GM President Frtiz Henderson came squeaky clean about the state of GM's brand portfolio, hurdles and losses. On the issue of too many brands, he admitted that the reason GM still has so many is that it is simply too expensive to kill any one of them. GM spent almost a billion large putting Oldsmobile to sleep, and with The General coming off a $3.25 billion Q1 loss, every half penny counts. In the mean time, GM will have to make do with its four new brand czars.
Henderson and CFO Rick Young also admitted that sales projections could be described as "rosy," the word "Delphi" is beginning to rhyme with "albatross," and that the intergalactic rise in gas prices has changed consumer buying habits "faster than we thought."
Fritz summarized the situation with: "We have to adjust. We have to learn how to make more money in cars and crossovers and tighten our belts with regard to cost expenditures." That's not the writing on the wall, that is the wall itself. Thanks for the tip, throwback!
[Source: CNN Money]
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Reader Comments (Page 1 of 1)
doug @ May 1st 2008 4:59PM
Amazing. And to think that a year ago, everyone was crowing that GM was 3-4 years ahead of Ford in it's turnaround plans and wondering what if anything Ford had in the product pipeline. Now, Ford has sold money losing brands, reorganized it product development process, is making a profit and will replace its entire NA lineup in the next 3 years, while GM still struggles with Delphi, the UAW, gas prices etc..
Disgruntled Goat @ May 1st 2008 5:15PM
I find it stunning to think that no one at GM foresaw a world where being fuel efficient counted. Toyota was selling the Prius 7 years ago yet here it is 2008 and the best GM can muster is a mild hybrid Malibu offered "in limited quantities"? The next best thing is a Cobalt that was last in pack when it was intro'ed 4 years ago.
Now they wake up and realize that "We have to learn how to make more money in cars". That's another thing they should have been thinking about 10 years ago when they lived and (now) died my SUVs and trucks.
And somebody somewhere thinks they have to pay these guys multi-million dollar salaries in order to retain this kind of talent? Amazing.
And as far as spending a billion to ditch a division, when you're losing $3 billion a quarter does another billion really make a difference?
elprogramer @ May 1st 2008 6:12PM
Seven years ago, the world was a MUCH different place.
Former GM'er @ May 1st 2008 8:16PM
Disgruntled Goat,
I was at GM and continually told people we needed to stop developing 5 different platforms of crossovers because gas prices might go up some day. A large company has no excuse to not have a diversified portfolio of products just in case. I also advocated bringing diesels over from Europe. Unfortunately, I didn't have the clout to change our product portfolios or the upper management's minds. Now GM is paying the price.
To be fair though, people didn't want to pay much for small GM cars back then and the Japanese companies had some economies of scale with their small car platforms that the Domestics just didn't have. It should also be noted that GM has had the efficient Saturn S-Series, the Sprint and then the Aveo and they are very efficient with their mid-size cars and large trucks (relatively speaking). When the ION came out, I thought that the only engine being 2.2 L wasn't efficient enough and now they'll be selling 1.4 L turbos in many GM products pretty soon. Saabs were and still are efficient luxury alternatives (when equipped with 4 cyl turbos), but the brand didn't have the cache or product support they needed to become a major player. The green luxury brand spot was wide open, but GM didn't want to invest too much money on a money-losing brand. If the Big 3 didn't have so much to pay on healthcare and pension like European and Asian companies, they would have more money to try risky or initially money-losing projects.
On a side-note, I once in 1995 asked a VP of engineering at Ford why they were focusing on trucks and not cars. I told him it was not a good idea because the market might swing back to cars. His answer was basically that they have to go where the money is. I think many companies fall into the short-term trap because they want big bonuses and shareholder returns now.
As far as retaining talent at GM, I took a buy-out in early 2005 from GM because they eliminated my position, didn't know if I'd have a job later that year.
MattKelly @ May 1st 2008 5:27PM
re; disgruntled Goat--actually if you listen to Bob Lutz's comments from Volt Nation during the NYAS in Feb., he stated that GM could've built a Prius-like hybrid years before Toyota did, but the prospect then of losing money on every vehicle in addition to the inital pricetag to build them wasn't something they wanted to go to the board with and propose. I mean who would? In hindsight, they realize, had they gone to the board with that proposal, but added that it would vault them into the leadership position in the hybrid marketplace allowing them marketplace advantage, it might be a different story today. All in all, I think Henderson and Young's transparency and authenticy is what should be commended here. This company is moving ahead to restructure through it
s new labor contract, and taming its legacy costs to be much more competitive. There will still be some bumps in the road until then--I'm looking to 2010 when its legacy costs will drop from about $7 billion a year to $1 billion and the release of the Volt. It will be a whole new ballgame then.
Andrew L @ May 1st 2008 6:28PM
No excuse... if they could have built it years before Toyota then why aren't they building it now and giving Toyota a run for its money
I am not even a Toyota fan, I am more of a GM fan than Toyota but even I find that a stupid remark on Lutz part. I also believe that Hybrids are not the answer, but still thats a market they are missing out on, and something to RAISE the average fuel economy
SPG @ May 1st 2008 5:59PM
Someone better get those cats before they run into traffic!
P.S. best of luck to GM.
oby @ May 1st 2008 6:00PM
"All in all, I think Henderson and Young's transparency and authenticy is what should be commended here. This company is moving ahead to restructure through it
s new labor contract, and taming its legacy costs to be much more competitive. There will still be some bumps in the road until then--I'm looking to 2010 when its legacy costs will drop from about $7 billion a year to $1 billion and the release of the Volt. It will be a whole new ballgame then."
Leave that GM Kool-aid alone will ya, it's bad for your stomach. GM is doomed plain and simple. The new ballgame will be endless courtroom appearances by GM lawyers as they try to figure out who's to blame for the mess known as Clueless Motors. If they are lucky it will be a chapter 11 court and not a chapter 7. As for that Volt, if it ever sees the light of day, it will be the biggest anticlimax in automotive history.
MattKelly @ May 1st 2008 6:39PM
See it's easy to be a naysayer because it requires nothing, except to sit back and point and laugh. Believing actually puts you out there, sometimes going against the crowd. It's kinda like voting--you actually have to go to the polls and vote to see change instead of being apathetic and complaining about your politicians and the state of the country from your armchair and leaving it up to others.
And as I've said before, we all as Americans have a vested interest in this company surviving. With 400,000 on GM's payroll, not to mention the tertiary jobs that rely on GM, if it were to go bankrupt, it would mean a whole lotta hurt in this country for a whole lotta people. Not just a recession, but probably a depression. So cut the company some slack, hope that the turnaround they are attempting to make occurs and that when the Volt appears, it does change the game, as all who love that car know it will.
jg @ May 1st 2008 8:17PM
'And as I've said before, we all as Americans have a vested interest in this company surviving. '
No we don't. The country was here before GM and we'll do fine after they're gone. And don't give me labor stats either. They'd build all their cars in Mexico or Canada if they could. Supporting GM supports GM's stockholders. It's not a patriotic duty to help sustain a small groups ability to make loads of cash. Let GM strangle themselves and watch a smaller more efficient company take their place. That's the American way.
motorman @ May 1st 2008 8:53PM
we GM stockholders help pay the bills of the country thru our taxes. just wait till all the industry is gone along with their taxes and see what you will have to pay in taxes to keep all those people on welfare.
America Fuc* Ya @ May 1st 2008 10:38PM
Yea cuz GM did/does nothing for this country like shifted production from cars to military equipment for WWII or the fact that they employ over 1 million people directly and indirectly (suppliers). You talk about factories which only hire avg. 2,000 but lets not FORGET suppliers!!! I am an engineer in the automotoive industry and even though I don't work for GM I do work for a GM suppiler and yes we supply Toyota, Nissan, Suburu. But they don’t give us the money GM/Ford/Chrysler does. We have 11 US factories in MI (7), KY (2), TN (1), IL (1) So ya keep thinking the country wouldn't miss them. Hey do you think BMW gives a sh*t if us Americans have a good qualty of life? Didn't think so.....
The Talking Hamburger @ May 3rd 2008 12:57PM
You sound like one of the last folks to realize that the housing foreclosure crisis would affect them. Hope you don't have a relative working in Sears, Kmart, or Linens 'N Things...
No, the U.S. won't fall into collapse through one big corporation going out of business. It happens. But if GM were the corporation shutting down, it's going to have an affect on you and your neighbors somehow. Guaranteed. Even if you drive a Honda.
I'm not saying that for some "buy American" spiel, I'm just trying to bring some logic to your version of reality.
iQuack @ May 1st 2008 8:50PM
Ridiculous! GM has less than half the the share of the U.S. market it had 50 years ago but offers MORE brands. Dumping Oldsmobile after creating Saturn makes that a wash, and adding Saab and Hummer have been 2 mistakes.
GM never needed Hummer--just a butch GMC when gas was cheap. And Saab? It's already dead, so GM should just bury the corpse.
Yes, there'd be upfront costs but I refuse to believe that GM couldn't eliminate brands. Buick is down to only 3 vehicles now (LaCrosse, Lucerne, and Enclave) and Pontiac is similarly weak. So, it seems that GM is weakening brands instead of killing them--just a slower death.
Tool @ May 1st 2008 9:26PM
Yes . . . It will be expensive to get rid of these brands.
Yet it will be GM's downfall not to. GM needs to be MUCH MUCH MUCH more focused going to market, with less product overlap, fewer brands and fewer dealers.
Everybody in this business and everyone on Wall Street would applaud GM for biting the bullet and doing what they need to do. For chrissake.
Jeff Stokes @ May 1st 2008 10:51PM
Dump Ponitac and Hummer now. Sell Saab to the Indians or Chinese.
No one wants to drive A Pon or Hum now let alone buy one.
Noidor @ May 2nd 2008 12:25AM
Joke has been what? "GM is a retirement company which also happens to make cars". I think that is a fair assessment. Back then (even still now) wages for UAW workers were much too high, there was huge emphasis on volume models markets as budget brands (much like Ford NA is these days), so to make up for it they went into lucrative SUV market. Is it any surprise they all, but abandoned small car and C/D segment? It was short-term thinking, putting eggs in one basket, no hedging risks whatsoever!
Well who would have thought that fed would start destroying the value of the dollar and driving up the price of oil (has nothing to do with speculation of it btw). They created the tech bubble, paid for Iraq war with low interest rate/lax lending standards housing bubble, and printing of more money out of thin air, and now it's too late; economy is going into a severe long-lasting recession which according to Mohammed El-Erian Co-CEO of Pimco, will keep on experiencing inflationary pressures for 3-4 more years.
This leaves domestic in a position where they have to pull an WRC car like 180, problem is they are all in Queen Mary 2 cruise-liner.
Yes Mercury and GMC need to go. Ford needs to up its image and get away from budget brand philosophy. Saturn and Vauxhall need to be renamed Opel and sold as such worldwide to build brand recognition to take on likes of Mazda and VW. Chevy needs to be in between somewhere, kind of like SEAT or perhaps Skoda, or Fiat? Pontiac is fine if it keeps on offering performance products with a premium feel to them without stepping on Cadillac too much.
Chrysler needs to dump half its SUV offerings and keep those which won't confuse the customer. I think they have the most difficult job ahead of them in regard to redoing their car line-up, their mainstream cars are not up to par at all.
Ford needs to implement its Euro line-up here while have NA specific products and move on! It sounds easy, but they and I both know what challenges are faced with that, but it has to be done.
Technology wise they must use everything available, I'd especially take notice of BMW's approach. Fight for every inch or more appropriate, every MPG - obviously with a common sense cost approach.
US car market is about to get a lot smaller, people are going to keep their cars longer, more and more will default on car payments, inventory will surely build up, price of raw materials will keep on skyrocketing until inflation is brought back under control.
Do car manufacturers actually think that Republicans are going to be friendlier towards automotive industry? I think not, just a random thought.
Is it going to come to a situation that Americans are going to be hopelessly trying to compete with the Chinese. As in everything that will be produced here will be exported under high demand, thus leaving Americans waiting in long lines and paying hyper-inflated prices for goods? What's to become of service sector? If it collapses (and it will if airline industry is anything to go by, oh and blockbuster/circuit city deal), then will we have manufacturing and other real industries to support the economy? I doubt we'll be able to change in the infrastructure in time. Eeeeick...ugly times are a-coming. Goodnight!
Borger @ May 2nd 2008 9:04AM
Ahhh, that explains it, the GM divisions are cats and GM is trying to herd them.
GM, now that you have Buick, GMC and Pontiac in on distribution channel, it's time to kill Pontiac. You wouldn't have to close or even buy out dealerships because they would still be selling GMC and Buick, in fact you could move Saturn into those dealerships and close down the old Saturn stand alone dearlership. Close Pontiac down before it's to late! TICK-TOCK!