GM currently owns about 13% of the small car market. With demand for small vehicles increasing with the price of black gold, GM is out to increase that market share. Nevertheless, even if it doesn't increase its share, it plans to make more money off of each small car sold. How? By raising the price, naturally.
The plan is simple: make better small cars, charge more for them. The upcoming Cruze could run you a few thousand more than the outgoing Cobalt, for instance. The test is to see whether cars like the Cruze will be worth the premium. GM Global Design Chief Ed Welburn said, "In North America, we never did a good small car." The General plans to bury that piece of its history... but it's going to charge you, the consumer, for the funeral.
The idea that GM can lasso the small car market while charging a premium, at the same time as slashes its marketing budget by $1.5 billion, takes some effort to swallow. One analyst said that demand for small cars will outstrip supply, so GM could get away with it. However, until we see proof of small GM cars that take bats to the established competition, we'll have to give this plan a "Hmmm."
At the end of World War II, GM "put a dealership in every little hamlet" to keep up with the postwar boom. Sixty years later, in 2005, long after that boom had ended and every domestic maker was losing market share, GM had 15,094 dealerships. By 2007 GM had reduced that to 14,118 dealers. But if GM plans to compete financially with its overseas competition, it will need to shrink that number a great deal further.
Chevrolet has 4,000 dealerships. Toyota, to sell the same amount of cars, has just 1,244 dealers. Put another way, the typical Toyota dealer moves 1,766 cars per year. The typical Chevrolet dealer moves 554. And the other domestics fare about the same: the usual Ford dealership rolls 556 vehicles off the lot every year, while a Dodge dealer does 374 per year.
GM is looking at consolidating Pontiac, Buick, and GMC shops into one. However, state franchise laws don't make closing dealerships easy, and it's hard to tell a profitable dealer that he needs to close for the good of the parent company. Dale Willey, head of the National Automobile Dealers Association, said "Dealers make the decision to get into the business, and the manufacturers accepted the dealers getting into the business. It ought to be the dealers' decision to get out of the business." While GM CEO Rick Wagoner realizes that the "payoff is significant" for reducing the number of outlets, he must know that the price will be significant as well.
Ford's been cranking out hybrid CUVs on the CD2 platform for four years now, and with over 40,000 produced, it's gotten to be old hat. Since it started in 2004, Ford's managed to make the Escape, Mercury Mariner and Mazda Tribute 30-percent cheaper to build. That cost reduction, coupled with the pending introduction of the hybrid Fusion and Milan platform-mates, will allow Ford's hybrid program to actually turn a profit for the first time in 2008. The Mariner and Escape hybrids find about 21,000 owners per year, and adding the hardware to the sedans could spur sales of Ford's hybrid system, further reducing costs. We're excited to try out the sedans with the hybrid system and the potential for a winner is there if Ford manages to deliver the goods at an attractive price.
BMW's running full-bore as it strains to double its profit margin within the next five years. Across all 23 of the company's manufacturing locations, capacity is maxed out at 100-percent, and there's nary an extra Roundel badge to be had. As BMW pushes for a 10-percent profit margin, they're also putting the squeeze on suppliers. To the OEMs, it seems that BMW has shifted its focus from quality and innovative technology to the bottom line. Not helping matters was a public statement by Manfred Scoch, deputy chairman of BMW's supervisory board, criticizing their suppliers for having better profits than the automaker. With their focus on building the Ultimate Driving Machine, BMW has enjoyed a reputation as a favorite customer of automotive suppliers. Scoch's lead balloon didn't go over well with the companies that make parts for BMW, and has stirred further rumblings that there's growing dissatisfaction with BMW's apparent focus shift. Suppliers shot back at BMW, expressing alarm at Scoch's statement and stating that their ability to generate a profit is tied to their innovation and hard work, rather than overcharging BMW. Understandably, suppliers are loath to concede any price breaks on agreements that are already in place.
For its part, BMW's decided that it's more cost effective to increase their ability to make some components in-house. With that in mind, the Leipzig and Regensburg stamping plants are undergoing expansion, and there will be a new Leipzig stamping facility in 2009. At least 200m euros will be invested in Leipzig and Regensburg, but BMW believes it's a better idea to invest its capabilities, rather than pay a supplier to sort it all out. By the time it's all said and done, further integration may happen to keep the slices on the pie chart looking healthy. If they keep ticking off the companies that make the pieces that they bolt together into automobiles, BMW may end up doing it all themselves.
Steven Landry, Chrysler veep of North American sales, was speaking to a group of business students at St. Mary's University when he said that Chrysler will be taking in $64 billion in revenue this year and would spend $65 billion. It doesn't take an MBA to figure out that those quoted figures put Chrysler $1 billion in the red for 2007. Andrea MacDonald for The Daily News was at the ceremony and filed the report, but when Automotive News tried to contact Chrysler's PR people, they declined to comment. It's unclear if this was a serious miscommunication or a statement of fact, but considering the state of affairs over at Chrysler, it's of little surprise.
Toyota reported its earnings today for the second quarter that ended on June 30th, and not surprisingly, profits are up. Bolstered partly by a weak Yen, Toyota's operating profits rose 31.8% to $5.48 billion USD. Revenue was up 15.7% to $52.92 billion and sales were up 7.1% to 2,365,000 (Side Note: GM sold over 2.4 million globally in Q2). In a coincidental twist of fate, Toyota sales the world over were all up except in its home market of Japan, a situation that mirrors closely what is happening to General Motors, Ford, and the Chrysler Group in the U.S. The difference, however, is that the U.S. is potentially the most profitable market in the world, and a loss in the States equates to a lot more potential sales missed.
Toyota also commented on the Tundra's performance in the market place, saying, "from the beginning, we were ready to offer incentives," and "We had some concerns about the Tundra, but the plans have been achieved." Incentives are certainly a permanent part of the game now for automakers offering full-size pickups, and Toyota is not immune. Nevertheless, as we reported yesterday, sales are doing well, with the Tundra possibly overtaking the GMC Sierra 1500 in units sold year-to-date at the end of Q2. According to Mike Levine from pickuptruck.com, while hitting the 200,000 unit/year mark may be in question, there's still a chance the Tundra could overtake the half-ton Dodge Ram in sales by the end of the year.
We tried hard to get a podcast going last week, but it just wasn't good enough. This week, the internet gods smiled on us with solid connections that cleared the way for our incisor-sharp banter. Kicking off #72, we discuss the dual surprise from Ford and GM - profit! The US operations showed losses, but overseas branches pulled in the dough, and as Alex points out "money is money." Moving on to less dull subjects, the MINI Clubman was officially unveiled, and it seems like all of the growth is in its arse. There's more legroom in the back seat, and cargo space gets a boost, as well. In typical German fashion, they took the long way around to achieve what could have been a simple platform stretch. Speaking of Germans - Wolfgang Bernhard is officially in at Chrysler. That is, if Hades 3-headed guard dog can pull it together on the funding side. It's not much of a surprise, and we hope that he can right the good ship Chrysler.
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A little bit ago, Stephan Winkleman was declaring that, as far as Lamborghini goes, "the results will speak for themselves." Now, he is proved right. These are the kinds of black and white numbers -- especially black -- that any business salivates at the chance to tell analysts: in all of 2006 Lamborghini made 18.1 million euros in pre-tax profit; in the first half of 2007, it has already posted a pre-tax profit of 26.4 million euros. That compares to a 6.9 million euro pre-tax profit in the first half of 2006.
Lamborghini sold more than 2,000 cars for the first time in its history in 2006. So far this year it has bested deliveries by 30%, selling 1,239 cars, and raised revenue by 61% to 253 million euros. Increased brand awareness -- via espresso makers and Batman Begins -- and a young model lineup have been attributed as causes. Nevertheless, we're sure that building the fastest, most comfortable, most reliable, and among the most beautiful cars the Sant' Agata maker has ever created could account for the flush results as well.
This morning, General Motors announced its second quarter earnings, which saw the giant automaker earn $891 million in Q2 compared to a loss of $3.4 billion last year that had analysts wondering whether the automaker would be around for today's announcement.
GM's performance in the second quarter played out largely like it did for cross-town rival Ford, in that the profitable performance of its overseas operations in Europe, Asia and South America outweighed its losses at home. Major cost cutting also helped the bottom line, and CFO Fritz Henderson is quoted as saying the company is going to keep the "pressure" on. He's likely referring to historic talks with the UAW occurring as we speak that GM hopes will result in lower healthcare bills for the automaker.
GM deserves to stop and smell the roses today, however, as its stock price has been surging all morning, being up as much as 6.0% before the opening bell and hitting a high of $34.65. As of this writing, GM stock is at 33.61, up about 1.00 or 3.07%.
After seven straight quarters of posting losses, Ford has surprised the industry by reporting a net profit of $750 million for the second quarter of 2007. Last year this time the company reported a loss of $317 million. The profit did not come from car sales in North America, as that figure dropped 9 percent in the second quarter, but nearly every other Ford automotive division contributed profit to the company's cause, including PAG, which added a pre-tax profit of $140 million. Other factors that contributed to the profit include Ford Motor Credit kicking in $112 million of profit and the company's continuing effort to reduce its costs, which saved $600 million this quarter.
The profit surprised not only us, but analysts who had predicted another loss and investors on Wall Street, the latter of which have pushed the price of Ford's stock up from $7.97 at Wednesday's close to a spike of around $8.33 this morning. It has since settled down to $8.22/share.
There are big questions looming now that we know Ford is not as bad off as we thought. The first is whether or not this profit is anomaly or if it can be sustained. The sale of Land Rover and Jaguar, as well as Volvo, which Ford confirmed are progressing, should certainly help the bottom line when they happen. The second question is whether the UAW will take advantage of Ford's good news to deny the automaker much needed concessions in its contract negotiations that are occurring as we speak. Only the passing of time will provide answers to these and other questions about Ford's fate, but it's nice to finally see the Blue Oval in the black again.
We tried hard to get a podcast going last week, but it just wasn't good enough. This week, the internet gods smiled on us with solid connections that cleared the way for our incisor-sharp banter. Kicking off #72, we discuss the dual surprise from 
This morning, General Motors announced its second quarter earnings, which saw the giant automaker earn $891 million in Q2 compared to a loss of $3.4 billion last year that had analysts wondering whether the automaker would be around for today's announcement. 
After seven straight quarters of posting losses, Ford has surprised the industry by reporting a net profit of $750 million for the second quarter of 2007. Last year this time the company reported a loss of $317 million. The profit did not come from car sales in North America, as that figure dropped 9 percent in the second quarter, but nearly every other Ford automotive division contributed profit to the company's cause, including PAG, which added a pre-tax profit of $140 million. Other factors that contributed to the profit include Ford Motor Credit kicking in $112 million of profit and the company's continuing effort to reduce its costs, which saved $600 million this quarter. 
Officially Official: 2010 Ford Mustang!
2010 Ford Mustang revealed early on Ford's own website!
2009 Nissan 370Z rolls out early in So. Cal
VIDEO: 2009 Nissan 370Z revealed early in So. Cal.
BRABUS begins business of tuning the Tesla Roadster
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In the Autoblog Garage: 2009 Mercedes Benz C63 AMG
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