Troubled GM May Kill One of Its Brands

[Missouri Mule]

The dominoes keep falling. Look for GM to junk the Pontiac brand. Buick is a big seller in China so they'll probably keep it. Obviously Chevrolet and Cadillac are safe. It is also possible that Saturn could go away. It's a shame. GM is trying to raise case and wants and "equity partner" for their mortage business. But this raises only $1 billion and they are over $103 billion in the hole. Looks hopelss to me. They have no other choice except to file Chapter 11. The handwriting on the wall gets more and more clear with each passing day. This is what happens when a company mortgages its future to placate a greedy union.
===============================

Troubled GM May Kill One of Its Brands

Wednesday March 23, 4:26 PM EST

DETROIT (Reuters) - General Motors Corp., which issued a shock profit warning last week and has been losing market share, may phase out one of its weaker car brands if sales fail to meet projections, company Vice Chairman Bob Lutz said on Wednesday.

GM's Buick and Pontiac are both "damaged brands" due to lack of investment over the years, and GM is working to correct that with an array of new vehicles coming to market, Lutz told a Morgan Stanley automotive conference in New York.

But if some of its brands fail to meet sales projections, "then we would have to take a look at a phase-out. I hope we don't have to do that. What we've got to do is keep the brands we've got."

Financial analysts have said for years that the world's largest automaker has too many brands to support, even with the gradual phase-out of the Oldsmobile brand a few years ago, particularly with its weaker U.S. sales.

Sales for both Pontiac and Buick have lagged in recent years. But GM is in the midst of a $3 billion investment in new vehicles for Buick and Pontiac showrooms, and they will have four new vehicles this year, including the Solstice roadster, Torrent SUV and the G6 mid-size coupe.

GM, which last week cut its earnings outlook for 2005 by as much as 80 percent, posted a 6 percent drop in U.S. sales for the first two months of the year. GM's U.S. market share fell to about 25 percent, far below its share of 27.5 percent for all of 2004.

Analysts said last week that GM's March sales could fall as much as 10 percent, while foreign automakers such as Toyota Motor Corp., Hyundai Motor Co. Ltd. and Nissan Motor Co. Ltd. would continue to gain U.S. market share...

(Snip)

http://finance.myway.com/ht/nw/bus/20050323/hlm_bus-n23365664.html

[Turenne]

I presumed it was done to the strenght of Japanese cars,and the general inability of American cars to go around bends,that GM was struggling.

How exactly is it the trade unions fault?

[Knightman]

I can see them dropping Pontiac, Chevy's are kind like the U.S.A. so incerdably red, white and blue. and Buick is a bit of an upgrade brand. I do not think we wil miss Pontiac. I would not, from personal experience with the brand.

It is sad to see GM stuggling but with such excellent foreign competition they either have to put the big bucks into continious R&D or face the consequences.

I dont' know about GM's foreign affiliations , but Ford/Mazda has been going for a while now and , Dodge/Crysler although I do not know the details have been working with several affiliations outside the U.S.

I am sure some of you folks know a lot more about the corporate deals.....

Competition has always been good for the automotive industry but it looks like it is taking its toll on good for old General Motors.....

[Missouri Mule]

I presumed it was done to the strenght of Japanese cars,and the general inability of American cars to go around bends,that GM was struggling.

How exactly is it the trade unions fault?

The wage demands were absurd. How on earth can a company be expected to pay 95% of the worker's pay when they aren't even working? They have about 750,000 retired workers and a fraction of that currently working. This is a fast developing story. Whenever a company denies they will go bankrup, you can safely assume they will go bankrupt. (Chapter 11)

None of the Japanese plants (and we have a bunch) employ union employees. The employees don't want them either because they see what happens when a company pays union extortion money in order to operate.

[beg your pardon]

American workers were better off in the 1800's before unions were around.

[lord tammerlain]

It was the managements decision to pay those union salaries, it was managements decision to pay themselves more money then they are apparently worth. It was managements decisions to produce cars and trucks that people will only buy at a large discount.

In the end it comes out to the faliure of GM's management. They made the poor decisions, their decisions helped cause poor union relations, their decisions to produced cars that no one wanted allowed Japanese automakers ( who in Japan have a very high cost structure as well) to gain a large market share in the US.

So instead of blaming the union perhaps the blame should be placed at the managers who are paid to make the tough decisions to make GM better and thier obvisous faluire.

[Missouri Mule]

It was the managements decision to pay those union salaries, it was managements decision to pay themselves more money then they are apparently worth. It was managements decisions to produce cars and trucks that people will only buy at a large discount.

In the end it comes out to the faliure of GM's management. They made the poor decisions, their decisions helped cause poor union relations, their decisions to produced cars that no one wanted allowed Japanese automakers ( who in Japan have a very high cost structure as well) to gain a large market share in the US.

So instead of blaming the union perhaps the blame should be placed at the managers who are paid to make the tough decisions to make GM better and thier obvisous faluire.

One would have to understand the auto industry to know why the unions are the core fault. They had a monopoly on the labor. If any one of the auto makers didn't bow to their extortion demands the company would be effectively put out of business. They couldn't simply stop supplying their customers with new cars. The customers will go to a different maker and the one who didn't pay the "ransom" would be toast. The UAW would pick a different "target" and the extortion demands paid and then to the next automaker who would likewise capitulate. There was no way the UAW could lose. They knew they had the managements over a barrel. That was in the bad old days.

Now, had General Motors had the entire U.S. market to itself and the demand was inelastic, they could simply have refused the UAW's demands and waited until the workers's unemployment checks had run out and then they would trickle back to work. It didn't work that way. General Motors couldn't afford this or lose its market share so they paid the ransom and they are now in this pickle. What has changed is that the Japanese auto makers are not unionized and their fixed labor and pension costs give up to a $2,500 per vehicle advantage. Knowing this the UAW has now begun to make concessions knowing their future rests with keeping the "Big Three" in business. Unfortunately, it is too little and too late. Now they will have nothing because GM will be forced to file for Chapter 11 to remain in business. All of these contracts will have to be voided and the benefits and pay down to the Japanese auto maker levels.

This is a dress rehersal for the German economy as well. All of those absurd wage and benefits will have to be cut back or the German economy will surely collapse in the face of world competition.

[lord tammerlain]

GM in the good old days had a 50% market share and was threatened by breakup from the US government, so yes they did have the opportunity to hold the line if management thought it was a good idea.

Management failed GM, it failed to think about future costs, it failed to produce products people wanted, and it still lost market share. Japan is far from low wage/ cost country and yet they still produce profitable cars for both domestic and export markets because in general they produce cars that people will pay more for then for a comparable GM product.

Now GM as a dress rehersal for the German economy, yes it is but you are not taking it far enough. It is a dresshersal for all of western europe including Italy and the UK. It is a dresshersal for the US as well.

All of our standard of livings are going to be under pressure from competition with China and India. How much more is a engineer in the UK worth then one with the same skills in India. As telecommunications has become cheaper, the idea of telecommuting so popular during the end of the Clinton administration has expanded to include working from China, and or India.

The German economy is taking its hit now, because the German people are not going heavily into debt ( and the Euro is to high). The US is postponing its future standard of living adjustment by taking on a large debt load

[beg your pardon]

If you're sure that they can keep Chevrolet and Cadillac around but need to kill off others it's obiviously now the unions fault but managements fault for making cars nobody wants to buy. If the union was destroying the company Chevrolet and Cadillac would be right up there in trouble with Saturn and Buick. Ill lay the blame on poor ad campaigns and crappy looking cars that nobody wants to buy.

[lord tammerlain]

By killing off Buick and Pontiac, possibly Saturn GM could focus on building the brand image of the remaining brands instead of diluting it's obvious weak managment's skills on so many brands.

Saturn itself was an extremely poor decision by GM, they spent a few billion dollars on building up the division with albeit the type of union management relations that GM should have been pushing in its other plants. For its multibillion dollar investment GM had developed ONE car that in its best year sold around 250 000 units. During this time the Chevy Cavalier (sp) was entering its 12 year of production with minor changes. Honda, had 3 generations of Civics, Toyota 3 generations of the Corolla (sp). GM untill recently has not pushed product development, ( Bob Lutz is only one man and can only change GM so much).

To its credit it appears GM may be changing, take a test drive of the Saturn Ion, then a Chevy Cobalt, and you can see what GM can do when the accountants are left out of Product development at GM. The two are basically the same care with one being subject to using the cheapest components, while the Cobalt was allowed to use more expensive parts to produce a better car.

[Missouri Mule]

General Motors has some good models but they probably ought to kill off the rest. The Corvette and Cadillac brands come to mind. But the rest are just not seen to be unique and distinctive. By contrast, the Ford Mustang is hotter than a firecracker. Not even the Japanese can lay a finger on it. The Chrysler 300C is another very unique model. It ain't rocket science.

[xexon]

Corvette is hanging on by it's past reputation.

There have been reliability issues, as with all GM products.




x

[xexon]

Chrysler is getting by on producing flashy, design heavy cars. Problem is, they build lousy quality vehicles. And their resale value is terrible.




x

[Missouri Mule]

Corvette is hanging on by it's past reputation.

There have been reliability issues, as with all GM products.




x

The Corvette has always had quality control issues but it has always occupied a unique position in the automobile world. It'll be around for a long, long time. And the Mustang is an unqualified success. The Japanese can't compete in that market nor do I believe they can compete with the Chrysler 300. The American manufacturers have up until now owned the pick-up market but Toyota has their 7/8 scale version and Nissan has a full sized version. Can they compete? I think the jury is still out. I still bought the Ford version because I thought it was superior over the other brands, including the Japanese versions. It is also the best selling vehicle in the U.S. for something like 23 years running. Americans can still do a few things right. The problem with GM is that they have tried to compete with "generic" vehicles and that won't work anymore.

If I were running GM I would junk most of these generic vehicles and concentrate on making the remaining unique vehicles the best in the world. Our wage structure isn't that far out of line IF they can dump the contracts and onerous pension and medical fixed costs. That will require a Chapter 11 but if that is what is required, they should do it and be done with it. They they will be a healthy company again. Right now they are being dragged further and further into the quicksand of insolvency.

[beg your pardon]

If I was going to buy a new truck it would be a Ford, any other car id look into Honda or Toyota first honestly.

[gopman]

I have a 10 year old Chrysler that is falling apart at the seams. One thing I have noticed recently is a ton of new Chrysler 300's driving around. I wouldn't put my money into another Chrysler until i see how these 300's hold up after a few years. Another thing I've noticed is a lot of new Saabs, but I don't know if this is a nationwide phenomenon. If so, it would be great for GM. They are already seeing success from their new Caddys. I know MM doesn't agree with me, but I think their stock is a bargain right now.

[ZXL]

I have a 10 year old Chrysler that is falling apart at the seams. One thing I have noticed recently is a ton of new Chrysler 300's driving around. I wouldn't put my money into another Chrysler until i see how these 300's hold up after a few years. Another thing I've noticed is a lot of new Saabs, but I don't know if this is a nationwide phenomenon. If so, it would be great for GM. They are already seeing success from their new Caddys. I know MM doesn't agree with me, but I think their stock is a bargain right now.

Take it from me those Saabs are very sweet indeed, drove one this weekend :)

[gopman]

That's good to hear. What kind of reputation to Opels have in Europe? They are a GM make, too.