New article about GM from BW
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New article about GM from BW
http://www.forbes.com/business/manuf...jf_1017gm.html
I'd say its a pretty honest article about their situation and isnt the typical doom and gloom were used to hearing
Originally Posted by BusinessWeek
Rick Wagoner Is Running Out Of Excuses
NEW YORK - For the past few years, General Motors Chief Executive G. Richard "Rick" Wagoner Jr. has complained to anyone who would listen about his company's engorged health care costs. And for good reason--the long-term liability is near $80 billion. It costs the company $6 billion per year to insure its workers and retirees, and many of GM's competitors have no such beast with which to wrestle.
On a per-vehicle basis, GM reminds us, legacy costs add up to $1,500, which rivals can use to add features or lower prices.
These are dramatic, and very real, numbers. But they also provide a tidy excuse to the financial community for GM's miserable performance, both on dealer lots and on income statements. Market share continues to slowly erode (down 1.1 percentage points this year), and in GM's third-quarter earnings announcement Monday, the company reported a $1.6 billion loss for the quarter, pushing its losses for the year to $3.8 billion.
"We've said for a while that [health care] has been the single line of cost uncompetitiveness for us," Wagoner said during a conference call with investors.
But Wagoner also announced a tentative agreement with the United Auto Workers that would have factory workers pay for more of their health care benefits. No details yet about who would pay what, but Wagoner said the agreement would trim $15 billion from GM's long-term liability, and reduce the annual health care bill by $3 billion. "This is a big move today," Wagoner said.
GM, it seems, is finally starting to get its health care situation under control. Other bogeymen that GM has complained about in the recent past have also been slain or weakened. GM's pension plan is fully funded. After years of complaining about the benefit Japanese competitors enjoy from an artificially weak yen, the dollar has weakened, providing at least a bit more parity.
Wagoner also said the company is on track to cut a total of $5 billion from its annual structural costs by the end of next year, and $1 billion in parts costs next year. GM said it is planning to sell a controlling stake in GMAC, a move that will raise untold billions of cash.
As Wagoner slowly puts the house in order, his excuses--legitimate or exaggerated--are running out. Now he has one major task to tackle, and it's harder than trimming any cost: to engineer and build great, profitable, desirable vehicles in every segment, for weakened brands such as Buick and Pontiac, and for strong brands such as Chevy, Cadillac and GMC.
Wagoner knows this. He has repeatedly said the company needs to work on the revenue side of the business as much as it needs to cut costs. The outlook for revenue, though, is stormy at best. October sales are said to be very weak for GM and for the industry, and forecasters say this weakness could continue into next year.
"It's a pretty cloudy crystal ball," said John Devine, GM's chief financial officer.
Also, the company is embarking on a new marketing strategy that shies away from cash-back and employee-discount incentive programs and instead puts lower price tags on the vehicles to begin with. GM calls it "total value pricing," but dealers and customers love big rebates. If October sales are any indication, the shift in strategy could be excruciating.
The next great hope for GM is a portfolio of redesigned large SUVs such as the Chevy Tahoe and Cadillac Escalade, due to go on sale early next year. The vehicles are attractive, with beautiful new interiors, and they are some of the most profitable vehicles GM builds. But they are being launched into the teeth of higher gas prices and a swoon in sales of large SUVs.
Redesigned and new versions of cars for Chevrolet and Saturn, shown to reporters earlier this year, look very sharp; they will trickle into dealer showrooms over the next two or three years. Also coming: hybrid pickups and SUVs that will finally get GM into a game dominated by Toyota Motor (nyse: TM - news - people ) and Honda Motor (nyse: HMC - news - people ).
They'd better all be hits. "For GM, the scary ride is just beginning, and much has to still go right," said Glenn Reynolds, a capital structure analyst at CreditSights, in a report.
GM hasn't been able, for one reason or another, to produce great vehicles across its whole portfolio for decades, and this has led to the restructuring pain that employees and shareholders are suffering through now. But the much-needed relief Wagoner announced will provide the company with cash it desperately needs. If Wagoner can somehow spin this cash into a string of great vehicles, the pain will have been worthwhile.
NEW YORK - For the past few years, General Motors Chief Executive G. Richard "Rick" Wagoner Jr. has complained to anyone who would listen about his company's engorged health care costs. And for good reason--the long-term liability is near $80 billion. It costs the company $6 billion per year to insure its workers and retirees, and many of GM's competitors have no such beast with which to wrestle.
On a per-vehicle basis, GM reminds us, legacy costs add up to $1,500, which rivals can use to add features or lower prices.
These are dramatic, and very real, numbers. But they also provide a tidy excuse to the financial community for GM's miserable performance, both on dealer lots and on income statements. Market share continues to slowly erode (down 1.1 percentage points this year), and in GM's third-quarter earnings announcement Monday, the company reported a $1.6 billion loss for the quarter, pushing its losses for the year to $3.8 billion.
"We've said for a while that [health care] has been the single line of cost uncompetitiveness for us," Wagoner said during a conference call with investors.
But Wagoner also announced a tentative agreement with the United Auto Workers that would have factory workers pay for more of their health care benefits. No details yet about who would pay what, but Wagoner said the agreement would trim $15 billion from GM's long-term liability, and reduce the annual health care bill by $3 billion. "This is a big move today," Wagoner said.
GM, it seems, is finally starting to get its health care situation under control. Other bogeymen that GM has complained about in the recent past have also been slain or weakened. GM's pension plan is fully funded. After years of complaining about the benefit Japanese competitors enjoy from an artificially weak yen, the dollar has weakened, providing at least a bit more parity.
Wagoner also said the company is on track to cut a total of $5 billion from its annual structural costs by the end of next year, and $1 billion in parts costs next year. GM said it is planning to sell a controlling stake in GMAC, a move that will raise untold billions of cash.
As Wagoner slowly puts the house in order, his excuses--legitimate or exaggerated--are running out. Now he has one major task to tackle, and it's harder than trimming any cost: to engineer and build great, profitable, desirable vehicles in every segment, for weakened brands such as Buick and Pontiac, and for strong brands such as Chevy, Cadillac and GMC.
Wagoner knows this. He has repeatedly said the company needs to work on the revenue side of the business as much as it needs to cut costs. The outlook for revenue, though, is stormy at best. October sales are said to be very weak for GM and for the industry, and forecasters say this weakness could continue into next year.
"It's a pretty cloudy crystal ball," said John Devine, GM's chief financial officer.
Also, the company is embarking on a new marketing strategy that shies away from cash-back and employee-discount incentive programs and instead puts lower price tags on the vehicles to begin with. GM calls it "total value pricing," but dealers and customers love big rebates. If October sales are any indication, the shift in strategy could be excruciating.
The next great hope for GM is a portfolio of redesigned large SUVs such as the Chevy Tahoe and Cadillac Escalade, due to go on sale early next year. The vehicles are attractive, with beautiful new interiors, and they are some of the most profitable vehicles GM builds. But they are being launched into the teeth of higher gas prices and a swoon in sales of large SUVs.
Redesigned and new versions of cars for Chevrolet and Saturn, shown to reporters earlier this year, look very sharp; they will trickle into dealer showrooms over the next two or three years. Also coming: hybrid pickups and SUVs that will finally get GM into a game dominated by Toyota Motor (nyse: TM - news - people ) and Honda Motor (nyse: HMC - news - people ).
They'd better all be hits. "For GM, the scary ride is just beginning, and much has to still go right," said Glenn Reynolds, a capital structure analyst at CreditSights, in a report.
GM hasn't been able, for one reason or another, to produce great vehicles across its whole portfolio for decades, and this has led to the restructuring pain that employees and shareholders are suffering through now. But the much-needed relief Wagoner announced will provide the company with cash it desperately needs. If Wagoner can somehow spin this cash into a string of great vehicles, the pain will have been worthwhile.
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Re: New article about GM from BW
Wow you mean that they didnt make any money selling all those cars at employee price and market share still dropped?
I do prefere the new pricing idea, lets see how it holds up. Even if they saved the 3 billion on heathcare this year what would the losses be? I estimate 2 billion, whats his excuse for that? the avian flu?
When is he gonna take some responiblity and say "Maybe we missed the target on a few things".
What is GM's operating budget per year, I think ours at the postal service is 65 billion with 740,000 employees and lots of unions to deal with. I dont recall us having a 5 billion dollar short fall in one year. I think the last few have been something like, -290 million, -350 millon, -120 million, +360 million. Of course we dont go out and do things like buy fiat.
I do prefere the new pricing idea, lets see how it holds up. Even if they saved the 3 billion on heathcare this year what would the losses be? I estimate 2 billion, whats his excuse for that? the avian flu?
When is he gonna take some responiblity and say "Maybe we missed the target on a few things".
What is GM's operating budget per year, I think ours at the postal service is 65 billion with 740,000 employees and lots of unions to deal with. I dont recall us having a 5 billion dollar short fall in one year. I think the last few have been something like, -290 million, -350 millon, -120 million, +360 million. Of course we dont go out and do things like buy fiat.
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Joined: Jan 2004
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From: Chesterfield Twp, MI
Re: New article about GM from BW
Redesigned and new versions of cars for Chevrolet and Saturn, shown to reporters earlier this year, look very sharp; they will trickle into dealer showrooms over the next two or three years.
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Re: New article about GM from BW
Originally Posted by meissenation
Wishful thinking and reading into it too much, maybe, but hmmm...
I have a feeling the chevy may be what we are looking for
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Joined: Mar 2001
Posts: 3,376
From: Sarasota FL
Re: New article about GM from BW
Originally Posted by Buickman
Now's the time for Return to Greatness.
"Dun Dun, DUN..."
Or is it Mighty Mouse? Are you hear to save the day??
Anyway, good article. I wonder what the GMAC sale will yield for cash. I really, REALLY hate to see GM sell ANY of GMAC, but you gotta do what you gotta do I guess...
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Joined: Nov 2000
Posts: 1,479
Re: New article about GM from BW
Originally Posted by Jason E
Anyway, good article. I wonder what the GMAC sale will yield for cash. I really, REALLY hate to see GM sell ANY of GMAC, but you gotta do what you gotta do I guess...
GMAC makes their money lending borrowed money. I'm thinking with junk bond status they'll be working with pretty skinny margins. If by selling 51% they can significantly improve their bond rating, and borrow at a better rate, the margins may fatten up enough to still give them a decent return on the 49% of GMAC they continue to own.
Registered User
Joined: Mar 2000
Posts: 300
From: Cleveland, OH
Re: New article about GM from BW
The article seems to have a positive side to it....
GM has gotten their healthcare and pension costs under control, so now they just need to produce some desirable vehicles, which from what we see comming down the pipe, might just be happening.
GM has gotten their healthcare and pension costs under control, so now they just need to produce some desirable vehicles, which from what we see comming down the pipe, might just be happening.
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Joined: Aug 2003
Posts: 3,011
From: Exton, Pennsylvania
Re: New article about GM from BW
Originally Posted by Buickman
Now's the time for Return to Greatness.
That was one of the funniest things I have read in awhile. The bluntness of the statement is probably what did it.
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Joined: Mar 2002
Posts: 499
From: Miami, Fl USA
Re: New article about GM from BW
Sounds like GM is addressing their problems from multiple angles, from improving products to restructuring debts and legacy costs. I'd say that now is the time to throw all that crap out and implement the plan of a person who's profession has a reputation for wearing white belts and shoes.
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From: TX Med Ctr
Re: New article about GM from BW
Maybe GM should invest all their remaining assets into building a time machine, then either assassinating Roger Smith or at the least preventing him from becoming head of GM. In so doing who knows what kind of effect we might get. GM may turn out financially secure now, or perhaps the world would be ruled by apes. But that is a 50% chance that they should be willing to take
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From: New York, NY
Re: New article about GM from BW
Originally Posted by poSSum
GMAC makes their money lending borrowed money. I'm thinking with junk bond status they'll be working with pretty skinny margins. If by selling 51% they can significantly improve their bond rating, and borrow at a better rate, the margins may fatten up enough to still give them a decent return on the 49% of GMAC they continue to own.
