Really, clue me in here.

Any chance the board of directors will take a pay cut too?

You wanted me to make the case that their core business is making money. As you (and Henderson) point out, they lost $600M on NA’s automotive operations.

But taking that loss into account, they made $390M globally on the auto business because the other 3 regions made enough money to make up for NA. That’s the basis for my comment that their core business (automotive) is finally making money.

Now, if GM goes bankrupt, should I drive the thing like hell to 36K miles so the third-party warranty kicks in?

But Chrysler in particular is fucked, because their overseas presence is close to nil. GM and Ford are in much better shape due to their larger overseas presence (plus they are bigger domestically as well). Chrysler clearly will fail first.

And if Chrysler fails, that demand doesn’t just disappear. Honda and Toyota can’t absorb all that demand (although there are indications that Toyota is no longer running all of their plants at 110% of capacity, so they might be able to absorb some). Hyundai/Kia will take some of it as well.

However, the majority of Chrysler’s sales will be absorbed by Ford and GM. Chrysler going out of business will save Ford and GM for at least a decade.

But I never for once thought or expected a car company of any flavor to actually care about me or anyone in my family. While I prefer (and buy) German and Japanese cars I certainly don’t think any of those companies care about me, either.

I think each car company does it’s level best to put out the cheapest product that will get the best journalistic coverage and sell it at a price point that keeps their factories running and profits up. The only difference between the products is where the company set the minimum standard.

You must be reading the chart upside down. This is not a winning stock: http://finance.yahoo.com/q/bc?s=GM&t=5y&l=off&z=l&q=l&c=

Will there be a storm tonight, you wonder? Is there a forest fire coming my way? Will there be a landslide?

All unknowns by you, until the fact.

However, if you watch animal behavior around you, you can pick up hints to environmental changes you will soon face.

For this discussion, the “animals” we need to be watching are GM’s dealers.

They can smell smoke long before we can.

Through negative Pavlovian learning, they instinctually know, by now, when to clear out, or hunker down.

So, my question to everyone is: What are the dealers in your neighborhoods doing?

Business as usual? Selling out in droves? Consolidating? Laying in inventory? Clearing it out and leaving lots empty?

I do know that my daily e-report from Auto News from a couple days ago was almost entirely about the state of U.S. Domestic Dealerdom. And it’s Doom. And Gloom. The big holding groups (Lithia, AutoNation, Sonic), tanking. Smaller individual stores, cratering.

I also know from personal observation that one of Chicagoland’s most respected dealer groups just bailed on their B-P-G store in my neck o’ the woods (which they took in as part of a Nissan point “swap” about four years ago). Now, why would you part with a Nissan point to take on a big B-P-G point, pour money into it, and then sell it in less than four years? This month in fact?

The smell of smoke.

Other large domestic dealers in big cities are fairing worse, finding NO takers for their Ford and/or GM dealerships. However, the land on which these stores sit is worth far more than the franchise, so they’re selling the land and handing back their franchises to the manufacturers, shuttering long-standing Ford and Chevy dealerships for good. Or bad. Depending on your point of view.

However, the Honda dealer near me has rented the parking lot of a closed movie theater about a half-mile from their store and piled it high with 4-banger Accords and Civics. About 150 units, plus what’s on the ground at the store itself.

And who owns the Honda store? Same group that just bailed on the B-P-G dealership.

The smell of smoke, if you sell Hondas, is apparently a very good thing. Enough to bet the floorplan farm upon.

Samir has a point — the GM management team is not lacking in intelligence. You don’t get to their level of the food chain being dumb.

What they’re doing — failing — may just be on purpose.

Intentional.

That’s all I can make of it. Simply no other way to look at it.

And as discussions above indicate: management failure hastens the necessary pull of the pin on the Chapter Grenade. Due to the fact things have gotten so bad, GM management will then heroically fall upon it, martyring themselves and hoping for favorable Chapter rulings against franchise laws, contracts, debts — everything.

Maybe the savvy dealers sense this already. That if you hold a franchise contract with GM currently, it may become worthless in the very near future, as it goes up…

in smoke.

At least Ford management had the cajones and intelligence to give up on Edsel after 2 years and 2 months (3 model years – very few 1960 cars were built).

My guess is that Generous Motors will be chapter 7 by 2012. I don’t think the current management believe their problems are “as bad as all that.”

Something will force them to pull the trigger on Chapter 7, not Chapter 11, though. Whether it is something totally unexpected like a Tsunami taking out their Daewoo plant in South Korea, or the Chinese government simply declaring 50% ownership of SAIC-GM null and void, or an extended CAW or UAW strike. Something will blindside them and that’ll be it.

This is GM’s 100th year of existance. Few people realize how many times it nearly ceased to exist.

Size is no real protection. Look at Pan Am, Bethlehem Steel. Studebaker-Packard was one of the 50 largest companies in the United States when it was formed. International Harvester was huge, but nearly died in 1982.

British Leyland was the top selling auto company in the UK for a long time, and in fact, the last remaining vestage of BL (MG-Rover) had a top-10 selling vehicle in the UK as late as about two years before its demise (in the equivalent of Chapter 7 – close er down boys – bankruptcy).

The question is – will a US Chapter 7 kill the entire entity of GM? I guess it depends upon how the ownership of the international operations is set-up. But I think they are wholly owned subsidiaries, so chances are (to my layman’s mind) that they’ll perish with the mother ship in a similar way to an unborn fetus dying when his or her mother dies.

I don’t know if emergency cesarian sections (so to speak) could save Adam Opel AG, Holden Limited, GMDaewoo, Saab, etc.

We’re witnessing the (painful) birth of a new American automobile industry. This remade auto industry will look more like the European model, where no one company dominates, and 5-6 companies with roughly similar shares jockey for position. It will be a more creative inudstry, which will be good for customers and, ultimately, the industry itself.

There will still be a place for GM (and Ford) in this remade industry. There is not, however, a place for GM as it’s presently constituted – a corporation selling middling cars under several brands whose meaning was lost on customers years ago.

A new, more focused GM will unleash the talent and resources currently contained (or, more accurately, smothered) within the current company.

jthorner: Not long ago Chrysler put the Plymouth brand to sleep and hardly anyone noticed. A few years earlier they did the same with Eagle.

GM hides behind the franchise law excuse because they are either idiots or have no cojones.

It was easier for Chrysler because Plymouth had never been a standalone brand. It was always paired with another Chrysler marque at the retail level. Eagle was only killed after the company had successfully merged the AMC-Jeep dealer network with the Chrysler dealer network.

Watch the current effort to merge Buick, Pontiac and GMC into one dealer group. My bet is that – if GM does not file for bankruptcy first – Pontiac will be gone within five years.

The wild card is Saturn. It has a standalone dealer network, which makes shutting down the brand very expensive. GM doesn’t have the money to buy out Saturn dealers. The new models are failing to connect with customers. The Saturn makeover is following the Oldsmobile script quite closely (too closely), but GM doesn’t have the money to buy out the dealer network. At the same time, spending money to give Saturn unique models – even rebadged Opels – doesn’t appear to be a profitable undertaking.

MichaelJ :

THAT’s why their stock is up. The people betting with their money, not just their mouths, are speaking.

My mouth is my money. Anyway, you repeat the fact that GM is making money on its core business four times. No matter how many times you say it doesn’t make it so. That said, I’m sure GM execs repeat a similar sort of mantra all day long. That said, here's a little ditty from Mlive.com:

GM is enjoying rising sales and profits in China, Russia, Brazil and other markets. But it continues to struggle at home, where GM generates roughly half its revenues.

"Losing $600 million in North America is not an acceptable result at all," Henderson said.

Again, this doesn't factor cash burn ( -$3.4b negative cash flow). Anyway, care to make the case that GM's core business is making money? I’m not seeing it.  

But here’s the point from a business perspective – despite all the NA problems, automotive operations made money. The only reason total ongoing operations didn’t make money was because of losses at GMAC. Remember when we always used to say that the only reason GM is staying afloat is because of GMAC’s profitability? GMAC’s profitability will return – the housing crisis won’t last forever, it never does.

We used to talk about GM’s inevitable demise because their CORE business – automotive – didn’t make money, even when the US market was up. At that time, they had to lean on GMAC and sell assets to stay afloat. Now, their core business IS making money, even when the US market is down, because they’re globally diversified and can weather a downturn in the US market.

To me, that’s not a bad business model.

You don’t want special items (asset sales) to keep you alive. That’s not sustainable. But they seem to be past needing that because the core business is making money.

So, the bright side: core business making money, GMAC will be back when the housing market turns around (maybe a year?), losses due to write-downs, significant additional cash flow coming in ‘10, and they’re solvent and sustainable enough to make it that far.

THAT’s why their stock is up. The people betting with their money, not just their mouths, are speaking.

I agree 100%. When I was in high school, you could say I was a fan of American manufacturers. But then I came to the realization that they don’t care about me if I buy a car from them. Why should I care about them, if they don’t care about me? So I buy whatever car meets my needs, regardless of manufacturer. Lets face it, when you’re sick, or imprisoned, or hungry, or thirsty, is GM, or any other manufacturer for that matter, going to give a flying fuck about you?

This is a free market economy. The people obviously don’t want to support GM (through the purchase of vehicles) so it’s time for GM to go.

What I’d like to bring up is the utter and complete lack of caring. As a GM family member, I’ve been watching what’s going on for many many years. I’ve driven their products and I’ve seen just how LITTLE these people care about the very people who pay their salaries. I see no amount of care at the dealership level, and I sure as hell don’t see any care from the very top.

I find it very disgusting to know the company I have supported time and time again …how they simply don’t give a sh*t…about me, my customer experience, my having gone out of my way to purchase their crap. It’s not about “me”…but it SURE AS HELL IS about the customer. All of them…every last one.

If not the customer, who?

Oh, I see…it’s about yourself. Isn’t gluttony one of the 7 Deadly Sins? Anyone who takes (and “take” is the appropriate word) a 64% pay raise for this type of performance simply DOES NOT CARE.

They don’t care about the families who will become unemployed, they don’t care about the slums they are working so hard to create…while simultaneously destroying a once-proud company. They wave the flag trying to get YOU to care, yet they turn around and spit at your feet when you ask them to fix one of the problems which came standard with one of their vehicles.

They are liars, hypocrites, users, manipulators, well-dressed slobs underneath who simply DO NOT CARE.

I feel sorry for the families who actually BELIEVED in their management team. Yes, it hurts knowing you have been screwed by the very people you once trusted.

But this seems to be the theme of the new America- Take as much as you can, and TAKE IT ALL. Don’t act like you’ve never seen this before…recall all those outlandish and disgusting raises everyone over at Delphi received three days (I believe) before they declared Bankruptcy.

Interpreting the numbers in Asia is a bit difficult, because the joint ventures in China are unconsolidated. That means they’re not included in revenue.

GM reports in Asia: revenue of $5,477M; earnings before tax of $286M; which includes equity earnings from Chinese joint ventures of $135M.

Deducting the equity earnings from China, GM has $152M earnings before tax on consolidated revenue of $5,477M.
This means their profit margin before tax is 2.8%.
That’s not a lot and far below the profitability of Toyota.

GM sold 311K vehicles in China in Q1. That brought in $135M in equity earnings from joint ventures. Assuming all cars sold are from those joint ventures, that amounts to $434 earnings per vehicle.
Of course, the Chinese joint venture partners also get a chunk of profit. And the majority of sales are ultra cheap Wulings. So, overall profitability in China looks decent.
But, I wouldn’t say GM is making a killing there.

Units delivered in Asia grew only by 6% versus last year on loss of market share in China and Australia. That’s weak.

Daewoo production was up only 2% versus last year. Again, that’s weak.

Overall, I’m not impressed, although something is better than nothing.

I think GM’s big problem as far as brands is the fact they are in denial and wont admit defeat. If they start selling off or shutting down brands they would have to admit they screwed up, I think we can all agree they are never the problem for all their woes. They can’t kill Saturn or Buick or Pontiac(I think Pontiac can be salvaged) or Saab, etc. without admitting their branding strategy and basic car business strategy is flawed and needs to be fixed. Instead they sold off the valuable pieces that were managed differently and profitable and more or less invisible to the general public from the car side. Once they start killing brands, even though some of the brands are invisible for the most part, people will come to notice maybe there really is something wrong with GM. It is entirely their egos since Ford has made it work, but GM hasn’t done a single smart thing to fix it’s brands. Saab should have been sold off just as Ford but instead they keep with their screwed up branding plan. How come they haven’t even thought of selling off some of the others, they are worth something if just to get them off the books and out of their hair and slow the bleeding.
The branding mess has been explain many times already, but they hide behind the franchise laws and cost simply because the management refuses to admit they screwed up and wont be humbled. I guess they will take it to the grave. The companies grave since their pensions guarantee little pain.

This theory runs parallel to the fact the must be the largest automaker in the world regardless of the damage.

“This pathetic episode of Detroit’s automotive history needs to be documented (independently) to show people, in the future, what went wrong for GM. It wasn’t the transplants unfairly “stealing market share”, it wasn’t the UAW demanding a fair wage and it wasn’t the customers “not doing their patriotic duty”. It was the management, pure and simple. They had a sense of entitlement, rather than a sense of competitiveness.

Boy oh boy Katie, you hit the nail on the head. To see where this is going for GM read about Bethlehem Steel. The similarities of these two companies are profound.

Cut and paste:

http://money.cnn.com/magazines/fortune/fortune_archive/2004/04/05/366339/index.htm

Check that. there are several. Unfortunately, none of them are actually sold in North America.

I’d like a Ford Ka, perhaps. A stickshift diesel Caravan might suit my fancy. Oh wait – that still leaves out GM.