Why GM Is Ready for a Rebound 50 comments
Rick Newman
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It may take awhile to convince car buyers, but General Motors (GMGMQ.PK) has emerged from bankruptcy with better prospects for a profitable future than virtually any of the automaker's critics predicted a few months ago. Here's why:
It exited bankruptcy in record time. Chrysler surprised nearly everybody by emerging from bankruptcy in 40 days. GM, a far bigger and more complex company, beat that by a couple of days. That gives the "new GM" a fighting chance to escape the cloud of failure that has hung over the company for much of the last year. "It helps them get the idea that 'GM equals bankruptcy' out of consumers' minds," says Michael Robinet of forecasting firm CSM Worldwide.
Its biggest problems are in the past. GM has left behind billions in debt, axed hundreds of low-volume dealerships, and gotten rid of its four underperforming brands: Hummer, Pontiac, Saab and Saturn. It can now spread marketing dollars and other resources among fewer, better cars.
The new GM is built for speed. CEO Fritz Henderson has described how GM is stripping out several "strategy boards" and other layers of management that have been in place for decades, and cutting 450 managers from its white-collar work force. If done right, that could allow GM to bring cars to market faster and respond more effectively to shifting consumer tastes. GM has also reduced its labor costs to the point that they're practically equal to the most efficient automakers, removing another obstacle to profitability.
GM already has appealing cars. Its overall lineup is still spotty, but popular vehicles like the Chevrolet Malibu, GMC Acadia, Cadillac CTS and new Chevy Camaro represent plenty of good product that's available today. Sales of such vehicles could take off if GM can exploit its quick exit from bankruptcy to convince buyers the company is back on its feet, and will be around for the long haul. Chrysler, by contrast, still has huge holes in its product lineup, and they might not be filled for two or three years.
GM has to work hard to win back consumers. Henderson admitted as much when he said that GM will try to distinguish itself by reaching out to buyers in new ways, such as listing vehicles for sale on eBay (EBAY). Even if GM only half-delivers, some customer pampering could pay off, as long as GM's vehicles are up to scratch as well. "Consumers have demonstrated they will endure a so-so customer experience to obtain a great vehicle,” says Jack Nerad of car research site kbb.com. “Consumers haven’t demonstrated they will accept a so-so vehicle because of a great customer experience.”
The feds want out of GM. Despite all the rah-rah, many Americans hate the idea of buying a car from a company run by the government. The real measure of success for GM will be a public offering that buys out the U.S. government's 61 percent stake in the company, and the repayment of $50 billion in taxpayer loans. Ahead of schedule. Henderson hinted that a public offering could come as early as next year, with hopes to pay back the loans ahead of the 2015 deadline.
The feds want that too. " The government is making sure they're setting GM up for success," says Robinet. "This must be done and dusted by 2012." That's because the success or failure of GM will be a big issue when President Obama runs for reelection. One sign of the government's eagerness to exit is the return of GM "car czar" Bob Lutz, widely credited with revitalizing GM's product lineup. Lutz, 77, announced his retirement earlier this year, presumably because he didn't want to work for "Government Motors." GM's federal overseers probably had to promise to stay out of Lutz's business in order to lure him back. Now Lutz, Henderson, et al need to convince a lot of skeptical car buyers of the same thing.
Disclosure: no positions
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This article has 50 comments:
The whole GM episode was an insult to the American taxpayer.
Next time that I replace my current car, I will again go to Consumer's Report and check on quality and reliability and repair frequency over a long time as a basis to judge if it's time to purchase that American made car.
I didn't say anything about Japan being better. Maybe you need to learn to understand written words. I'd gladly buy a Ford. The quality of Ford products is now close to if not better than many foreign brands.
My complaint is with the way the government threw billions of dollars of taxpayer money at an inefficient company that couldn't fix itself. Ford has been able to make those changes without handouts from the American taxpayer.
GM and Chrysler should have had to figure it out on their own, with the employees, shareholders, creditors and bondholders all fixing their problem without all the political crap that was involved and will follow.
On Jul 10 05:17 PM gcorvette88 wrote:
> kohalakid is an idiot. I'm sick of you un America pieces of crap
> cutting down GM. If you think japan makes such a fine car go live
> over there and help their economy. My Grandpa didn't die to make
> Japan great he died to make America Great
What will happen with this stock? Any ideas, anyone?
Time to buy into? Triple or total loss? Seems GM falls in the to-big-to fail category like the banks.
On Jul 10 06:03 PM tailspin wrote:
> GMGMQ had a huge bounce today following the announcement of Mr Henderson
> about the restructurization of GM. Seems they ruffle some feathers
> which helped investor confidence..
>
> What will happen with this stock? Any ideas, anyone?
>
> Time to buy into? Triple or total loss? Seems GM falls in the to-big-to
> fail category like the banks.
>
Quoting the ticker as well did not help to dispell the confusion that brought GM to jump by 36 % today....
The best I expect of this new GM is a "zombie" existence of functional failure followed by complete and final collapse. It would've been much better for all involved, including the average American to have taken the opportunity to allow these companies to fail properly.
On Jul 10 06:39 PM Robert.from.Ct wrote:
> I would NEVER,EVER buy a GM car...I hope they rot in Hell...
You really MUST warn folks that GMGMQ.PK going to zero is an absolute certainty, regardly of what happens to the new GM emerging from bankruptcy.
forget Japan they are building in America it's China you had better worry about now that unions have destroyed their industry! GM will survive with its profits from joint ventures outside of the USA. The parts supply is dead in the water with GM trying to procure 65 billion worth of parts supply contracts from LCC Low Cost Country's, truly American in nature.
In 2010 and 11 there will be many of made in China models selling in America for under 15,000 so western car companies will never compete unless the continue to eliminate workers by the use of automation. And all the future automation will be designed and constructed outside of America where the ASI Assembly Shop Index proves a 60% lower cost of capital equipment.
The american mid west is in trouble
On Jul 10 10:11 PM expat in China wrote:
> gcorvette88!
>
> forget Japan they are building in America it's China you had better
> worry about now that unions have destroyed their industry! GM will
> survive with its profits from joint ventures outside of the USA.
> The parts supply is dead in the water with GM trying to procure 65
> billion worth of parts supply contracts from LCC Low Cost Country's,
> truly American in nature.
>
> In 2010 and 11 there will be many of made in China models selling
> in America for under 15,000 so western car companies will never
> compete unless the continue to eliminate workers by the use of automation.
> And all the future automation will be designed and constructed outside
> of America where the ASI Assembly Shop Index proves a 60% lower cost
> of capital equipment.
>
> The american mid west is in trouble
This was a horrible business that crashed and while still bleeding on the ground has been tidy'd up a bit. Of course, with enough free money maybe it will serve as an excellent "vehicle" to buy some votes from union workers.
I wasn't happy about the bail out but if we dont all support our American companies and buy American when we can, We will all be spending Euro' or Yen in the future. It's your choice. I choose to stay American and continue what our fore fathers fought for.
On Jul 10 04:55 PM kohalakid wrote:
> I would not own a GM vehicle even if it was 25% cheaper than other
> brands.
>
> The whole GM episode was an insult to the American taxpayer.
You haven't been following the story....Ford was able to stay afloat because they mortgaged everything and I mean everything...they are living on borrowed money and have been. Great for them. I'm glad that they didn't have to borrow money from the FED's. At some point they are going to be in the same boat as GM was because they have huge debt that the new lower sales volume won't support and they still have the legacy costs that GM has shed. Sales will never regain to the level they were a few years ago because we all took huge hits to our annual household incomes. This is far from over. You don't want to buy a GM product because the Fed decided to save the country from something worse then what has already happened??? Fine...don't...but at the very least buy a Ford while they are still free of your ownership.
On Jul 10 05:43 PM kohalakid wrote:
> Gee, don't get all huffy.
>
> I didn't say anything about Japan being better. Maybe you need to
> learn to understand written words. I'd gladly buy a Ford. The quality
> of Ford products is now close to if not better than many foreign
> brands.
>
> My complaint is with the way the government threw billions of dollars
> of taxpayer money at an inefficient company that couldn't fix itself.
> Ford has been able to make those changes without handouts from the
> American taxpayer.
>
> GM and Chrysler should have had to figure it out on their own, with
> the employees, shareholders, creditors and bondholders all fixing
> their problem without all the political crap that was involved and
> will follow.
>
>
On Jul 10 06:03 PM tailspin wrote:
> GMGMQ had a huge bounce today following the announcement of Mr Henderson
> about the restructurization of GM. Seems they ruffle some feathers
> which helped investor confidence..
>
> What will happen with this stock? Any ideas, anyone?
>
> Time to buy into? Triple or total loss? Seems GM falls in the to-big-to
> fail category like the banks.
>
"be it's just me, but with the reputation China>"
You are very mislead and most companies are 5000 worker families with beautiful painted facilities and canteens with great lunch and good care for workers.
Geely is a wonderful private car company that takes great pride in its people and its community and also will deliver shortly the best electric car in the world.
This is a black swan for oil and gas.
A Chinese made car is also from joint venture and you may buy and not even no but BMW, Mercedes, Toyota, these are also the cars that will come to America.
For 5000 dollars I can get 60 MPG city car with great Korean made power train and fantastic electronics.
I do love the new Camero and would buy if not Government motors.
I have 2 GMC PU's.I like them.
The 94 model cost too much at $23000,but has 228,000 miles and is still great.
The 2001 cost $45,000 which was too high,and I bought it used for $25000 in 2003.
My point is that GMC is a good reliable truck,that costs tooo much.
The theme of my discourse is that the two entities that brought GM Chrysler and Ford down,The UAW and Management ,are in charge of the New GM.
Why do you think any thing will change?
In 70 years they managed to eliminate the WIDE MOAT the domestic manufacturers had after WWII.
They allowed stockholders and debt holders to spend billions to modernize plants and processes,had a large tarfif on imports,and in return coerced insane work rules and benefits,leading to today.
Why do you think an auto is financed for 4 times as long today as it was in 1968?
I believe it is because they cost 4 times more than they should,since the unions had an $80/hr rate,and most folks would be fortunate to average $20.00/hr.
I could be wrong , but just think .
I bought a 2005 Honda CRV that was assembled in The U.K. It now has 83,000 miles on it. 2 sets of tires, new struts, a battery and oil changes have been the only repairs Why can't GM, Ford or Chrysler build a similar vehicle? Would I buy an American vehicle?
Maybe, but not unitl I totally wear the Honda out and that may take a while.
Every vehicle I have purchased since 1979 has been an import. The American offerings did just not cut it.
Good luck Fritz. The new GM faces a lot of challenges.
On Jul 11 09:29 AM Soldalma wrote:
> SeekingAlpha should add an "Idiot" button besides the "Follow" button
> so we could get rid of people like Mr. Newman, who do not do their
> homework and still insist in distributing advice.
>
> GMGMQ is NOT the new GM, and the success or failure of the new GM
> have absolutely nothing to do with GMGMQ's performance. GMGMQ will
> go to zero, as correctly pointed out by other commenters.
I believe some MM is trading GMGMQ among themselves to keep the price up. This gives an illusion that GMGMQ is part of the new GM company as endorsed by this article (can you tell why?). This sucks in some ignorant small investors hoping to make a big profit when they are actually paying the shares that will worth nothing soon. Please note there is no shares available for small investors to short or it is very expensive to borrow. So you and I cannot profit from this trading. By keeping the price up the big institutions can unload whatever they have to the small guys. This is another WS scheme.
This rewards the seller who is offering me a good product at a decent rate and it encourages the seller who offers me lesser quality at too high a rate to improve the product and reduce the price to compete.
I happen to only buy domestic wines because I don't see any huge quality disparity between foreign and domestic wines at any particular price point.
I can't say that GM has offered quality small cars at good prices.Their trucks get good reviews, but I don't need a truck.
So I don't buy what I need from GM.
And I don't fear losing my job. I've been a self-employeed commodity trader for 35 years and if I price MY goods too high, I lose the sale to someone else, maybe even a foreigner.
On Jul 11 12:38 AM slowdown wrote:
> If you are a resident of another country (not the US)...then fine...you
> should purchase products made in your own country to support those
> that work and live in your country. If you live and work in the
> US - you should support the US economy by purchasing products made
> in this country. If you choose not to - don't whine when you are
> out of a job. I've learned my lesson. I won't even buy hamburger
> unless it states "product of USA" on the label.
I do hope the new GM succeeds because we the people have a lot of money on the table but they have steep hill to climb.
On Jul 11 11:52 AM a. palmer jr. wrote:
> I might agree that the new GM offerings are nice in the showroom;
> the problem we have been having is four or five years after they
> leave the showroom. They seem to fall apart and they (and other brands)
> have cleverly figured out a way to keep owners from repairing the
> cars themselves. Have you noticed that you can hardly do any of the
> normal repairs to these newer cars. Things like changing a thermostat,
> which used to be simple, now take a team of mechanics, er..."technicians"
> to change. They also have the "engine management" systems that no
> one can figure out. This is what they've always strived for...a vehicle
> that you will rush to trade in. They must have a team of engineers
> who's job is to figure out how to keep the vehicle from lasting too
> long.
One problem. There are few people out there who can qualify to purchase a GM or for that matter any other auto mfg. car now.
With anemic demand...how will GM and others do?
1. No govt. has ever been able to build a decent car.
2. The mafia union which destroys whatever it touches.
QUALITY: quality of a car is always measured once it is used for 5-7 years. all cars are good for first 50k mile. thus, even if gm makes as good qualtiy as toyota and honda now, it will take at least 5 -7 years before we will know.
WORLD MARKET: when we are dealing in us market qualtiy is very important. however, in next 10 years, us market will be shrining compare to world very rapidly. so, for gm to surivive, they have to make qulaity car for world market. better than 80% of market will be at cars below $5000. and as price increases, market share drops very quickly. gm can not make car now or later below 15k and make profit. so they have long ways to go to survive. companies like tata motors, hundai and many other new comers are already putting all electirc cars in european markets around 6k. i have heard that there are companies that no one has heard names in india that are putting out cars for india/china and world market under 2k all electric. lot of new emerging companies are ready to compete at a cut throat prices.
I DO NOT THINK THE SAME CULTURED GM HAS WHAT IT TAKES TO COMPETE IN THIS NEW WORLD MARKET. GM WILL BE FACING A NEW BANKRUPTCY VERY SOON.
CULTURE AND MANAGEMENT: gm does not have management who is qulaified to compete and manufacutre car. government could have pulled management from top companies who produce low price cars. they have experience and management style to compete in this cut throat enviournent. we can make cars in usa market for $5-6k all electric cars (which goes 150 miles on single charge) using american labor. tata motors is doing this using western european labor which is not much cheaper than us. and yet they are maintaining 25% margin. in indian makets, they are putting cars below $2k. as american consumer is dealing with over leveraged balance sheet, these cars can be purchsed without any debts and very inexpensive to operate.
this is not only possible but it is already happening around the world. we are just blinded by various union interest, political interest groups who are more worried about getting elected than doing the right thing.
As others here mentioned already, this statement by Mr. Newman is wrong and misleading and his comment should be corrected or removed
The old GM is now called Motors Liquidation Co
www.motorsliquidation....
The New GM is a completely new company, not yet quoted.
Have a good day
My dear old dad drove a Chevy Nova from date of purchase in '77 until 1999, and through Quebec and Maine winters at that. He was living in a waterfront four-bedroom house, but that car and patched jeans were plenty good for him.
Only the pleading of his mechanic convinced him to let the old girl go. I often think of the Nova as one of the last durable American cars.
He went out and bought a Toyota Camry (a six-month old fleet car in order to save a few grand) and it has been FLAWLESS.
Your common-sense approach to choosing your next car seems a bygone way. I did the same when buying a Ford Ranger. It was cheaper than ALL of the other pick-ups and nearly as reliable as the best of the Japanese, which were as much as 30% more expensive. The GM and Dodge options were over-priced and had spotty reliability. The Ranger was a no-brainer.
It amazes me how some folks CLING to a brand-name, when it defies logic.
I applaud your thinking. By the way, I'd go Japanese in a minute if the price was right.
On Jul 10 05:37 PM mextex wrote:
> I have often wanted to purchase an American made car, however, each
> time I go to Consumer's Reports and look up reliability and quality
> the American made cars fall far short of the Japanese. Since I drive
> my cars for years and don't trade often I expect low maintenance
> costs and little to no problems, especially since I am retired and
> on fixed income.
> Next time that I replace my current car, I will again go to Consumer's
> Report and check on quality and reliability and repair frequency
> over a long time as a basis to judge if it's time to purchase that
> American made car.
Proud owner of a 1991 Toyota pick up that has NEVER let me down........broken fan belt and a bad outside right front wheel bearing and that's it.
Tell me of an American car that can claim the same.
As long as the American car makers don't give us what we need foreign cars will rule.
www.wealthalchemist.co.../
To have to bring back a 77 yr old grandpa to jumpstart?? How sad a commentary is that, about our 'new, metric driven managers of today'???
I'm sure your ancestors did not fight for the right of a minority of Americans to force the majority to subsidize a poor business model. GM and Chrysler are failures and no amount of government marketing or backing will save them. Sure, some will buy their products, but the general trend will not be good.
GM would be cool if it could build electric cars and small trucks based upon the NiMH battery in volume! Lithium ion is too expensive and don't last as long.
fireofenergy, I owned an Ford Econoline E200 van some years ago. I overloaded it past capacity many times. The rear leaf springs held beautifully; basically, never fear a chassis break on a Ford light truck, or even Chevrolet and Dodge. Bulletproof. An F350 series, in particular, could nearly pull a semi trailer! Watch the bearings though; they do wear, and do lose proper frictional coefficient tolerance, audio-signalled via off-kilter rubbing sound (minimally similar to disc-caliper "wobble" rub) -- ie, best to keep the F350 series non-press bearings packed and clean. Ford door handles, well.... just "fit and finish" and "consumer perception," short term stuff, no big deal. USA!!!
If yes - by whom? and why?
If no - why didn't / wouldn't they have?
Other companies describe themselves as "employee owned". Now however, we not only have an "employee owned" but with the help of the government, "employee stolen" auto companies. Only unlike Johnny Cash, they didn't have to do it a piece at a time.