’t build this much metal and make a profit selling them for $11,900, never mind paying some UAW guy $35 an hour to mow the lawn in front of the GM-NA plant, plus his free Viagara (to black-market on the street), plus his dental, medical, huge additional discount for buying GM junque, retirement bennies and all the rest of it.
I wonder who’s going to go to jail eventually from the GM collapse, once the “gum’mint” figures out that they’ve been fiddling the figures in order to try to keep the Titanic afloat?
The SEC are on their case right now. Maybe it won’t even be Chapter 11, but Chapter 7. I mean, c’mon, one good-sized strike at Delphi and the show’s over.
GM have essentially done an “MG-Rover” – selling everything but the executive dining room silver (or maybe I’m wrong there, even). Subaru 20%? Sold. Suzuki? Gone. Isuzu? Broomed. 51% of GMAC, the ONLY thing that made them any money in North America? Gone, finally.
Anyone who can’t see the handwriting on the wall needs a good dog-for-the-blind.
The title says it all again
I drove a new Silverado 2000 miles last week across the southeast. The interior is nice. Other than that I couldn’t tell any real difference between the new and the old truck. The mileage and handling felt the same. Even though GM claims otherwise, the frame still felt very flexible compared to the Ford.
With the heavy discounting on the 06 model, there is NO WAY I would spend the extra money for the 07. Give it a few months and the 07 will be heavily discounted too.
How flexible are GM’s current production lines? I assume all the GMT900s come from truck-only lines and thus are only tooled for building ladder-frame trucks and SUVs. I could be wrong, though. I’m just curious about how substantial the changeover would be if they did suddenly decide to substitute different vehicles for these trucks over time, on the same production lines. That is probably one of the keys to their future success, assuming they come up with something to take up the volume (and hourly wage) on those lines.
I saw a great Toyota truck ad in my area (New England):
[Open with manly-looking guy in work clothes holding up his dad’s hammer and talking about how dad built houses with it].
“Of course, if I’m gonna build a house now, I’ll use one of these [holds up nail gun].”
[close with Toyota trucks logo]
MW
Without seeing it, that sounds like exactly the message Toyota needs right now. If only the domestics could be clever, but their chances have come and gone. They’re locked into the Toby Keith vs. John Mellencamp battle.
The problem is, that even sustaining the market share isn’t good enough since the market is shrinking fast.
Everyone knows that Trucks & SUVs are a sinking ship, the only problem is that the domestics don’t have any life boats (well built small and/or economic cars that people want). They were convinced that the ship is unsinkable and now they suddently find themselves on board the Titanic after hitting the iceberg of climbing gas prices.
Now they’re fireing up the engines and spend a lot of marketing Dollars and give incentives, hoping to reach a save haven before it’s too late. But as we know from history, when the captain of the Titanic decided to fire up the engines, it only led to more water pumping through the leaks, hence making it sink even faster.
Toyota (the benchmark) on the other hand never tried to sail the Arctic Sea with only one giant ship, but with an entire armada of well established cars in every class. So if one of them happens to be in distress there are enough ships left to help out.
will they never learn? To bing out new trucks with four speed trannys and say better (six speeds) will come later is like asking motor trend to delay the car of the year award to toyota camry for six months while they get their new power train into the cars as they have to start the model year with the carry over power plants. At $2.50 a gallon no large pickup truck is going to fly off the shelf and at $3.00 all the manufacturers can shut down plants for good. This is not the market you want to be in for the future without any hot selling cars to back stop you. In the motor trend the runner ups were either gm or chrysler (brand new car models, as ford didn't have any). And the line is the same, improved, now competent, at least as good as a 7 year old japanese car, but generally lacking in refinement. It seems the big three can only put refinements in trucks never cars. Most of the new cars the Japanese are fielding sell for under $30K many under 20K. And the new benchmark for small cars is close to 40mpg with four banger engines and all kinds of multi speed trannys. ex. toyotal five speed, VW six speed, nissan variable. These companies are ready for any fuel crisis. and If we get one, I promise you won't be able to get a hold of any of these latest fuel saver models. As for the big ones from gm, all of the testers are yet to see the 25% increase in fuel efficiency that is touted. The trucks neither lost weight, gained gears, or any other technology save cylinder deactivation. I have it on my chrysler 300C and I can tell you that on a trip in flat areas it works. In the city or mountainous terrain or suburban stop and go driving you will not see any difference. I suspect this latter driving is what most of the pickup trucks do. You can't stop and start 5-6000 pounds cheaply, nor can the engine do it on four cylinders. Bob said they need't new technologies to take 1000 pounds out of the truck, do something radical with powering, downsize the outside of the truck, give it less wind resistance. etc. Gm went for the upscale looking (read bigger) exterior and more german like interiors (read plusher). In a $2.00 gas world this would do it as ford and dodge are older models. In todays world of a five year payment and maybe $5.00 gas at the end of the payment, joe sixpack is thinking twice about ponying up for one of these improved models.
All these laid-off Big 3 workers no longer qualify for employee discounts, right? The downstream effects of losing these “selling to their own (and their families)” has yet to be felt.
When the GMT900’s debuted, GM Car Czar Bob Lutz confidently predicted that his employer’s new[ish] behemoths would do just fine; they’d capture an equally profitable slice of the diminishing pie. While the SUV market shrank but good– down by 24% in annual sales– GM’s surrendered SUV market share to Toyota.
Maximum Bob’s words about the GMT900’s not surrendering share were right on. Adding up all Escalades, Yukons, Avalanches, Tahoes and Suburbans comes out to a YTD 2.5% decline in a supposed 24% decline in the overall SUV market. Translation: this platform gained market share.
Toyota’s competing models (Sequoia down 24%, Land Cruiser down 31%, LX470 down 33%, GX470 down 25%) all lost more market share. We’re talking full-size platforms here.
References:
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=74&docid=30971
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/12-01-2006/0004483737&EDATE
Toyota gained share because of the RAV4 and FJ. So yes, they gained share. However, Bob’s words were correct. He wasn’t comparing apples to oranges, he was talking about the full-size SUV market.
The workers that retire early still have their discounts. I’m not sure if the ones that get paid 100K to walk away do or not. I don’t think so.
Regardless – many of the ones being forced out are pissed and feel betrayed, and no longer feel the need to support their former employer. This has got to add up to a significant number of lost sales.
As a matter of fact, over time, many might feel liberated – able to buy the best vehicle for their money regardless of the name on the back. Without guilt or peer pressure.
Scary times for d’etroit.
RF: I totally agree with you that GM’s timing couldn’t have been worse; that their R and D dollars would have been better spent designing competitive compact and even B cars. It positively astounds me that the the 2.5 just don’t seem capable of getting the message that the first time buyer of a Yaris or Fit, will probably stick with T and H for the rest of their life. These segments aren’t truly about profit at all (although T and H still manage to squeeze out one from these cars), but brand loyalty. Yes, GM sells a lot of Daewoo Aveo’s but these throwaways do nothing other than appeal to the lowest price point consumer; not the young person who will buy maybe 10 or more cars over their lifetime.
There is certainly a place for the GMT900s in the marketplace; and this go-round seems poised to do well; they are a definite quality improvement by iteration over the previous ones. But you are right on the money when you wonder where the game-changers are from the 2.5, whose only testament seems to be their capacity to fill the highways with leviathans (even though they do keep getting marginally better each iteration). The GMT900s in the context of some truly inspiring and revolutionary models would place them in a healthy context of a balanced and confidence-inspiring portfolio. As it is, they may be deemed rightly as more of a last hoorah; like the mediocre golfer who refuses to change his swing, but rather swings the same only faster.
What behooves me to no end is the utter incapacity of these companies to accurately read the market – consumers, trends, the economy, fuel efficiency demands, quality interiors, etc. How can T and H (and even increasingly Hyundai of all makers) manage to get so many things right when GM for instance, with all of its resources and reach just keeps flailing miserably at the bad pitches? Hmmm.
How forgiving can the marketplace continue to be when you are late to the game with almost every innovation, trend and fluctuation in consumer preferences? I can’t think of one (off the top of my head) recent trend where the 2.5 clearly foresaw it coming and responded first as true market leaders. Yet isn’t this the American way? Or it has been since WW2.
I know there are many factors – the UAW being a big one – but if product is the lifeline that these execs presume it to be – then where is the product? Where is the innovation? Where are the vehicles that catch T and H off guard and fill them with fear and dread? Where is that vital dynamic that fostered so many memorable vehicles of old? I fear that unless this can be recaptured, then the bloodletting will persist, and even more UAW families will be forced to turn another page into tomorrow.
Lutz is reading from the script because he gets in trouble when he doesn’t. What else would you expect GM to say?
Rethinking the big trucks was in order. However, I understand why GM thought it could save a few bucks by squeezing more years out of the existing platform . . . and wait to see where the market was going. This strategy was undoubtedly favored by the bean counters and the ever-cautious catsup oracles.
At any rate, I wonder whether GM would have been perceptive enough to “rightsize” the trucks so that a full redesign would have been worth the investment. The problem isn’t with the engineers, but with the “fatal conservatism” of top management.
Bill Wade,
It seems like you checked the fuel economy. Would you be so kind as to tell us which model and engine it had? What sort of mpg did you achieve and how would you describe the driving you did? Highway? Stop’n’Go? Did it have a cap? Cargo?
one thing that GM might do is resurrect the electric car they they killed and thereby really pissed off all sorts of people who would forgive them gently for all the fuss and bother over trucks that no one wants.
Re: Employee (GMS) Discount
The issue is that the employee’s ENTIRE family loses access, so you have a significant multiplier effect.
If you look at a town like Dayton, OH, for example (Delphi/GM town), you’ll see what the future holds for the Big 3 in their core Midwest markets: a surge in import sales, and a dealer body awash in red ink.
The buyers that remain domestic-loyal move down the price chain–many of them switch to used vehicles.
This market shift may be more pronounced with the white collar buyouts, as these employees tend to be more import-friendly from the onset. They drove domestics when they had to, many of them will shift to brands with greater status once they no longer have subsidized transportation.
As a full-time investor, I can tell you that seeing the future is nothing that any of us mortals can do. Rick and GM paid their money and took their chances on the GMT900s and the future turned out to be different than what they envisioned when they committed the capital. Three years ago, there was not one analyst on Wall Street calling for oil to see $80 and gas to top $3. That does not mean that GM should have continued to accept their pitiful status in the car market, but GM made the decision to build on its strength instead of shoring up its weaknesses. So they took their best shot and the future turned out to be different than what they expected. Stuff happens. And what if three years ago GM had committed the capital and organizational focus to its car line up instead of to the GMT900s? Is anybody here certain that GM would have some car product in the marketplace right now that would be slaying the established high mileage car leaders. I am not, although we probably can agree that GM would have been better off at least taking a shot in the car area instead of putting so many of its chips on trucks.
The real problem at GM remains the work rules and legacy costs. The UAW needs to lay down for GM in 07 to protect some portion of its existing wage/benefit package for active and retired workers with a minimal amount of disruption. If the UAW refuses major work rule changes and major benefit cuts, then I don’t see how GM can avoid filing if US vehicle sales next year total only the 16.4 million level predicted by non-biased industry pundits. And what if the economy goes really bad and the industry sees sub 16 million level sales levels? There is simply way too much production scheduled out there for sales at these levels and nobody will generate any cash flow on their sales as discounting will be required to stuff the excess production into the retail marketplace.
Some here have commented to previous DW articles that BK is not a good option for GM (sales will go down, etc.). Therefore, the logic goes, GM should not and will not file. If GM files it will not because filing is an option, it will because GM has to recast the business into something that can produce positive cash flow. GM can’t burn cash forever. Eventually, it will just run out of liquidity and that point is approaching faster than many realize, especially those who only read GM’s press releases instead of reading and understanding GM’s financial statements.
NN, Where did you get your figures? According to Automotive News, the change in comparing Jan – Nov 05 to Jan – Nov 06 for the GMT900 SUVs are: Change in 06 Escalade +25.5% Escalade ESV +13.7% Escalade EXT -17.8% Avalanche -13.7% Suburban -12.6% Tahoe +6.4% Yukon -3.1% Yukon XL -15.3% Net Change -16.9% That looks like a pretty serious decline in full size SUV sales to me, especially since this was what was supposed to save the company. Maybe that's why they now say the pickups — no wait — the new crossovers will pull them out of their tailspin? And Toyota's large SUVs are down, but as RF said, you only tell half of the story. Toyota has a very low sales volumein large SUVs. The difference between 05 and 06 Toyota's and Lexus' large SUVs is only 13.5K units total.
I don’t see why GM goes on like this, but it seems to me like the shareholders lost complete control of the company. They are supposed to have the power to fire management, and it’s in their best interest to invest heavily on new product.
If GM dies a slow death, most debtholders will be paid and shareholders bear the costs.
If GM goes all in, shareholders have at least a probability to gain and if things go wrong, the additional costs go to debtholders.
I agree that this is a quite simplistic view of the problem, but put it like this; if debtholders are in control of this situation, it’s not in their best interest to make bold moves, and there will not be a turnaround until bankruptcy is a fact…Then the assets will just be sold to the highest bidder.
There’s one thing that helps the fullsize truck market…tax breaks. You can buy a fullsize truck for your business and write it off anyway you like. That’s not an option for SUVs anymore. I think this alone will help keep the truck market afloat. I know it’s the major reason I plan on buying another truck soon.
And Toyota’s large SUVs are down, but as RF said, you only tell half of the story. Toyota has a very low sales volumein large SUVs. The difference between 05 and 06 Toyota’s and Lexus’ large SUVs is only 13.5K units total.
Translated: Toyota sells less Sequoia’s in a year than GM sells Tahoe’s in a month. Less than a couple thousand Land Cruisers + LX470’s get sold yearly in the US, basically a rounding error for GMT900 sales. If Toyota’s big SUV sales went to 0, would they even notice?
NN,
Thanks for providing the actual truth about cars. It’s a refreshing change from the uninformed gloom that has become commonplace.
RF,
Your point is that GM was foolish to put its resources behind the full size SUVs and pickups that make up 20% of the US market?
Your point is that GM should not have pulled hundreds of people who were engineering a RWD platform for Buick (when the company already had a Cadillac RWD platform and a Holden RWD platform that could easily be substituted) to ensure the quick and successful launch of their most profitable vehicles?
Your point is that GM is dying because it is gaining share with the GMT900 and has the lowest incentives amongst domestic producers?
Would you be happy if GM were getting killed in large SUVs and pickups because they decided to invest in a killer B instead? You’d gladly give up say 200K units at $40K appeace to get 60K units at $15K each?
SherbornSean: If you read the article, you'll see that I'm saying that GM did not put ENOUGH time, money and effort into their SUV's. Just like it doesn't put enough time, energy and money into just about everything it builds. Your point about pulling people off the Buick gig to buck-up the trucks reaffirms an over-riding theme in these parts: GM's bloated portfolio spreads its talent too thinly. GM's trucks are gaining share in a niche that's in terminal decline. Remind me again: how great is that? And please don''t trot out that old saw about "there's no real money is small cars." That argument is not only over thirty years old (and wrong), but it also avoids the central point of this article: GM can't build game changers in any genre save high-priced sports cars.
Sometimes I go to the GM website and ‘shop’ a truck just for fun. In fact, GM makes a short ext cab that I could consider buying. But even the ‘classic’ ’06 model prices out at $28G with not much more schwag than a radio and heater – we’re talking about the 4×2 with chrome steel wheels, not the loaded model.
When you start getting into the ’07 4×4 LT 4 doors, you ring up nearly $40G.
Think about the cars you could get for that kind of money. An STS? A loaded 3 series BMW?
A visionary GM would have shed weight off of these monsters. They’re not as heavy as Ford, but they’re still about 250lbs more than last year. What if GM commited to a 25mpg big pickup? Predicting the future is no easy task, but then again the 2003 Iraq war should’ve clued them in a little.
A major factor in this decision is the power the truck people have within GM due to their financing the vehicle production over the last 12 years.
GM is a series of fifedoms, and “by God, we truckers made this pile of GM cash and we will spend it on new trucks, not those puny little cars”.
The Proving Grounds had massive investment in truck development facilites during the past decade, truly impressive equipment and buildings.
For cars, not so much.
“Increasing share…” – SherbornSean, others
… of a declining market was the radical and successful strategy of America’s last buggy whip manufacturer. They achieved perfection at 100% of the market with zero units shipped.
Robert,
From what I understand, GM recently announced it would do exactly what you propose — reduce the number of platforms engineered. So DAT handles small car platform engineering, Opel engineers C and D class cars, the Aussies do RWD cars and GM US sticks to trucks and the largest cars. Sounds like plan.
I am definitely not a proponent of “microcars = microprofits”, but I’d rather see GM sell an extra Suburban than an extra Aveo, because Suburbans bring in 3x the cash.
On the other hand, while I appreciate your interest in inspiring the troops to do the impossible, the Audilike, highest torque, double today’s mileage truck is too much of a stretch.
A more practical objective would be a dual mode diesel hybrid that could double as an on-site construction generator — on today’s GMT900 platform for a $4K premium. That could be a game changer.
On topic:
“Artificial reefs” and Ron Jeremy reference – priceless.
The diehard Big 2.5 supporters (you know who you are) are clinging to the same logic management has. Focus on the here and now and not the future. Doesn’t work in the automotive industry with long product refresh rates. Could Apple stay on top with 4 year refresh rates on their iPods? Toyota is considered industry leading by hitting that mark and EVERYONE else lags behind. You really need to be forward focused if you want your 2007 designed product to compete in 2011 or beyond.
Lutz has failed history (2003 big SUV predictions did not work in 2006) and is doomed to repeat it.
“Think about the cars you could get for that kind of money. An STS? A loaded 3 series BMW?”
Brilliant point. I would consider the BMW with an 8 foot box, trailer package and diesel to haul the 12,000 lbs I need to.
I’d rather see GM sell an extra Suburban than an extra Aveo, because Suburbans bring in 3x the cash.
So would GM. Too bad they can’t control the market and make people buy their products.
Buy the bimmer AND a used GM truck for the same money. Use depreciation to your advantage.
There are still people making buggy whips in America. Very small numbers of really good buggy whips.
Roberto and TTAC,
Do you have any data on how GM dealer inventory now;compares with ’05,please?
Comps would be helpful.
Thanks!
Frank,
I got my numbers from GM’s report that I linked prior. I did the actual number based off of volume…i.e. a 6% raise in Tahoes more than offsets the near 18% drop in Escalade EXT’s. Therefore, they are a more accurate representation of the % difference of the actual # of models sold. 424,662 GMT900’s were sold in the first 11 months of 06, as opposed to 435,656 in 05. That amounts to a -2.5% difference.
That is a strong performance in this quickly declining, yet highly profitable, category. Good for GM; they need it.
RF,
There you go playing fast and loose with the facts to promote yet another DW diatribe.
NN already pointed up that, while the FS SUV segment is (naturally) down with rising gas prices, GMs sales fell much less than the market and they gained share. And 77 days supply is not ideal, but much less than most would consider a large problem.
And according to Automotive News, 11-month sales of GMs large SUVs (Tahoe/Subn/Esc/Esc ESV/Yukon/XL) are about even, so they did not contribute to GMs year to year sales loss.
Here are the actual sales numbers:
Nov YTD 2006 2005 % Change
Suburban 69087 79045 -12.6%
Tahoe 146230 137399 +6.4%
Avalanche 50300 58327 -13.8%
Escalade 34228 27281 +25.5%
ESV 14007 12323 +13.7%
EXT 5928 7209 -17.8%
Yukon 64401 66445 -3.1%
Yukon xl 40361 47627 -15.3%
Total 424542 435656 -2.6%
For what its worth GM (and some others) actually consider Avalanche and EscaladeEXT as pickups. Combined they contribute almost a 10,000 unit loss so without them GMs FS SUV sales are actually up in a shrinking segment.
And where did you find all these new 2006s? I recently watched my dealer search for ANY 2006 Tahoe 4X4, and just 21 showed up within 1,000 mile radius of Lexington, KY. Hardly the “many” you assert are still on the ground.
And Toyotas “truck” sales increase comes mostly from the small-ute segment Rav4.
There is much more at stake with the F/S pickup market and that will be an interesting fight. When Tundra hits the streets we’ll see how the trucks stack up. But I for one will not be getting those “facts” from TTAC since it’s obvious that in your hands they are merely tools to be twisted to fit your agenda.
Resharpened saw: There is no real money in small cars, for GM, yet.
I am not clear why so many posters think GM could just whip out a small car that could actually make profit. The real game that needs to be changed before any small car project can work is for the domestics to get their costs under control (yes, health care and UAW at the top o’ the list) Seems logical to me that GM is trying to hit a few singles and doubles before it aims for the fences. Remember the Metro?
Personally, I don’t see the pickup market in “terminal” decline. There will always be people like me who want them for work or hobbies. That should prevent the segment from going to 0.
What concerns me is this: I have a basic ’97 Chevy 4×4 that does everying I need it to. When I consider a replacement, I don’t want “bigger and better”, I’m looking for the same size and capability, but with more refinement for about the same price.
All the new trucks seem to be “bigger and better” to go after people who want the truck image and the comforts of a car. If you’re looking for a truck simply to do a given job, the new trucks are just more expensive.
NN: I got my numbers from GM’s report that I linked prior. And that explains it. GM only reports retail sales in these reports (and you wouldn't expect them to release a PR blurb that says they LOST sales, would you?). I also notice you overlooked the Avalanche and Escalade EXT, both of which are GMT900- based and both of which had sales declines. The numbers I listed were compiled by an impartial third party firm and includes employee and fleet sales. They reflect all GMT900 SUVs.
You want 25 mpg pickups? They’ve been making them for decades, in everyplace on the globe but here. The closest thing to it here is DCX’s Sprinter van, which is available in the rest of the world as a pickup in three wheelbase lengths, single and double cab, dump beds, single and dual rear wheels, etc.
DCX should dump their Ram PU line and tool up to build the full Sprinter line. That’s what they did with their ancient Ram van line, and the Sprinter van sells very well, no incentives there!
Check out MB’s UK or German web site to see the pickup, or use your imagination.
Face it, globalisation in vehicles is here (has been going on for decades); the American pickup and large SUV is really one of the last uniquely “American dinosaur” vehicle types left (ok: Town Cars). Just like European and Japanese car concepts have mostly taken over (we’re not driving ’73 Impalas anymore); it’s long overdue to happen with light trucks.
The question in my mind is how GM is going to come up with a 25mpg full size truck. A Dodge Sprinter will do approximately 25mpg, and you can get a chassis cab with a dropside box for around $35k that is actually a better work truck, as long as you don’t tow a big trailer. And if you are so inclined you can put a Mercedes grille and hub caps on it. Ford could do the same thing with the Transit if they got on the stick and Federalized it, and both companies make a crew cab. AFAIK GM doesn’t have a comparable Euro truck, relying on rebadged Isuzus.
Slow_Joe_Crow: Nothing about GM suggests to me that they’re willing to take that kind of sea-change risk. But the technology is out there.
Sprinters are a bit pricey, but that’s because they’re imported as a “knock-down assembly” and assembled in South Carolina on a fairly modest scale. If either DCX or Ford (Transit) produced these vehicles on a full scale, prices would be more in line.
The real issue is, would US pick-up buyers find them too effete, because they don’t have huge hoods and balls-out grilles?
It seems to me that the figures and stats are being twisted by both sides of this debate.
This it what I see from my position at the bottom of the employee food chain.
G.M. is not gonna build cars/trucks that nobody is gonna buy.
That explains Jan. shut downs[very common in the industry]
Right now, today we are running the truck plant flat out 24hrs a day 6 days a week.While maintaining this pace quality is at an all time high.Equal or better than the tranplants
Are we stocking dealers? or are we selling trucks?
I don’t know I do know the overtime comes in pretty handy this time of the year.
Is GM going B.K.?If they are they certainly don’t tell us,or the salary people.
Management tells us the turn around is right on track.
I have read every DW posted and I still don’t know who is right and who is wrong.
Keep the DWs coming its allways entertainig.
“You want 25 mpg pickups? They’ve been making them for decades, in everyplace on the globe but here. The closest thing to it here is DCX’s Sprinter van, which is available in the rest of the world as a pickup in three wheelbase lengths, single and double cab, dump beds, single and dual rear wheels, etc. ”
Yeah. A uni body 5 cyl diesel that can’t tow, can’t get out of it’s own way, no 4 wheel drive option, 15 inch wheels and parts availability issues. Just what the pick up market is demanding…
Hmm…I actually think the new GM trucks are decently different (to discerning truck buyers, at least).
I wish GM would simply tell the story about the improvements in the mechanics of the trucks (mileage, powertrains, etc.) and stop marketing trucks using John Mellencamp. I have heard the sales pitch for the 900s on the basis of features/performance and I think GM makes a darn good argument for them.
You want the best mileage possible on your full-size truck or full-size SUV? You won’t end up buying a Toyota!
The most efficient non-hybrid 2007 Silverado is 16/23 (18/21 for the Silverado hybrid).
The most efficient Tundra is 17/20.
How about the most-comparable SUVs (most efficient configurations #s are listed):
Tahoe 16/22
Sequoia 15/18
Let’s not forget, a heck of a lot of people NEED those full-size trucks (needing a FS SUV is a harder argument to make). These buyers are stuck within a segment that has practical limits on efficiency (and even within this segment it is a tradeoff with other features). The more players in the segment, the better–and GM is definitely a competitive player!
Finger has it right.Truck buyers have all kinds of small trucks to choose from.The full size still rules.I think its called market demand
Finger: The pickup versions are not unibody, they have a full frame. Payload: up to 6,000lbs. Towing: can’t get that info off website, but anything that has a 6000lb payload should be able to tow at least that much or more. 4×4 available. The new CDI V6 (over 200hp) available. When I say available, I mean everywhere else, except US. You think contractors in the rest of the world don’t need to haul the same stuff as we do here?
You just confirmed what I said earlier: it probably wouldn’t sell here because it doesnt have a 10 foot long hood and a balls-out grille.
Robert,
The shut down of “truck” production is to switch the plants over to GMT 900 production (like they do all the time during this time of year on multiple “change over’s”). I suspect that part of the excess inventory is there to make up for the 2 weeks of change over down time. You do understand that GM still makes the GMT 800 for 2007 and overlaps the 900’s? I think some of your statistics are lumping in the 800 with the 900 so you can’t call out just the GMT 900.
Towing on the Sprinter is rated at 5,000# from my prior research, and that’s with the current 5-cyl cdi. The newer 3.2 bluetec should make it’s way into that chassis very soon, improving towing, performance, and hopefully economy, too.
From what I’ve seen, Sprinters have gained a LOT of ground with UPS, ambulance services, and local service providers (plumbers, etc). I’ve still yet to see one in the US with a pickup bed, though.
While we’re on the subject of “outside the box” pickups, how about the landscapers’ favorite, the Isuzu NPR. That’s a really cool, purpose-built truck. But Sprinters and NPRs require owners who don’t stick their unmentionables up the tailpipe every weekend, thus eliminating more than half the US truck market of garage queens and showboaters.
ash78: I’m talking about the Sprinter pickup as currently sold in UK, Germany etc. Net Payload: 2,770 kg (x2.2) = 6,094 lbs. Do any of those butch US pickups carry 6,094 lbs?
But Sprinters and NPRs require owners who don’t stick their unmentionables up the tailpipe every weekend, thus eliminating more than half the US truck market.
What the F are you talking about?
If they can build a Sprinter pickup that gets 25 mpg, they should also be able to put a 10 foot hood and a macho grille on it and everybody (every American) would be happy.
Yes, it is TRUE that GM’s share of the pickup and SUV market overall in slowly increasing. But this is in a declining market. To make a somewhat extreme analogy to prove this point, it’s akin to winning the lottery, while being on-board the sinking Titanic. Doesn’t do you much good in the long run.
Now yes, the full size truck/SUV segment *will* stabilize, but it will be a few years before that happens. And at that point, the market will only be a fraction of what it is today. The difference will be that most buyers will be those who need these vehicles for work or for daily use, instead of mom or pop driving that big ol F250 to pick up the kids or get some groceries.
And RF’s point is that GM didn’t spend *enough* on it’s new trucks/SUVs. I guess the other main complaint is that exterior-wise, they look too similar to the GMT-800s, and the new interior while being an improvement, is still quite plain. Understandably, GM was stuck between a rock and a hard place. Their trucks and SUVs were aging, and they had to redesign them. But if GM had the hutzpah to make radical changes, like get rid of the Yukon, and only make a Tahoe and Escalade, and make the Suburban merely an “extended Tahoe*, then it would have had more R & D money to make the Tahoe and Escalade both more competitive overall.
Also, I have heard from various industry insiders that GM spent an additional 1 Billion *more* than originally planned on the GMT-900s, when they heard whispers in the air about the new Tundra’s rumoured capabilities. And yet, even with additional R & D spent on the GMT-900s, the money was spread too thinly because of the myriad of GMT-900 variations. The payload and towing capacities of the GMT-900s have changed very little compared with the GMT-800s.
For instance, GM releasing their new pickups a few months early certainly required an increase in spending to pull it off. Toyota releasing it’s Camry this year 6 months early required a substantial amount of resources to pull off.
Meanwhile, Toyota is in no rush with it’s new Tundra. It went overbudget at it’s Texas plant after a last-minute decision to instal state-of-the-art technology at the plant.
GM seems to be pulling the same mistake with it’s full size crossovers, releasing too many variations of the same vehicle. This results in it’s R & D being spread too thinly across too many models.
And yes, Lutz *did* say the new SUVs would spark a turnaround for GM, which has not materialized, and now they are banking on the new pickups to turn them around, not to mention gloating that they will sell over a million pickups in 2007. What Lutz does not mention (and a small correction to the article) is that this total includes the mediocre Colorado and Canyon pickups.
Ford gloated that this year they would sell 900,000 F Series pickups. That’s become simply a dream, as Ford right now won’t be able to even sell 800,00 units this year.
Year-to-date so far, GM has sold about 885,000 pickups. Mind you, this total includes both the Colorado, Canyon, *and* the Silverado and Sierra. Now If one is to make a rough estimate, and say GM in December will sell about 70,000 trucks, including the Sierra, Silverado, Canyon, and Colorado then it would put the grand total at 955,000 for 2006.
The Colorado and Canyon are on a sales decline, so I don’t see their sales increasing, or even remaining stable. They will likely further drop in sales.
Now GM would need an overall annual increase of about 5% to sell over 1 million full size and mid size trucks in 2007. Will GM actually achieve this? Remains to be seen. Some analysts say the market will further shrink in 2007, while others say it will remain stable due to the new GM and Toyota trucks.
But Lutz is still misleading people by speaking of pickups in general, and including the Colorado and Canyon. One thing I can say with certainty is that GM WILL NOT sell 1 Million Silverados and Sierras next year … not even close.
Lutz is past his prime. He’s 74 years old, and head of global development at GM. He’s totally disillusioned with reality.
Some of you claim GM did the right thing and had reasonable vision when 3 years ago they decided to update their GMT-800s. Now let’s compare. Toyota in the early 90s had the long term vision that environmentally friendly cars would become important, and fuel mileage would also become more important. All you need is common sense to realize that fuel costs will only continue to rise, not drop. Toyota had the vision to realize the inevitability of rising fuel costs and more concern over the environment. This is why they poured billions from the early 90s into the Prius project, and it has led them to where they are today: market leader in hybrids. So much so, that DCX, BMW, *and* GM had to all partner together and develop a two-mode hybrid system, just so they could catch up and compete with Toyota.
Lutz and Wagoner have got to go. Wagoner is not the man for radical change at GM, and Lutz is not the man for long term vision in vehicle development.
finger
It’s a reference (not my invention) to obsessive ownership and flashiness above all else.
“how about the landscapers’ favorite, the Isuzu NPR. That’s a really cool, purpose-built truck”
You are absolutely right. The NPR is an excellent product that is used as a dump, landscape dump and primarily as a box truck. It is powered by either a 4 cyl 5.2 L isuzu diesel or a 6.0 L GM V8!
1984: The shut down of “truck” production is to switch the plants over to GMT 900 production (like they do all the time during this time of year on multiple “change over’s”).
————
From Automotive News:
[GM] announced today that it will be reducing production in three plants that produce the GMC Yukon, Cadillac Escalade, and Chevrolet Tahoe from 56.5 vehicles per hour to a nice even 50. The plants will remain closed for the first half of January, extending the normal 1-week holiday shutdown to three, and then resume production at the reduced rate.
————–
The referenced shutdown is not for a changeover to anything. These production lines already build GMT900s. So the question that bears asking is: If they’re selling so well, why are they shutting down production for 2 additional weeks, then restarting at a lower rate than previously?
The real threat to the new retail pickup market is used pickups. If the steady rise in gas prices forces out the casual buyer (i.e. person who uses his PU mainly to commute), then the worker bees are going to buy used or new only if it is very heavily discounted. You want to bet your firm on $35,000 new full size pickups? GM just did. If the Tundra doesn’t quite work out for Toyota, oh well, but GM didn’t put out the GMT900 to see declines in absolute sales. And when (and it is not if) dealers start putting $8k on the hood to move the merchandise, it doesn’t really matter if you got 40% of (a declining) market or not.
Isuzu added the GM V8 version some years ago because gas was cheap, and some buyers wanted to save a few bucks and have a cheaper engine. I bet most of them regret it everytime gas prices are up.
And when (and it is not if) dealers start putting $8k on the hood to move the merchandise, it doesn’t really matter if you got 40% of (a declining) market or not.
Dealers don’t put any $$ on the hood. Manufacturers do.
The V8 gas engine truck is produced here in the US and is actually an appropriate alternative for many customers. The engine carries a B10 rating of 210,000 (a B10 rating is a statistical measure that basically translates that 1 in 10 engines tested fails at 210,000 miles) compared to the diesels B10 of 310,000. Also, the gas engine is nearly $7,000 less than the diesel. Combine that with diesel fuel costs higher per galon than gas and the 6.0 L makes a lot of sense for anyone driving less than 25,000 miles per year.
You want the best mileage possible on your full-size truck or full-size SUV? You won’t end up buying a Toyota!
The most efficient non-hybrid 2007 Silverado is 16/23 (18/21 for the Silverado hybrid).
The most efficient Tundra is 17/20.
How about the most-comparable SUVs (most efficient configurations #s are listed):
Tahoe 16/22
Sequoia 15/18
Wrong. The most efficient Silverado, according to EPA ratings, and taken straight from Chevrolet.com is the 5.3L V8 2WD model that gets 16/22 mpg. The most efficient Tundra, the 4.0L V6 2WD model (taken from Toyota.com) gets 18/22. So if you’re looking for the overall most efficient full size *at the moment*, it’s the Tundra.
Besides, why compare old dated models to new redesigned models? The new Tundra comes out in 2 months, and the new Sequoia a few months later, so why not make comparisons then?
finger: as long as gas is cheap, the old paradigm works. Think I could convince DCX to put the hemi in a Sprinter for me?
As owner of twenty-three gas station, I no like you article. Big SUV, big truck all very nice. Evriboby need one, maybe 2. GM do not need to make 25mpg truck. That crazy talk. Gas mileage right now, just fine.
Paul,
I am obviously ill equipped to challenge you mentally. I will retreat to the background and read you with a tinge of jealousy.
finger: thanks, I really need to get to work anyway.
Frank,
For the record, I did include Avalanche and Escalade EXT sales. Feel free to check my numbers again. You are correct that GM only reports retail sales…but…aren’t those the important ones? I assumed that was what we were talking about.
Production may be slowing, as well as sales. Still; GM is going to sell 1/2 a million SUV’s/Avalanches/EXT’s (read: high margins) this year off of this platform. So why is this a failure?
424,662 GMT900’s were sold in the first 11 months of 06, as opposed to 435,656 in 05. That amounts to a -2.5% difference.
What is the profit per vehicle sold ratio of 06 compared to 05 ?
The GM Guaranteed Pension Corporation will need to find a more profitable business. Automobile manufacturing, with ever decreasing margins, will not keep them solvent.
Need to look at profit per unit sold……
Rabid Rick had no other choice than to pure resources into GMT900.
whats the point of having 40% of the market when your selling the trucks at (or below) invoice and not making money? they might save money by NOT selling vehicles…
i have said it multiple times…the next gen of trucks are going to be smaller. alot smaller. with diesel engines. I forsee the return of a VW Caddy/Old S10 sized pickup. only the people that NEED a truck will get a fullsize one.
My only comment to GM and all the people that say that future cannot be predicted… Welcome back to 1973!!!
The parallells between 1999-2006 and the 1968-1972 period are just gruesome. Dark years ahead for the auto industry!!!
NN and Frank Williams:
While the body of the press release repeatedly refers to “retail” sales, it is my understanding that the numbers contained in the charts cover both retail and fleet sales.
Lazy engineering.
Lazy marketing.
Lazy planning.
Just plain lazy. That sums up GM.
They thought they could outsmart consumers — stupid way of running a palette of brands, as it turns out consumers are pretty smart.
Bob Lutz should’a, could’a made an effort. Didn’t.
A litlle bit like arguing whether the Titanic’s top speed was 23 knots or 24 knots.
—————————————————————————
# dhathewa:
December 14th, 2006 at 11:47 am
Bill Wade,
It seems like you checked the fuel economy. Would you be so kind as to tell us which model and engine it had? What sort of mpg did you achieve and how would you describe the driving you did? Highway? Stop’n’Go? Did it have a cap? Cargo?
—————————————————————————
5.3l, 4wd, extended cab, mostly highway, 2 dirt bikes in the back, 16.2 mpg. I attribute the poor mileage to the truck being new. This truck is only marginally different from the truck it replaces.
I agree, Stein. My comment was about the “fleet vs retail” sales disagreement.
“whats the point of having 40% of the market when your selling the trucks at (or below) invoice and not making money? they might save money by NOT selling vehicles…”
Dealers sell trucks for whatever amount they desire. Every unit delivered to the dealer is a “sale” for the manufacturer and their profit is not affected by the eventual sale price.
Finger,
You are correct, but only up to a point. If dealers can’t move product for more than they pay for it, then eventually they stop taking product from the automaker.
dealers can’t move product for more than they pay for it, then eventually they stop taking product from the automaker.
True that Sean
Sure, things look bad for GM now. But that’s because you’ve all forgotten one thing.
From the East Coast… to the West Coast…
Down the Dixie Highway… back hooommeee…
Thiiissss iiiiisss ouurrrr counttttrrryyy!
and then you have the BS that is going on at chrysler. sales banks. dealer bribes. not good stuff.
i want to ask a question to you all. Which of the 2.5 is the closest to hanging up the “sorry, we’re closed” sign. and which of them do you think has the best chance of pulling out of the skid.
Yournamehere-
Closest to a turnaround: Ford – mysterious new products, two reliable overseas brands (Volvo and Mazda) for cars and platforms. New CEO.
We’re Closed: Chrysler, supply issues, outdated SUVs and trucks, and undesirable cars (see Sebring).
GM- Who knows?
K.
# finger:
December 14th, 2006 at 3:05 pm
And when (and it is not if) dealers start putting $8k on the hood to move the merchandise, it doesn’t really matter if you got 40% of (a declining) market or not.
Dealers don’t put any $$ on the hood. Manufacturers do.
# finger:
December 14th, 2006 at 4:44 pm
Dealers sell trucks for whatever amount they desire. Every unit delivered to the dealer is a “sale” for the manufacturer and their profit is not affected by the eventual sale price.
Well that doesn’t seem fair.
To truly appreciate GM’s performance, let’s go back 3 years to when they decided to refresh their big SUVs. Wouldn’t an investment in better diesel technology have made sense, even if you did little else??? Even then, GM knew that the abysmal gas mileage of the big SUVs was probably costing them sales AND GM knew (or should have known) that gas prices would eventually rise, even though the timing of that rise could not have been known.
A big push into diesels for big SUVs would/will not ultimately save GM, but it could have bought GM precious time to develop new products. Instead, GM did nothing in this regard and the diesel charge is being led by the BlueTec coalition of Audi/VW and MB. It’s moves like this which doom GM to eventual bankruptcy. And missed opportunities like this demonstrate why shedding union contracts and reducing legacy costs will not change GM’s fortunes.
Claude Dickson:
Not only did GM NOT invest in diesels, they sold off their stake in Isuzu, which Toyota has now picked-up and tapped for their new diesel engines.
I reckon your average Fortune 500 CEO makes four important decisions a year. Rabid Rick Wagoner has consistently bet on the wrong horses.
Mr. Farago: I thought that when GM sold off its stake in Isuzu, it kept the diesel technology – or at least took away as much as it could before the sale was completed.
Geeber: GM kept the excellent Duramax truck engine, but that’s it. Isuzu will be like a supplier to them for that engine.
That said, GM has developed its own line of up-to-date 4 cylinder diesels for the European market. And they could “clean” them for US consumption. I wouldn’t be surprised to see them in the “new” Saturn (nee Opel) Astra, etc.
Mr. Farago: I thought that when GM sold off its stake in Isuzu, it kept the diesel technology – or at least took away as much as it could before the sale was completed.
What did it take away? It’s true that Isuzu is still partnered with GM on the Duramax, but Isuzu did the majority of the development work there, so I’m not sure exactly how much GM learned. Toyota already has competitive small diesels in Europe, and their Hino division has a wealth of experience making large, heavu duty diesels. In fact, Hino and Isuzu are Japan’s top two diesel makers, not just in volume, but in terms of actual technical expertise.
Toyota partnered with Isuzu to further bolster it’s small diesel technology. Independently, Toyota also has their next-gen ultra clean diesels coming out in 2008 for Europe, and possibly North America. And by 2010, Toyota has said it will come out with a diesel hybrid.
Rumours are also rampant the new Tundra will be getting a diesel in the next year or two.
Let’s hope GM is prepared for all of this, or even part of it.
I’ll add one more thing to the Toyota/Isuzu hook-up. Toyota already has top-drawer passenger car diesels, in fact their D-NOX cat diesel came out two years ago, beating MB and Blue-tec to the table. That’s not something you hear much about here (US).
Toyota doesn’t need Isuzu for car diesels, but guess where the Tundra’s diesel will come from (and maybe Tacoma)?
Toyota has the leading edge of both gas-hybrid and diesel technology well in hand.
Isuzu diesels can be found in not only the Isuzu cab forward series, but also the Chevy Kodiak and GMC TopKick conventional cab trucks. The smaller “W” series Isuzu utilizes a 5.2 L turbo 4cyl diesel while the “C” series conventionals and “T” series larger cab forwards use a 7.8 L Duramax diesel that is available in horsepower ranges from 200 to 300.
And Hino sales are dwarfed in the US by the Isuzu trucks.
The metric that matters most for GM right now is cash contribution margin per vehicle. Cash contribution margin = net cash from vehicle sale – cash variable cost to produce vehicle. Whatever cash contribution margin GM is able to generate from its vehicle line-up must cover its massive cash fixed cost nut. GM has been failing miserably in generating adequate cash contribution margins from vehicle sales, which is why GM has been burning through liquidity like a straw house on fire. GM's real cash contribution margin workhorses (pickups and SUVs) have deteriorated in both volume levels and contribution margins achieved. The numbers simply don't allow the company to cash flow itself. GM has little left to sell or offer as collateral to secure additional financing. GM did in nibbles over the past few years what Ford just did in one fell swoop. The problem for GM is that it has already nibbled (I should say chomped) through a good portion of the funds it has been able to source from its asset base. GM needs higher sales volumes and higher sales prices from major segements of its vehicle line-up, but industry and the economy appear to be in no shape to offer much encouragement that either will happen in 07. GM may not make it out of 07 without a filing. The only remaining significant source of liquidity that I see left for GM is the sale of the retained portion of GMAC. I am not sure that GM will go there vs. filing.
Jolo: Welcome aboard. my12by60: I agree. This is last orders for GM. Unless they pull a rabbit (diesel) out of their hat, this will be their last year before Chapter 11.
Frank Williams reported:
Change in ’06
Escalade +25.5%
Escalade ESV +13.7%
Escalade EXT -17.8%
Avalanche -13.7%
Suburban -12.6%
Tahoe +6.4%
Yukon -3.1%
Yukon XL -15.3%
Net Change -16.9%
I believe that considering the Escalade EXT and Yukon XL’s relatively low sales volumes, your reported Net Change figure is mathematically impossible and is therefore inaccurate.
If fleet sales are down more than retail sales, I think we can all agree that this is a good thing for GM.
So far I think the data suggests that GM has gained market share in the large SUV segment, which is a bit surprising to me. Does anyone have figures to refute this?
Here are the real numbers from the Dec 4 edition of Automotive News:
Nov. YTD 2006 2005 % Change
Suburban 69087 79045 -12.6%
Tahoe 146230 137399 +6.4%
Avalanche 50300 58327 -13.8%
Escalade 34228 27281 +25.5%
ESV 14007 12323 +13.7%
EXT 5928 7209 -17.8%
Yukon 64401 66445 -3.1%
Yukon xl 40361 47627 -15.3%
Total 424542 435656 -2.6%
For what its worth GM (and some others) actually consider Avalanche and EscaladeEXT as pickups. Combined they contribute almost a 10,000 unit loss so without them GMs FS SUV sales are actually up in a shrinking segment.
I’m pretty sure the AN numbers include fleet, but fleet sales of f/s SUVs are very low anyhow so they would not have much impact.
Overall GMs fleet/daily rental sales are dropping as a percentage of overall sales, and that is a good thing for GM and buyers of its products. Impala and Cobalt residuals are now the same or within a point or two of Camry and Corolla, due in part to right-pricing and lower daily rental sales.
Mr. Farago
You say
“Unless they pull a rabbit (diesel) out of their hat, this will be their last year before Chapter 11.”
O.K. so you are not only predicting GM’s Chap-11, but a deadline – Dec 31 2007.
We’ll see.
Toyota doesn’t need Isuzu for car diesels, but guess where the Tundra’s diesel will come from (and maybe Tacoma)?
As far as I know, the Tundra’s diesel is already finished, and Isuzu didn’t have a part in it. Toyota (from insider sources) developed this diesel independently.
And Hino sales are dwarfed in the US by the Isuzu trucks.
And? Hino hasn’t bothered to establish a real market presence in the States, and they’ve only been in the US market for a few years. In Canada though, it’s a different story, where Hino maintains a pretty strong marketshare here for medium duty trucks.
That detracts nothing from the point that Hino and Isuzu are Japan’s two best diesel makers, one of which is a division of Toyota, and another of which recently partnered with Toyota. You don’t need be a rocket scientist or an analyst to figure out what this will do for Toyota’s diesels, competitively speaking.
And FYI, Hino is one of the largest truck makers in all of Asia.
Closest to a turnaround: Ford – mysterious new products, two reliable overseas brands (Volvo and Mazda) for cars and platforms. New CEO.
We’re Closed: Chrysler, supply issues, outdated SUVs and trucks, and undesirable cars (see Sebring).
GM- Who knows?
K.
++++++++++
Hve to disagree with you K.
Closest to a turnaround: GM – lot of new stuff in the pipeline. Started restructuring earlier than Ford (hell, realized they were in trouble before Ford).
We’re Closed: Ford. Very few products in the pipeline – 3 unreliable overseas brands (Jaguar, Land Rover, Aston Martin (either lose money or have such small sales that do not justify the resources spent on them)). New CEO still a question mark.
Chrysler: Not going anywhere. Trust me on this. Daimler wants to get into the mass market in Europe and they are not going to do that with Mercedes. That’s why Chysler, and more especially Jeep and Dodge are being promoted in Europe. By the way the one millionth vehicle was recently produced at the Chysler plant in Graz, Austria. Someone else owns it now but it still makes Chrysler products.
Now any of the above could change if the economy significantly changes for the worse. No one can predict the future. Chrysler was on it’s way to solvency in 1979-80 until the Iranian revolution and subsequent oil spike. I may have the exact years wrong. Now I didn’t say great profits. I said solvency. As in not going under. As in not needing loan guarantees. Lee thought they were righting the ship and then events beyond thier control took over. This could happen next year to the domestics too (and everyone else) in which case my predictions – and everyone elses – go out the window.
It seems to me that GMT900 achieves more of a stinging blow to Ford and Dodge than it does anything else. If a few years from now Dodge is out of the full size truck business all together and Ford remains on the ropes then we might look back on the GMT900 as a brilliant chess move.
GM right now is in the position of gathering up a larger share of a decreasing market. Long term that is bad, but short and medium term it can work out well.
A case could be made that compared to ford's juke box expedition and chrysler's bland aspen, the gm large suv's are handsome and sell well. However, to have to reduce production one year after launch is not an inspiring sign. Also to have the niche evaporate out from under you is not what Lutz and company gambled on three years ago. They won't loose money on these suv's if they have to give $5-7K incentives back on each one, however, they won't have the original 10K that they could earn to put against the other loss leaders of GM. The last two winners of the american car companies got more time than this. Ford's mustang still is holding strong after four years, and chrysler's 300 went for three before softening. One year of banner sales was good enough40 years ago when you changed models every September (this will tell you how old you are if you remember). But if the suburbans etc have to go say 7 years on that platform; to not get three years with top sales is not a success. Now comes the pickups, if they go one year on a seven year platform there goes the ranch.
Based on a hunch and not much else, I’d give Ford the best odds for future success. Probably this view reflects a combination of nostalgic wishful thinking (my parents’ first two new cars were Fords), some good reviews of the Fusion and the first Focus, and a feeling that if somebody told me I must make my next car a Detroiter, I’d head for FoMoCo, not having seen much that interests me from the other two. I’d be hoping a new and improved Focus wagon would be waiting for me.
“Sure, things look bad for GM now. But that’s because you’ve all forgotten one thing.
From the East Coast… to the West Coast…
Down the Dixie Highway… back hooommeee…
Thiiissss iiiiisss ouurrrr counttttrrryyy!”
And isn’t that post so typical of what I consider a very sorry time we are in right now.
Finger, would you care to elaborate on that?
Are you saying that we are in a sorry state if we buy things because they come wrapped in the flag? Whether it be cars or foreign policy?
Or are you saying we’re in a sorry state if our once world-leading manufacturer is wrapping its products in the flag in order to prevent further market share erosion and they’re doing this because otherwise the product wouldn’t compete?
Or are you saying I should buy a vehicle that doesn’t meet my needs because it’s wrapped in the flag? Even if it’s built in Mexico?
No, I don’t think there is a need to elaborate, Kix.
Windswords says: > I have to disagree with this handicapping. What your logic does not seem to account for is the amount of liquidity that each of GM and F have to work with before the ship must be righted. F just raised a fresh and available $20 billion to add to an existing $20 billion. So F can fumble around for probably three or four years of large annual negative cash flow. GM is sitting on cash of $23 billion and this is after shooting what looks like its best and last bullet – selling half of GMAC. F is conceding that it will burn plenty of cash in the next few years and has put expected annual cash burn amounts out in the media along with a target year for the cash burn to be ceased. GM is being a lot less upfront about its situation in the media. All GM execs will do is concede, and usually only under questioning, is that negative cash flow remains a large problem. GM execs are a long way from stating a target to anyone of when GM will turn cash flow positive and refuse to disclose or estimate the extent of negative cash flow expected over the next few years. I think GM is much closer to the edge with its liquidity, knows this, and does not want the world to know how dire the situation is (nothing to be gained at this point by GM in highlighting the problem). GM needs something to start working and needs it to start working now. I am not sure that 2007 is going to be the right year for something to start working. The economy and auto market look way too soft. If GM has a bad cash burn year (say $7 or $8 billion) in 2007 it could be all over for GM in late 2007 or during 2008. If GM can limit cash burn to $2 or $3 billion per year, then it should be able to hang on longer. Under the high cash burn scenario, when a filing might occur is really just dependent on strategy as planned at the board level of GM. Burn the last drop of cash in hopes of a turnaround in 08? or take the company into BK with some liquidity left and more flexibility for restructuring? The best case scenario for GM is to burn say $3 billion in 07, $1 billion in 08, then somehow return to positive cash flow from operations thereafter. This is the avoid BK scenario. This scenario is not zero probability, but it is lower probability IMO than the uglier scenarios given the condition of the auto industry and economy. GM needs some help from circumstances outside of its control.
In fact, Kix, you sound a little defensive. Let your conscience be your guide…
“Hino hasn’t bothered to establish a real market presence in the States, and they’ve only been in the US market for a few years. In Canada though, it’s a different story, where Hino maintains a pretty strong marketshare here for medium duty trucks.”
Hino markets a conventional cab in the US and Canada that mainly competes with Chevy/GMC Kodiak/TopKick models. The GM products enjoy many advantages over the Hino.
Finger, if GM execs let their conscience be their guide, would GM build the wretched excess that is the Hummer? Would they be marketing gas hogs to the masses to pull the 36' speedboats that they don't own, anyway? Would they do this knowing full well that a gas price spike is going to really put the hurt on people with mega credit card debt? Yeah, maybe there's some mechanism in the atmosphere that will keep rising CO2 levels from becoming a global warming disaster – but maybe there isn't a compensating mechanism and it's an unarguable fact that atmospheric CO2 levels have increased by 50% in the last hundred years and the physics of infra-red energy entrapment is a fact, too, as is the fact that the world's oceans have actually risen measurably in the few years. Does GM's conscience prick GM a bit to say, "should we worry about the consequences of building ever-bigger gas-hogs or should we just continue to give people 'what they want,' particularly when 'what they want' is carefully groomed by our incessant advertising campaign?" Does GM's conscience prick GM a bit to say, "those V6 engine gaskets were crap and we knew it and we left them in production for 10 years, should we make sure that we do right by our customers?" Does GMs conscience prick it just a bit to tell it that many of those soccer moms are going to be blowing through stop signs in their Yukoburbahoes while babbling on the cell phone and that's a death sentence for the Aspire driver they T-bone? If GM had a conscience, would GM just build the good, reliable, inexpensive cars that people really need for transportation and orient their advertising that way? Yeah, I can let my conscience be MY guide. And, anyway, your post of 10:03 am IS ambiguous. Clue us in a bit better on your thinking.
my12by60
You state that the best case scenario for GM to survive is to lose $3B in 07 and $1B in 08, and then start generating cash. This is the only way to avoid bancrupcy.
You also state that GM has $23B in the bank. I would add that they have additional saleable assets, including the strongest presence in China, the other half of GMAC (worth $13B), OnStar, a piece of XM,…
Am I missing something?
Kix,
I am glad that my post got you thinking. Sounds like you have a boatload of issues regarding Hummer, environment, class envy etc., Way too much to handle here.
Finger, you got me to thinking? It is to laugh.
==========================================
# SherbornSean:
December 15th, 2006 at 11:54 am
my12by60
You state that the best case scenario for GM to survive is to lose $3B in 07 and $1B in 08, and then start generating cash. This is the only way to avoid bancrupcy.
You also state that GM has $23B in the bank. I would add that they have additional saleable assets, including the strongest presence in China, the other half of GMAC (worth $13B), OnStar, a piece of XM,…
Am I missing something?
=========================================
Your post has me wondering. Would GM and it’s shareholders be better off if GM ceased auto production, sold their automotive assets and invested in the market, GMAC and their XM holdings? Wouldn’t the return on investment exceed what their return is now?
I really don’t see a strong future for GM in the automotive business. How can they support cutting edge research and development to compete against the highly profitable and cash rich Japanese manufacturers like Toyota?
The loss in GM value the last few years is staggering. It certainly seems like they have closed the barn door after the horse has left concerning financial management.
Oh well, smarter (supposedly) people than I are running GM.
KixStart: Finger, if GM execs let their conscience be their guide, would GM build the wretched excess that is the Hummer?
GM is a for-profit business, not everyone’s nanny. If there is a demand for a product, the company will build it.
For several years, there was a demand for huge SUVs, so GM built them, and used the money gained from those transactions to pay workers’ salaries and dividends for stockholders. (And there was also a demand for Mercedes G-wagens and Toyota Land Cruisers and Land Rovers, which aren’t exactly gas sippers. So GM is hardly alone here in meeting this demand.)
This is the way business works.
KixStart: Would they be marketing gas hogs to the masses to pull the 36′ speedboats that they don’t own, anyway?
So GM is to make sure that when people buy one of its vehicles, the people actually use all of said vehicles’s capabilities?
As I said, GM is a for-profit business, not everyone’s nanny.
That job has been filled by the British lady on ABC who visits one family’s house every week and straightens out the kids.
Perhaps she needs to go car shopping with all of us, too?
Or is GM supposed to give her a job monitoring how customers use its vehicles, and sit them in the naughty seat if they don’t use that Tahoe to tow a boat?
KixStart: Would they do this knowing full well that a gas price spike is going to really put the hurt on people with mega credit card debt?
If people who are buying new vehicles haven’t accounted for possible increases in gasoline prices in their monthly budget, it is not GM’s problem.
People who lack skills in budgeting or basic math did not spring forth because of anything GM did.
KixStart: Yeah, maybe there’s some mechanism in the atmosphere that will keep rising CO2 levels from becoming a global warming disaster – but maybe there isn’t a compensating mechanism and it’s an unarguable fact that atmospheric CO2 levels have increased by 50% in the last hundred years and the physics of infra-red energy entrapment is a fact, too, as is the fact that the world’s oceans have actually risen measurably in the few years.
Global temperatures and ocean temperatures have fluctuated throughout the centuries, long before GM was on the scene. Even among those who agree that global warming is being worsened by carbon dioxide emissions, there is still disagreement on how drastic the effect will be.
KixStart: Does GM’s conscience prick GM a bit to say, “should we worry about the consequences of building ever-bigger gas-hogs or should we just continue to give people ‘what they want,’ particularly when ‘what they want’ is carefully groomed by our incessant advertising campaign?”
If I were a shareholder or an employer of GM, I would certainly want GM management to be giving customers what they want, as opposed to what you think they should want.
You do know, incidentally, that virtually all of Toyota’s sales growth over the past decade has come from additional truck and SUV sales, NOT sales of hybrids, right? And that Toyota is busily readying a factory in San Antonio, Texas, to build a full-size pickup to compete with…GM’s full-size pickups?
KixStart: Does GM’s conscience prick GM a bit to say, “those V6 engine gaskets were crap and we knew it and we left them in production for 10 years, should we make sure that we do right by our customers?”
You are correct on this; GM has not handled this issue very well. But given the falling market share experienced by GM, I’d say that customers are effectively doling out the proper punishment for GM’s failure to adequately make customers whole.
KixStart: Does GMs conscience prick it just a bit to tell it that many of those soccer moms are going to be blowing through stop signs in their Yukoburbahoes while babbling on the cell phone and that’s a death sentence for the Aspire driver they T-bone?
And your proof that this happens on a regular basis is found exactly where? Are you not aware that accidents have declined and the death rate per 100 million vehicle miles traveled was at a record low for 2004 – as cell phone usage and SUV ownership climbed – and only rose slightly in 2005 because of increased fatalities among motorcyclists and pedestrians, which have nothing to do with cell phones and SUVs?
More facts, less emotion, please.
KixStart: If GM had a conscience, would GM just build the good, reliable, inexpensive cars that people really need for transportation and orient their advertising that way?
I guess you haven’t heard of the Cobalt, Malibu or Impala. Not bad cars – just not great ones. But they certainly aren’t deathtraps or clunkers. GM’s problem is that today’s buyers are faced with “good, better and best” when making a selection. “Good” doesn’t cut it anymore.
But just because there are better choices out there doesn’t mean that GM’s cars aren’t “good, reliable and inexpensive.”
my12by60:
December 15th, 2006 at 10:44 am
Windswords says: >
—————
Just to set the record straight I did not post the comment attributed to me by my12by60. My comment was earlier.
@ Sherborn Sean
I can see GM becoming a multi-diversified company in the next 50 years or so with auto manufacturing (with a slant to commercial/military) only a small part of its business operations. Of all the automakers, it has its fingers in enough pies that this could be a likely scenario.
Many things have to happen in the meantime, because if General Motors disappeared tomorrow it would leave a gaping hole in North American manufacturing with horrific ramifications.
That said, I hope GM can make its North American (and it’s mainly North America where the major structural problems are) operations viable. They just have to remember that the product is king and not let themselves be sidetracked by marketing gimmicks and questionable alliances.
edit: geeber, you are a revelation.
“Finger, you got me to thinking? It is to laugh. ”
Well then I got you laughing…
“KixStart: Yeah, maybe there’s some mechanism in the atmosphere that will keep rising CO2 levels from becoming a global warming disaster – but maybe there isn’t a compensating mechanism and it’s an unarguable fact that atmospheric CO2 levels have increased by 50% in the last hundred years and the physics of infra-red energy entrapment is a fact, too, as is the fact that the world’s oceans have actually risen measurably in the few years.”
Wow. You should head to the local Starbucks immediately and officially protest.
Right on geeber!
I don’t have the litracy or computer skills to express my thoughts as well as you and finger do. It is good to know there is a least some people that think like I do
Thanks again
SherbornSean:
…A more practical objective would be a dual mode diesel hybrid that could double as an on-site construction generator — on today’s GMT900 platform for a $4K premium. That could be a game changer.
I think this is a BAD idea for the following reasons:
1) It renders odometer readings meaningless. There are a number of things that no longer become valid measures:
1a) Measured fuel economy. How do you know what your gas mileage really is if you run the engine as a generator for 8 hours a day at your worksite?
Not everybody checks their gas mileage, but I do. Not because I drive a Prius, either. I’ve always checked my gas mileage in all of my cars, so that I will know when something is wrong. Mileage often suffers first before the driver notices a problem such as a slow-leak in a tire, a dirty air filter, or an ignition problem.
1b) How do you know when to change the oil and perform other maintenance tasks? We would have to begin maintaining vehicles on an “hours of operation” basis, much like airplanes. I don’t think the industry (or the consumer) is ready for that.
1c) Vehicle value in the 2nd-hand market would plummet, because buyers would really have no idea how many “miles” were really on that engine…unless the on-board computer somehow kept track of (and displayed) the aforementioned “hours of operation). But again, the industry isn’t ready for it, and consumers would have nothing to compare it to.
As a sometimes-second-hand buyer, I would have to assume hard usage/high mileage in any vehicle that may have been used by a prior owner as a simple generator.
2) $4,000 more? People have trouble justifying a “reg’lar” hybrid for a $3,000 premium. What makes you think that people will pay another 33% (of the first premium) just to get an onsite generator? No, no…I think it’s cheaper to just buy an actual GENERATOR for construction site usage. They fit on a truck bed with room to spare, they’re not that expensive for the power they provide, and they can be put into storage when not needed.
And most importantly, a portable generator does NOT have to be paid for over and over again everytime you need to buy a new truck!
Hino markets a conventional cab in the US and Canada that mainly competes with Chevy/GMC Kodiak/TopKick models. The GM products enjoy many advantages over the Hino.
To each their own … the Topcicks/Chevys/Kodiaks also enjoy some disadvantages.
My points still stand. Hino has a good presence in Canada, and virtually no presence in the US. In the next 3-4 years, Hino wants to increase their US sales by tenfold. Not exactly an easy thing to do.
You state that the best case scenario for GM to survive is to lose $3B in 07 and $1B in 08, and then start generating cash. This is the only way to avoid bancrupcy.
You also state that GM has $23B in the bank. I would add that they have additional saleable assets, including the strongest presence in China, the other half of GMAC (worth $13B), OnStar, a piece of XM,…
Are you then implying that GM can simply “sell off” it’s market position in China? Anything involved with China would be the last thing on GM’s mind right now. OnStar won’t fetch a whole lot of liquid, and neither will XM. Selling the other half of GMAC would be equivalent to throwing in the white flag, because it would only increase the negative cash flow, without a cash cow like GMAC helping out.
Do not forget GM needs at least 10 Billion just to keep daily operations running. If they drop anywhere near that number or below it, bluntly put, they won’t have enough money to even keep themselves running, let alone talking about any kind of R & D.
What’s also interesting is that over the past 3 years, GM has increased R & D spending. Then again, so have many other automakers. But GM, being such a big company, is burning through cash faster than Ford or Chrysler, and it makes you wonder for how long can they keep increasing R & D spending while incurring losses and negative cash flow. Increasing R & D spending at this stage of the game only accelerates their cash flow. GM is also spending a lot of money, money which it doesn’t have, to update various plants it has for new models.
For several years, there was a demand for huge SUVs, so GM built them, and used the money gained from those transactions to pay workers’ salaries and dividends for stockholders. (And there was also a demand for Mercedes G-wagens and Toyota Land Cruisers and Land Rovers, which aren’t exactly gas sippers. So GM is hardly alone here in meeting this demand.)
This is the way business works.
And here lies the problem. This is the way most American managers and execs think the business works. They only worry about the here and now, they seem to lack something called a “long term vision”.
Let me clarify: there has ALWAYS been demand for big SUVs, but worldwide, the demand has been relatively modest. It’s only when the “SUV craze” hit North America, and demand inflated, is when Detroit automakers decide to focus a large part of their attention to SUVs, and trucks.
Meanwhile, companies like Toyota or Honda saw this demand, and Honda was clever (financially) by trying to fullfill that demand as best they could with unibody vehicles. Toyota only made a slow, limited entry into full-size trucks and SUVs in North America to gauge market trends over a longer term. Land Cruisers have sold well for decades, and worldwide, Land Cruisers continue to sell very well. The Tundra and Sequoia were developed for the North American market, which is why Toyota entered it slowly and gradually, because it saw these vehicles as a risky proposition.
And right around when the SUV craze in the 90s started, Toyota had already started R & D on their first hybrid. Toyota realized that the inflated demand for SUVs in North America wouldn’t last. Toyota has never been one to focus too much on a certain market trend. They have always tried to have a well-rounded lineup. Even with hybrids now, and a new Tundra and Sequoia, they are focusing heavily on sedans, compacts, and crossovers too.
Detroit execs should have had some vision and realized it was not a wise move to focus so much of their time and money into the SUV craze, which was limited to the North American market, and was not a worldwide craze.
If I were a shareholder or an employer of GM, I would certainly want GM management to be giving customers what they want, as opposed to what you think they should want.
You do know, incidentally, that virtually all of Toyota’s sales growth over the past decade has come from additional truck and SUV sales, NOT sales of hybrids, right? And that Toyota is busily readying a factory in San Antonio, Texas, to build a full-size pickup to compete with…GM’s full-size pickups?
People have *always* wanted fuel efficient cars, at least in the worldwide market. People didn’t even know before what hybrids were, but Toyota had the vision to invest in hybrids knowing fuel efficiency and environmentally friendly cars would become more desirable in the future.
So what you’re basically saying is that you want GM to only worry about the “here and now”, right? I mean who cares about future or long-term market trends?
As for Toyota’s sales growth, incorrect. In Europe, Toyota’s sales growth over the past decade has come almost exclusively due to cars, for example the Yaris, Toyota’s top selling model in Europe. In Japan too, Toyota’s sales growth has come from cars. In North America, Camry and Corolla sales have increased considerably over the past decade, and these two are Toyota’s top selling North American models.
I guess you haven’t heard of the Cobalt, Malibu or Impala. Not bad cars – just not great ones. But they certainly aren’t deathtraps or clunkers. GM’s problem is that today’s buyers are faced with “good, better and best” when making a selection. “Good” doesn’t cut it anymore.
But just because there are better choices out there doesn’t mean that GM’s cars aren’t “good, reliable and inexpensive.”
I certainly wouldn’t call the Cobalt or Malibu interior “good”. At best, their interiors are mediocre. The Malibu’s interior is humiliating to sit in. The Impala is the only vehicle I would consider as “good”. And certainly, for it’s class, the Cobalt’s fuel economy isn’t anywhere near “good” either. Mediocre at best.
one thing that GM might do is resurrect the electric car they they killed and thereby really pissed off all sorts of people who would forgive them gently for all the fuss and bother over trucks that no one wants.
Until electric cars get over 200 miles out of a 5 minute charge on a 4 door, midsized platform, you can stick a fork in the EV and call it done. Of course GM isn’t going to take another risk in that venue, so waiting for a privateer or T/H to do it would be your best bet.
As far as GM’s SUV woes go, the one thing they could do to salvage the GMT900 situation is to do the one thing that T/H and the other Big 1.5 wouldn’t expect them to do: go diesel on all of their trucks and SUVs.
Say what?
Look at it this way: VW has the Touareg out with a TDi V10, a $60k price point and 23mpg on the highway. Imagine if GM stuck a super-refined version of the Duramax diesel in the Silverado and Tahoe, made it an option for its 1500-series pickups, and developed a TDi for the Colorado/Canyon. People would think twice about SUVs and trucks because a major impediment — gas mileage — would be mitigated somewhat.
”
1b) How do you know when to change the oil and perform other maintenance tasks? We would have to begin maintaining vehicles on an “hours of operation” basis, much like airplanes. I don’t think the industry (or the consumer) is ready for that.”
The engine hour technology is already in place in most diesel applications. It is also standard on all GMT 900’s. GM vehicles also utilize an engine oil life monitor to safely communicate oil change intervals.
“Toyota only made a slow, limited entry into full-size trucks and SUVs in North America to gauge market trends over a longer term. Land Cruisers have sold well for decades, and worldwide, Land Cruisers continue to sell very well. The Tundra and Sequoia were developed for the North American market, which is why Toyota entered it slowly and gradually, because it saw these vehicles as a risky proposition.”
So, you are privvy to Toyota’s thinking? Please tell us more. And GM should not respond to customer demand. Whatever they build, the customer should buy, right?
But Johnson,
Even if GM couldn’t sell another asset, even if it did need $10B in the bank for liquidity, even if it did lose $4B in negative cashflow over the next few years, it would still have $9B in cash.
I should be so lucky.
Zoomzoom,
The issue of when to change the oil on a vehicle that could also function as a worksight generator has already been addressed. BMWs flash the ‘need maintenance’ light based on how much gas has gone through the engine.
The on-board computer could easily tell you how much use the truck got as a generator, reassuring used car buyers.
I just spent $6K on a emergency generator for my house. I would have preferred to have spent an extra few bucks on a hybrid or fuel cell vehicle that could have served the same purpose.
Johnson;
I mostly ignored your drivel until I got to your last “point-counterpoint”.
The range of EPA ratings in the small car class (excluding the AWD Subarus and hybrids) starts at 20/28 and ends at 34/40. Cobalt comes in at 25/34 with 5-speed manual. I guess middle of the pack is technically “mediocre” but you have to be really digging for reasons to talk down the car to use fuel efficiency as a negative.
And you ignore the fact that Malibu and Impala are near the top of thier class in mileage, ahead of Camry and Accord.
Zoomzoom,
As far as the appropriate premium for a diesel hybrid goes, the math is easy. If a typical gas work truck gets 15 mpg, it will cost $15K in fuel over 100,000 miles at $2.25 per gallon.
If a diesel hybrid gets 25 mpg, then it only costs $9K over 100,000 miles at the same $2.25.
Most businesses will pay $4K to save $6K, especially if they have additional capability (generator) and ability to improve the environment (biodiesel).
John Williams: GM could have– should have– gone diesel– only they don't have a handle on the technology. Despite all the people hereabouts singing the praises of their Euro diesel chops, The General's Eurozone oil burners are produced in Poland in a plant jointly owned with Isuzu IIRC. GM has no real diesel expertise. The $4b FIATsco was supposed to help in that regard, but, um, it didn't really pan out (for GM). That said, the Cadillac BLS comes with a FIAT diesel!
GM could have gone diesel– only they don’t have a handle on their technology.
Thats why they have Isuzu as a partner for their diesel expertise. And Ford has International (Powerstroke), and Dodge has Cummins, and Nissan UD (Undependable Diesel) and on and on…
So, you are privvy to Toyota’s thinking? Please tell us more. And GM should not respond to customer demand. Whatever they build, the customer should buy, right?
This is common sense. In the early 90s, was there ANY noticeable demand for hybrids? No. So why then did Toyota pour *billions* into R & D for the first gen Prius? Hmmm, could it be they actually had a long term vision that hybrids would become more popular, due to fuel efficiency and the environment becoming large concerns among the car buying public?
Even if GM couldn’t sell another asset, even if it did need $10B in the bank for liquidity, even if it did lose $4B in negative cashflow over the next few years, it would still have $9B in cash.
I should be so lucky.
Too many assumptions. First off, you assume that GM will lose 4B over the next few years. Frankly, we don’t know if they will lose more than that, or less than that. But most people familiar with GM’s situation would say this number is on the optimistic side.
But wait, what about increased R & D spending? What about additional investments in some of it’s plants to prepare for new models? What about the numerous SEC investigations that are still on-going with regard’s to GM’s accounting practices? What about additional costs in terms of marketing, or offering unforeseen incentives? What about unforeseen losses due to lower demand with pickups and SUVs? What if Toyota starts a price war with full size pickups? That money has to come from somewhere.
Your analysis of GM’s cash flow is very simplistic, and there are numerous factors which could slow down or accelerate this process. And if it comes to it, GM will not let it cash flow go down to the wire, *exactly* to 10 Billion. That is much too risky. Because then, in essence, GM would have zero in terms of liquid.
The range of EPA ratings in the small car class (excluding the AWD Subarus and hybrids) starts at 20/28 and ends at 34/40. Cobalt comes in at 25/34 with 5-speed manual. I guess middle of the pack is technically “mediocre” but you have to be really digging for reasons to talk down the car to use fuel efficiency as a negative.
The Cobalt competes directly with entry level compacts, not mid-market compacts (Subarus), or specialized compacts (WRX STi, Lancer EVO). The Cobalt competes with the Civic, Corolla, Mazda 3, and a few others. In this segment, it’s fuel economy *is* mediocre. And like I said, it’s interior is nothing to be proud of, and it’s refinement leaves something to be desired.
GM could have gone diesel– only they don’t have a handle on their technology.
Despite all the people singing the praises of their diesel chops, The General’s oil burners are produced in Poland in a plant jointly owned with Isuzu IIRC. GM has no real diesel expertise.
The $4b FIATsco was supposed to help in that regard, but, um, not really. That said, the Cadillac BLS comes with a FIAT diesel!
/Sarcasm/
What’s this? But GM is a leader in diesel technology. Toyota’s diesels are crap, and their reputation for diesels is mostly based on smoke and mirrors. There is no way Toyota can compete with the mightly Opel diesels, or Fiat sourced diesels GM has in their cars. And Hino doesn’t hold a candle to the mighty Isuzu-sourced diesels powering GM’s medium duty trucks. Toyota’s in-house developed diesels are thoroughly mediocre in every way.
/End sarcasm/
” And like I said, it’s interior is nothing to be proud of, and it’s refinement leaves something to be desired”
And I trust that this is noted as your “expert” tinged opinion?
Finger, Work on your reading comprehension. “It is to laugh” is not the same as “I laughed.” I see your buddy Geeber’s got game, even if you don’t.
Geeber, If there isn’t demand for a product, GM will build it. The demand, that is. GM spends enormous amounts of money persuading you, for example, that buying their gas hogs is patriotic. They’ve spent enormous sums in the past to persuade you that their vehicle is more stylish because it had a curvy roof when others were flat and more stylish when it had a flat roof because the others were curvy. The rationale behind the SUV was simple – if we can pump up demand for bigger cars, we can charge more because they’re bigger. It doesn’t cost twice as much to build a $40K car as a $20K car, so there’s more money in it. Why not spend some money developing a small car and advertising the idea that a fuel-efficient car is patriotic? After all, it is more patriotic to buy a fuel-efficient car. Or at least doing so helps reduce a dangerous dependence on foreign oil, which hampers and reshapes our foreign policy. If not for oil money, bin Laden would be harmlessly herding camels somewhere.
As Johnson points out, Toyota knew that, not only is there eternally demand for fuel-efficient cars (more mpg is always a selling point in any vehicle class) but that there would be more demand for fuel-efficient cars with rising oil prices and there *might* be demand for more environmentally friendly cars and they did something about it. GM has economists and planners with access to the same information Toyota has and they knew that there would be demand for fuel-efficient cars. They chose not to develop them, in favor of ramping up the advertising budget for the guzzlers.
GM spends a lot of money touting vehicle capabilities; they are not addressing concerns they know full well that they are craeting demand. The proof is in the parking lot. There’s dozens of empty trucks out there. I don’t expect GM to police how people use their vehicles but I think it’s reasonable to ask them to lay off pumping up phony requirements.
And, actually, people’s credit rating IS GM’s problem. 100% finance for deadbeats is also making it GM’s curse.
And, no, I don’t know that ALL of Toyotas sales growth has come from trucks because at least 100K units of their recent sales growth has come from the Prius alone. Toyota gorwht has also come from selling Scions (new in the last couple years) and the Yaris (new this year) and doubled the sales of their compact SUV, the Rav4 this year (which at 31mpg does better on the highway than the Impala and possibly the Malibu). Toyota somehow finds small cars profitable. Imagine that.
As for GM’s quality issues, yes, they’ll just have to tough it out until anybody who really cares about reliability believes that their engines are anything bug crap. However, from the tone of Finger’s original note (which he has refused to clarify), I’m guessing Finger expects me to let bygones be bygones and take GM’s quality on faith. Fat chance.
And, while you are correct that safety has improved considerably, the fact remains that the driver of a large – very large – vehicle is 4 times more likely to kill the driver of a small car. As for “less emotion, more fact,” well, Jack, that’s a fact.
Now, we are talking about “conscience,” here, at Finger’s behest. I have one AND I think. My thinking actually expands my conscience beyond the narrow limits of my observation to take in the world as a whole. This includes the unintended effects of buying a gas guzzler (which I could well afford, I assure you) of increased environmental damage and oil money ending up in the hands of terrorists. MY conscience says that I should curb me appetite for a big vehicle and get along with a vehicle that merely meets my needs, rather than one that’s primarily intended to impress my neighbors.
While GM is a business and it’s appropriate for a business to make money and even to spend $$ to persuade consumers to buy their product, it’s still operated by people who *should* have consciences of their own and who, being at the top of the economic, social and educational ladder have the opportunity to view the full effect of their decisions – to have their consciences exposed fully to the ramifications of their actions. It surprises me not at all that they will consistently act to maximize their financial gain but that doesn’t mean I am not disapointed, nor am I required to approve it.
GM talks a big game on green issues but it’s just talk; they simply want to soothe consciences all around as they roll you out the door in yet another Yukoburbanhoe. Lutz liked to talk about rolling out hybrid tech in the biggest vehicles first to have the greatest impact on fuel supplies and green house gases but that was ALL talk. Their one “hybrid” FS truck was only available in limited areas (it’s a CARB-technicality fighter, not a real hybrid) and their VCM/DoD technology is hardly available on anything. They put it in the limited quantity Impala SS, for instance, in the V8, instead of rolling it out in the much more popular V6. They could have achieved the same fuel savings in the Impala, no doubt, with a 5-speed transmission (and that’s a selling point, too).
And Toyota has demonstrated, amply, that one can make money without flooding the market with gas guzzlers, so a defense of GM that the gas-guzzler card is one they MUST play is evidently invalid.
Mikey, something important that I learned a long time ago is that if you can’t defend your beliefs, then you’re going to have to consider the likelihood that they’re wrong.
Johnson (RF?)
Lots of assertions, but who cares about the ALL the facts?
The EPA “Small Car” class I used includes Civic, Corolla, and Mazda 3. With some powertrains they come out ahead, with others they aren’t as good. Cobalt doesn’t play at the top of this class, but I also have a feeling that Camrys Corollas 40 MPG is unrealistic, and the new EPA rating system will bring all these cars closer.
Japanese companys employee 3600 American workers in R and D.3600 sounds pretty big eh.65,000 Americans work in Rand D in the state of Michigan alone.
The top 4 R and D spenders in America are, reported by the
Wall Street Journal, Pfizer,Microsoft,Ford and General Motors.
Odd I don’t see Toyota or Honda there.
Finger, Work on your reading comprehension. “It is to laugh” is not the same as “I laughed.” I see your buddy Geeber’s got game, even if you don’t.
GM spends a lot of money touting vehicle capabilities; they are not addressing concerns they know full well that they are craeting demand.
Toyota gorwht has also come from selling Scions (new in the last co
You want me to work on my comprehension?
And I trust that this is noted as your “expert” tinged opinion?
I do not base my opinion on the domestic supporters on internet forums. Rather, this is an *industry-wide* opinion, one that virtually all reviews tend to support, and consumers also support. The Cobalt’s interior really is nothing to be proud of, compared to the Civic, Corolla, and Mazda 3. It’s refinement could also be improved quite a bit.
Of course, if you’re in the business of making cars that are “just enough”, “good enough”, or mediocre then by such a measure, the Cobalt is a great car. Sadly though, it provides nothing meaningful (unless incentives are considered meaningful) which would entice any import compact buyer to jump ship and buy a Cobalt.
Lots of assertions, but who cares about the ALL the facts?
The EPA “Small Car” class I used includes Civic, Corolla, and Mazda 3. With some powertrains they come out ahead, with others they aren’t as good. Cobalt doesn’t play at the top of this class, but I also have a feeling that Camrys 40 MPG is unattainable, and the new EPA rating system will bring all these cars closer.
If you are using the EPA “small car” class as the basis for your argument, you are only fooling yourself. That class puts Porsche Caymans and Lexus IS250s together with Corollas and Civics. Do you think people cross-shop Caymans and Corollas? Would you honestly consider them to be in the same market segment?
Fact is, the *best* powertrain the Cobalt has provides only mediocre fuel economy. The best powertrains the Civic and Corolla have both provide exceptional fuel economy.
And comparing the Camry to the Cobalt now? An act of desperation? The Camry is in a different class than the Cobalt, and yet, a 4 cyl Camry achieves fuel economy awfully close to that of a Cobalt.
From Motor Trend:
Chevy’s Cavalier has trailed the compact class for about as long as Toyota’s Corolla has led it. The new Cobalt aims to end all that. We’ve praised its stout structure, clean styling, and high build quality, and we loved the driving dynamics of the Cobalt SS coupe (MT, May). For now, a $595 sport package buys 16-inch wheels and Pirelli P6 tires, a spoiler, and other styling cues inside and out. Next year, Chevy will add a 170-horse, naturally aspirated SS sedan with suspension dynamics tuned somewhere between this LS and the supercharged coupe.
Is that an *industry wide* opinion?
Kixstart;
Not only is GMs Active Fuel Managment on all the GMT900s with the 5300 V8, it is also standard on the 3.9l, 233 hp V6 in Impala and Monte Carlo, with an EPA ratings of 20/29 in an upper-mid size vehicle.
True, GM is behind Toyota and Honda in hybrids, but two-mode hybrids in GMs f/s SUVs are just around the corner, with pickups and mid-size cars to follow, all before Most manufacturers (including Nissan or DCX) produce their first one.
Johnson: And here lies the problem. This is the way most American managers and execs think the business works. They only worry about the here and now, they seem to lack something called a “long term vision”.
KixStart was criticizing GM for building large SUVs in the first place.
Long-term vision is important, but companies have bills to pay in the here and now, and one way to do it is by satisfying the demands of customers today. And until last summer, people wanted big SUVs. Even now there is still a decent-size percentage of the market that wants them – just not enough to save GM’s bacon. But that doesn’t mean that GM shouldn’t have made them in the first place.
This is why GM – and others, including Toyota, Ford and Mercedes-Benz – are building large SUVs.
Johnson: Let me clarify: there has ALWAYS been demand for big SUVs, but worldwide, the demand has been relatively modest. It’s only when the “SUV craze” hit North America, and demand inflated, is when Detroit automakers decide to focus a large part of their attention to SUVs, and trucks.
The SUV craze hit American FIRST, and it is now taking hold in other areas, especially Europe. When I was in Europe (Great Britain, Germany) this summer, the big news was the increasing popularity of SUVs.
What matters to GM is demand HERE for SUVs, and that had been relatively strong until the summer of 2005.
Did GM (and Ford and Chrysler) neglect passenger cars in favor of light trucks? Absolutely! But KixStart’s contention, if I read his post correctly, was that GM should never have built these vehicles in the first place. Which shows a fundamental misunderstanding of how business works.
Johnson: Meanwhile, companies like Toyota or Honda saw this demand, and Honda was clever (financially) by trying to fullfill that demand as best they could with unibody vehicles. Toyota only made a slow, limited entry into full-size trucks and SUVs in North America to gauge market trends over a longer term. Land Cruisers have sold well for decades, and worldwide, Land Cruisers continue to sell very well. The Tundra and Sequoia were developed for the North American market, which is why Toyota entered it slowly and gradually, because it saw these vehicles as a risky proposition.
How they entered the truck and SUV market is irrelevant. The point is that they entered it, and, in the case of Toyota, most of its growth over the last decade has been fueled by increasing sales of trucks and SUVs.
Johnson: And right around when the SUV craze in the 90s started, Toyota had already started R & D on their first hybrid. Toyota realized that the inflated demand for SUVs in North America wouldn’t last. Toyota has never been one to focus too much on a certain market trend. They have always tried to have a well-rounded lineup. Even with hybrids now, and a new Tundra and Sequoia, they are focusing heavily on sedans, compacts, and crossovers too.
And their well-rounded lineup includes lots of SUVs and trucks, and is about to become heavier – literally – with trucks when the new Tundra begins pouring out of the San Antonio plant in Texas.
Johnson: Detroit execs should have had some vision and realized it was not a wise move to focus so much of their time and money into the SUV craze, which was limited to the North American market, and was not a worldwide craze.
American cars have not been popular overseas since the end of World War II. GM and Ford have preferred to build vehicles tailored specifically for the market – hence their ownership of subsidiaries in Europe, South America and Australia.
The idea that they should not focus on SUVs because they are largely popular in the North American market does not square with reality. Very few American vehicles have been popular overseas since the early 1960s.
Incidentally, you are aware that one of the most popular American vehicles in Europe is…the Jeep Grand Cherokee?
Johnson: People have *always* wanted fuel efficient cars, at least in the worldwide market. People didn’t even know before what hybrids were, but Toyota had the vision to invest in hybrids knowing fuel efficiency and environmentally friendly cars would become more desirable in the future.
Sure, people have wanted them, but they don’t want to pay too much for them.
And you did see the articles recently where Toyota said that it needs tax breaks for hybrids to continue in order to sustain sales of the Prius?
The demand can’t be that strong if takes tax breaks to sustain the sales of this vehicle. Toyota itself basically said so.
Johnson: So what you’re basically saying is that you want GM to only worry about the “here and now”, right? I mean who cares about future or long-term market trends?
The long-term trend is for customers to trade out of big SUVs into crossovers…like the Saturn Outlook, Buick Enclave and GMC Acadia (and Ford Edge).
If you think most people are going to swap Suburbans for Priuses, you are sadly mistaken.
Johnson: As for Toyota’s sales growth, incorrect. In Europe, Toyota’s sales growth over the past decade has come almost exclusively due to cars, for example the Yaris, Toyota’s top selling model in Europe. In Japan too, Toyota’s sales growth has come from cars. In North America, Camry and Corolla sales have increased considerably over the past decade, and these two are Toyota’s top selling North American models.
First, I was referring solely to the American market.
Second, Toyota’s growth has come from crossovers, SUVs and trucks. Csaba Csere wrote a recent editorial about this in Car & Driver. It is NOT from increased sales of the Camry and Corolla.
Johnson: I certainly wouldn’t call the Cobalt or Malibu interior “good”. At best, their interiors are mediocre. The Malibu’s interior is humiliating to sit in. The Impala is the only vehicle I would consider as “good”. And certainly, for it’s class, the Cobalt’s fuel economy isn’t anywhere near “good” either. Mediocre at best.
The Cobalt and the Malibu are good in the interior department. The problem is that the competition is better.
Sorry, but there are no really bad cars available today. I learned to drive on a 1973 AMC Gremlin, and remember when the competitive choices were a Chevy Vega, Pontiac Astre, Datsun F-10 and, in the early 1980s, the Chevy Chevette, American-made VW Rabbit, Renault Alliance and LeCar and Fiat Strada.
Do not talk to me about bad cars – including bad interiors – until you’ve driven one of those (or at least sat in one), which were terrible cars even in the context of their time.
From Car and Driver:
CAPSULE REVIEW
The long-awaited replacement for the ancient Cavalier, Chevy’s Cobalt family emerges as a serious presence in the compact sedan segment–solid chassis, respectable powertrains, attractive interiors. The sedan range runs from the basic LS model to the fancier LTZ and the 173-hp SS.
And you say the industry opinion is what?
Finalists for the 2007 North American Car of the Year award are the Honda Fit, Saturn Aura and Toyota Camry. The winners will be announced Jan. 7 at the start of press preview days for the North American International Auto Show in Detroit.
How could a GM product be in that list? And I heard that Silverado is a finalist for Truck of the Year. How could that be? Isn’t there an *industry wide* opinion that this cannot be?
Finger, I see that you’re quibbling over my typos. Should I interpret that as something other than a sign of your complete intellectual impoverishment?
By the way, I rented a Cobalt and achieved a whopping 30mpg in very nearly 100% freeway driving at no more than the posted limits of 65 to 70mph. That’s mediocre. And the interior was crappy (although, I must admit, the back seat had fair legroom… but so did my ’82 Cavalier, which achieved 40+ on the highway at similar speeds).
Further, will that new 170hp SS engine in the Cobalt improve the mediocre gas mileage?
Johnson,
I mis-typed when I included Camry in the Cobalt EPA post, but now that you mention it, lets talk about Camrys EPA ratings.
Apples to Apples, Camry Auto V6 vs Malibu V6 vs Impala V6
Camry V6 22/31
Malibu V6 22/32
(a comparable size car, with more interior room in most specs, including 1 more cu. foot of trunk space.)
Impala 21/31
(a bigger car with more room in almost every measurement and over 4 cu. feet more trunk room.)
Who has the efficient package here?
ucanthandlethetruth pointed out that Active Fuel Management (we need to agree on an acronym) is available on a wide range of gas guzzlers.
That’s great – finally GM has done something about fuel consumption in the guzzler fleet. When can I have that in a Malibu? I wouldn’t mind getting 4-cylinder fuel economy with 6-cylinder performance. However, I’m not buying 6-cylinder fuel economy with 8-cylinder performance that I don’t need.
And two-mode hybrids – just around the corner? Forgive me if I fail to leap up and applaud; Toyota turned that corner years ago.
KixStart: Geeber, If there isn’t demand for a product, GM will build it. The demand, that is. GM spends enormous amounts of money persuading you, for example, that buying their gas hogs is patriotic.
If GM is so all-powerful in its ability to get people to buy products they don’t want, why has it lost half of its market share over the past 30 years? Why couldn’t it save Oldsmobile? Why was the Aztek a flop?
KixStart: The rationale behind the SUV was simple – if we can pump up demand for bigger cars, we can charge more because they’re bigger. It doesn’t cost twice as much to build a $40K car as a $20K car, so there’s more money in it.
There is more money in it because Americans equate size with value and more expense. They did this long before GM came into being.
KixStart: Why not spend some money developing a small car and advertising the idea that a fuel-efficient car is patriotic? After all, it is more patriotic to buy a fuel-efficient car. Or at least doing so helps reduce a dangerous dependence on foreign oil, which hampers and reshapes our foreign policy. If not for oil money, bin Laden would be harmlessly herding camels somewhere.
Because, as has been explained before, advertising is not as effective in this regard as you and most advertising executives think it is.
American people, by and large, do not want to purchase mini-cars in large numbers. Do you think that Honda ever planned to sell 300,000 Fits?
For example, the Civic and the Accord have only grown in sales as they have grown in size. Park a 2006 Civic next to a 1977 Civic. The size differential is astounding.
I know – I used to drive a 1977 Civic hatchback in college.
KixStart: GM spends a lot of money touting vehicle capabilities; they are not addressing concerns they know full well that they are craeting demand. The proof is in the parking lot. There’s dozens of empty trucks out there. I don’t expect GM to police how people use their vehicles but I think it’s reasonable to ask them to lay off pumping up phony requirements.
Do you know how those vehicles are being used when not in the parking lot? Do you not know that pickup truck drivers are told to jettison unnecessary cargo to improve fuel economy?
KixStart: And, actually, people’s credit rating IS GM’s problem. 100% finance for deadbeats is also making it GM’s curse.
You implied it was GM’s fault that people bought vehicles they can’t afford.
Unless GM forced those people to purchase trucks at gunpoint, it is not at fault.
If adults cannot figure out what they can and cannot afford, it is not GM’s problem.
KixStart: And, no, I don’t know that ALL of Toyotas sales growth has come from trucks because at least 100K units of their recent sales growth has come from the Prius alone. Toyota gorwht has also come from selling Scions (new in the last couple years) and the Yaris (new this year) and doubled the sales of their compact SUV, the Rav4 this year (which at 31mpg does better on the highway than the Impala and possibly the Malibu). Toyota somehow finds small cars profitable. Imagine that.
You are aware that the Yaris replaced the Echo (my brother owns one), and that the Scions replaced the Celica and MR-2? So those models hardly represent completely new business for Toyota.
And I said that Toyota’s growth LARGELY came from increased sales of trucks and SUVs. Not all of it, but most of it.
KixStart: And, while you are correct that safety has improved considerably, the fact remains that the driver of a large – very large – vehicle is 4 times more likely to kill the driver of a small car. As for “less emotion, more fact,” well, Jack, that’s a fact.
Well, it also a fact that as more and more large vehicles were sold, the death rate DECLINED to record lows, and accident also decreased.
For those people in small cars to be killed, the collision must happen in the first place. They apparently aren’t, judging by the falling fatality rates.
Incidentally, that safety-size differential has been around since the days of the VW Bug versus the Ford Galaxie and Chevrolet Impala (the original one). It didn’t start with SUVs.
KixStart: While GM is a business and it’s appropriate for a business to make money and even to spend $$ to persuade consumers to buy their product, it’s still operated by people who *should* have consciences of their own and who, being at the top of the economic, social and educational ladder have the opportunity to view the full effect of their decisions – to have their consciences exposed fully to the ramifications of their actions. It surprises me not at all that they will consistently act to maximize their financial gain but that doesn’t mean I am not disapointed, nor am I required to approve it.
Of course GM will act to maximize its financial gain. It will do this by building products people want. This is the way it makes money.
The fact that it cannot do this across its entire product line is why we even have the Deathwatch series. That does not mean that GM should not build large SUVs.
KixStart: And Toyota has demonstrated, amply, that one can make money without flooding the market with gas guzzlers, so a defense of GM that the gas-guzzler card is one they MUST play is evidently invalid.
And Toyota has a different cost structure than GM, so it can afford to build a wider variety of products, as it can make money on them. It isn’t supporting an army of retirees, it isn’t unneeded keeping plants open because of a UAW contract, it designed its employee health benefits to keep costs under control, and it isn’t constrained by the UAW when it comes to firing deadbeat employees.
Granted, those aren’t the sole reasons for GM’s problems. There has been a dearth of creative thinking in the executive suites. But its cost structure DOES constrain it in certain ways.
GM only recently began making money on small cars (the Cobalt, at least according to Bob Lutz).
“By the way, I rented a Cobalt and achieved a whopping 30mpg in very nearly 100% freeway driving at no more than the posted limits of 65 to 70mph. That’s mediocre. ”
Well, I have achieved more mileage at greater speeds in a sedan Cobalt. Something is amiss here. Could your calculations be flawed?
Kixstart,
Once again, Impala, 3.9l, 233hp 240 lb/ft torque, active fuel management, 20/29, upper mid size car.
As for hybrids, Nissan, DCX, Hyundai, Kia, and the vast majority of manufacturers haven’t even admitted there is a corner until recently. Toyota loses money on every one they sell, but gains PR. And they are pleading for guvmint help to continue to make them less expensive. They have the lead and may not ever give it up.
But there has been a contention in this post that only GM is big, bad and uncaring cause they forced large SUVS on an unsupecting American public, and don’t do hybrids. Well they do hybrids now (Vue) will do more shortly (big mother SUVs and trucks that 100s of thousands of people still buy now) and midsize Malibu shortly after that.
Long-term vision is important, but companies have bills to pay in the here and now, and one way to do it is by satisfying the demands of customers today. And until last summer, people wanted big SUVs. Even now there is still a decent-size percentage of the market that wants them – just not enough to save GM’s bacon. But that doesn’t mean that GM shouldn’t have made them in the first place.
This is why GM – and others, including Toyota, Ford and Mercedes-Benz – are building large SUVs.
Toyota has continually made billions in profit each year by selling mainly compacts, sedans, and a few crossovers here and there. It was only recently that they got into full size SUVs and trucks.
Stop thinking in absolutes. What most of us (and the rest of the industry) have criticized GM and Detroit for is their narrow, short sighted thinking regarding the market, and them putting too much focus into SUVs and trucks. That’s a big reason why they’re in the predicament that they are today, because they must now adapt to a market where fuel efficient cars and crossovers are gaining in popularity, yet they don’t have much to show for it.
Ford, GM, and Chrysler still heavily rely on full-size SUVs. Toyota and Mercedes do not.
The SUV craze hit American FIRST, and it is now taking hold in other areas, especially Europe. When I was in Europe (Great Britain, Germany) this summer, the big news was the increasing popularity of SUVs.
What matters to GM is demand HERE for SUVs, and that had been relatively strong until the summer of 2005.
Did GM (and Ford and Chrysler) neglect passenger cars in favor of light trucks? Absolutely! But KixStart’s contention, if I read his post correctly, was that GM should never have built these vehicles in the first place. Which shows a fundamental misunderstanding of how business works.
Apart from Europe, what other areas? I sure don’t see full size SUVs gaining in popularity in other parts of the world. And in Europe, full-size SUVs are a novelty. Most of the increased sales are coming from emerging and growing markets like Russia. If we talk strictly Western Europe, than full size SUV sales are not even noticeable, and even then, most of them are diesel models.
If GM is only focusing on North America, than that is being narrow-minded and short sighted again. GM needs to focus on the worldwide market, not *just* North America. It’s funny though how GM’s corporate culture allows it so simply “give up” in markets like Japan, whereas if you look at Toyota’s corporate culture, when they fail or do bad, they only try harder until they achieve success.
How they entered the truck and SUV market is irrelevant. The point is that they entered it, and, in the case of Toyota, most of its growth over the last decade has been fueled by increasing sales of trucks and SUVs.
Wrong, as I have pointed out. Toyota’s top selling models right now in order are: Camry, Corolla, Tacoma, Sienna, and Rav 4. The Tacoma is a midsize/compact truck, a market where Toyota has been in a long time for, before the SUV craze hit. The Rav 4 is more of a car than truck or SUV. So with it’s top 5 selling models in the US, only the Tacoma is actually considered a truck, and even then, it’s a midsize/compact truck, a segment that Detroit automakers have almost given up on. And in Canada, Toyota’s top selling model is the Yaris, along with the Camry and Corolla.
And their well-rounded lineup includes lots of SUVs and trucks, and is about to become heavier – literally – with trucks when the new Tundra begins pouring out of the San Antonio plant in Texas.
The Tacoma, Tundra, Land Cruiser and Seqouia are “lots of models”? Land Cruiser sales are almost non-existent. If they dropped to zero, Toyota wouldn’t even worry, as the LC is a big seller worldwide, because of it’s off-road capabilities. Plus, most LCs sold worldwide are diesels. The Highlander, Rav 4 are not trucks nor SUVs: they are car-based crossovers.
Even with a huge marketing push, and very competitive product, Toyota is worried about the new Tundra and Sequoia being “too big”. It’s part of Toyota’s corporate culture to constantly be worried. Meanwhile at GM, everything is a-ok, and if Bob Lutz says that their new SUVs and trucks will save GM, then it must be true! Lutz is confident about GM’s new trucks and SUVs. Confident about a shrinking market it seems.
American cars have not been popular overseas since the end of World War II. GM and Ford have preferred to build vehicles tailored specifically for the market – hence their ownership of subsidiaries in Europe, South America and Australia.
The idea that they should not focus on SUVs because they are largely popular in the North American market does not square with reality. Very few American vehicles have been popular overseas since the early 1960s.
Incidentally, you are aware that one of the most popular American vehicles in Europe is…the Jeep Grand Cherokee?
And thus my point is further proved. Domestic cars haven’t been popular since the 1960s. This is a huge point, and one that is not addressed enough. I wonder why this came to be. Could it be short sighted and ignorant management? Not worrying enough about the competition?
The long-term trend is for customers to trade out of big SUVs into crossovers…like the Saturn Outlook, Buick Enclave and GMC Acadia (and Ford Edge).
Oh, here I was thinking people were trading their SUVs into crossovers like the Highlander, Lexus RX, Rav 4, CRV, and Pilot, just to name a few. And this has been going on for years now, ever since Toyota and Honda pioneered the crossover segment with the Rav 4 and CRV, and started a new trend.
Even with crossovers, GM has made too many variations of the same vehicles, and all of these crossovers are FULL-SIZE. It remains to be seen how the market will react to vehicles that are as big, if not bigger in exterior dimensions to the Tahoe and Yukon.
First, I was referring solely to the American market.
Second, Toyota’s growth has come from crossovers, SUVs and trucks. Csaba Csere wrote a recent editorial about this in Car & Driver. It is NOT from increased sales of the Camry and Corolla.
I beg to differ. On a worldwide scale, Toyota’s sales have almost exclusively come from increased car sales. In Canada, most of Toyota’s increased sales have come from the Camry, Corolla, and Yaris.
Over the past decade, Camry and Corolla sales have increased by a large amount, and they are Toyota’s top two North American sellers.
The Cobalt and the Malibu are good in the interior department. The problem is that the competition is better.
Sorry, but there are no really bad cars available today. I learned to drive on a 1973 AMC Gremlin, and remember when the competitive choices were a Chevy Vega, Pontiac Astre, Datsun F-10 and, in the early 1980s, the Chevy Chevette, American-made VW Rabbit, Renault Alliance and LeCar and Fiat Strada.
Do not talk to me about bad cars – including bad interiors – until you’ve driven one of those (or at least sat in one), which were terrible cars even in the context of their time.
Everything is relative, and must be viewed in context. You cannot pretend you live in a bubble.
The Cobalt and Malibu, in context with the class leaders and the segment, have average-at-best interiors. The Malibu more-so than the Cobalt. Bob “the Putz” Lutz himself admits to the mediocrity of the Malibu’s interior.
By themselves, they might not be bad interiors, but again, we do not live in a bubble.
The propaganda is running full-blast. You believe what you want to believe finger. Black-and-white, absolutes, extremes … easy to think in those terms, too bad they don’t reflect reality.
KixStart: By the way, I rented a Cobalt and achieved a whopping 30mpg in very nearly 100% freeway driving at no more than the posted limits of 65 to 70mph. That’s mediocre. And the interior was crappy (although, I must admit, the back seat had fair legroom… but so did my ‘82 Cavalier, which achieved 40+ on the highway at similar speeds).
My 1999 Civic EX sedan (with automatic) achieved about the same results…so I don’t know if the Cobalt is that out of line.
And the Cobalt is one of the smaller sedans that can actually get out of its own way on the freeway, and can cruise comfortably at 75 mph (which is the de facto speed limit around here; most people ignore the posted limit of 65 mph).
Most of us aren’t going to toddle along at today’s ridiculously underposted speed limits to save a few gallons of gas.
And Toyota has a different cost structure than GM, so it can afford to build a wider variety of products, as it can make money on them. It isn’t supporting an army of retirees, it isn’t unneeded keeping plants open because of a UAW contract, it designed its employee health benefits to keep costs under control, and it isn’t constrained by the UAW when it comes to firing deadbeat employees.
Granted, those aren’t the sole reasons for GM’s problems. There has been a dearth of creative thinking in the executive suites. But its cost structure DOES constrain it in certain ways.
Problems, most of which are a direct result of bad management at GM. Now their mistakes of the past are coming back to haunt them.
I mis-typed when I included Camry in the Cobalt EPA post, but now that you mention it, lets talk about Camrys EPA ratings.
Apples to Apples, Camry Auto V6 vs Malibu V6 vs Impala V6
Camry V6 22/31
Malibu V6 22/32
(a comparable size car, with more interior room in most specs, including 1 more cu. foot of trunk space.)
Impala 21/31
(a bigger car with more room in almost every measurement and over 4 cu. feet more trunk room.)
Who has the efficient package here?
From Toyota.com and Chevrolet.com
EPA passenger volume for the Camry: 101.4 cu-ft
Malibu: 101.1
Sorry, the Malibu has less interior room in most specs.
The Malibu 3.5 3500 V6, achieves 22/32 EPA mileage, and provides a whopping 217HP and 217 lb-ft torque. Compare this with the V6 Camry that gets 22/21 EPA, which provides 268HP, and 248 lb-ft torque. The Malibu 3.9L V6 gets a dissapointing 18/26 mileage, and only puts out 240HP, 240 lb-ft torque.
And typical, this went off-topic. Let’s get back to the topic of the Cobalt’s fuel economy.
Toyota loses money on every one they sell, but gains PR.
And you know this as a fact?
Johnson;
No. That’s been the conventional wisdom. But do you know the opposite as true? As there is no way to prove it either way, let’s forget I even said it.
However, your figures prove that Malibu and Camry are comparable size cars. I only pointed this up because most TTAC enthusiasts would scoff at my including it, preferring to think of it as comparable in size to Impala. Wrong.
Camry 101.4 cu ft versus Impala at 104.5 cu ft.
Camry 22/31 versus Impala 21/31
And Impala has more interior room in EVERY dimension except rear headroom (tie) and rear legroom (by .7 of an inch)including that much larger trunk.
I know becasuse I rented a Camry for 10 minutes in Florida until we found there was no way to put my families luggage in it. I asked them to sub a bigger car, but they wouldn’t without charging more. The atttendant did let me take an Impala, saying “this happens alot, the Camry is smaller than they say”. The impala swallowed my family of five and all luggage with little problem.
And look at RFs letter. The topic is his contention that GM s GMT900 SUVS are flops (disproved in many subsequent posts with no direct answer o the sales figures). How far off topic are Cobalts EPA ratings?
Geeber,
While advertising is not effective in all ways, it is actually effective in shaping attitudes. GM is well aware of this. If they didn’t think advertising didn’t work, John Mellencamp wouldn’t be on TV wailing about “our country” and “our truck.” But you are correct that GM has put too much faith in advertising to sell people cars that they do not need.
Wrt to Toyota sales, you’re right, the Echo is gone, as is the Celica and MR-2. However, the Scions are not really a replacement for the latter two, the tC is not the same kind of car the Celica was (too bad). The fact remains that Toyota’s growth does include big gains in passenger vehicles. And their product line is big enough that they offer three models which get 40mpg or better. Most of their top selling vehicles are passenger cars.
The large/small vehicle mismatch in accidents is real. However, the increase in size of the behemoths is pulling up the minimum size of vehicle people are willing to drive. And the smaller cars are getting better safety equipment, too. It’s still not a fair fight and the behemoths aren’t driven by people who take their extra size and weight seriiously. This is a foreseeable consequence. Some enterprising lawyer is going to go after GM on these grounds at some point. The suit is probably unreasonable even by my standards but I’ll be cheering the guy on, anyway. I no longer drive an Aspire because it’s not worth the risk; a FS SUV t-boning me would hit me in the head with the bumper. An Expedition – literallyl with the soccer mom on the cellphone – blew through a stop sign on my left as I sat and watched. I thought about laying on the horn as she went by but there would be a significant risk that, startled, she’d swerve into the oncoming traffic and kill someone else. Letting the kids drive the Aspire was out of the question. It’s an arms race and GM knows it full well
GM built it’s own cost structure, it can lie in it. They agreed to a large number of obligations that they didn’t bother to fund. That’s practically fraud. It mystifies me that they don’t jump on board with a national health care plan; it would help save their bacon.
Finger, yes, I can calculate fuel economy. On the highway, I can get 30mpg out of my ’99 Rav, which has the aerodynamics of a brick. 30mpg in a compact is mediocre. If I drive at more moderate speeds, I can get 28mpg out of my ’01 Sienna.
Ucanthandlethetruth, I am glad to see GM has moved AFM into more engines. It’s still mediocre fuel economy, though (27 hwy). They do have bragging rights there over Toyota (but not over Honda).
But I’ll believe in all these miracle hybrids when I see them. Ford, at least, has been building them for a while. And when these GM hybrids are available, do I want a GM first model-year hybrid? I could get a hybrid from a manufacturer with several years experience building hybrids if I go across town to the Toyota, Honda or Ford dealer. You know, if you get to the dance late, sometimes all the girls already have partners.
Kixstart;
Not only is GMs Active Fuel Managment on all the GMT900s with the 5300 V8, it is also standard on the 3.9l, 233 hp V6 in Impala and Monte Carlo, with an EPA ratings of 20/29 in an upper-mid size vehicle.
That’s great – finally GM has done something about fuel consumption in the guzzler fleet. When can I have that in a Malibu? I wouldn’t mind getting 4-cylinder fuel economy with 6-cylinder performance. However, I’m not buying 6-cylinder fuel economy with 8-cylinder performance that I don’t need.
Now who needs to sharpen their reading comprehension?
Kixstart:
I’m beginning to think you like the Malibu. Looks like AFM is all that’s holding you back. I’ll let you know when it’s available.
Once again, Impala, 3.9l AFM, 20/29 (not 27), upper midsize car. Pay attention.
Ucanthandlethetruth, I got the 27mpg figure from Edmunds (just double-checked it). Perhaps they’re mistaken. But 29 isn’t what I want. I want to break comfortably into the 30’s.
As for the Malibu, you’re right. For me, the Malibu is the most attractive Chevy product. A decent-sized sedan is what I want and the Camry is slighly larger than I reallly want. It helps that I find the Malibu more attractive (not a huge consideration but a help in decision-making). If it offered better fuel economy, I would have given it more consideration this summer when I bought a car. With rebates and 0% financing, perhaps it would have been a deal. I bought a used Toyota instead.
However, when I go to purchase my next car (maybe late 2007/early 2008), Honda is supposed to have their 2.xL I4 diesel available here. Euro versions of this in the Accord have been reported to get 90mpg. Even if that’s imperial gallons, that’s amazingly good. You know Toyota’s going to match that, somehow. Where will the Malibu be? Diesel V6 with AFM? C’mon, GM, you can do it!
I could swear the text editor is mangling my text. Maybe it’s just late in the day.
It’s always possible that a clean-diesel will make its way into the next-gen Malibu. Probably not, but you never know. Certainly not in time for your next purchase in 2007/2008.
GM is heading first to the hybrid promised land, at least until they get to the fuel cell promised land.
And it is 29. I think the 2006 without afm was rated 27 so it’s most likely where that figure came from.
Methinks you guys should just arm-wrestle for this one. :)
Johnson: Toyota has continually made billions in profit each year by selling mainly compacts, sedans, and a few crossovers here and there. It was only recently that they got into full size SUVs and trucks.
And they are have been moving aggressively into full-size SUVs and trucks, which was my point. If GM is stupid for catering to this market, why is Toyota so hot to enter it? They aren’t building that big plant in Texas to turn out the all-new, larger Tundra because Toyota executives like the climate.
Johnson: Stop thinking in absolutes. What most of us (and the rest of the industry) have criticized GM and Detroit for is their narrow, short sighted thinking regarding the market, and them putting too much focus into SUVs and trucks. That’s a big reason why they’re in the predicament that they are today, because they must now adapt to a market where fuel efficient cars and crossovers are gaining in popularity, yet they don’t have much to show for it.
Ford, GM, and Chrysler still heavily rely on full-size SUVs. Toyota and Mercedes do not.
Sorry, but I’m not the one thinking in absolutes, my friend. It was KixStart that castigated GM for even building these vehicles in the first place, and has, at various times, either suggested that people really don’t want them, and are tricked by advertising into buy them, or that people do want them, and GM should do the right thing and not build them.
My point is that it makes sense for GM to build them, and it is not the only company to build them. Hence, the reference to large SUVs made by Mercedes and Toyota.
Incidentally, I never denied that GM ignored its passenger cars. That’s why I posted this previously: Did GM (and Ford and Chrysler) neglect passenger cars in favor of light trucks? Absolutely!
Johnson: If GM is only focusing on North America, than that is being narrow-minded and short sighted again. GM needs to focus on the worldwide market, not *just* North America. It’s funny though how GM’s corporate culture allows it so simply “give up” in markets like Japan, whereas if you look at Toyota’s corporate culture, when they fail or do bad, they only try harder until they achieve success.
If you are arguing that GM should make vehicles in North America that can be sold overseas, and therefore should not waste as much effort on full-size SUVs, which largely appeal to Americans – sorry, but no.
GM has subsidiaries across the globe – Opel, Vauxhall, Holden, Daewoo (which makes rebadged Chevys for Europe and Asia) – that supply local markets with vehicles specifically tailored for those conditions. It is not going to export vehicles from North America in large quantities any time soon. This has not been its strategy for over 50 years, and it is not going to change, and it should not change.
Johnson: Wrong, as I have pointed out. Toyota’s top selling models right now in order are: Camry, Corolla, Tacoma, Sienna, and Rav 4. The Tacoma is a midsize/compact truck, a market where Toyota has been in a long time for, before the SUV craze hit. The Rav 4 is more of a car than truck or SUV. So with it’s top 5 selling models in the US, only the Tacoma is actually considered a truck, and even then, it’s a midsize/compact truck, a segment that Detroit automakers have almost given up on. And in Canada, Toyota’s top selling model is the Yaris, along with the Camry and Corolla.
First, before accusing me of being wrong, it may be a good idea to actually answer the correct question.
The question isn’t which Toyota vehicles sell the best. It is which vehicles have largely fueled its sales increase over the past decade.
Here is Csabe Csere, Car & Driver Editor-in-Chief, in the September 2006 issue:
“Trucks were only 26.7 percent of the 1,083,709 vehicles Toyota sold in 1995. By 2005, Toyota had more than doubled its U.S. sales to 2,260,296 vehicles, and of this much larger total, trucks had INCREASED to 43 percent. (emphasis added) Put another way, Toyota sold more than three times as many trucks in 2005 as it did in 1995.”
This sounds to me as though trucks have largely fueled Toyota’s sales growth over the past decade.
If you disagree with this, please take it up with Mr. Csere. In the meantime, given his obviously greater knowledge of the automotive industry, I’m taking his view as the correct one.
You may find a subscription to Car & Driver to be helpful for future discussions.
Johnson: The Tacoma, Tundra, Land Cruiser and Seqouia are “lots of models”? Land Cruiser sales are almost non-existent. If they dropped to zero, Toyota wouldn’t even worry, as the LC is a big seller worldwide, because of it’s off-road capabilities. Plus, most LCs sold worldwide are diesels. The Highlander, Rav 4 are not trucks nor SUVs: they are car-based crossovers.
Given Toyota’s smaller product range, that constitutes a decent percentage of the model range.
Let’s compare Toyota, to Chevrolet:
Tacoma = Colorado
Sequoia = Tahoe
Land Cruiser = Suburban
Tundra = Silverado
The one Chevrolet truck that Toyota doesn’t match is the Avalanche. So, it seems to me that Toyota has a fair number of trucks in its lineup.
Now, Toyota offers fewer BADGE-ENGINEERED versions of its trucks and SUVs. This is because it has fewer divisions. GM has too many divisions, but that is different from saying that GM offers too many SUVs.
Johnson: Even with a huge marketing push, and very competitive product, Toyota is worried about the new Tundra and Sequoia being “too big”. It’s part of Toyota’s corporate culture to constantly be worried. Meanwhile at GM, everything is a-ok, and if Bob Lutz says that their new SUVs and trucks will save GM, then it must be true! Lutz is confident about GM’s new trucks and SUVs. Confident about a shrinking market it seems.
This question isn’t whether the vehicles will save GM – I’ve already said that they won’t.
So I don’t know who you are arguing with here, but it isn’t me.
The question is whether GM should have made them in the first place.
Johnson: And thus my point is further proved. Domestic cars haven’t been popular since the 1960s. This is a huge point, and one that is not addressed enough. I wonder why this came to be. Could it be short sighted and ignorant management? Not worrying enough about the competition?
You’ve proven nothing here. I’ve mentioned them before, but you are aware of GM’s subsidiaries around the globe – Opel, Vauxhall, Holden, etc.? GM isn’t going to make vehicles for export from North America when it has these companies to supply local markets with vehicles tailored to local needs and desires.
Johnson: Oh, here I was thinking people were trading their SUVs into crossovers like the Highlander, Lexus RX, Rav 4, CRV, and Pilot, just to name a few. And this has been going on for years now, ever since Toyota and Honda pioneered the crossover segment with the Rav 4 and CRV, and started a new trend.
And GM has the Saturn Vue, Chevrolet Equinox and upcoming crossovers. And Ford has the Escape/Mariner and Freestyle. So it is not as though they have completely ignored crossovers in favor of SUVs.
Johnson: Everything is relative, and must be viewed in context. You cannot pretend you live in a bubble.
Yes, that was my point. Cars were built before 1995…
Johnson: The Cobalt and Malibu, in context with the class leaders and the segment, have average-at-best interiors. The Malibu more-so than the Cobalt. Bob “the Putz” Lutz himself admits to the mediocrity of the Malibu’s interior.
By themselves, they might not be bad interiors, but again, we do not live in a bubble.
In this day and age, average is still good. The gap between “good” and “best” is not as big as it used to be. In the 1970s, moving from a Gremlin to a Civic was like crossing a chasm in ergonomics, build quality, materials quality and style.
The gap between a Cobalt and a Civic is not nearly as large.
Historical perspective is wonderful thing. Come with me to the various auto shows at Carlisle, or the big Antique Automobile Club of America (AACA) event in Hershey, and I’ll help you to gain one when it comes to cars.
Johnson: The propaganda is running full-blast. You believe what you want to believe finger. Black-and-white, absolutes, extremes … easy to think in those terms, too bad they don’t reflect reality.
You must be projecting on to me. Try again.
KixStart,
When you find proof that the fatality rate per 100 million vehicle miles driven has increased in tandem with increased SUV sales, let me know. Until then, I don’t waste much time worrying about theories, and neither should anyone else.
Geeber, I did not say the fatality rate has increased, I’m saying it is disproportionately borne by people driving small cars and that part of the reason for that is that some cars are just pointlessly large and the ones that end up driven by people with no appreciation for Newton’s laws and little common sens (and there’s no special licensing requirement), these are a disproportionate danger.
I do not fault GM for building them in the first place, I fault GM for emphasizing and encouraging them.
I’ll state the obvious, and maybe we can get some resolution here, rather than argue over the Malibu’s mpg per inch of rear legroom.
1. Question: Has Toyota gained sales in big trucks or small cars? Answer: Yes to all. They are selling Tacomas and Rav4s and Yarises and bBs and Sequioas, etc. They are selling everything they can produce and are constantly expanding capacity.
2. Question: Does GM make world class product or garbage? Answer: Yes again. The Silverado, Tahoe, Aura and Acadia are at/near the top of their respective classes and are worth considering if that’s your cup of tea. The Relay, Rendezvous, Aveo and Trailblazer are not.
3. Question: Is GM stupid for selling big SUVs? Answer: No, they are only filling market demand. OK, Robert, you’re right, they are slightly over-filling demand (77 day inventory vs. norm of 60) and need to slow the factory a bit. Maybe some people are foolish for buying vehicles with more capability than they need, but since I’ve never used the pass-through between my trunk and the back seat, I won’t throw the first stone on that debate.
4. Question: Then why *is* GM stupid? Answer: I’ve thought about it, and Robert is right. GM is stupid for its half hearted attempts in markets it should OWN. To date, GM has failed to marshal its considerable resources to attack market segments including B-class (Aveo?) hybrid (Vue?) and, frankly, small and midsize affordable sedans. Yes, that means Cobalt and Malibu. Just recently, GM came to realize that its overseas subsidiaries engineer better platforms and are realigning to leverage those capabilities. Way too late.
I want to defend GM as much as the next guy, but if you truly believe the Malibu, Cobalt and Aveo are world class, that just means you’ve never been to a Honda dealership.
ya know whats fun? reading these comments from the bottom up.
>
Sherborn:
I don’t think you are missing anything. We are probably looking at the same basic facts and drawing different conclusions. Here are a few more facts that might make you question GM’s future outside of a BK court.
Cash and Marketable Securities @ 12/31/04 per GM’s Annual Report = $58 B
GMAC, Isuzu, Suziki + Other Asset Sales since 12/31/04 = $12 B (conservative estimate without digging)
Total Cash Available = $70 B
Cash and Marketable Securities @ 9/30/06 per GM’s 8K = $23 B (reflects proceeds of GMAC sale on a retroactive basis)
Cash Burned During 9 Quarter Period = $47 B
Average Cash Burn per Quarter = $5+ B
All figures pulled from GM’s posted financial statements per GM’s website. These are historical facts that are not subject to spin and distortion. Staggering value destruction.
As I mentioned in my earlier post, GM provides no cash flow guidance. All we know is that GM continues to maintain that cash burn remains a big problem. My cash burn estimates were simply guesstimates, but if the next 9 quarters look anything like the prior 9 I will just about guarantee you that GM will be in a BK court.
GM does indeed have some other assets that have some market value, but the only thing I see on your list of significant value in the billions is probably the other half of GMAC. And I doubt the sale of the other half will produce $13 billion in cash to GM. GMAC’s business has deteriorated badly since the original deal was struck. And by the time GM decides that selling the other half of GMAC is necessary to stave off BK, GM will be the classic wounded animal and won’t likley be able to command anything other than “we know you need the money” bids. GM makes big sales gains in China but does not make much net income in China, therefore the value of GM’s China ops may not be as great as you think. But instead of quibbling about values, the more important global point is that GM’s board is not going to watch forever as the NA auto operations consumes every decent and saleable asset that GM owns. At some point the board will throw the NA auto ops into BK to cut the costs and liabilities to the point where the remaining NA auto business can make a profit. I just don’t see the board feeding the UAW legacy cost machine until nothing is left of GM other than a cash flow negative NA auto business that exists simply to siphon off cash flow and value from other parts of global GM that do work economically. I see the board giving this mgmt time to work with the union on an a new package in 07 that allows mgmt to lay on the table a credible cash flow projection that shows NA auto ops as cash flow positive. But if the UAW makes only minor givebacks and the projection is for more cash burn then I see the board taking the NA auto ops into BK — cut the leg off to save the remaining body. How much will active workers and retirees have to give so that the NA auto ops can cash flow? I think more than the UAW will want to give voluntarily. Just one man’s view, but I don’t see this ending well based on what the actual numbers from the past 9 quarters tell us.
windswords – sorry for mis-attributing a quote to you earlier
@ Geeber
“Trucks were only 26.7 percent of the 1,083,709 vehicles Toyota sold in 1995. By 2005, Toyota had more than doubled its U.S. sales to 2,260,296 vehicles, and of this much larger total, trucks had INCREASED to 43 percent. (emphasis added) Put another way, Toyota sold more than three times as many trucks in 2005 as it did in 1995.”
This sounds to me as though trucks have largely fueled Toyota’s sales growth over the past decade.
If you disagree with this, please take it up with Mr. Csere. In the meantime, given his obviously greater knowledge of the automotive industry, I’m taking his view as the correct one.
Three times as many trucks in the U.S. – geeber. Toyota is a worldwide company, and their total sales in 2005 were 8,1 million plus vehicles. Outside the U.S. trucks are a smaller share of their total and it is the appeal of their smaller and medium sized vehicles in these markets that is boosting their growth.
The fact that the U.S. has been truck-crazy is part of their calculations. (For the record, I’m a rural kid and perfectly understand why large portions of the U.S. are best served by trucks. My criticism of GM Truck Mania strikes at those portions of GM’s effort that seeks to sell trucks and SUVs to city people.)
In 2005 cars began moving in on truck sales in the U.S, turning a trend. (Also, a lot of the “trucks” sold are reported as such due to regulation. The PTCruiser is a truck …)
GM should be as nitpicking about quality as you and finger are about minor items here! :-)
Sure toyota sells a lot of trucks. Many of them are four cylinder and they define the lighter duty market in cars and trucks anyhway. The difference with toyotas, they don’t make a lot of money on trucks, lose it on their cars and have a negative p&l quarter after quarter. If you make money on everything you sell, then the mix of cars and trucks is not so threatening to you. It’s like this, if big pickups and suv’s sales collapse, toyota has to find another use for the new Texas truck factory. If this happens GM and Ford are gone.
There’s trucks and then there’s trucks. The Sienna is their top-selling “truck.” The Rav4, originally built on a Corolla platform and not a whole lot bigger now, is a “truck.” The Highlander, a “truck,” is still available with an I4, weighs about the same as a Camry and is rated for 28mpg, hwy.
Sure, Toyota’s truck business has grown but that includes these “trucks,” none of which existed in the initial comparison year of 1995.
geeber
Fatality rates have been falling, almost continuously, for 70 years. Looking at a graph of deaths / 100,000 miles vs. year, you will see a relentless decline starting in~1920.
Death had declining trend when prohibition was started, when it was ended, when 55 mph was imposed, when it was repealed, etc, etc. Declining trend existed when cars got lighter after the oil crises, and as they got heavier during the recent truck/SUV boom.
I think overall cars have got more safe, roads have gotten better, and there is maybe less drunk driving. But I think the roads would be even more safe with less “big iron” on the road.
There have been studies showing that when truck and truck-based SUV’s collide with cars the fatality rate in the cars is much higher. This partly from the large mass, but also from much stiffer structure and higher impact points.
The family that chooses a 6000 lb expedition “for safety” achieves about the same level as safety as a minivan, but if they hit a car they greatly increase the damage. Where better brakes, tires etc have *everyone’s* safety simply trying to out-mass the next driver is not good for everyone.
I don’t want to sound rabidly anti-SUV. An SUV will do things a minivan can’t (better off road, tow, burn more gas). Also I don’t think that SUV drivers are any better or worse on average than other drivers.
Two bloggers were writing above the pro-gm phile says to the anti-gm guy, even if gm built a better car than toyota or honda you wouldn’t buy it until it proved it self over the long haul for longevity and resale. This says a lot, if some of the gm cars are better than the japanese who will wait for the verdict to come in? Does gm have say a five year time frame for the public to test drvie their products in the real world andthen try and trade them in. Back in the historic sixties and seventies this is what the japanese builders had to do until word of mouth and strong resale values allowed the products to sell themselves, and do it without huge discounts.
thx_zetec:
Also I don’t think that SUV drivers are any better or worse on average than other drivers.
around here, the suv drivers think they are invincable in bad weather, and take stupid chances. Its the SUV’s that are stuck in the snow, not the sedans.
Geeber: Geeber, I did not say the fatality rate has increased, I’m saying it is disproportionately borne by people driving small cars and that part of the reason for that is that some cars are just pointlessly large and the ones that end up driven by people with no appreciation for Newton’s laws and little common sens (and there’s no special licensing requirement), these are a disproportionate danger.
Over 56 percent of small car fatalities involve collisions with either another small car, or a roadside object, (trees, street lights, etc.).
It is not SUVs endangering the drivers of small cars.
You may have better luck launching your hypothetical lawsuit against builders of small cars.
Geeber: I do not fault GM for building them in the first place, I fault GM for emphasizing and encouraging them.
A distinction without a difference.
KixStart: Sure, Toyota’s truck business has grown but that includes these “trucks,” none of which existed in the initial comparison year of 1995.
And that was my point – and the point of Mr. Csere. Despite the effort to play up Toyota’s “green” credentials – an effort pushed by Toyota and happily supported by certain members of the media – most of Toyota’s sales growth in the U.S. has come from additional truck sales, NOT hybrids. And Toyota is pushing for even MORE truck sales with the construction of the new Tundra plant in San Antonio.
If Toyota could sell 900,000 Tundras, and an additional couple hundred thousand full-size SUVs based on the same platform, it would do it – green credentials be damned.
Stein X. Leikanger: Three times as many trucks in the U.S. – geeber. Toyota is a worldwide company, and their total sales in 2005 were 8,1 million plus vehicles. Outside the U.S. trucks are a smaller share of their total and it is the appeal of their smaller and medium sized vehicles in these markets that is boosting their growth.
I am referring to Toyota’s growth in the U.S. market, not the world market. GM’s full-size SUVs and pickups are largely sold in North America, and will continue to be sold almost exclusively here.
In some quarters, GM is being castigated for even building full-size SUVs in the first place. The growth in Toyota’s light truck sales over the past decade in the U.S> is the relevant comparison.
Outside the U.S., almost the same could be said about GM – trucks are a much smaller share of its total sales, and it relies heavily on smaller and medium-sized cars for sales.
thx_zetec: If SUVs were so dangerous to other vehicles, it would show up in higher fatality rates. Their negative impact would simply overwhelm other safety efforts.
Light trucks’ percentage of new vehicle sales has doubled since 1978…while the fatality rate has declined by half during that same time.
Studies are interesting, but its real-world results that count.
I remember hearing the cries of doom when the 65 mph national speed limit was repealed in late 1995. Why, if a driver crashed into a bridge abutment at 80 mph, the chances he or she would be killed would soar!
Except that…people weren’t crashing into bridge abutments at 55 mph, 65 mph or 80 mph.
If people want to criticize GM management for making stupid decisions, missing numerous market shifts over the past 30 years, putting a happy face in its press releases, and using fleet sales to pad its sales totals, thus giving a misleading picture of its vehicles’ success – fine. I agree.
But the criticism has to be fair, and accurate. GM’s big SUVs and pickups are important products, and it needed to make them over because they were outdated and dealers need them, and it is not the only auto maker making a big play for this market.
Yes, Mr. Leikanger, I am stickler for accuracy – along with a stickler for FAIR criticism. I want to read criticism deeper than, “GM sucks; they are singlehandedly ruining the environment; Bob Lutz is an out-of-touch old fogey; anyone who buys a Cobalt is an idiot” etc., etc.
(In fairness to TTAC and Mr. Farago, this site does provide deeper commentary in its articles and editorials, which is why I check this site daily).
Geeber, that was most certainly a distinction with a difference.
I have no problem with GM building the fullsize SUV. There is certainly a class of people that need such a vehicle. To build a vehicle to meet their needs is a reasonable way for GM to make some money.
I fault GM for shaping consumer desire to meet GM’s own needs.
At risk of sounding obnoxious, there’s a war on. Several, really. We are at war with our own climate – and surrender is the best approach to that. We are also at war because of oil. Victory is essential there but our thirst constrains our choices.
GM will wave the flag in their ads but they will not work to enhance the real security of the nation. That’s hypocritical.
As far as large vehicle/small vehicle collisions go, you’re right in the limited view you take and you’re ignoring the other aspects of the problem. The fatalities are disproportionately borned by the small vehicle operator. It’s simple. The large vehicles, increasingly, exist because GM builds them.
Heck, GM builds them even though they have to cut the price dramatically and offer 0% to deadbeats to move them. GM, in my view, probably does this to help keep the large SUV alive in the public consciousness in the hopes that they can return to making $10K per unit on them.
And, yes, “Toyota ships more ‘trucks’ than in ’95” is true, but only in a narrow sense, as Toyota offers several “trucks” that suck about as much gas as GM’s mid-size cars.
GM touts the Outlook as a “crossover ute.” It’s 5Klbs! What’s it crossing to and from? Between a fullsize SUV and a not-quite fullsize SUV?
One wonders if GM will make money on the Outlook, even with it’s road-hugging weight. The Rav4, in spite of – or because of – it’s compact proportions, is flying off Toyota lots. Want a V6 Rav? The line forms over there.
GM’s pursuit of fullsize trucks and SUVs, even the ones that they claim are something else, is bad for the country, bad for other drivers and it’s even bad for GM.
1) GM’s pursuit of fullsize trucks and SUVs, even the ones that they claim are something else, is bad for the country, bad for other drivers and it’s even bad for GM.
2)I have no problem with GM building the fullsize SUV. There is certainly a class of people that need such a vehicle. To build a vehicle to meet their needs is a reasonable way for GM to make some money.
Can you believe that these paragraphs came from the same post?
Make that “GM’s all-out pursuit…” which is what I should have written.
I have no problem with GM building the full-size SUV – and pickup – for those who need them. However, GM no longer builds the full-size SUV and pickup for people that need them. They build full-size SUVs and pickups for people they can con into thinking they need them.
Bad for the country, bad for other drivers and the numbers tell us it’s bad for GM.
Here’s another thought for you; economic power is important to our national security. Japan understands this and their automakers are building increasingly sophisticated vehicles and building them all over the world. GM North America is building ever-larger vehicles that are wanted nowhere else in the world. Not in our best interest, even if they are waving the flag in our face. Far better for GM to build something here that they could readily export (especially with the falling dollar – a good GM North American car would look increasingly attractive overseas), or to develop vehicle technologies they could implement in automobiles built overseas. They aren’t doing that, now, are they?
KixStart: I have no problem with GM building the fullsize SUV. There is certainly a class of people that need such a vehicle. To build a vehicle to meet their needs is a reasonable way for GM to make some money.
I fault GM for shaping consumer desire to meet GM’s own needs.
GM didn’t shape anything. Blaming advertising is the last refuge for both incompetent business executives and critics who can’t stand that large numbers of people are using their free will to act in ways that said critics don’t like.
And you still haven’t explained how, if GM can manipulate the public into buying vehicles they don’t need, why it doesn’ t use this mysterious ability to encourage 400,000 retail customers to buy Impalas at full sticker, and another 300,000 retail customers to sign up for Cobalts.
That would end the need for the Deathwatch series.
KixStart: At risk of sounding obnoxious, there’s a war on. Several, really. We are at war with our own climate – and surrender is the best approach to that. We are also at war because of oil. Victory is essential there but our thirst constrains our choices.
At war because of oil? Last time I checked, Middle Eastern nations would sell their oil to anyone who wanted it. The U.N. sanctions PREVENTED Saddam Hussein from selling his oil. He WANTED to sell it.
The current mess in the Middle East leaves plenty of room for criticism, but if we were really only after the oil, we could have encouraged the U.N. to drop the sanctions and the oil would have flowed from Iraq.
KixStart: As far as large vehicle/small vehicle collisions go, you’re right in the limited view you take and you’re ignoring the other aspects of the problem. The fatalities are disproportionately borned by the small vehicle operator. It’s simple. The large vehicles, increasingly, exist because GM builds them.
At the risk of being repetitive, I’ll say it again: When you have proof that accidents and fatalities are increasing because of SUV collisions with small cars, let me know.
Please reread my previous post, where I showed that fatalities that are disproportionately borne by small car drivers come from collisions with other small cars and roadside objects.
Until then, you have nothing except a bunch of theories, along with what you think you know, all of which are profoundly uninteresting to informed drivers.
KixStart: Heck, GM builds them even though they have to cut the price dramatically and offer 0% to deadbeats to move them. GM, in my view, probably does this to help keep the large SUV alive in the public consciousness in the hopes that they can return to making $10K per unit on them.
No, they do this to keep factories running, because they have to pay UAW members whether they work or not, so they might as well generate SOME revenue from the factories and workers.
KixStart: And, yes, “Toyota ships more ‘trucks’ than in ‘95″ is true, but only in a narrow sense, as Toyota offers several “trucks” that suck about as much gas as GM’s mid-size cars.
The question was – what is fueling Toyota’s rise in the U.S.? And the answer is – largely trucks, despite the initial attempt by you and other posters to deny this.
KixStart: One wonders if GM will make money on the Outlook, even with it’s road-hugging weight. The Rav4, in spite of – or because of – it’s compact proportions, is flying off Toyota lots. Want a V6 Rav? The line forms over there.
And you are aware that with each redesign of the RAV4, it has grown in size? I guess smaller isn’t always better, even at Toyota.
Kixstart: GM’s pursuit of fullsize trucks and SUVs, even the ones that they claim are something else, is bad for the country, bad for other drivers and it’s even bad for GM.
And somehow the roads are safer than ever and even the air is cleaner than it has been since the Industrial Revolution really took hold in this country after the Civil War.
As I said, a historical perspective is a wonderful thing…
KixStart: I have no problem with GM building the full-size SUV – and pickup – for those who need them. However, GM no longer builds the full-size SUV and pickup for people that need them. They build full-size SUVs and pickups for people they can con into thinking they need them.
So, after all of those posts, we are now back to having the ABC nanny make sure that SUVs are only sold to people who use them to tow boats?
KixStart: Here’s another thought for you; economic power is important to our national security. Japan understands this and their automakers are building increasingly sophisticated vehicles and building them all over the world. GM North America is building ever-larger vehicles that are wanted nowhere else in the world. Not in our best interest, even if they are waving the flag in our face. Far better for GM to build something here that they could readily export (especially with the falling dollar – a good GM North American car would look increasingly attractive overseas), or to develop vehicle technologies they could implement in automobiles built overseas. They aren’t doing that, now, are they?
This has been explained before – GM is not going to make every platform compatible with every market, and it is not going to export vehicles from North America when it has subsidiaries all over the world that can build vehicles tailored for the local market.
Certain vehicles – such as the Epsilon-based vehicles – can be shared among various continents. But they will be produced in the home market for local consumption.
Other vehicles cannot.
The last time I checked, Toyota’s new full-size truck has been designed specifically for the American market. So GM must be on to something.
Incidentally, the Japanese economy has considerably underperformed the U.S. economy for the past 15 or so years. Their economic power is considerably below ours. Don’t judge the health of the entire Japanese economy by the success of Toyota and Honda.
Personally, I am annoyed by all the dangerous 20 somethings darting around in their small cars. They are yakking on their cellphones, music blasting and darting in and out of traffic.
…at least this is my theory.
First of all there are no rice burner cars getting 40 miles per gallon except for the prius and the insight, maybe a couple of others made in Europe or Korea. The rice burners have the same problem as everyone else, you can’t make bigger fancier cars and increase fuel economy. To do work one has to expend energy which means gas. As for trucks, there are no rice burners that can come close to dodge ford or gm trucks in towing. In fact, a guy at work that just spent a fortune on a new yoyo extended cab pickup is not happy with gas mileage less than what he got in his old blazer. True the 3/4 tons domestic trucks use fuel but they can also tow a house and do it day after day without a any complaint. No nissan or toyota pickup could pull 15,000 pounds over the Sierra Nevada or Siskiyou mountains without problems. I drive them all at work and find ford trucks the most trouble free of them all with gm the best at saving your fuel dollars.