Is it any wonder GM announced another deadbeat deal and cash incentives the day after they reported their long-delayed fourth quarter and year end financial results? Whatever else you can say about GM, you can’t fault their news management skills. If the automaker had revealed the package before the accounts were released, the discounting would have [rightly] be seen as a sign of desperation. Coming hard on the heels of a fourth quarter profit and a reduced year-on-year financial loss, the sale seems part of a successful turnaround strategy. Only it isn’t.
March madness: zero percent financing for up to 36 months and reduced-rate financing for up to 72 months, plus $1k in “customer cash.” The “Spring Sales Event” (for Chevrolet and Saturn) and “Upgrade Event” (for Buick, Pontiac and GMC) excludes Hummer, Caddy and Saab. More importantly, it includes all GM’s GMT900 SUV’s and pickups. In other words, the marketplace has ruled that GM’s Hail Mary pass is unintentional grounding.
On the macro level, the financial experts are beginning to lose faith in GM’s game plan. "For the first time in a long time, I am questioning their strategy," BNP Paribas analyst Brad Rubin told The Detroit Free Press. "The results aren't that great considering everything. It still isn't enough."
True dat. GM has cut its costs to the bone. They’ve sliced an astonishing $6.8b from their expenses. They’ve also butchered their GMAC cash cow (for a paltry $5b initial payout) and sold off everything that isn’t nailed down, including their Arizona proving grounds. The company’s launched a slew of new products. And they’re still losing money in North America.
Forget smoke and mirrors accounting: “special charges” and “net profit.” Don't forget: (especially?) with its former CFO at the helm, General Motors filed its SEC paperwork si x weeks late AND restated its accounts all the way back to January 2002 AND admits that its internal controls on financial reporting are "currently ineffective.” So look at the cash flow.
Scanning backwards, GM’s burned through $3.8b in cash in 2006 and $8.2b in 2005. Scanning forwards, GM CFO Fritz Henderson said his employer would experience “negative cash flow” for the rest of 2007. Looking backwards, GM’s “first quarterly profit since 2004” masks the fact that the North American market didn’t even break even in the fourth quarter, and lost $779m for 2006. Looking forward, the company has, um, shot its wad.
Despite the arrival of the Tahoe, Yukon, Aura, Acadia, Outlook, Silverado and Sierra, GM NA’s fourth quarter revenues fell by $1.2b, while market share slipped to 23.2 percent. U.S. sales tumbled six percent through February ‘07. GM’s CFO says the company has “some impressive models coming,” but does anyone really think that the Astra (imported at a loss), Vue, Malibu, G8, restyled CTS and hybrid versions of the Yukon and Tahoe will be enough to turn around GM’s U.S. fortunes?
“GM’s automotive results are anemic at what we still believe is the peak of the company’s product, pricing and cost reduction cycle,” Banc of America Securities analyst Ronald Tadross told his clients.
So the light at the end of the tunnel is the headlight of an oncoming train. Although it’s increasingly clear we can’t depend on GM for an accurate picture of its cash reserves, even if we accept their $26b figure, that hoard is under mounting pressure. Take off $10b for float just to keep the doors open. Remove $6b – $7.5b for the Delphi payoff. Peel off another bil for the GMAC blowback. And then watch the burn.
The truth is GM has depended on asset sales to maintain its liquidity over the last year or so. That gambit is just about played out. GM can off-load the rest of GMAC, sell its Allison Transmissions unit, and, um, that’s about it. While GM’s overseas operations are the only bright spot in an otherwise bleak picture, the General’s foreign profits can’t save the domestic troops from an ignominious defeat.
Simply put, GM’s North American operations are not sustainable. According to the mavens over at Fitch ratings, “Despite profitability on a reported basis, GM's margin levels remain insufficient for long-term viability given the economic and product cycles inherent in the industry.”
If the United Auto Workers agree to a massive roll-back in their pension and health care benefits this summer, if gas prices slide to the point where GM’s high margin pickup trucks and SUV’s experience an enormous sales surge, if the competition takes a major hit (safety, reliability, something), GM could, conceivably, live long enough to turn itself around. That’s just about as likely as it sounds.
Meanwhile, GM is rolling out its latest national sales campaign, sealing its reputation as the K-Mart of cars. It could be US car buyers’ last chance to pickup a bargain– before all Hell breaks loose.
While the results were not great, or even good, they were better then last year. If they go at this pace a couple years from now they will be turned around, and I do think they have a couple years left in them, even at this pace.
No “Gem” bargains wanted (by myself). Lost confidence in them 8 years ago, won’t go back. Besides, who wants a car from a company which may well end up being out-of-business? Like in, the warrantee is already worthless enough (prior experience / straw the broke the camel’s back) so why would I buy a car with a better than even chance of not having ANY warrantee when the company finally does a stern-up sink-fast?
I wouldn’t.
Bye bye GM.
Jalopnik has a QOD with choice quotes from GM's 10-K filing today. Here are some of the best: "A decline in consumer demand for our higher margin vehicles could result in diminished profitability." "Shortages and increases in the price of fuel can result in diminished profitability due to shifts in consumer vehicle demand." "The financial distress, bankruptcy, or insolvency of a major competitor could have significant adverse consequences for us." "GM's significant investment in new technology may not result in successful vehicle applications." "Further reduction of our credit ratings, or failure to restore our credit ratings to higher levels, could have a material adverse effect on our business." "The federal government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results." "The federal government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results." "We are subject to significant risks of litigation." “Continued failure to achieve profitability may cause some or all of our deferred tax assets to expire.”
The results were better, but sales were not better. Sales = Profit. They can not sell GMAC again, even if they really really wanted to.
Maybe the play is to “survive” until the UAW can be defeated. Maybe even hold on to some bad news until negotiations begin, then point the finger at the UAW. Its clear to me that GM can not sustain it production numbers and variety of vehicles. Its also clear GM can not currently afford to reduce production do to the current UAW agreement. Once the UAW has been neutered the plants will go away or go overseas, and serious, realistic decisions can be made about product lines. Besides, by the summer or early 2008 MY it will be clear which brands will be strong enough to complete and which must die. Readers of TTAC already know, of course, which ones will stick around…
Also isnt Toyota offering incentives on the “perfect” all new Tundra?
Glenn A, you think the company is going to go bye bye? Delphi is still around and Chrysler is too (no idea why.) They file for bankruptcy and nothing will get voided besides UAW contracts. I am sure they could void warranties but i dont think GM is even dumb enough to do that.
“given the economic and product cycles in this industry” That says a lot, because GM’s new product “avalanche” is going to start petering out soon.
I am increasingly convinced that domestic cars buyers have ADD; they’ll get excited about the next hot new product being marketed to death (literally), and a year or two later, those cars languish away.
That’s the real difference between the 2.5 and Hondota: people want Accords, Camry’s and Civics all the time.
Paul not according to a recent article on Autoweek. Honda dealers are upset because they have been advertising Accords to much and Civics arent selling well…everyone makes mistakes, some just do it more often then others.
GM is like the building that is being demolished with explosives and the charges have just blown out the ground level structure. For a moment in time the building is still there but soon the structures weight causes the implosion. If you break thru all the wordsmanship in the filing you will see that their gross profit and cost structure are at odds with each other. They don’t have enough margin to cover their enormous debt load much less all the many legacy costs they have. Without GMAC’s revenue this year will be worse. All the large public dealership groups are and have been taking measures to reduce inventorys and sell off poor performing dealers, almost all of them domestics. This does not bode well for GM to sell more vehicles. I know of many GM dealers for sale as many are unprofitable.
Robert, I have to give you credit – no matter how good the news out of GM, you can always find a way to make it sound rotten as hell, and the company is only minutes away from permanent collapse.
Let’s see, we’re on GM Deathwatch . . . . . 114? At this rate, GM is definitely going to die. Of old age.
Vetteman:
Video to accompany your entry:
time is everything. If all the ifs turn out positive they might make it…but how often doees that happen?
Obligatory disclaimer – yeah, i hope they make it.
The missing link here is to the economy itself, and the fact is that the economy has been very, very good for some 4+ years now (the dot-com debacle bottomed by late 2001), and yet somehow GM has avoided positive cash flow the entire time. What if the economy declines to mere W. European levels, the mid 1’s rather than staying in the plus 3’s quarter after quarter? Under the usual rules, the economy is pretty much at full employment right now. Needless to say if the economy actual jerks into negative for a couple of quarters expect to see Ricky in the Bahamas on pretty much a permanent basis. The key to cyclical companies is always that they are cyclical, but if a company can’t get its’ head above water when times are good, uh, uh, uh, oh, shucks.
Thanks Starlightmica not the collapse I see but a collapse none the less.
sykerocker: Don't take my word for it. Look at the numbers. Read the financial papers. And just think what number Death Watch I'd be on if I'd begun chronicling this sad saga when it started in the 70's.
Glenn, I’m with ya 100%.
I will not buy a vehicle from a company whose PAST PERFORMANCE with me has been dismal.
sykerocker:
“…no matter how good the news out of GM…find a way make it sound rotten…”
Here’s a bit more of the truth:
Pre-tax profit per vehicle, 2005:
Chrysler: $223
Ford: -$590
GM: -$2,496
It’s 2007, so perhaps we can assume GM cost-cutting has brought that 2005 figure down. Even if the loss per vehicle sold is $100, how long can such GM sales “sucess” go on with no impact?
For the average person, if monthly debt exceeds monthly income, how long can they hang on? Truth is, for a while, but not forever.
Imagine my credit cards are maxed out; I’ve burned through the cash from my second mortage; and borrowed all I can from relatives; and have a second job. Yet my debit continues to exceed my income. Trouble ahead? You betchya.
Might take longer for that to happen to a global enterprise, and hey, they may pull it off. I’d be nice to see the domestics build vehicles that sell better than Honda, Toyota and others. Really.
If things continue as is, however, and the cash burn continues, the day of recconning will come.
starlightmica: I think that video shows GMs current state – the bottom’s blown out, but the top hasn’t quite toppled yet. Don’t worry, though, the troops are on it, another couple of swift kicks to the shins (poor quality, heavy reliance on trucks & rebates, pick a couple more), and down she’ll go.
Tones03:
“Paul not according to a recent article on Autoweek. Honda dealers are upset because they have been advertising Accords to much and Civics arent selling well…everyone makes mistakes, some just do it more often then others.”
Check the numbers yourself. Record sales in 2007 topping record sales in 2006 seems pretty good to me. And by what standards do you say Civics aren’t selling well? I’m happy to see them on the dealer lot (finally)! Just need the Fit to follow suit.
Link:
http://www.hondanews.com/categories/1090/releases/3901
Well some one is lieing…
http://www.autoweek.com/apps/pbcs.dll/article?AID=/20070315/FREE/70312012/1528
tones03: “Honda dealers are upset because they have been advertising Accords to much and Civics arent selling well…”
American dealers. Japaneese company.
Short-term verses long-term outlooks.
Typo: Should be “Japanese”
Edit button, please. :-)
I believe Autoweek intended to be truthful. But sales drops from scorching levels doesn’t warrant a crisis. More likely, with Honda building to consumer demand, the drop in sales is needed to boost production to meet CR-V demand (39.2% higher this year), which is also built at the same East Liberty, Ohio plant.
Looks like things are running well at Honda.
While I enjoy reading the GM Deathwatch series, I think most of them will be filler until Septmber 14th of this year. That’s when the current UAW contract expires.
It’s because of this that I disagree with Roberts assesment that “GM has cut its costs to the bone.” We will not know if the cuts have been to the bone until the contract is renegotiated.
At least Wagoner realises all is not well: “there is still a lot more work to do to achieve our goals of steady growth, solid profitability and positive cash flow generation.” Ofcourse recognizing a problem and being able to do something about it are two totally different things.
I laugh whenever I see someone question the validity of Deathwatch because there are over 100 editions of it.
A dam of water doesn’t begin to collapse two minutes before the flood. It starts with a small leak, that water slowly erodes into a bigger leak. Eventually, the hole causes a structural weakness. The damn, no longer able to support the water, then collapses.
The collapse of an empire appears gradual to the keen observer, if one knows when to start looking for its genesis.
GCI: I am not saying they are in trouble, just saying they arent as big of a hit as they used to be. As is with everything.
Good news out of GM? Don’t kid yourselves.
GM lost 2 Billion in 2006, and that includes all the “special items” and “one time costs”, as it should. GM is hoping they don’t have to restate anything further, with the SEC going through all of their accounting at the moment.
GM also ended the year with about 26 Billion cash on hand … this includes the cash they got for selling their GMAC chunk.
Cash burn will continue through 2007. GM’s GMT-900 SUVs have not been the savior that GM was convinced they would be. GM’s GMT-900 trucks aren’t likely to change that very much. If the trucks don’t save GM, and they likely won’t, GM is already putting it’s eggs into another basket … crossovers. Good old GM, always looking for the “next great thing” that will save them, but never looking within the company or within themselves to find the real problems.
Oh, and the “March Madness” incentives include the Cadillac Escalade in there.
Investors are finally starting to see clearly through all the smoke, and realize that GM’s great “turnaround” strategy is highly questionable.
When Toyota overtakes GM for the top spot in worldwide sales (very likely it will happen this year) it will be a huge blow to GM psychologically and will only further damage GM’s reputation.
The oncoming train at the end of the tunnel is blowing it’s horn, but it’s being heard by deaf ears.
RF: Despite profitability on a reported basis, GM’s margin levels remain insufficient for long-term viability
Vetteman: They don’t have enough margin to cover their enormous debt load much less all the many legacy costs they have.
These two statements are key. I dont know how GM will remain a viable enterprise producing automobiles. GM needs to get into a more profitable line of work…Say…Drug running.
RF: They’ve also butchered their GMAC cash cow
The GMAC cash cow was running out of milk anyway. GM is working hard to find a better cash cow replacement with zero risk and guaranteed milk-flow like all large and failing/politically-connected companies do… Taxpayer teat sucking.
Samir,
An empire, like a person, begins to die the moment it begins.
So with all this “good” news from The Ren Cen what is the likelihood of GM buying Chrysler or a piece thereof?
The answer is scary….
Yesterday was the good news day,today we are back to doom and gloom.
I still have faith that GM is on the comeback trail The scary thing is fuel price On full size pick ups and SUVs GM can blow the Toyota and Honda vehicles away.
I havn’t checked US fuel prices but in Canada its obscene roughly 4.30 in US funds a US gallon.I just put 50$ of gas in friggen Grand Am!
Unless your rich or you really need to drive a big honkin truck/suv you gotta be nuts to buy one
2 or 3 year old Yukons are selling at1/2 the original cost.
Now after reading the latest Death Watch and knowing full well that GM can’t beat HONOTA in a head to head small car battle,its time to be scared again
Cowbell, that is a very semantic sort of statement.
Though the analogy isn’t perfect, if I extend yours (a person), one who is healthy will live to an average age expectancy. One who has, say AIDS, will not.
Of course, in the early stages (HIV) AIDS doesn’t show much unless one knows where to look (lingering colds, lack of energy, etc.). In later stages, it begins to show with loss of weight, no immune system and physical weakness (kind of like how GM is losing assets!). Then in the terminal stage, everything goes to hell.
People only remember the terminal stage, but the evidence is there all along.
So yes, GM was beginning to die the day it was founded. Indeed, nothing lasts forever. Of course, its death was accelerated by its own “disease”, which we can all see quite plainly now.
It will take nothing short of a miracle for GM to pull out of this death dive it's in. When the shattered pieces of this corporation are recovered, I believe we will see a leaner, more focused GM emerge from the wreckage. Those pieces will be re-assembled in the CH11 hanger and GM will live to fly another day. Perhaps it will split up into individual car makers made up of the ones originally merged to form GM in the first place. Either way, it will look a lot different from it's present form. I have read the DW series with interest and I think it really should be a suicide watch like the Chrysler one because the predicament that GM is in is largely one of it's own making. As RF has said, the genesis of this decline began in the 70's. GM is now at terminal velocity and now that most of the family silver has been sold well….. The vultures will soon gather to pick the best bits. It's really sad because there is undoubted talent among the people in GM at all levels of the corporation and it's these people who will bear the brunt of the crash.
Regarding Accord/Civic sales: step back and look at their sales performance over the past 30 years. GM does not have ONE single model that has been continually on the market the past 30 years (except Corvette).
To be fair, the new GM crossovers and pickups are only now beginning to reach their full ship rates and inventory levels with the Buick Enclave still to arrive. The new incentives excluded the Outlook and Acadia for that reason. Pickups are already under duress from Tundra as well as huge discounts on the Ram and F150 so they were included in the sale. Rough road ahead to be sure.
No matter how they spin it selling off GMAC was the defining moment in GM's long decline. This to me was and is a very poor deal for GM but inevitable once their bond rating got to Junk status. They are moving further down the black hole with every decision they have to make. They are forced to make choices between bad and horrible in everyday operations. Having worked for a GM dealer all my life and having a great deal of contact with the company thru the years the average person cannot imagine the anguish and sorrow for GM over selling GMAC. They were the crown jewel of a company that has been primarily a financial entity run by finance men(bean ciounters) The ongoing accounting debacle is further evidence of disfunctionality at the highest level. Rick Wagoner was chief financial officer before being made ceo and this has happened on his watch. Not talked about very much is that now shareholder equity has gone negative. One has to only look at all aspects of the business and you see deterioration in all things that matter. Negative cash flow. Selling off assets at fire sale prices. Consistent declining market share. Declining customer good will. Increased debt service expense as well as increasing debt levels. Exposure to GMAC subprime chargeoffs from rescap/ Di-tech. I could go on and on there aren't many bright spots. As my daddy used to say if it weren't for bad luck they wouldn't have any luck at all. Alfred P Sloan must be spinning in his grave.
Glenn C,
The GM situation is, iam afraid, a small reflection of the US economy. If you believe that the USA economy has bottomed in 2001 you have either been living under a rock or are completly dillusonal. With more debt that all the other nations of the world put together the US-economy has not been healthy for the last 8 years… Somebody above was mentionning the demise of an empire, i am very saddened to tell you that that sounded more like the USA than GM!
Wow, Pessism really reigns around here today. Not disputing Robert’s analysis, and I agree that cashflow is the right metric.
Wagoner committed to taking $9B out of the cost structure, $6B of it in 2006. He got $6.8B out to date –ahead of schedule, which is a MAJOR achievement.
He clearly has further to go, but eliminating duplicate platform development teams in N.A. is another big step forward.
As far as incentives on the pickups go (from ALL manufacturers), I wouldn’t read in too much. This market follows the construction and housing markets, which are in the doldrums. Regardless of gas prices, roofers use pickups, so once that market is back, I’m sure pickups will follow.
Funny, Silverado becomes the best selling vehicle on the planet, and TTAC sees another sign GM is dying.
“Funny, Silverado becomes the best selling vehicle on the planet, and TTAC sees another sign GM is dying.”
Who says it’s the best selling vehicle on the *planet*? Last time I checked, that title belonged to the Corolla, when you look at worldwide sales.
Argh.
Anybody here play chess?
Seems like GM is in that awful position where you know like 10 moves out that you are going to lose, but you have to play it out.
fellswoop, interesting analogy, and it sure seems that way, although GM management seemingly refuses to accept the truth.
Most everybody has made good points and arguments above.
Mr. Farago’s logic and insights are well thought out – as usual.
However, as far as the GM Death Watch goes, at the end of the day all that really matters is whether GM survives or not.
If many years from now GM is still in business, then Mr. Farago’s reputation as a seer will be slightly diminished.
However, if GM officially goes bankrupt in the near/mid future, then Mr. Farago will be vindicated.
Personally, I hope GM pulls it off.
I can’t help but wonder what the impact of the current crisis will be on the company 3-4 years down the road (if they get there). The current product renaissance that’s underway (Saturn’s recent makeover, GMC Acadia, ’08 Malibu and ’08 CTS, Camaro) is encouraging, but the development of those vehicles started several years ago. What’s happening now? What corners are being cut? What R&D is being deferred? What can’t they afford? The long term outlook for GM remains very difficult indeed.
shabster, think of it this way. For GM to be competitive and profitable in the long-term future, they *need* to go to Ch. 11, so they can fundamentally and radically change the entire corporation.
If GM does not do this, then they risk going into Ch. 7.
Current Chevy 2007 offers for CA
$500-100 off Colorado
$1500 off Aveo, Cobalt, HHR, Impala
$1750 off Malibu
$2000 off Equinox, Avalanche,
$1000 off Silverado…
$3000 off suburban/tahoe
The Silverado I see as “No Big Whoop”, toyota is doing more on the tundra. But $2k on the avalanche? $3k on GMT900 SUVs?
And why did GM repeat the same @#$)*(@ crap with the Malibu. A “Silverado Classic” sale is a failed Silverado sale, but with $4k of discounting instead.
The shoe is dropping from the fuel side right now. This is curious because the new excuse for high gas prices is refinery capacity not middle east supplies. But it matters not one iota why someone needs $75.00 to fill his pickup or suv, it will kill the market. This 2007 fuel shock following so closely the last spike should put fear in anyones mind about buying a 12mpg anything.For gm there are two problems, one they make no money on small cars (the logical switch to product in times of high or limited fuel)the second problem is competitors like toyota can take a tundra (13mpg) hit and still make money on small cars, honda doesn’t even have anything bigger than a ridgeline truck (16mpg) and has always made money on smaller efficient products.
SS3, easy to say but when you know whats in the pipeline its very very promising, product looks great.
Boston Tea Party I hope you don’t invest in the stock based on GM having great product coming. I heard all the same hype back when the vega came out then the citation and the rest of the x cars arrived then the chevette and on and on. I have been to one too many GM dealer meeting where dealer concerns were dismissed with gotta have product is coming just be patient. Most of the smart dealers such as Carl Sewell ,Wrote the book customers for life, Penske ( Longo Toyota ) and many others long ago put the money they had made in their GM stores into buying import franchises. I know I sound pesimistic and I probably am but to get me to feel good about GM they have to produce a Hi volumn home run vehicle . They really have not done this in over twenty years.
Profit.Profit.Profit. It is not now well something sells, its about Profit.
Just think of the wonderful/optimistic news coverage GM would receive if they were in a more profitable line of work…Like illegal narcotics:
Amsterdam (Reuters) — GM posted a third quarter profit of $180B on revenues of $200B today due in large part to huge demand for the Cadillac Crack, Buick Qualude, Chevrolet Cocaine, and Saturn Pot. At the GM shareholders lovin-in fest at GM headquarters in Amsterdam, GM CEO had this to say about GM’s results “Duuuuude!!!”. When asked about future products, GM’s clear and out-spoken Product Director Bob Lutz stated “The high the fewer”. When asked about customer satisfaction, GM’s new Product Quality Czar, Kieth Richards said ” “. When asked to expand on Richards’s statement, Richard’s Personal Assistant/translater, Amsterdam-born, 63 lbs super-model Hagd Ojujt stated “Kieth said it all. Quite frankly, you asking me to expand on Kieth’s statement just makes me want to throw up”. When asked about accounting irregularities and a possible SEC investigation, GM’s CFO Cheech N. Chong stated “Restatement! We dont need no stinkin restatement”. GM shares rose 13% in after hours trading on news that the slow selling Hummer Heroin will recieve more power.
Fuel prices in California are now over $3.00 per gallon; the mortgage loan industry has hit the iceberg, GM is burning through its cash at a rapid pace, etc. etc. This is going to get much uglier for the Detroit boys.
“Subprime” would be a more appropriate title.
We all seem to enjoy the continuing GM / Ford Deathwatches—but I have a question.
How is death defined in the case of Gm / Ford ? Go away ? Re-organize ? Bought Out ?
What form does death take ?
This article offers some great insights. In the final analysis, GM continues to flounder because its core problem area remains the same as it ever was: the product.
Cutting expenses has been touted as Wagoner’s pathway to Nirvana, but without product to back it up, that will only slow the bleeding. No matter how many expenses, jobs or pensions are slashed, GM cannot be turned around unless it can develop winning products in key segments — not just niches — and then sell those cars in large numbers to retail buyers.
Which brings us back to the real short- to medium-term crisis: the product pipeline remains severely deficient, with no end to that deficiency in sight. GM’s best cars in North America, such as the Corvette and Aura, are not even intended to be mass sellers, but are low-volume products that by themselves will never generate enough cash or market share to put GM back in the game anytime soon. Meanwhile, the bread and butter cars in the lineup, such as the Malibu, G6 and Cobalt, remain darlings of the fleet business, with no replacements due for quite some time.
GM has reduced its fleet sales not by improving these essential make-or-break cars, but by slowing their production and increasing their inventories, as has been reported elsewhere on TCAC. That all may have been a lovely stall tactic that could fool the analysts for a few quarters. But those cars will ultimately need to be sold to end users, and that isn’t going to happen without major incentives and/or moving them out of storage and onto fleet lots.
So the treadmill remains the same: incentives and fleet sales, leading to more losses, further declines in retail market share, and more market opportunities for the competition (read: Toyota and Honda.) The only thing that can save GM today is a revival of SUV and truck sales, and that’s about as likely as Osama converting to Christianity. The writing is on the wall — the only question now is how long it takes Wall Street to read it.
Adrian–while much of what you say has merit….some clarification is needed. GM will be replacing he Mailbu and CTS this year…should be great mid-size cars on the everyday and luxury fronts. I no longer think it is a matter of product as GM will have a stong entry in every category except compact. The larger question… is it too late.
When Toyota overtakes GM for the top spot in worldwide sales (very likely it will happen this year) it will be a huge blow to GM psychologically and will only further damage GM’s reputation.
http://www.freep.com/apps/pbcs.dll/article?AID=/20070213/BUSINESS/70213053
here ya go!
this is where the american economy is going!
what do you think will happen when Toyota takes over GM?
I think there will be a backlash!
umterp85, my apologies for the typo (I do miss the edit function) — I meant to reference the Impala, not the Malibu.
But I frankly don’t see the Malibu-aura garnering many conquest sales from the Camry or Accord, which is what it needs to do. It will sell modestly, to be sure, but not in large enough numbers to make much of a difference.
The Malibu would need to hit retail sales of 300,000-400,000 units per year to be in league with the Camry and Accord. Compare that to the Aura, which as of February 2007 had sold fewer than 28,000 units since it was launched. Being that the Malibu has more than a few things in common with the low-volume Aura, can we really expect it to turn GM’s fortunes?
Adrian: Not saying the Malibu will change GM fortunes or that it will steal massive sales from the Accord. It may steal a few from the Camry and may take sales away from the Korean makes.
My main point is that product will be the least of GM’s worries 1 year from now as they will be competitive in most every segment sans compacts…..and the profit per vehicle from compacts (I do not care what make they come from) hardly adds alot of profit.
If you think about what’s going on, you’d see how ELEGANTLY and BEAUTIFULLY this is all playing out.
It’s like the 350lb man/woman you read about on occasion…someone bedridden for the past 6 years, sleeping in his/her own excrement because he/she is so bloody (stinking!!) fat! Totally helpless….yet SOMEONE IS FEEDING IT!!!
…the person feeding “IT” the donuts and milkshakes and bean pies is the same person who slavishly buys GM products out of loyalty!!
…and in the END the person (company) STILL DIES A WRETCHED and NASTY/FILTHY DEATH!!
Yes, is it NOT only PROPER that this company dies of its own negligence/lethargy/sloth/greed…but JUST as well?
Why…it’s the “Mona Lisa” of a corporate downfall. It just doesn’t GET any BETTER than this!!
One day you can tell your children/grandchildren the story of the fat-ass company which choked to death on its very own food…and then rolled over, face down, it a pool of vomit of its own making.
Lovely!! Just LOVELY.
cykickspy: “what do you think will happen when Toyota takes over GM? – I think there will be a backlash!”
Tempest in a teapot.
Most Americans are aware that Toyota and Honda make a fair number of cars in North America.
Total U.S. trade deficit in 2006 = $763.6 billion.
Of that, vehicles/parts from Japan = $60.2 billion
Trade gap with China = $232.5 billion
Headline from the Freep article you reference: “Japanese cars help boost U.S. trade deficit to record in 2006”
That headline is a bit like saying the arctic ice shelf (Japan) contributed to the sinking of the Titanic. Sure, it’s true, but the real story was the actual iceburg (China) that sunk the ship.
Johnson,
You may be right about Corolla outselling Silverado, I’m not certain. It probably depends on whether you include all the various Corolla spinoffs (Auris, Blade, Matrix, Vibe?)
But the point remains. In America, the best seller in February is Silverado, and that was before they announce 0% financing. My take is that GM is willing to give up fleet sales, but they want to retain retail share. Hopefully they make more money over time through retail channels, even if they have to discount a bit.
#cykickspy:
“When Toyota overtakes GM for the top spot in worldwide sales (very likely it will happen this year) it will be a huge blow to GM psychologically and will only further damage GM’s reputation.”
Piffle… nah! My gut tells me that GM is exactly where they wants to be, psychologically, in the minds of the dumbed-down masses.
RATSUS: One day you can tell your children/grandchildren the story of the fat-ass company which choked to death on its very own food…and then rolled over, face down, it a pool of vomit of its own making. Lovely!! Just LOVELY.
Could be talking about the god-like Toyota if they continue at the quality pace they have been on over the past few years—but instead of its own vomit—-it will be engine sludge that comes from the 3.5 million (probably many more) Americans they swindled with their faulty engines.
Glenn Swanson:
“Total U.S. trade deficit in 2006 = $763.6 billion.
Of that, vehicles/parts from Japan = $60.2 billion
Trade gap with China = $232.5 billion”
yes but how much of china the china deficit takes away from high paying manufacturing jobs here in america? NONE
Toyota and Honda have been constantly depleteing our economy of our high paying manufacturing jobs and it is starting to be felt. One high paying manufacturing job in the US supports seven other jobs. When you eliminate that job it also eliminates 7 other jobs! Bottom line…. Asian auto makers have to increase the wage of their employees if they dont want to feel the backlash!
or else its time to reject asian brands
umterp85: “My main point is that product will be the least of GM’s worries 1 year from now as they will be competitive in most every segment sans compacts…”
If staple vehicles such as the forthcoming Malibu can’t hit those Camry/Accord type of volumes, then the product is a serious problem.
GM needs to produce some breakthrough high-volume retail sales leaders soon if it is going to generate the cash that it needs to recover. With the oil crunch on one side and Toyota’s push for the Tundra on the other, I don’t see anything left in the GM lineup to generate that cash.
Don’t you worry, folks. Why, John Cougar Mellencamp …along with Willie Nelson of Farm-Aid fame…they’ll be there for ya. Trying to sell you a bio-diesel Isuzu-sourced GM V8 pick-em-up truck.
Honestly…there are theories that the US really DID know ahead of time before the Japanese struck Pearl Harbor. They (the powers that be in Washington) just choose to let it commence. This is not idle speculation, but the truth.
GM…don’t tell the American Public you did NOT SEE THIS COMMING, hear??
Be a man and admit your guilt and complacency. Suck it up!!!
…enter jingle….”I was born in a small town…gonna die in a small town…” la dee dah…
Anyone expecting a consumer “backlash” when Toyota outsells GM is suffering from delusional thinking. The vast majority of US consumers have nothing to do with the manufacturing of GM branded vehicles, and are concerned with the price, quality, brand image, etc. of their purchases. If Made By A US Based Corporation had significant marketing advantages you would not be seeing the market go to way it is going.
To the poster who said that good manufacturing jobs aren’t going to China by have been taken by Honda and Toyota, you are also delusional. Plenty of non-automotive factories have closed up shop in the US and moved production to China. For example, the vast majority of power tools sold in the US now come from China or Taiwan, even if the label says “Dewalt”, “Porter-Cable”, “Skil” or “Milwaukee”. Also, many auto parts and components jobs have moved to China, Mexico and other low cost labor countries.
GM, Ford and Chrsyler have shown contempt for their customers for decades now and are paying the price for it.
A friend at work was employed by one of Ford’s now deceased electronics plants in the Philadelphia area. He told me that management determined that even if the employees were not paid, the company would still not have shown a profit.
If GM is losing $2400 per vehicle, aren’t they better off not selling anything ?? They had a decent import fighter with the original Saturn, but Spring Hill never broke even.
It is becoming obvious from a financial standpoint that the big 2.5 are destined to die if that dont manufacture the majority of their products offshore. Build the niche products such as Mustangs and hummers in the US and the rest where a profitable product can be built (China).
Look at other American products – Guitars for example. The high end instruments are made by highly skilled Americans in Small, efficient factories. The Sub $1000 instruments for the mass market are made in Mexico and China. They adapted, so must Detroit.
Didn’t Dwight Yoakam sing a song called “Guitars and Cadillacs”?
Maybe the three of them (Willie Nelson, Mellenhead, and Dwight) can form a “Feed the GM worker” trio.
If we can feed Ethiopia, why not a GM worker?
Scratch that….I refuse…wholeheartedly!!! :)
I remember a time when GMAC was the only thing making a profit for GM. Then they had the bright idea of selling it off?! I still wonder why.
Why does a crack whore sell herself for a single rock? Why does a junkie exchange her only daughter…3 months old…for a syringe of heroine?
Of course it doesn’t make sense. In order for it to make sense you have to be of the same frame of mind as a junkie!
cheezeweggie:
“If GM is losing $2400 per vehicle, aren’t they better off not selling anything ?? ”
GM is not losing money per vehicle… that amount is what it costs gm for paying out in pensions and medical. This and only these reasons are dragging down a great company. Too many people retired collecting a pension from GM which means they arent collecting from the gov’t.
But if GM goes belly up… the taxpayer will be on the hook for a lot of retired seniors putting a tremedous strain on the once great american economy.
http://tinyurl.com/3arbd8
American automakers pay better, better benefits, which in turn help other business’s in the communities which in turn offer more jobs etc etc….
Maybe the Asian automakers should pay more!
But than again I heard that the UAW is going to try to organize a union at TOYOTA
Here is the real reason why GM cant stay above water… holly cow!!
http://www.cbc.ca/cp/business/070315/b031581A.html
when silverado retook the best selling nameplate in Feb this year the fuel prices had dropped to just over$2.00 per gallon. Now with nearly $1.00 additional coming up for spring and maybe more, we will see if silverado reigns supreme. $3.00 fuel killed suv’s and pickups last year, it can happen again. This is the slipperly slope that the big three have continued to bet the ranch on.
“How is death defined in the case of Gm / Ford ? Go away ? Re-organize ? Bought Out ?
What form does death take ?”
My guess? When the dealers all take down the signs and you can’t buy any more XXXXXX brand cars.
Oldsmobile is dead. GM took one of their arms, and cut it off. Plymouth is dead. Chrysler took one of their legs, and cut it off. The fact that both GM and Chrysler let a body part atrophy, by not feeding it, is moot.
Seen any new Packard dealers, Studebaker dealers, Hudson dealers or Glas dealers lately?
Well, Glas is long dead. But it got bought up by BMW which survives. Hudson is dead, but it got merged into AMC, which got bought by Chrysler, which got “merged of equal” (not) with Daimler-Benz and now may be sold off as Chrysler to whomever is dumb enough to buy it…
So “dead” may also mean like Glas, or like Hudson.
Or it may be like Studebaker or Packard. Kaput.
Another area of attack on GM that could push it over the edge is Government.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070316/AUTO01/703160357/1148
and
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070315/AUTO01/703150392/1148
show that both state and national government may very well legislate GM out of existence. They could outright BAN the big pickups made by GM/Ford/DaimlerChrysler because they don’t meet some criteria that Toyota/Honda/Nissan etc. can meet.
If the governments on the N. American continent start tacking serious carbon taxes on gasoline, say $10/gal, it’s all over.
No big pickups = no way to make profit = no company.
There is no Chapter 11 for GM, Ford or Chrysler. It is not an option. Chapter 11 would allow these companies to shed what they need to shed to become profitable however by the time that took place there wouldn’t be any money left. No one is going to buy a car from a bankrupt manufacturer. It’s too large of a purchase and you are stuck with it because no one is going to buy it from you.
If GM can renegotiate a successful contract with the UAW and the housing market comes back they could survive. The could also lobby to have franchise laws changed which could alleviate the dealer bloat. It could also encourage combined dealers since GM can’t afford to kill of any more brands.
Why not just have GM stores like a Carmax where you can buy any and all GM brands under one roof?
What I don’t understand is how SUV/big truck sales are supposedly tied to the price of gasoline. Are there people out there who think, “I’ll buy a new SUV because gas is now a little over $2 a gallon.” Do they think it will stay that way?
Are people really buying big trucks because gas is/was cheaper now than a few months ago?
Gas has been climbing up recently and the wonderful days of filling up the tank for under $40 of premium are becoming a distant memory. Sure it might go back down again, but we’re never going back to really cheap gas.
K.
Steve_S:
DC area Carmax stores used to carry new Mitsubishi’s until the franchise implosion a few years back. There’s just too much money in cream puff used cars to bother with them to bother with the new market.
gm and ford are in franchise hell. the laws are 50 state not national. In each State the dealers would have at least as much clout as gm or ford, therefore nothing will change there. As to they can’t kill any more brands, if your model proliferation is built for more than 30% of the US market ala gm and you are just over 20% in sales and still slipping, how do you justify all of these brands, models, and dealers? Financially you can’t and it is a recipe for more losses. Toyota and honda function with one mainstream and one premium level of dealers. They have also limited these dealers to metro areas and kept them apart geographically. Each dealer sells over 100 new units nationally per month and are strong financially. They have the final good fortune to be able to trade their own cars back at high values and resell them easily. These are not readily overcome problems as gm and ford keep finding out.
Steve_S
As far as the availability of Chapter 7 or 11: there has been much debate on the site about whether a consumer will purchase a car from a company in bankruptcy. I don’t take a position on that one way or the other.
But it does seem Ford has little option for Chapter 11. Ford pledged all its assets making its lenders secured creditors. Thus in bankruptcy there’s nothing for the court to do as the creditors can each take their pledged asset and sell it, etc. No doubt some creditors could see their chance at recouping the loan is better by recreating a new viable Ford. If not, they liquidate the asset. Therefore Ford should go into Chapter 11 sooner rather than later so its more readily salvageable as a going concern
Seems the Ford family decided on an all or nothing play. Chapter 7 or 11, the Fords would seem to lose their controlling stock positions. Perhaps someone more knowledgeable than I could comment on whether that is true in bankruptcy regarding preferred stock. Thus if Ford is going to fail, they’ve insured that it fails in a big way
“GM, Ford and Chrysler have shown contempt for their customers for decades now and are paying the price for it.”
DING!DING!DING! Score this person 500 bonus points! Yes, this is it in a nutshell.
“What I don’t understand is how SUV/big truck sales are supposedly tied to the price of gasoline.”
Certainly that seems the case, i.e., most don’t need something that big and will not buy if gas is too much.
John
I’m thinking the retiree health care deal will follow the same path as Goodyear. A one time payment that lets the union administer the program with a significant “haircut” but knowing that any potential chap 11 wouldn’t impact the program. A bird in the hand vs two in the bush enticement.
That’s the real reason for the dalliance w/ Chrysler. If GM acquires them, it’s pretty much GM & UAW vs the world, figuring that Ford is pretty inconsequential.
“What I don’t understand is how SUV/big truck sales are supposedly tied to the price of gasoline.”
OPEC trys to maintain a price for crude oil. If we all stopped driving cars and started riding bicycles, OPEC would stop pumping crude. If we all went out and bought Hummer H1s, then OPEC would start pumping crude like crazy.
$10 per gallon gasoline? driving would be the least of our worries. There would be no place to drive anyway. Millions of people would starve at that gas price.
Rereading my initial statement, I want to clarify my question.
This is not in regards to OPEC, refinery capacity, etc… What I see and I think many will agree is that in the future, gasoline will become increasingly expensive for whatever reason. We will not be going back to the days of $1 – $1.50 gas in the forseeable future. Gas prices may dip now and then, when they dip are we supposed to believe there are people who buy the Suburban because gas prices are low? Do these purchasers really believe that since gas is at $2.10 it will stay there? Are manufacturers (I’m looking at everyone) betting on this?
K.
Indie500fan
If its GM and the UAW against the world, I’m betting on the world. They wouldn’t even represent a speed bump as the world apathetically rolled over them.
‘Fuel prices in California are now over $3.00 per gallon’
You are a bit better than us….the price of regular here in Toronto is now cresting 4.00 Canadian (3.50 US) for an American gallon. It’s a killer. Some people can shrug it off, but with insurance climbing steadily and the cost of living going up, at some point it has to become prohibitively expensive to own and operate a thirsty vehicle. And as someone else pointed out, not everyone driving pickups are tradesmen or farmers. In Toronto, in fact, it’s probably only about half.
‘the mortgage loan industry has hit the iceberg,’
They’ve been sounding the alarm about this for a few years now…the chickens are finally coming home to roost. I think of this as the first domino in what I’ve felt for some time was a bubble economy. It’ll be infinitely more difficult for GM to survive when the economy tanks.
‘If GM is losing $2400 per vehicle, aren’t they better off not selling anything ??’
I wonder how they calculate that. If it is an allocation of fixed costs, costs that would exist whether they made that one unit or not, then it’s probably not relevant. So long as the selling price exceeds the variable cost, GMs cash flow would improve. The only time producing fewer vehicles saves them money is when there are so few being sold that they can close a plant, or abandon a shift.
‘They had a decent import fighter with the original Saturn, but Spring Hill never broke even.’
I remember reading a business case on Saturn, when it was first getting started. The whole thing was predicated on an absolutely ridiculous premise, with virtually no chance of making the investment back. Pouring that money into a Cavalier/Sunfire or Lumina (at the time) replacement would have been an infinitely better idea.
I know this sounds like heresy, but does anyone else think that the Camaro, appealing as it is, is largely a waste of time?
NickR
“I know this sounds like heresy, but does anyone else think that the Camaro, appealing as it is, is largely a waste of time?”
I agree, it is a waste time. A low volume car, where Ford already rules with the Mustang. GM needed to hit the mainstream of the market, and they have failed to do so.
It is true though, that Toyota and Honda make most of their profit on more expensive vehicles – none of the automakers generates much profit on entry level cars.
A couple of years ago, GM types were hyping that the new GM pickups would have 25% better fuel economy than the ocmpetition, due to “variable displacement” engines. Now I see they beat the comparable F150 by only 1 mpg city, 1 mpg highway.
There is no way an engine designed to be a good V8, can also function as a good 4 cylinder when half the cylinders are “shut down”. For this reason alone, I would avoid the new GM pickups, and go with Ford, Dodge, Toyota, Nissan.
Maryann Keller wrote “Rude Awakening” in 1989, and it is just as true today as it was then. GM, managed by bean counters, cannot compete with companies that are run by knowledgable product people.
The only thing that survives at GM is arrogance, as they constantly claim they are as good as the Japanese, when they are not, and they display open derision regarding Ford and Chrysler. Ford and Chrysler are closer to having competitive cars than GM.
vitek:
My take is that if the UAW had only GM as a partner, they would be much more likely to do whatever was necessary to survive – however I’m not predicting that will be successful. Obviously there’s a lot more than labor cost in play here.
Also there is the potential for pro-union political intervention depending on the 08 US elections.
GM has another problem to contend with: the HELOCs are over. No more people using their houses as ATMs to purchase toys with. And no more housing builders/contractors buying $40k trucks like they used to. Seems to me that the world’s three largest producers of SUV’s and pick ups are gonna be hurting. That would be GM, Ford, nad Chrysler.
Also, the troubles at GMAC have not completely been quantified. It may not just be GMACs ‘folio of sub-prime lending, it can spill over to the ALT-A loans, and maybe even prime loans. If so, then it could be lots more than a one billion dollar hit.
Regarding:
rtz:
March 16th, 2007 at 1:21 am
I remember a time when GMAC was the only thing making a profit for GM. Then they had the bright idea of selling it off?! I still wonder why.
The way I understand it, GM had no choice. With GM’s bonds at junk level, GMAC would have had to borrow at uncompetitive rates (which in the fast-moving finance world means death a billyin times faster than a manufacturer with an uncompetitive union contract).
Summer and fall ’07 are looking to be GM’s Shakespearean moment of truth; gas prices, union negotiations, Judge Drain blowing up Delphi’s union contract and a strike resulting…
For the most part, I agree with RF’s DW series. But if GM’s still standing this time next year, they deserve to make it.
jthorner: GM, Ford and Chrsyler have shown contempt for their customers for decades now and are paying the price for it.
It’s payback time.
**********************************************************
Now here is a thought: If America was not such an obese society, where most people exercised and avoided eating crap, and if obesity related illnesses where not as prevalent, then what would these health legacy costs be like for the 2.5? How much less would it cost these UAW employers?
Just say’n.
It seems to me that as long as you have a very generous health care system (be it medicaid or UAW) then the capitalistic system will seize the opportunity and provide us with the rope (junk food) to hang ourselves and provide a steady income stream for the phamaceuticals, doctors, diagnostics, etc…
“If the governments on the N. American continent start tacking serious carbon taxes on gasoline, say $10/gal, it’s all over.”
You bet it is and the worst of it is – it’s a scam! I am not a climatologist but I don’t believe this greenhouse gas BS is any more than a money maker for vested political interests and a means to restrict the progress of the developing world. Many leading scientists all over the world say that there is no conclusive proof that increased CO2 = increased global temperature = Climate change. It is more likely that the CO2 increase is caused by global warming rather than the other way around. I don’t know how to post a live link but do a search on YouTube using “The great global warming swindle” and check it out. I am all for cleaner emissions for the sake of better air quality but to hamstring the industry on the basis of bogus science is immoral IMHO. I am not GM’s biggest fan but I would hate to see it legislated out of existance because of carbon taxes!
It seems to me that as long as you have a very generous health care system (be it medicaid or UAW) then the capitalistic system will seize the opportunity and provide us with the rope (junk food) to hang ourselves and provide a steady income stream for the phamaceuticals, doctors, diagnostics, etc.
European countries have more generous health care systems than ours, but much lower rates of obesity, diabetes, etc. And the highest rates of obesity in the US are among lower-income groups, which have the least health care coverage.
The whole developed world is gaining weight on average, but the US is fatter, and getting fatter, than any other major country. You need to look more at cultural and lifestyle factors.
The whole developed world is gaining weight on average, but the US is fatter, and getting fatter, than any other major country. You need to look more at cultural and lifestyle factors.
You’re not kidding!!!!
As far as the obesity comment, you can thank the food companies. They figured they can save a buck and generate more profits by using the addictive high fructose corn syrup as a sweetener in place of sugar.
So the Big 2.5 aren’t the only corporations that tries to take a short-cut to profitability…
I am not a climatologist but I don’t believe this greenhouse gas BS
I’m not a doctor, but I believe you have lung cancer.
I’m not an appliance repairman, I’m here to fix your dishwasher.
is any more than a money maker for vested political interests and a means to restrict the progress of the developing world.
Right, somehow the hippie tree-huggers pushing the ‘global warming BS’ are also colluding to shaft the malnourished children in third-world countries? You need a class in critical thinking, my friend.
Many leading scientists all over the world say that there is no conclusive proof that increased CO2 = increased global temperature = Climate change.
Name one (cite his credentials and instutional affiliation, and make sure that he still feels this way now, in 2007 — scientists do change their minds based on new evidence). If you can, chances are quite good he’s on Exxon’s payroll.
I am not GM’s biggest fan but I would hate to see it legislated out of existance because of carbon taxes!
There won’t be any ‘carbon taxes’ without some major unforeseen catalyst. It would be political suicide for any politician, from any party. If you want something to blame GM’s problems on, try GM.
To add, about the Malibu, I just drove a rental 2007 LTZ model. That version was supposed to be competitive with the ‘imports’ a few years back. But the interior is plainly inferior to that in my cheap old 1999 Subaru.
So, there’s an all-new Accord for 2008. I think there’s no chance in hell Honda hasn’t upped the ante yet again. GM is still playing catch up with the current Accord and Camry. Too late.
Whitenose – You may have a point on the 2008 Accord being better than the Malibu redesign. That said—-throwing the clearly inferior Camry in there is a mistake.
The latest Camry iteration is an ugly plasticky bland mobile—-about as fun to drive as a 1999 Buick Century. The Aura, Accord, Fusion, Mazda 6 and the 2008 NAIAS Malibu concept blow the Camry away in just about every aspect.
Toyota was David—-they are now Goliath—-it won’t be long before the press will get bored with reporting the GM / Ford ills. They will latch on to Toyota and start reporting the “real” news. 1) 2006—more recalled vehicles than sold 2) 3.5 million sludged engines 3) Disgraced US CEO sent home to Japan after years of sexual harassment.
And now we will know the rest of the story………….
Whitenose,
If you take the trouble to do as I suggested in my post and watch that documentory, you will have all the names and their credentials you want plus very good and plausable reasons why climate change is happening anyway whether we are dumping CO2 into the atmosphere or not. One of the things that is also pointed out is the fact that people who do not worship at the alter of “we are the reason why climate change is happening” are looked upon as heretics. if one does not tow the line on the politically correct views on this subject, you are derided and belittled. Some among the dissenting scientists have even received death threats.
In microcosm, your post dramatically illustrates this problem.
I am not the one who needs a class in critical thinking. If you pass even a cursory glance at the developing world you will find that many countries are being presurised to not go down the path the West has traveled. Having spent some time in several African Nations (Nigeria & Zambia) I have seen this first hand myself. To the “sky is falling” crowd, a world where every 3rd world farmer and urban dweller has a fridge. a car and a personal computer is looked upon with fear.
Have a fantastic weekend.
“Police made several arrests at the General Motors Lordstown Assembly plant after a drug investigation”
All the Marijuana smoke from GM parking lots during breaks can’t be helping the environment! So if the fit and finish on your Cobalt and/or G5 is bad…I wonder why???
http://www.vindy.com/content/local_regional/318666735477827.php
How’s this for an idea. GM’s Euro and Asia business is doing ok, turning a profit. And they run pretty autonomously, even designing their own products (Opel/Holden/Vauxhall Saab produce some decent cars, and Daiwoos don’t suck much more than their ilk).
>GM sold 9.1 million vehicles worldwide in 2006.
>For the second consecutive year, unit sales
>outside of the U.S. surpassed domestic sales with
> almost 5 million units, or 55 percent of global
>volume. GM Europe (GME), GM Asia Pacific (GMAP),
>and GM Latin America, Africa and the Middle East
>(GM LAAM) all set regional sales records, with
>GME exceeding 2 million units, GMAP topping 1.25
>million units, and LAAM surpassing 1 million
>units for the first time.
>GMAP earnings of $441 million
>in 2006 (reported net income of $1.2 billion),
>compared with $557 million in 2005
>Record 2006 sales of GM Daewoo products
>contributed to GM’s continued strong performance
>in the region, headlined by sales gains of 32
>percent in China and 19 percent in Korea.
>GM’s LAAM region delivered its best financial
>performance in 10 years with adjusted earnings of
> $533 million in 2006 (reported net income of
>$490 million), an improvement of $381 million
>over 2005.These improvements were driven by
>record revenue and volume for the region, and
>significant gains at GM do Brasil.
>GME posted its first full year of profitability
>since 1999 with adjusted earnings of $227 million
>for 2006 (reported net loss of $225 million)
So – bold and crazy thought. How about they just shut down their cancerous and massively loss-making North American region where their brand is in freefall, and pull their design and engineering guys to a nice office somewhere else in a profitable operation.
Vauxhall and (recently) Chevrolet UK are in Luton (gag), but engineering is at Millbrook which is quite pretty. Or Rüsselsheim in Germany at Opel.
Best not to take much GM NA management across, GME, GM LAAM and GM AP’s management has proven vastly more competent and less addicted to hubris, so leave them running the show.
Then when things are a bit more settled, reopen GM NA with a clean slate and no labour baggage. Hey presto, America’s car giant becomes global car giant.
OK, so it’ll never happen… but an interesting thought.
Roger:
I think you have a better proposal than anything coming out of GM. Chevrolet is dead as a car brand in the US. Can’t imagine Pontiac and Buick holding on much longer. Saturn is going to be all Opels. Anyway, what you are suggesting may come to pass as GM files for bankruptcy or is taken over by Hyundai.
I do not understand why many people who post on this site want to see GM fail so badly. GM failing will have a enormous inpact on the US economy, cost thousands of people their jobs, income, and security. Some people have a serious issue with schadenfreude here. Do you really want Toyota and Honda (and lexus and acura) to be your only choices?
I’d like to see Ford die and I’d like to see GM die is a lot of what I read. Is GM mismanaged? Absolutely. Do they need to trim the fat even more? Yep. But I certainly hope that neither Ford nor GM goes into bankruptcy.
Do I have a GM product, yep, a Saab. Is it as good as a BMW? Not even close. I bought it because it had decent performance for the money, and it wasn’t another “me too” 3-series BMW that every 25 year old renting his first apartment has in the San Francisco Bay area and can barely afford to make the lease payments has. There is something to be said for choices. With GM and Ford out of the picture there will be fewer and fewer choices.
Todd,
I really felt as if I needed to reply to your posting.
Why? Because one must have been living in a cave for the past 30 years to realize companies such as Toyota, Honda, Nissan, and yes…even Hyundai…
…THESE companies were the companies who gave the American public a *CHOICE*
And now you are saying we need GM and Ford…because they provide us a choice, when for the longest time no other choice existed?
Why, Todd, do you realize the very LACK of choice (lack of competition) is what started this entire mess …some 30 years ago?
Your reasoning is ludicrous.
Have a nice evening!!! (choice…give me a BREAK!! haha, I have to laugh :)
Todd,
It is not wishing for GM to fail, it is facing the reality that GM is a failed company. Mismanagement causes extreme hardship for employees who lose their jobs, but that is not the fault of the consumer. As for the product, it would not be missed at all, there are other companies who can step in and provide better cars.
If GM high level management even had a clue as to what a car is, GM never would have failed. How often has rabid rick driven an accord, side by side with a malibu?
Where is Ross Perot when you need him?
Rastus:
You are right that 30 years ago there were no choices, you could only buy GM, Ford, Chrystler, AMC, etc. Now there are a lot of choices.
Does GM have a myopic market view? Absolutely. Should they drive their competitor’s cars. Yep. But I don’t understand your logic that because 30 years ago GM didn’t allow choices, that therefore now they should no longer exist, and along with it tens of thousands of jobs?
Can toyota and honda step in and provide better cars, probably, but then it will just be toyota and honda in the same position as GM and ford were 30 years ago being the big boys on the block. Then we’ll be complaining about the crappy cars that they are putting out. Lack of competition tends to do that.
Having fewer brands in the market doesn’t help any consumer. What’s the incentive to produce better cars when there is no competition?
Hi Todd,
The funny thing is this: GM’s history is riddled with squashing the competitor. Sincerely, that’s the truth.
And as far as choices go…don’t you worry my friend…there are about 80 (if not more!) Chinese automotive companies itching to satisfy the consumer’s desires.
Don’t you worry about the pipes not being full.
The US is heading the same way as GM. In a few decades we will no longer be able to maintain the military it does now and will no longer be a superpower.
If the UAW is forced into rewduced benefits, which am sure they will be, there will be more seniors requiring MEDICARE and other social security monies. GM may survive, but how much more do you want to pay in taxes to cover the medical expenses of all of these people. You should be happy to because you’re all going to do it for Toyota, Honda, Nissan, Hyundai, when the time comes.
The foreign companies thank you for helping them be more profitable, so they can send more money back to home.
Queensmet-
Yes, we are headed down that path. The failure of the US auto industry has negative consequences for the US as a whole. National Health Care would be a tremendous help to all US manufacturers. GE, GM,they all ask for it. Nope, the people running the show do not want universal health care, no matter how many manufacturing jobs it would save/create. GM should take on the UAW and demand that GM provides no health care beyond 65 for salaried or blue collar, let medicare/medicaid handle it. Of course, GM has no balls when it comes to dealing with the UAW.
But do not blame foreign companies for providing competition. As the 2.5 have brain dead MBA management, we either fall behind the rest of the world in a protected economy, or we go out of business. Going out of business is probably better in the long run. Whatever takes its place will be more efficient, even if we have to work for Japanese or Chinese companies.
The UAW is totally irrelevant; want they want, what they concede, no longer matters.
“starlightmica:
March 15th, 2007 at 12:15 pm
Jalopnik has a QOD with choice quotes from GM’s 10-K filing today. Here are some of the best:
“A decline in consumer demand for our higher margin vehicles could result in diminished profitability.”
“Shortages and increases in the price of fuel can result in diminished profitability due to shifts in consumer vehicle demand.”
“The financial distress, bankruptcy, or insolvency of a major competitor could have significant adverse consequences for us.”
“GM’s significant investment in new technology may not result in successful vehicle applications.”
“Further reduction of our credit ratings, or failure to restore our credit ratings to higher levels, could have a material adverse effect on our business.”
“The federal government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results.”
“The federal government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results.”
“We are subject to significant risks of litigation.”
“Continued failure to achieve profitability may cause some or all of our deferred tax assets to expire.” ”
Is this the first 10K you’ve ever read? It would appear so. Boilerplate like this is in every companies SEC filings to mitigate their exposure to shareholder lawsuits. It’s frightening when auto enthusiasts try to read financial statements.
FIrst, which statement are you saying is untrue. That I would avoid the GM product?
Where is the GM CLEARLY superior? As far as I can tell, it is just catching up to where the F150 has been the last couple of years.
Awards from those rags don’t mean a thing. Every new domestic introduction wins those awards. Explain how the GM trucks are measurably better than an F150. Lets look at some numbers.
EPA mileage 2007 Sierra Classic 5.3 liter V8 is 16/21. The new truck, with variable displacement, has a remarkable improvement to 16/22. All that engine complexity for 1 mpg highway. F150 5.4 liter V8 is 16/19. I would take the mechanically simpler Ford V8 for long term reliability.
I have owned the old Silverado, no I have not driven a new one. Now I have a Tacoma. But if I wanted a large 4 cylinder engine it would be inline with dual balance shafts. What you get with GM is either a straight 4 or a V4, depending on which cylinders you are shutting down. Not good for vibration. Now to get any mpg improvement, which based on 1 mpg highway is questionable whether you get any improvement, the valves on the unused cylinders must be shut down. This takes a lot of complexity, just waiting to fail.
Glad you like the smoothness they achieved when in 4cyl mode. No, I am not going to test drive one, I have no desire to own that type of enginer.
-you end up with a very compromised 4 cyl. You get a lot of mechanical/electrical complexity, the fuel economy of an 8, and the smoothness of a poorly designed 4.
Chrysler and Honda each have an engine on the market doing the same thing. Honda with their V6 went to the greatest engineering lengths to control noise, vibration, harshness. I still won’t buy it.
2004 Silverado needs warranty work. Over and over, “We can’t replicate problem.” Oh, so I just have to accept defects that are not easy, cheap and quick to repair. Many days wasted AND lost wages. Too high of a price to pay.
Bought Chevy to help the “home team.” Stupid me. First GMC vehicle ever purchased. Never again. Sure, dealer is a separate entity but the GMC entity IS a package… and, hearing the SAME reply from several dealers, I can’t help but wonder how disparate dealers behave and respond so similarly. Corporate edict at work?
Whatever. I made a terrible mistake and will not do so again.
GMC is crossed off my list of possible purchases permanently. And, I will warn all I can of sub-par warranty coverage.
Toyota and others look better all the time.
Bye bye, GMC. I hope I can contribute to your fall. You proverbially slapped me in the face over and over. I will share my horrid experiences with all I can.
http://www.247wallst.com/2007/04/gm_more_motor_c.html
GM and Ford truck sales are off big time in March. More red ink.