Its nice to have a nest-egg of course and its a comfort no doubt for GMs pensioners and health care dependents that the end isnt imminent. Gmheadquarters Having said that, the piper must be paid and the most General thing that can be said about the Motors company is that its operating in the wrong decade; product, engine and consumer-wise. Across brands, product is redundant, the lines of difference between marques so blurred as to be non-existent. Chevrolet and GMC, both marketing the same SUV? Oh, come now. Engine-wise the GM bread and butter is big V-8s, even as Toyota takes over as American #2 carmaker from Ford by building small and elegant. Consumer-wise, the numbers are less clear, but lead times are overlong in the auto business and GM looks to be on the wrong side of that equation as well. The company lost a bundle in its second quarter even as it became profitable for the first time in a long string of reporting periods. In round numbers, they made a billion, lost three and a half and ended up posting a negative three. Somewhere a half billion got lost in the shuffle, but 'profitable while losing money' is one of those things that happen within organizations like the Pentagon and GM. Company sales equaled $54 billion. Profit, sliced and diced down to of 1% and squeezed out the end of the tube, is too lean to lean on. The truly frightening news is that this narrowest of profit margins was, according to the company, powered mainly by cost-cutting initiatives and the success of the automaker's latest crop of large sport-utility vehicles, the GMC Yukon and the Cadillac Escalade. Holy Toledo (or in this case, Detroit). The Jurassic period at GM is in full swing. If these dinosaurs are the only oar they have in the water, then worse times are a coming. The corporate cash-account has $19 billion in hand for rainy days, but its been pretty wet in Detroit for a number of years now. The primary GM strategy has been to close down plants and lay off workers in the same market within which the Japanese are expanding. The closer to the bone (and the bone-yard) cost-cutting takes them, the higher their fixed retirement and health costs become as a percentage of product price. Rickwagoner_1 CEO Waggoner eagerly tells anyone who will listen (because thats where he wants relief) that the health-care obligation comes to about $1,550 per vehicle. The pension and retirement benefit numbers are not so easily found, but if theyre similar (and recent employee-buyouts would push them in that direction) it doesnt take a wizard to see that $3,000 or so in non-manufacturing costs per vehicle are damned hard to hide in small-car prices. In 2005, which is not exactly ancient history, GM lost $10.5 billion. Two years back-to-back like that and its Katie-bar-the-door for the $19 bil. The future is probably less grim than that, but inexorable. What can possibly be done with a company that has got itself in the position of begging its entire workforce to quit and then paying them $35,000 to $140,000 each to leave the company? Hello out there, all 113,000 of you, please go home. Then GM can fold the company and offload the pension and health benefits to the federal government. Hummer Others can make money in small, innovative and efficient cars, but GM needs behemoths in which to hide all that pork the unions ran off with in the good old days. The very cars that would bring them into this century, competitively, are a prescription for going broke all the more quickly. Catch-22, the choice GM dares not make. Outside America, GMs results are scraps here and there from the bone pile. $124 million in Europe, $156 mil in Latin America, $167 mil from Africa and the Pacific rim combined. Numbers that wouldnt satisfy Google. According to Business Week, More cuts are now in the cards. Wagoner has told Wall Street that he intends to have manufacturing capacity reduced so that it matches demand by 2008 "if not sooner." The cuts could come with Wagoner starting to ax capacity by at least 600,000 vehicles next year. Three assembly facilities that are already idled -- an SUV plant in Linden, N.J.; a van plant in Baltimore; and a midsize-car plant in Lansing, Mich. -- could be first. Other assembly facilities may also go -- possibly a truck plant in either Janesville, Wis., or Pontiac, Mich. Another SUV factory in Oklahoma City and a minivan plant in Doraville, Ga., are at risk, too. GM may also discontinue a couple others that make engines or steel body panels. If Wagoner closes five factories, GM would have the capacity to make only around 4.7 million vehicles a year. Should sales continue to fall, more factories could be shuttered later, says one company source. That doesnt sound like a plan to regain market-share and achieve profitability. That sounds like trying to shoo the horses out of a burning barn. |
