A few days after GM's vice president of vehicle sales, service and marketing assured auto industry analysts that his employer will maintain incentive-free “value pricing," General Motors announced two grand cash back on the 2007 Chevrolet Tahoe, Avalanche and Suburban and the GMC Yukon, Yukon XL and Denali. To be fair, nobody took LaNeve’s price promise seriously. By now, everyone knows GM’s new(ish) SUV’s are a drug on the market, and it ain’t Viagra. There’s only way to move the metal: lower the price. Either that or stop making the damn things.
Last Friday (always Friday), GM CEO Rick Wagoner announced that The General will curtail production of its GMT-900 based SUV’s. Rabid Rick tried to minimize the damage by asserting that GM was going to halt “some overtime” on SUV assembly lines and introduce “other products” into the production mix— as if to say demand for GM’s gas guzzlers was still hot, just not sizzling, and besides, we can make some other stuff instead.
Yeah right. At the end of July, in an industry where a 60-day supply is an acceptable maximum, GM dealers were stuffed to the gills with Tahoes (82 days), Yukons (89 days) and Chevrolet Suburbans (75 days). Although the figures are not far off last year's, these are GM's "new" trucks. August is going to be a bitch.
Meanwhile, Rabid Rick proclaimed that GM's share of the full-size SUV market has “boomed.” According to Wagoner, GM now “owns” 50 to 75 percent of various segments within the SUV genre— which is a bit like saying you’ve scored the best cabins on the Titanic after it hit the iceberg. The executive’s statement was a remarkable piece of spin, but it pales in comparison to GM’s creative accounting. Lest we forget, Rabid Rick ascended to his throne as GM Chief Financial Officer. Here’s a bit of what he’s learned…
Yesterday, The General’s GMAC finance unit signed a three-year, $10b funding facility with a Citigroup subsidiary. Four billion dollars of the money falls into a brand new category for GMAC: “unrated notes”. Unrated notes are papers representing loans that are so far outside traditional credit parameters that the vast majority oif insitutional investors are literally prohibited from buying them.
In other words, GM’s “Zero Percent for Deadbeats” summer blowout left GMAC with billions of dollars of risky loans. No surprise then that GM's finance arm reported that the unrated notes are backed by assets “not typically securitized by GMAC.” OK, here's the "creative" part…
Because the risk is so high, there's a gap between the money GMAC lent its less-than-perfect customers and the amount of money Citigroup paid for the loans. As part of the deal, GM has agreed to cover the shortfall (i.e. securitize the assets). It’s all a bit confusing (by design), but here’s the bottom line: GMAC carries little or no risk for the bad loans. GM buries a “charge” in its sales costs to cover the money paid to GMAC for the dicey loans.
The shell game maintains the illusion of higher average transaction prices, hides huge discounts/rebates and moves vehicles off the lot. Given that GM generates about $28b in North American sales per quarter, $4b in bad debt equals about 15% of sales (assuming 100% financing). Since most of this paper was written in 60 days, as much as 40% of GM's recent sales surge may be directly attributable to bad loans. Put that in your quarterly report and smoke it.
Just like last year’s “Fire Sale for All” program, the “Zero Percent for Deadbeats” program will eventually bite GM in the ass. Can you imagine what these vehicles will be worth when (not if) they’re repossessed? At the risk of sounding, um, deadbeatist, people with sub-basement level credit scores tend to smoke, spill beer, puke, rip up interiors, ding ‘em good and never fix a thing. And speaking of repairs…
In the second financial quarter, GM downgraded its warranty expenses per vehicle to $325 (compared to $523 for the same quarter in ’05). GM’s improving reliability record is admirable, but it doesn’t justify that kind of drop. The revised figure added $433 million (the equivalent of $0.67 a share) to GM’s second quarter “profits.” Clearly, GM is ducking and diving, window dressing its earnings to mask the company’s true performance, or lack thereof.
The truth is things are not going well at RenCen. While GM has finalized its new credit line of $4.5b (on onerous terms), the company still withdrew an additional $2b from its VEBA on July thirty-first to cover health care reimbursement. GM’s continual need to tap into the VEBA account suggests a cash shortage.
Now that the GMAC sale has been postponed until next year, the need for operating funds could well become critical. While the risk of a GM default may not be imminent, a strike at bankrupt auto parts maker Delphi would be the tipping point. In the event of a work stoppage, GM’s credit line would be reduced by a billion dollars.
Industry watchers still say it’ll never happen. Meanwhile, negotiations at Delphi are stalled and the most recent final deadline arrives in two days. If Delphi goes down, GM goes down. If it doesn’t, the company's descent into bankruptcy will merely be postponed.
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Robert you have nailed it. The new full sized suv’s were the necessary ingredient for a GM recovery. Why? They don’t make any money selling cars. The 10 to 15k profits on these 40k mini-motorhomes are the mouse milk GM and ford need to continue. We all know that if you have a real hit (say the chrysler 300) you get at least one year of full production and little discounting. ie. the public let’s you make some serious money. But it you introduce something in Jan and by summer they are piling up on lots, your profit run is too short to be meaningful. In other words GM has one more cannon to fire the full size pickups. If they dethrone the F-150 but start to sputter next year, the same thing will happen as the SUV’s. Wagoner will declare victory (defeating ford) but ignore that the entire segement is fading into to sunset. Neither GM or Ford have yet to explain how non profitable little cars (at least ones they sell) will replace these huge truck profits. And yes Robert no amount of financial dancing will allow that dog to hunt.
The next year or two is going to be real interesting in the auto industry. It would be a real shame to see the 09 Camaro go down the tubes though.
Good report, thanks for all the juicy details.
Two questions:
1) What is a VEBA?
2) How can they downgrade their warranty expenses? If they need to pay more for warranties than they want to admit, they could file it as other expenses, but that still wouldn’t affect their reported profit?
Voluntary Employee Beneficiary Association – a tax-free account to pay for health care expenses. GM's short-term VEBA is down to $800m.
GM [supposedly] calculates warranty expenses based on historical costs and production per quarter. A so-called “plug number” is recorded as an expense, which creates an offset to the warranty reserve (a liability account). When warranty reimbursements are approved, the reserve account is debited and the cash paid to the dealers.
Theoretically, a warranty reserve account could grow a surplus. Last quarter, GM cut its warranty expenses AND reversed the warranty reserve.
As you point out, there is always a reckoning. In any case, all of these developments– loans to deadbeats, reduced warrany costs, rushing refreshened SUV's and pickups to market– smacks of desperation.
This kind of reminds me of how George Bush just came back from vacation and declared that Hizbollah (I’ve seen so many spellings) has been defeated. Of course, he wasn’t actually involved in the fighting, and those that were have a different opinion, but it lets him attempt to turn cease-fire into a win for the War on Terror, when in reality he was sunning himself at the ranch while the rest of the world was ****ing their pants.
In the same way, it sounds like good old Rick is declaring that reducing production of the GMT-900s is a win, while the reality is that the battle has simply moved to other fronts, and the enemy is no less voracious (for market share in this case).
Wagoner just needs to proclaim “Mission Accomplished” with a big sign and maybe he’ll believe that we will all fall for it. Worked once…
Come on Guys – lets all leave the political statements out of these comments lest the board get soured and hijacked away from it’s orignial mission – -Intelligent informed comments & feedback about the articles on this outstanding site.
Mr. Farago… want to weigh in here?
Mega-dittos. As apt as the analogy may be, please save the Bush-bashing for the political blogs. You know, in general.
GM needs creative car-making instead of creative(?) finance book-keeping(infact finance cook-booking)
I tend to agree with Farago, as we should keep these comments as free from personal attacks as possible.
…but “Mission Accomplished” is pretty frigging apt.
No Bush bashing?
Only GM bashing here.
The constant Hate of GM gets tiresome. They do have some really good cars and trucks. They still sell the most also.
>>>By now, everyone knows GM’s new(ish) SUV’s are a drug on the market, and it ain’t Viagra.
No, in fact it’s one of those testosterone blockers they give to people with prostate cancer.
I deeply appreciate Mr. Farago’s articles like this. I have a little bit of layman’s knowledge about accounting, but having someone with the time and skill to ‘read between the lines’ in company’s financial statements and translate the accounting-ese to simple English is a wonderful resource.
Keep up the good work!
Buzz L.
espo19047:
August 15th, 2006 at 2:48 pm
No Bush bashing?
Only GM bashing here.
The constant Hate of GM gets tiresome. They do have some really good cars and trucks. They still sell the most also.
It’s not hate. It’s criticism which could be constructive if only GM would listen. As for sales, GM’s have been tanking. They had more than 50% of the US market in the early ’60s, when I started paying attention. Their share is going down significantly every year.
David (a GM shareholder and former fan whose only new car was a ‘93 Saturn SL2, but who wouldn’t buy another one)
GM’s have been tanking. They had more than 50% of the US market in the early ’60s, when I started paying attention. Their share is going down significantly every year.
How many players were there in the 60’s?
The media does not report Toyotas recent recalls with glee like they do when they report all the negativity about GM.
Right it’s a conspiracy.
The editors turn the glee up when they report on GM’s recalls.
Sure.
“If they dethrone the F-150 but start to sputter next year, the same thing will happen as the SUV’s. Wagoner will declare victory (defeating ford) but ignore that the entire segement is fading into to sunset.”
WTF are you smoking or snorting? Stop hanging out with the Cokeheads!!
The largest single US vehicle segment, by a huge margin, full size pickup trucks, is “fading into the sunset”?? With all of the hoopla surrounding subcompacts, that entire size class might have total sales this year in line with the single digit market share of the 4th place entry in the full size pickup market, the Toyota Tundra. I agree there will be some decline in the overall size of the full size pickup market, but the term “fading into the sunset” is ridiculous hyperbole.
What is it with you yanks seemingly wanting to watch your domestic Auto manufacturers go down the plughole? Wheres the support these days??
At least you seem to be catching onto the fact that gas prices will always escalate and you can’t keep living in your american dreams.
WV14, the american dream extends quite a bit further then driving an SUV or a full size truck…..
Just a reminder GM has sold nearly 1.5 million trucks/vans this year (Jan-July). While obviously their sales are down compared to 2005, there seems to be a running theme on this site that no one wants their vehicles. GM has also sold over 900K cars in addition to the numbers above. Whats with all the SUV hating? What is the basis for the “or stop making the damn things” comment?
Both corporate and personal finances have seen a lowering of standards as evidenced by “creative” financing like non-traditional mortgages, bizarre stock market trading derivatives, etc.
Chiding a person for taking credit at the culmination of a long term process is like criticizing a Nobel prize winner for being on vacation the day the award is announced.
GM is getting to be a tired topic, but i also appreciate the insight into how they spin their numbers. For many years i’ve wondered why GM execs didn’t just go for a spin in a camry/accord and then compare it to their crapmobiles and make the necessary changes. seemed like a no brainer to me; apparently they were happy making $$ on their trucks and just said “rent them” to the cars.
one point though, when i checked into the zero percent financing a summer or two ago, it was only available to those folks with rather high credit scores, so these wouldn’t be junk loans at all. Is that no longer the case?
Forget volume. The trick to making money is to take in more than you spend.
Lesson two: if volume exceeds demand, price falls. Curtail volume to match demand, and prices stop falling. So, if GM stops making so many SUV's, the profits won't disappear.
Hey! That's what Rick did! Only he doesn't really like to talk about it in those terms…
As for GM's loans, yes there is a general lowering of credit standards in the biz. And then there's what GM dealers did during the Zero Percent for Deadbeats sale. The guys getting 120% loans on new cars had ten-foot pole marks all over them. We're talking low 500 FICO ratings and… lower.
The constant Hate of GM gets tiresome. They do have some really good cars and trucks. They still sell the most also.
They do and they do. However:
Sales – Expenses = Profit
When Profit is negative, it’s call loss. Selling the most cars and trucks is not what counts, it’s making a profit on them that does.
GM is hindered by so many factors, internal (burocracy, unions, politics) and external (perceived quality, loss of market share, difficulty to turn a profit, health care expenses) it’s gonna get a lot worse before it gets better.
Hello I`m MIKEY I am a low life hourly worker at GMs OSHAWA complex all of us in production workers and management work work are butts off to produce the best cars and trucks on the market today period.
Yes we have had some problems with percieved quality.Yes we made some goofy looking cars.and yes SOME of the dealers should be closed cause of crappy service.I fully understand the anger of many buyers,and I see why you would buy an import.but I ask you go to a GM dealer look at an IMPALA or a BUICK take one for a drive the improvement in the last 3yrs is remarkable
We in the plant are busting are ass to get that NEW 900 truck to the dealers
d`ont condemn it yet.look at it drive it.It will blow away any imported truck bar none
THANX for taking your time to read this
MICHAEL H BROWNE shipper/reciever OSHAWA METAL CENTER
Sorry to even tilt this discussion towards politics. I know it’s an inflammatory subject, and like the rest of you, I have other places that I prefer to discuss it.
As regards the complaint of a GM hate-on, obviously if GM is still losing marketshare, they could be doing things better. If no one bothers to tell them what they are doing wrong, how can we have any expectation they will improve? Would it be more supportive to GM to simply shut up and let them screw everything up? (Unfortunately, there are also some apt political analogies here too, but I’ll leave those out)
Hi Mikey,
Good for you! As a fellow Canadian, I’m always proud to see the quality awards you guys win. You are probably the brightest spot in GMs future.
Also, I’m a big fan of the Impala. I think it’s one of the best overall sedans made by any domestic. Unfortunately for GM, it’s sold as more of an old person’s car, with the Malibu and G6 being the “mainstream” models. It’s barely more expensive than the base G6, and if they offered it with a decent 4 cylinder, I imagine it could be a much more popular car. I also like the “Lucerne” quite a bit, I think it looks very classy. But without more great entry-level vehicles, it’s less likely that people will upgrade to these nicer mid-range models.
I’ve got high hopes for the new trucks (very nice exteriors), but I see $5 gas in the near future (for us Canucks, I wouldn’t be surprised to see it in the $1.60 range), and that’s bad news for any full-size truck, no matter how good it may be on it’s own.
So you keep working your butt off, tell management to get some dynamite small cars onto your line, and maybe you’ll help build my next vehicle.
I want a deathwatch for the GM Deathwatch article. I’m thinking 150ish range or so.
MIKEY,
If you really want to get hot under the [blue] collar, have a read of our reviews of the Impala and Buick. When you calm down, ask yourself a question: could these guys actually be right? What would THAT mean?
This is one editorial which continues to fascinate.
With reference to Mikey. I really appreciate the effort you guys must be making to build a better vehicle. But, let me give you a couple of examples of my recent experience with hiring GM vehicles.
Buick Rendezvous – Interior liftgate handle fell off as I closed the door for the last time before returning vehicle – my last impression?
Chevy Impala – The IP top pad was bowing above the trim strip, right above the center console. The unintended gap was about 1/8th inch. The car had 3 front seats! If you stowed the front center seat you had 2 (only 2) cupholders. There were none in the rear (for my kids).
Chevy Equinox – I really enjoyed this car. It wasn’t great but it was good. There was nothing really negative about it. The ease of closing the liftgate is one of the best I’ve experienced (except electric). My wife really liked it.
Chevy HHR – My wife really like this also. She liked the flexibility and the bullet-proof interior (easy to clean). I thought that the doors might detatch from the panel when I shut them. The door panel squeaked. Also, the glass flapped around inside the door while I was driving like it was’t being supported.
I don’t think Mikey and his colleagues are responsible for any of these issues.
It might not even be GM. Most of this stuff is designed by suppliers who really should know better.
These vehicles may represent a great improvement on what GM offered 3 years ago, but this overall level of quality is still not competitive.
Speaking of politics — Hey I wouldn’t mind some commentary on Rabid Rick’s (and Ford’s Fields) recent theme of complaining that the current administration doesn’t have an energy policy, and doesn’t want to nationalize the healthcare industry.
I get the healthcare — Rick Waggoner would love it if US Taxpayers would pay GM’s corporate expenses. What CEO wouldn’t like someone else to pay the bills?
But the energy policy one is kind of funny — wonder what exactly he means by that, considering he’d certainly fight tooth and nail against any REAL conservationary energy policy, such as stricter CAFE standards or huge gas taxes. I suppose he’s faulting the government for not magically making gas cheap again so he can keep selling land behemoths?
“a real shame to see the 09 Camaro”
Just get a brand new 1969 model instead:
http://www.superchevy.com/technical/paint_body/bodies_panels/0506sc_cars/
http://www.dynacornclassicbodies.com/classic.html
One word. Mitsubishi.
GM is like Mitsubishi on illegal steroids, and it isn’t a pretty sight.
For those of you not “in the know”, some brainiac at Mitsu USA decided to move the metal and did it with zero down zero payments for a year, anyone with a pulse please come buy a Mitsubishi. Well, the inevitable happened, and since Daimler-Chrysler owned part of Mitsubishi at the time, the management went to them hat in hand looking for support.
Instead they were told to go to hades, do not pass go, do not collect $200 or any other amount.
So Mitsubishi Bank and Mitsubishi Heavy Industries (Mitsubishi Motors’ original parents) bought up the stock from DCX and bailed them out.
Now, the important question is this.
Who is going to bail out GM? Answer: nobody.
The second question is this.
How long before the Chapter 7 (as in close the doors) bankruptcy happens for GM?
How about in as little as two days when Delphi goes out on strike?
If I were a betting man….
Yes R.F. I have read all the reviews from all of the writers and I never get hot under my blue collar. I tend to do my own reviews the auto writers have been slamming the big 3 for years,a lot of it well deserved.a whole lot is not.
A few questions for the GM bashers/import lovers.
Where is all of the old imports I see 12 and 15 yr old domestics every day CHEVYS.FORDS a couple of K cars what about the HONDAS and TOYOTAS where did they go?Repair cost maybe? Nah they never break down those auto writers said so.Remember back in the early 90s we built crap of course that same crap is still rolling down the road.maybe the glove box door won`t close and the trunk leaks but it still runs.I call that quality.
Why are all the taxi cabs domestic?Can you think of a harder life for a vehicle multiple drivers,24hr 7 days a week,city traffic limited maintinace you think they would being using TOYOTAS or BMWs maybe.
I get off at midnight, when I walk across the G.M. parking lot in February at -25 degrees and the wind coming off lake Ontario would freeze the nuts off a bridge,I d`ont care if my 6yr old Grand Am G.T.eats brake rotors or the seat belt won`t retract.I KNOW my little darling will start and the heater will work. I call that QUALITY!
mikey: Hey man, just thought I would point out how many old Hondas and Toyotas are on the road too…I mean I live about 20 minutes from Oshawa myself and I drive an 18 year old Honda Civic that just won’t die! Bought for $100 and it is close to indestructible! There are so many late 80s Civics out there it’s not even funny.
mikey -
Depends where you live. In my neck of the woods (WashDC) there are lots of old imports – was followed to work today by a 20 year old Honda Prelude. Taxicabs – very amusing the first time I saw a Scion xB in taxi livery, lots of import brand minivans in yellow, fitted for handicapped/rampvan access.
Robert,
Your insiteful reporting and insider info “KEEPS ME UP NIGHTS”
Keep up the good work!
Jack
I worry too about GM’s new marketing effort toward a “buy here, pay here” dealership. For the uninitiated, a BHPH dealer will sell anything to anyone regardless of the customer’s outhouse credit score. What’s new is that these are typically USED car lots, not NEW dealerships.
The value pricing concept is putting a royal squeeze on the dealer’s margin, and most of the dealers don’t even realize the extent of it because GM is playing a confusing shell game with the margin (MSRP less base cost) of the vehicle and supposedly higher margins on the options (guess who has better information on THAT bit of scorekeeping!).
There is hope for GM, despite the death march here, but it will require a different cast of characters designing the product. Alas, the lead times required for a product changeover are longer than the cash flow probably, but hope springs eternal….
One can’t avoid bringing just a bit of governance issues into this discussion, since the last time an American auto company teetered on the edge of bankruptcy, the Federal government backed the loan up. Of course, that was heading into a presidential election with a president and Congress amenable to such hijicks. (No, I am not going to count the time that the now Chrysler Corporation was acquired by DaimlerBenz, now DaimlerChrysler, as a time when they were teetering on bankruptcy; but I didn’t see the books, so someone might know but not I.)
If General Motors goes out of existence before 2008, the repercussions in this country, especially in the mid-west, will be enormous. And believe me, the auto industry will then definitely be discussed in the context of politics – big time.
I see lots of old Hondas and Toyotas; specifically the 93-97 and 98-2002 Corollas and similar model year Civics. Camry and Accords from the same years were very common, but it’s the 98-early 2000 models I mostly see now.
Some of the most common vehicles on the road in Van, along with the J-bodies
Hi, Mikey. There are Prius taxicabs. And some police departments are using the Prius for community outreach cars.
I’m sure there are many other examples, but I’m a Prius fan these days!
Prius:
Self immolation isn’t confined to Dell computers. Toyota is beginning not to care. Why compete in F1 and then not sell a single sports car?
Because 14 billion in profit means you can.
(They just canned the 2009 Supra).
Mikey,
I feel for you and your hard working co-workers. No, seriously, I do. My industry is also faced with overwhelming competition and aging buyers. We’re not fighting bankrupcty, but, like your employer, we have cut back in places and pulled the belt tighter. So I somewhat know how you feel.
But, unlike GM, we have innovated and evolved. We’ve met our new competition head on and come up with new strategies and new products. By doing so we’ve not only stopped our marketshare loss, we’ve gained a little. It took upper management realizing that the old way of doing things was leading us straight to the crapper and everything had to change.
The GM you and I know is very near death. One way or another, it’s as good as dead. Either through bankruptcy, merger or (preferrably) with a huge paradigm shift throughout the entire company, the old GM is not gonna cut it much longer.
I’d love to support you and all the industrious people on the line at GM by buying a GM product, but despite three years of improvement, GM cars still can’t hang with the ever-innovating imports. But even more importantly my family with its limited resources can’t take a gamble on a company that’s burned us (quite badly in fact) in the past.
So we’re shopping for an Audi, VW or Volvo wagon. I’m hoping the Astra wagon makes it to the States mostly unchanged and I can give GM another chance. We’ll see.
Mikey,
Around here (Colorado), Toyota and Nissan pickups and cars from the early 80’s are quite common. By contrast, the Chevy and Ford trucks from the same era are typically beaters in pretty poor shape.
“Hello I`m MIKEY I am a low life hourly worker at GMs OSHAWA complex all of us in production workers and management work work are butts off to “”"produce the best cars and trucks on the market today period.”"”
”
Mikey,
Gotta love your dedication and spirit as an EMPLOYEE to make that statement about the company you work for.
I work for Toyota….and a dedicated and growing group of CUSTOMERS are making the same statement about our vehicles.
The difference?…those customers are paying the bills. Toyota Corporation now has a net worth of 3 times the value of GM, Ford, and Daimler Chrysler put together.
Enough of the cheerleading.
Plain facts….I’ve owned both domestics and “foreign” made cars. My last new vehicle was a 1999 4Runner SR5-V-6. It was purchased for $38,000 in December/98. I drove this vehicle for 5 years and sold it for $13,000 with 278,000 km. on it. In all that time the only money spent on it was for routine maintenance (oil changes every 5000 km.)
The mechanic who certified it was blown away to discover that this truck had 60% of its original brake lining and that the rotors were unwarped and not in need of turning after almost 300K.
(most of my driving is highway miles so I would be interested to hear from anyone else with one of these trucks who does more city driving)
I am presently driving an ‘02 Impala as a daily commuter. The air conditioning doesn’t work, the dash lights come on and off intermittently,I just replaced the turnstalk/blinker/dimmer switch at a cost of $580 (wouldnt hold high beam on), the catalytic convertor failed and was replaced, and it has wind noise at highway speeds.
Why would I drive this POS??? Simple….. it was dirt cheap to buy. I picked it up for less then $7000 with 135k on it. I will run it for 300 k. and throw it out like a Bic lighter. It probably will still be worth a couple of grand when I dump it and then I’ll look for another disallusioned GM owner to sell me his pride and joy for 1/3rd of what he paid for it 2 years ago.
My daughters car….a 2000 Grand Prix …..purchased for $2000. It sounds like a diesel with that horrible 3.1 piston slap noise but my mechanic assures me that if you can live with the rattle and tolerate complete strangers telling you that your car sounds like the oil plug fell out, that the car will likely go 300 +km (if the head/intake gaskets dont fail and dump all the coolant into your engine oil)
If she gets 50K out of it I’m ahead of the game.
So yes, you really can come out a winner with a GM product ……if you let someone else take the kick in the ass that comes with buying a car with severe depreciation.
In truth I hope GM can stay in business. The Union brothers have set our wages in the auto industry by hanging tough when times were good for the domestics. We are appreciative of that fact. Toyota prefers to match what the Union companies pay rather then risk dealing with a Union themselves. So far it has worked for them.
It was interesting to note that the last Union auto contract was settled for just enough of a raise to cover the Union dues. Essentially that means a wage freeze for the Union workers for the duration of their contract.
It also means that Toyota only has to match the Union rates so they get a break from paying the higher increases that were negotaited in the past.
Lets hope GM can pull it together by next contract time. I’m on your team Mikey!!
I would suggest that if Mikey wants to see some 12 to 15 year old Hondas that he take a drive outside of Oshawa (a traditional GM stronghold). The rest of the GTA is simply awash with Civics, Corollas, and Accords of those vintages. Many if not most are rolling testaments to metal oxidation (such are the joys wrought by the merger of Canadian winters and sodium chloride), but they run on.
As for most taxis being domestic, I believe that has as much to do with rampant depreciation and wide availability at police auctions making them cheap second-hand buys.
I want GM to survive, but only if they can produce something remotely desirable for me to drive. At present, that list contains one vehicle (the Corvette), which costs more than a year’s take-home salary for me, so I guess I won’t be buying it anytime soon. Why doesn’t a Cobalt handle as well as my Mini or have an interior that simply demolishes the GTI I’ve been eyeing up? Why doesn’t the CTS meet or beat the driving dynamics of the 3-series I might just stretch my budget to fit? Why does a Solstice weight several hundred pounds more than a MX-5 (this is a sports car, after all)?
Since I have no utility or desire for a truck there’s just nothing out there for me to buy except for econoboxes built in Korea or vanilla sedans that offer little or no driving enjoyment.
That’s really, really sad.
Mr. Farago:
You fail to mention that the days-supply inventory numbers, though high, were lower for July 2006 than they were for July 2005 (Suburban 75 vs. 79, Tahoe 82 vs. 102, and Yukon 89 vs. 103). And this is without the employee pricing fire sale. So apparently production is coming in line with supply. And yes, faster would be better….. (Also, Toyota is sitting on 67 days of Sequoias and 154 days of Land Cruisers, Nissan on 79 days of Pathfinders and 90 days of Xterras,so this problem is not GM-centric)
The $4b in unrated notes. Two questions about that. Why is Citigroup interested in buying this risk if it’s as bad as you say? And why isn’t the financial press (typically not big fans of GM) making more of a stink about it? Analyst’s comments were generally favorable.
And you report the adjustment to GM 2nd quarter earnings from reduced warranty expenses at $433 million. GM’s Form 10-Q filing with the SEC claims only a $300 million adjustment. Where is the discrepancy?
High inventory is high inventory. Bottom line: SUV’s sales are way down. The trucks are stacking up.
Citigroup doesn’t hold the paper. It sells the high risk notes to other investors. They make a commission. Done.
I’ll recheck the figures on warranties, 10Q very much.
Toyota and General Motors decided to have a canoe race on the Missouri River.
Both teams practiced long and hard to reach their peak performance before the race.
On the big day, the Japanese team won by a mile. The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.
Their conclusion was the Japanese team had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.
So American management hired a consulting company and paid them a large amount of money for a second opinion.
They advised that too many people were steering the boat, while not enough people were rowing. To prevent another loss to the Japanese, the American’s rowing team’s management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the “Rowing Quality First Program,” with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses.
The next year the Japanese won by two miles.
Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year’s racing team was out-sourced to India.
capt tungsten: yes, GM has a little less inventory of suv’s this year than last, however, last year was the end of the line for the tired decade old design of suburbans and tahoes. This year’s inventory is the brand new state of the art “fuel efficient” new ones. As I pointed out in another blog, if you can’t get one year of brisk sales out of a brand new possibly billion dollar overhaul before the stuff stacks up, what are you going to do for the next several years when they are no longer freshened models?