By Robert Farago
April 30, 2008 -
And this, folks, is just the beginning. Or the end. Or the beginning of the end. Whatever you call it, however you look at it, GM's $3.25b first quarter financial loss makes a mockery of CEO Rick Wagoner's $14.4m annual compensation, and eliminates any hope that GM's foreign markets can keep the corporate mothership afloat. As Bloomberg reports, the number would have been even more horrific if not for GM's international growth. "GM's European profit grew by more than 18 times to $75 million. The Asia-Pacific region and Latin America-Africa-Middle East region doubled earnings to $286 million and $517 million, respectively." Meanwhile, "GM had an $812 million pretax loss in North America, its largest region, wider than the $208 million deficit a year earlier." And if you think things will be better stateside in the second, third or fourth quarter, what with strikes and tanked SUV and pickup sales, you need to be working at GM. Otherwise, no one will believe you. [Read General Motors Death Watch 175: Phone Calls from the Dead for a full analysis.]
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April 30th, 2008 at 9:41 am
Wagoner ought to give his salary AND bonus back based on morals. Or ethics, or principle.
Oh wait, what was I thinkin….
April 30th, 2008 at 9:47 am
Where I worked about a decade ago one of the postings on the coffee room wall was a supposed article from a Chinese newspaper about the execution of refrigerator factory managers for years of shoddy work. At the time for some reason most people believed it. It turns out to be an urban legend according to snopes, but somehow rings true:
http://www.snopes.com/politics/business/refrigerators.asp
Shanghai Automotive, GM’s partner in China, bought what was left of the once mighty Rover of England which in turn was the resting place of most of British Leyland (Jaguar is the only BL member which got out alive, or as a zombie). It is not far fetched to imagine Shanghai or another Chinese company picking through the bones of GM sometime in the next few years. Shanghai already owns half of GM’s single growth business.
April 30th, 2008 at 9:47 am
Wagoners compensation is a piss in Mississippi. What I wonder is, where does the money come from, to hold this sinking ship afloat? And that without fixing the problems in the first place?
April 30th, 2008 at 9:51 am
jthorner,
While that one may be urban legend, some managers in China have been executed for similar things. China is trying to build a better reputation for themselves and if anyone screws it up there’s hell to pay.
April 30th, 2008 at 9:53 am
“What I wonder is, where does the money come from, to hold this sinking ship afloat?”
It came from two sources: 1) In recent times, almost two decades of huge profits on cheap to build, yet high priced, highly optioned trucks and SUVs. 2)Selling off pieces of what was once the largest and most profitable corporation to ever roam the earth. Said pieces were acquired and built over a 50 year stretch of time when GM was master of the automotive universe.
Today the good ship Easy Truck Money has run aground and the valuable assets have pretty much all been sold. It is a bit like the heir who lives high for years by pawning the family jewels and one day goes to the safe only to find it empty.
April 30th, 2008 at 9:57 am
Wow. How long will the board of “directors” tolerate this kind of abject failure?
How much more red ink has to flow for someone in that dysfunctional organization to even HINT to Rick that it is time to fall on the sword??
April 30th, 2008 at 9:59 am
Folks, this is actually a missed blessing of sorts.
GM did achieve 20% revenue growth in international markets and they have been among the best in the industry when it comes to that measurement.
The North American market is substantial. But it’s declining in importance by an awful lot these days. With hundreds of millions of new car shoppers in these overseas markets over the next five years, GM may actually be able to attain the income and growth they need to keep competitive.
On a side note, you should take into account that GM is likely to reduce their North American parts and assembly dependence by double digits over the next several years. You may very well see a GM that is American in name only in the times to come.
All of this may help the stock price. But is a very unfortunate set of events for the future of this country.
April 30th, 2008 at 10:10 am
I wonder when the ‘turnaround’ will be seen for what it was, a mirage, and with it, any fantasy that this guy ever had a clue. They’ve got $1k on the hood of the pathetic Aveo and $1.5k on the hood of the Cobalt while Civics, Fits and Toyota’s similar offerings need no help other than how they run. Meanwhile after all of Wagoner’s known ideas have failed to turn anything of importance around, the bleeding continues at Saturn, the starving continues at Buick and Pontiac and the snoozing continues at board meetings. Time for another gem out of the mouth of the vice chairman.
April 30th, 2008 at 10:14 am
Stephan Lang, you know a tad more about this than I do, but my thinking has been that GM has been doing well in ‘immature’ markets where the full offerings of Toyota, Honda, Nissan, etc. are not available. So I see GM’s success there as temporary. Do you see it as having more life?
April 30th, 2008 at 10:32 am
So, GM lost 4 TIMES as much this quarter as they did last year. Wow. And when you look at the international profit numbers, well, they seem kind of piddly compared to the total loss. A few hundred mil here, a few here, it’s like the weight of mankind’s CO2 contributions compared to the weight of the atmosphere in total (which happens to be 30 billion tons of CO2 per year as compared to the atmosphere’s weight of 5 quadrillion tons - it’s 0.6% of the atmospheric weight.) In this case, GM’s international profits, combined, don’t equal even a third of their total loss. Pretty sad.