GM Chairman/CEO Ed Whitacre just announced during GM’s Q2 financial conference call that he will step down as CEO on September 1, and as Chairman at the end of 2010. GM board member Dan Akerson will take over both of Whitacre’s position. Whitacre called Akerson “very involved” and said he expects a smooth transition. Whitacre planned to leave after “returning GM to greatness,” and says that “with a good foundation in place,” he’s ready to leave. The board’s been aware of Whitacre’s plan, and the board was ready to act when Whitacre said he was ready to step down. Akerson says he and Whitacre “share a vision” for GM, so instead of setting an agenda now, he’s focusing on a smooth transition. Akerson noted that Whitacre “had made some management changes” already, and he’s confident in his “deep bench.” The major transition, he says, “is me,” because he needs to gain a day-to-day, operational perspective on the business.
GM has released its Q2 earnings, and it’s pulled off a $1.3b net profit on improved North American revenue, and narrower losses on GM Europe. Revenues for GM International, however, were down to about half of their Q1 level. Despite over $1b in capital expenditures last quarter, GM managed to improve free cash flow from $970m in Q1 to $2.834b in Q2. Full chart packet available in .doc format here, presentation slides available in PDF format here.
Editor’s Note: Legendary auto journalist and TTAC inspiration Jerry Flint died this week. Rather than write a sappy eulogy, we’ve decided to let Jerry speak for himself. What follows is a speech Flint gave to GM employees at Milford Proving Grounds in October 2000. It’s feisty, passionate and deeply insightful… the kind of speech that made Jerry famous, and paved the way for sites like TTAC. Moreover, it shows just how deep GM’s problems run, and serves as a timeless warning against the worst impulses of the business. Rest In Peace Jerry… we will always remember you at your best. [Courtesy: The Olds Zone Hat Tip: Ken Elias]
There was an auto executive, he was a very high ranking GM man. You all know his name but I won’t mention it because it might embarrass him. He’s not at General Motors anymore.
I once asked this man what he would do if he found himself the chief executive of General Motors. He said, and I quote, “I would fire 1,000 executives.” End of quote. I’m not sure whether it made any difference to him which 1,000 executives, if he had anyone in particular in mind, or any thousand would do. I just tell you this to start things off.
At the end of the second quarter of this year, Ford’s overall automotive debt totaled $25.8 billion. Just three months before, its debt level was at $32.6 billion. The debt reduction is all part of CEO Alan Mulally’s plant to earn an investment-grade debt rating by the end of 2011, a move that will lower Ford’s cost of borrowing as well as lowering interest payments. And though Ford’s been making a healthy profit, America’s bailout-free automaker has had more than its fair share of government help to beat the debt. According to the WSJ [sub], Ford’s extensive collection of government loan guarantees has been key to its ability to pay down more expensive debt accumulated during Ford’s 2006 restructuring.
[Editor’s Note: The following is the transcript of a speech given by GM Chairman/CEO Ed Whitacre today at the Center For Automotive Research’s Management Briefing Seminar (via GM Media)]
Thanks, Dave [Cole], and good afternoon. It’s a pleasure to be here…and it’s no wonder why you picked this location.
This really is beautiful country up here. And as a Texan, it pains me to say this, but it’s true…your lake really is bigger than any lake in Texas.
This is my first time at this conference, so I hope you will take it easy on me. You were nice enough to invite me last year…but at the time, I was still trying to figure out my way around the RenCen without getting lost.
Earlier this week, newly-elected UAW President Bob King gave a speech before the Center For Automotive Research Conference, touting the deep changes that have transformed the union. The first half of King’s speech sounded a much-needed note of contrition, and highlighted the new spirit of cooperation between the UAW and Detroit’s management class. But a number of observers noted that the second half of King’s speech represents the flip side of the UAW’s new sense of responsibility for the fate of Detroit: a commitment to targeting the transplant factories that have made life hell for the union and the Detroit automakers alike. After all, nothing brings enemies together like a common adversary. But the UAW’s enemy isn’t just South of the Mason-Dixon line… it’s lurking within its own confused body politic. (Read More…)
Sales numbers for the US market in July should drop today, and based on an early analyst survey, the market’s only recovered to a 12m SAAR at best. Estimates aside though, it’s beginning to look more and more like the US market for new cars is approaching a “new normal.” How so? Automotive News [sub]’s Jesse Snyder figures it’s
Because discipline is breaking out all over– at manufacturers, suppliers and dealerships.
Even Snyder’s headline captures the mood of cautious realism that’s suddenly taken hold of the auto industry: though the market appears to have moved towards 12m annual units in July, Snyder’s analysis is headlined Life at 11 million U.S. sales. (Read More…)
Legislation aimed at improving the transparency of Technical Service Bulletins (TSBs) has passed the Massachusetts state House of Representatives, and awaits approval by the Senate. If approved, Bill 2517 [full text in PDF format here] would require that
The manufacturer of a motor vehicle sold in the commonwealth shall make available for purchase to independent motor vehicle repair facilities and motor vehicle owners in a nondiscriminatory basis and cost as compared to the terms and costs charged to an authorized dealer or authorized motor vehicle repair facility all diagnostic, service and repair information that the manufacturer makes available to its authorized dealers and authorized motor vehicle repair facilities in the same form and the same manner as it is made available to authorized dealers or an authorized motor vehicle repair facility of the motor vehicle.
The Alliance of Automobile Manufacturers is opposing the bill, according to the DetN, because it believes the bill is motivated by parts manufacturers who want access to parts in order to reverse engineer and sell them. Literally. And yes, it is China’s fault.
When Chrysler’s CEO Sergio Marchionne took the stage over the weekend to honor Lee Iacocca with an induction into the Walter P. Chrysler Legacy circle, he admitted to feeling unworthy of honoring Chrysler’s most famous executive in recent memory, and called Ford’s Alan Mulally and the UAW’s Bob King to help share the honor. And being the business-obsessed type he is, Marchionne wasn’t about to let Mulally get on stage without at least a mention of Ford’s just-announced $2.6b profit. And though the recognition and ensuing awkward “moment” helped add to the usual Detroit gala hometown booster vibe, it also highlighted the fact that Chrysler still has yet to announce its Q2 results. (Read More…)
Ford Motor Company has announced its second-quarter results for 2010, and the company says it earned $2.6b over the last three months on $2.9b in operating profit before special items. In a departure from the typical model for domestic automakers, Ford’s growth was largely driven by improvement in North American results: Ford earned $1.9b in pre-tax operating profits in North America after boosting its Ford brand to the top spot in the American market over the first six months of 2010. Ford earned $31.3b in Q2 revenue, a $4.5b improvement over Q2 2009 (a $7.4b improvement excluding Volvo). Ford’s operating cash flow improved by $2.6b despite ending the quarter with $21.9b in cash, a $3.4b drop since the end of Q1. However, that drop in cash-on-hand was the result of a $3.8b debt reduction, and Ford figures its total automotive liquidity (including all credit facilities) is $25.4b. Automotive debt was reduced by about $7b, to $27.3b, the result of both the UAW Retiree Medical Benefit trust buydown and a $3b repayment of a revolving credit line. The shutdown of Mercury has reportedly cost Ford about $229m so far, and Ford expects that amount to equal slightly under half of the total cost of eliminating the brand.
Ford’s results aren’t very surprising given the fact that it Ford brand outsold all other brands over the first half of 2010, but the healthy profit shows that a rumored dependence on fleet sales wasn’t enough of a factor to weaken Ford’s financial results. Though debt levels remain high and its overseas performance remains weak, Ford has proven once again that it’s the healthiest American automaker… if only in terms of its North American market performance.
After months of speculation about GM’s re-entry into the subprime lending market, The General has announced a deal in which it will purchase the lender AmeriCredit for $3.5b. Founded in 1992, and managing assets worth $10b, AmeriCredit has been pursued by GM for the last month, according to GM CFO Chris Liddell in the WSJ [sub]. GM paid AmeriCredit stockholders $24.50 per share for a controlling interest in the firm, a 24 percent premium over its $19.70 closing price yesterday. Still, GM insists that acquiring AmeriCredit will have “a minimal impact” on its balance sheet, although no explanation is given as to how. $3.5b is at least ten percent of GM’s cash pile at this point, and it’s not clear if that qualifies it as a “minimal impact” or if GM is using some kind of financial instrument to purchase the firm. AmeriCredit says it will “expand its offerings” to support GM, likely in the area of lease deals, but it will also continue to offer loans to non-GM-brand car deals.
The best-selling nameplates in America may still be pickup trucks, but for the first time in nearly a decade, cars and car-based crossovers are outselling the body-on-frame competition. The shift occurred in the second half of 2007, as gas prices built to their Summer 2008 peak, and despite more reasonable energy prices, consumers do not appear to be going back to large trucks and SUVs en masse. And, as Automotive News [sub] reports, the downsizing of America’s buying tastes is doing more than just putting a fork in the SUV fad.
Every day, German auto managers go on their knees and pray that the financial troubles in Greece, Spain and elsewhere continue. Why? The troubles keep the Euro low, and a low Euro is high octane fuel for German car exports. In May, German car exports rose 46 percent. For the first five months, German car exports are up 50 percent. Despite a lackluster home market, the German car industry is hitting on all cylinders: For the first five months, German production is up 26 percent to 2.3m units, driven mostly be strong demand from China and the U.S. However, red flags are going up. Literally. (Read More…)
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