GM still in trouble
07-06-2007, 08:46 PM
#1
Team Owner
Thread Starter
GM still in trouble
When will this affect GM's racing programs in a big way?
Sales decline weighs on GM
Wall Street drives stock down after June demand drops 21 percent; dealer calls for higher incentives.
Sharon Terlep / The Detroit News
GM credit rating drops after 'surprisingly weak' June sales
Slumping truck sales and hand-wringing on Wall Street have cast doubt over General Motors Corp.'s turnaround bid, threatening to overshadow the automaker's cost-cutting and product successes of the past year.
This week's June sales report showed surprising weakness in GM's new full-size pickup trucks, a linchpin of the automaker's comeback plan.
An investment analyst downgraded GM on Thursday, fueling a 3 percent decline in GM shares.
And with GM still burning cash in its key North American operations, analysts say second-quarter earnings due out later this month are expected to be less than stellar.
"We believe the near term outlook may get rocky," Deutsche Bank analyst Jochen Gehrke wrote in a research note in which he reduced GM's 2007 production and earnings forecasts. "We see no reason for GM to post strong earnings or market share trends over the next few months."
GM's June sales were down 21 percent from a year ago, with sales down 7 percent year to date.
Particularly troubling is that sales of GM's redesigned full-size pickup trucks fell 23 percent, while sales of Toyota's new Tundra, its first full-size pickup, more than doubled. The Tundra was helped along by no-interest loans and other incentives adding up to $5,083 per pickup, according to auto data firm Edmunds.com.
"The bottom line was that it was a tough quarter and a first half that was weaker than we expected," GM sales analyst Paul Ballew said.
GM blamed the decline on its strategy of scaling back incentives and low-margin fleet sales, though the extent of the drop surprised many industry watchers. GM's foreign competitors also offered more aggressive discounting than expected, which hurt each of Detroit's automakers.
Knoxville, Tenn.-based Chevrolet dealer Jim Quinlan said GM's Chevy Silverado is as good as advertised but it is being hurt by attractive deals on the Dodge Ram and Toyota Tundra. "We are just not in the game on incentives," he said. "We are not competitive at all."
Pointing to disappointing June sales as well as a market made volatile by rising gas prices and continuing worries in the mortgage market, Bear Sterns analyst Peter Nesvold downgraded GM's stock to a peer perform rating from outperform.
Nesvold bolstered his GM rating less than two months ago, saying the automaker could gain significant concessions from the UAW.
GM's stock has climbed since then, and Nesvold, in his Thursday note, said it's time for investors to cash in.
He then quoted economist John Maynard Keynes: "When the facts change, I change my mind."
GM shares closed Thursday at $36.76, down $1.22, or 3.2 percent.
GM's troubles put even more pressure on the automaker and the United Auto Workers to reach a deal that will help the automaker cut labor costs.
The labor question is the lingering unknown in a turnaround that began after a $10 billion loss in 2005, said auto analyst John Casesa of the Casesa Shapiro Group.
Since then, GM has successfully eliminated waste and downsized to cut costs. It's also becoming clear that the automaker's market share woes aren't going to lift dramatically anytime soon, he said.
"On revenue, the company is struggling, on cost it has done a fabulous job -- the open question is labor relationship," Casesa said. "The turnaround will hinge on automaker's ability to forge a radically different relationship with the UAW."
Casesa said the stock price drop isn't cause for too much concern, given GM's gains over the past year.
Even after Thursday's drop, GM shares are up more than 20 percent from a year ago.
Some promising product launches, namely the redesigned Chevrolet Malibu and Cadillac CTS sedans, are set for later this year. Analysts also seemed hopeful that GM will strike a favorable deal with the UAW.
"We nonetheless believe structural changes will be significant," Gehrke wrote. "And that these changes will prevail in the intermediate term."
You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.
More Autos-Insider Headlines
Wall Street drives stock down after June demand drops 21 percent; dealer calls for higher incentives.
Sharon Terlep / The Detroit News
GM credit rating drops after 'surprisingly weak' June sales
Slumping truck sales and hand-wringing on Wall Street have cast doubt over General Motors Corp.'s turnaround bid, threatening to overshadow the automaker's cost-cutting and product successes of the past year.
This week's June sales report showed surprising weakness in GM's new full-size pickup trucks, a linchpin of the automaker's comeback plan.
An investment analyst downgraded GM on Thursday, fueling a 3 percent decline in GM shares.
And with GM still burning cash in its key North American operations, analysts say second-quarter earnings due out later this month are expected to be less than stellar.
"We believe the near term outlook may get rocky," Deutsche Bank analyst Jochen Gehrke wrote in a research note in which he reduced GM's 2007 production and earnings forecasts. "We see no reason for GM to post strong earnings or market share trends over the next few months."
GM's June sales were down 21 percent from a year ago, with sales down 7 percent year to date.
Particularly troubling is that sales of GM's redesigned full-size pickup trucks fell 23 percent, while sales of Toyota's new Tundra, its first full-size pickup, more than doubled. The Tundra was helped along by no-interest loans and other incentives adding up to $5,083 per pickup, according to auto data firm Edmunds.com.
"The bottom line was that it was a tough quarter and a first half that was weaker than we expected," GM sales analyst Paul Ballew said.
GM blamed the decline on its strategy of scaling back incentives and low-margin fleet sales, though the extent of the drop surprised many industry watchers. GM's foreign competitors also offered more aggressive discounting than expected, which hurt each of Detroit's automakers.
Knoxville, Tenn.-based Chevrolet dealer Jim Quinlan said GM's Chevy Silverado is as good as advertised but it is being hurt by attractive deals on the Dodge Ram and Toyota Tundra. "We are just not in the game on incentives," he said. "We are not competitive at all."
Pointing to disappointing June sales as well as a market made volatile by rising gas prices and continuing worries in the mortgage market, Bear Sterns analyst Peter Nesvold downgraded GM's stock to a peer perform rating from outperform.
Nesvold bolstered his GM rating less than two months ago, saying the automaker could gain significant concessions from the UAW.
GM's stock has climbed since then, and Nesvold, in his Thursday note, said it's time for investors to cash in.
He then quoted economist John Maynard Keynes: "When the facts change, I change my mind."
GM shares closed Thursday at $36.76, down $1.22, or 3.2 percent.
GM's troubles put even more pressure on the automaker and the United Auto Workers to reach a deal that will help the automaker cut labor costs.
The labor question is the lingering unknown in a turnaround that began after a $10 billion loss in 2005, said auto analyst John Casesa of the Casesa Shapiro Group.
Since then, GM has successfully eliminated waste and downsized to cut costs. It's also becoming clear that the automaker's market share woes aren't going to lift dramatically anytime soon, he said.
"On revenue, the company is struggling, on cost it has done a fabulous job -- the open question is labor relationship," Casesa said. "The turnaround will hinge on automaker's ability to forge a radically different relationship with the UAW."
Casesa said the stock price drop isn't cause for too much concern, given GM's gains over the past year.
Even after Thursday's drop, GM shares are up more than 20 percent from a year ago.
Some promising product launches, namely the redesigned Chevrolet Malibu and Cadillac CTS sedans, are set for later this year. Analysts also seemed hopeful that GM will strike a favorable deal with the UAW.
"We nonetheless believe structural changes will be significant," Gehrke wrote. "And that these changes will prevail in the intermediate term."
You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.
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07-06-2007, 09:13 PM
#3
Team Owner
Thread Starter
07-06-2007, 09:22 PM
#4
Safety Car
Much depends on Cerberus Capital Management, new owners of Chrysler, and the UAW.
Looks like Delphi, GM and UAW have their disputes settled. That's a plus!
Looks like Delphi, GM and UAW have their disputes settled. That's a plus!
07-06-2007, 10:05 PM
#5
Melting Slicks
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I dont get it...I see more and more new GM cars, trucks, in-betweens everyday...brand new, driving around. It isnt like they are giving them away for free! However, I still think GM needs to consolidate their brands...having competing cars with different symbols on them is not what I would call the best thing since sliced bread.
Also, they need to separate the corvette brand from chevy....at least have dedicated corvette only dealerships that are up-scale like the benz, p-car, bmw, audi, whoever dealers. I am not a big fan of going to a dealer selling a 12k car with 1972 interior and billy bob wearing camo selling me a 50-75k+ car. Oh, and on that note, charge more for the damn car! It runs circles around some of the competition costing 2-3 even 5 times as much! The demand is there...perhaps lower supply by a few units. I certainly think the new z06 is worth more then 70k...the performance and the quality is there...maybe add an option for composite big brakes and a 90% track, 10% street version like the GT3 RS. It WILL SELL!
(off the soap box)
Also, they need to separate the corvette brand from chevy....at least have dedicated corvette only dealerships that are up-scale like the benz, p-car, bmw, audi, whoever dealers. I am not a big fan of going to a dealer selling a 12k car with 1972 interior and billy bob wearing camo selling me a 50-75k+ car. Oh, and on that note, charge more for the damn car! It runs circles around some of the competition costing 2-3 even 5 times as much! The demand is there...perhaps lower supply by a few units. I certainly think the new z06 is worth more then 70k...the performance and the quality is there...maybe add an option for composite big brakes and a 90% track, 10% street version like the GT3 RS. It WILL SELL!
(off the soap box)
07-06-2007, 10:21 PM
#6
Drifting
I dont get it...I see more and more new GM cars, trucks, in-betweens everyday...brand new, driving around. It isnt like they are giving them away for free! However, I still think GM needs to consolidate their brands...having competing cars with different symbols on them is not what I would call the best thing since sliced bread.
Also, they need to separate the corvette brand from chevy....at least have dedicated corvette only dealerships that are up-scale like the benz, p-car, bmw, audi, whoever dealers. I am not a big fan of going to a dealer selling a 12k car with 1972 interior and billy bob wearing camo selling me a 50-75k+ car. Oh, and on that note, charge more for the damn car! It runs circles around some of the competition costing 2-3 even 5 times as much! The demand is there...perhaps lower supply by a few units. I certainly think the new z06 is worth more then 70k...the performance and the quality is there...maybe add an option for composite big brakes and a 90% track, 10% street version like the GT3 RS. It WILL SELL!
(off the soap box)
Also, they need to separate the corvette brand from chevy....at least have dedicated corvette only dealerships that are up-scale like the benz, p-car, bmw, audi, whoever dealers. I am not a big fan of going to a dealer selling a 12k car with 1972 interior and billy bob wearing camo selling me a 50-75k+ car. Oh, and on that note, charge more for the damn car! It runs circles around some of the competition costing 2-3 even 5 times as much! The demand is there...perhaps lower supply by a few units. I certainly think the new z06 is worth more then 70k...the performance and the quality is there...maybe add an option for composite big brakes and a 90% track, 10% street version like the GT3 RS. It WILL SELL!
(off the soap box)
Although you do make some good points, I must repsctfully disagree. Line consolidation would hurt guys like me who sell three lines. I can't tell you how many times someone came to look at an Impala(w body) and drove out in a grand prix or lacrosse(both w bodies as well). As far as "Billy Bobs" selling Vettes I guess I am sorry to hear that. We try to maintain a clean image and offer the best vette service that can be had in our area.. If a luxury image is what you want the Caddy dealers are a bit better I suppose. Remember where the vette started. If was/is the working mans sports car. Not so much the Z06 but you get my point. Corvette and Chevrolet need to stay together. Kerbeck has a stand alone vette dealer and it looks nice. Vette customers are much harder to deal with over a person buying anything else. Thats not a bad thing they just need an educated Sales associates to provide the attention needed. The dealer I work at only gets about 2-3 vettes a year. For the last 2 1/2 years I have sold them all.
I think if GM cut another brand it may not be too bad but I think GM is still the strongest American automaker out there. I like the diversity and I think alot of other brand loyal people do as well.
We all need to stop worrying so much. GM will be fine and the Vette will be around as well.
Last edited by AUTO_X_AL; 07-06-2007 at 10:28 PM.
07-06-2007, 10:33 PM
#8
Melting Slicks
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I totally agree! But it is almost alarming to see the stock take a dump.Anyway, my points were/are just my opinions
You know what they say about those
I hope to see GM live on for many, many years. And I plan to purchase many, many more vettes! Already on #3 and im still under 30
07-06-2007, 11:22 PM
#9
Race Director
Only a very short matter of time before we have CHINESE cars in our dealerships, THEN see how long Detroit holds out. The imports have already destroyed my career (the chemical business, not the track setup), and it's only a matter of time before bad gets worse for automakers.
07-07-2007, 02:01 AM
#10
Tech Contributor
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You get the same service at any dealer of the regular auto manufacturers. If you are buying a Rolls, Maybach, or Bentley you may get better service. The quality of the service depends on the dealership and its people not the manufacturer whose name is on the sign.
From a brand situation GM needs to get more differentiation between the models sharing the same platform. They had that differentiation before the mid 70s and need to get back to it. It is pretty bad when they constrain the options available on a car because the only way the can differentiate is to keep one brand from having a common option.
Bill
From a brand situation GM needs to get more differentiation between the models sharing the same platform. They had that differentiation before the mid 70s and need to get back to it. It is pretty bad when they constrain the options available on a car because the only way the can differentiate is to keep one brand from having a common option.
Bill
07-07-2007, 08:32 AM
#11
Melting Slicks
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Bottom line, GM needs to put some pressure on the dealerships to clean up their act and look presentable. The dealership is the first thing people see and associate the car with quality (or lack there of). If it were not for my first hand experience driving these cars on the track and only had the car to wax and drive on the street, I doubt I would have ever gone back for a 2nd or 3rd.
Before people jump down my throat, I am only speaking from my experiences in my area of the country. For those who do own or work at a dealer and feel it is top notch, THANK YOU! GM needs more like you and the people who own the cars appreciate the extra effort!
07-07-2007, 08:37 AM
#12
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Only a very short matter of time before we have CHINESE cars in our dealerships, THEN see how long Detroit holds out. The imports have already destroyed my career (the chemical business, not the track setup), and it's only a matter of time before bad gets worse for automakers.
07-07-2007, 09:12 AM
#13
Drifting
When I had my M3, I would take it in for service and without any questions they gave me a brand new car to drive for the day (or however long the service took). With the vette, I am lucky to even get a car. Usually it is "we have a shuttle to take you to work" or if I am lucky to get a rental, the thing looks like it went to hell and back and smells like a chiminey. And this is not even one particular dealer - I have had the same experience with several dealers.
Bottom line, GM needs to put some pressure on the dealerships to clean up their act and look presentable. The dealership is the first thing people see and associate the car with quality (or lack there of). If it were not for my first hand experience driving these cars on the track and only had the car to wax and drive on the street, I doubt I would have ever gone back for a 2nd or 3rd.
Before people jump down my throat, I am only speaking from my experiences in my area of the country. For those who do own or work at a dealer and feel it is top notch, THANK YOU! GM needs more like you and the people who own the cars appreciate the extra effort!
Bottom line, GM needs to put some pressure on the dealerships to clean up their act and look presentable. The dealership is the first thing people see and associate the car with quality (or lack there of). If it were not for my first hand experience driving these cars on the track and only had the car to wax and drive on the street, I doubt I would have ever gone back for a 2nd or 3rd.
Before people jump down my throat, I am only speaking from my experiences in my area of the country. For those who do own or work at a dealer and feel it is top notch, THANK YOU! GM needs more like you and the people who own the cars appreciate the extra effort!
07-07-2007, 09:15 AM
#14
Drifting
I totally agree! But it is almost alarming to see the stock take a dump.Anyway, my points were/are just my opinions
You know what they say about those I hope to see GM live on for many, many years. And I plan to purchase many, many more vettes! Already on #3 and im still under 30Unlike alot of auto excutives I have faith in Rick Wagner. He has done more than any Auto excutive in the past five years or so. Combined with Bob Lutz I really think a turn around is well underway. I do however think that the other american brands are reeling pretty bad and only hope that they can pull out of this as well.
07-07-2007, 10:51 AM
#15
Safety Car
GM's probs are multiple.
The MAIN problem now is unit cost. If they can't get their costs in line they'll head to bankruptcy court. Labor, Health and Legacy are the choke items - bankruptcy might take care of these.
Very sad for all.
The MAIN problem now is unit cost. If they can't get their costs in line they'll head to bankruptcy court. Labor, Health and Legacy are the choke items - bankruptcy might take care of these.
Very sad for all.
07-07-2007, 10:53 AM
#16
Safety Car
If their cars are anything like the crap you buy at harbor freight, then they will last only a few years in this country. The quality control is not there - "a little bit off" = ok for production and sales. Just look at the difference in life span of the china napa rotors vs canada made. The chiness have no good steel/iron manufacturing or foundries.
But they learn quickly.
07-07-2007, 02:32 PM
#17
Melting Slicks
IMO, GM still has too many brands & models for its current US market share. GM has 5 brands (not counting Saab) with approx. 45 models of cars/SUVs and a current US market share of 19.2%
Toyota has 2 brands with approx. 25 models of cars/SUVs and its current US market share is 19.9%
I think it still needs to reduce brands and number of models to reduce costs and compete. This isn't 1980, when GM had 46% of the US market.
Toyota has 2 brands with approx. 25 models of cars/SUVs and its current US market share is 19.9%
I think it still needs to reduce brands and number of models to reduce costs and compete. This isn't 1980, when GM had 46% of the US market.
07-07-2007, 04:50 PM
#18
Le Mans Master
I'm sure the Big 3 are behind the scenes lobbying big time for National Health-care so as to push those costs off onto the taxpayers. That cost shift alone could make a huge difference in unit costs.
07-07-2007, 04:55 PM
#19
Melting Slicks
If their cars are anything like the crap you buy at harbor freight, then they will last only a few years in this country. The quality control is not there - "a little bit off" = ok for production and sales. Just look at the difference in life span of the china napa rotors vs canada made. The chiness have no good steel/iron manufacturing or foundries.
Just think of how many people you know who buy Honda, Toyota, Nissan. Why aren't they buying American and supporting the American car manufacturers? After all isn't that the right thing to do? They're sick of buying crap, poorly built, heavily recalled cars built by over paid workers who don't give a damn.
07-07-2007, 04:58 PM
#20
Racer
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I give some seminars about business and use the information about GM and Toyota.
basically the infomation reads that one of the reasons for Toyotas success is that they are in a cycle of "constant and never ending improvment" (canei). They are always making small changes to the business to improve every aspect. In that way they dont have to make the huge changes and even though the business is hugely profitable, they dont sit back with no improvement.
On the other hand GM seems to go through a cycle of profitability and loss. When there are profits they are on top of the world and dont watch what they are doing (overhead costs, labor and union costs, design changes) but when things go bad they are so under the gun that they have to make HUGE changes to try and straighten things out. Layoffs, plant closings, etc. When is the last time a Toyota plant shut down?
GM lost 6 billion last year, Toyota made 4 billion ( the exact number may be a little off, but its close) I think i read that GM lost 3k per car sold or something to that effect.
Another thing that really amazes me about GM is the fact that the new Camaro, that is a great looking car, is not due to come out until 08 or 09??? What in the hell are they thinking?? By that time Ford will have sold a few million new Mustangs.
I went and looked at new GM products the other day. A new Suburban is 52k. Lot is full of them.
I agree that Corvettes should only be available at certain dealers. They should be branded as "The only american sports car" or something to that effect and be more exclusive. They certainly deserve it. The new z06 is among the best cars in the world. It pretty much blew everything away in the new Car and Driver.
basically the infomation reads that one of the reasons for Toyotas success is that they are in a cycle of "constant and never ending improvment" (canei). They are always making small changes to the business to improve every aspect. In that way they dont have to make the huge changes and even though the business is hugely profitable, they dont sit back with no improvement.
On the other hand GM seems to go through a cycle of profitability and loss. When there are profits they are on top of the world and dont watch what they are doing (overhead costs, labor and union costs, design changes) but when things go bad they are so under the gun that they have to make HUGE changes to try and straighten things out. Layoffs, plant closings, etc. When is the last time a Toyota plant shut down?
GM lost 6 billion last year, Toyota made 4 billion ( the exact number may be a little off, but its close) I think i read that GM lost 3k per car sold or something to that effect.
Another thing that really amazes me about GM is the fact that the new Camaro, that is a great looking car, is not due to come out until 08 or 09??? What in the hell are they thinking?? By that time Ford will have sold a few million new Mustangs.
I went and looked at new GM products the other day. A new Suburban is 52k. Lot is full of them.
I agree that Corvettes should only be available at certain dealers. They should be branded as "The only american sports car" or something to that effect and be more exclusive. They certainly deserve it. The new z06 is among the best cars in the world. It pretty much blew everything away in the new Car and Driver.