By on July 27, 2006

storm.jpgAccording to GM, happy days are here again.  Profits are up, costs are down and the company’s turnaround plan is on track.  The automotive media have swallowed The General’s spiel hook, line and sinker.  The financial markets are ready, willing and able to view The General’s second quarter losses through the automaker’s prism of perpetual positivism, sending GM’s stock price to its highest level since last October.  Well folks, it ain’t necessarily so…

First, let’s not forget that a $3.2b dollar loss is a $3.2b dollar loss.  Sure, if GM hadn’t bought out 34,410 UAW workers’ contracts, it might’ve made a $1.2b profit.  And if my grandmother had wheels, she’d be one of those trolley cars that GM removed from city streets in the 40’s.  More to the point, GM’s US market share is still in decline, down 3.1% from last year, to 24%.  Until and unless that changes, the “one time charges” related to production downsizing won’t be enough.  Or, if you prefer, they signal the beginning of a trend, not the end.

So if things are so bad for GM, where did all the profit come from?  As TTAC’s Deep Throat has pointed out, GM’s public promise to wean itself off fleet sales, to boost residuals and transaction prices, isn’t being born out at the sharp end.  In the second financial quarter, GM sold at least 120k high content units to rental fleets.  The General also sold their new LWB GMT-900 SUV’s to dealers, which carry fat margins.  [NB: In this case, “sold” means shipped to dealers.]

And then there’s accounting. For the second financial quarter’s statement, GM made some pension calculation adjustments, reduced their warranty charge (lowering their warranty reserve fund on the supposition that their vehicles are getting better), booked some workers costs (which previously appeared as expenses) against previously charged restructuring costs and benefitted from a strengthening Canadian dollar. 

In fact, if not for the GMAC dividend of $900m, GM’s cash position wouldn’t have changed.  So while it looks like The General’s making earnings, cash generation from operations isn’t getting better.  GM still has an inventory problem at its dealers, which isn’t going to go away without massive incentives.  And thanks to hundreds of thousands of “zero percent financing for anyone with a pulse” deals, the loan rate buy down is probably on the order of several thousand dollars per vehicle. 

Pistonheads have a better grasp of the situation than the bean counters.  They know GM has failed to produce a runaway best seller (or sellers) to replace their [once] hugely profitable SUV’s.  They know that it’s business as usual down at their local Buick, Chevy, Cadillac, Saab, Saturn, GMC and Pontiac dealer— at least from a product point of view.  From a financial perspective, there’s been a huge change.  Again, GM’s dealers have been writing bad paper; lots and lots of bad paper. 

It’s Mitsubishi redux.  The Japanese manufacturer’s US fortunes foundered on the rocks of easy credit, when hundreds of thousands of borrowers defaulted on their loans.  There is every reason to believe GM’s bad paper will also spontaneously combust, leaving dealer lots stuffed with vehicles no one wants and a big old hole in their accounts receivable.  The practice may appear better than offering large discounts on slow selling GM products.  But if you think about the implications of writing bad loans in the medium to long term, it isn’t. 

There are other dark clouds on the horizon. GM watchers seem to have forgotten about bankrupt auto parts supplier Delphi.  While most industry wonks discount the possibility of a strike– now that GM’s paid thousands of Delphi’s UAW workers not to work– there’s still an August drop deadline for union – management agreement, and no agreement.  At the same time, we hear ominous rumblings that other GM suppliers may not make it out of Chapter 11. And while analysts have hip-hip-hoorayed GM’s job cuts and plants closures, they would do well to remember that reducing production in the third financial quarter will create a significant drop in revenue. 

Meanwhile, the list of assets GM put on the line for its new secured credit facility should give GM boosters pause for thought: “certain” North American accounts receivables, unspecified vehicle inventories, the entire Saturn brand, its Canadian operating unit (plants and property) and 65% of GM de Mexico.  In short, The General has wandered into the pawn shop with a large list of assets to secure credit it once enjoyed on the back of its income.  Add GM’s dicey cash position and the situation doesn’t fill me with $30 a share confidence in the company’s future.  But hey, that’s me.

The real bottom line is that GM is a car maker.  There’s only one way out of their current death spiral: produce enough vehicles that people want to buy at a price that makes the company enough profit to stay in business.  It still ain’t happening.   

             

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152 Comments on “General Motors Death Watch 85: The Calm Before the Storm...”


  • avatar
    Dr. JP

    There’s only way out of their current death spiral: produce enough vehicles that people want to buy at a price that makes the company enough profit to stay in business. It still ain’t happening.

    That is exactly right. I am doing my research to buy a new car late Q4 ’06 or early Q1 ’07, and GM does not have any models I want to buy at their price. I probably won’t even visit a dealer.

    What does my list look like?
    ’07 Altima (V6)
    ’07 Camry SE V6
    ’07 Camry Hybrid
    Mazda 6 (wish it had another 40 HP)
    ’07 Infiniti G35
    Lexus IS350
    Acura TL
    Used MB C-class
    Used BMW 3 series

    What GM product should go on that list? Malibu? G6? Impala SS? I can’t think of one that belongs on there.

  • avatar
    David

    It’s painful to watch GM decline, but they have not made a product that has sparked my interest in decades. Their product styles are dull at best, dash layouts and function are quirky, and the seating positons are irritating unless you are built like Bigfoot. I can see a lot of different automobiles in my future including some Ford and Chrysler products, but not a single GM is on my radar.

    GM products make me think that they do their market research on their own executives and their wives in the California wine country, at company expense of course. Very few consumers are paying attention to board room discussions and talk-it-up promotions, they are sizing up your products against everything else that is available. Maybe if GM encouraged their employees to buy and live with competitive products on a day-to-day basis instead of finding every way possible to prohibit them from easily doing so a critical mass within GM would finallly begin to understand how they really stack up against the competition.

    Good luck!

  • avatar
    Jonny Lieberman

    JP: If you are considering Infinit, Acura and Lexus, why not a Cadillac CTS?

    (I know, I know — the interior, right?)

  • avatar
    Glenn

    Indeed, Robert, I have to agree with everything you wrote about here. In fact, the parallel to Mitsubishi is very, very telling. There is one major difference here. Mitsubishi had its prior “parents” (Mitsubishi Heavy Industries and Mitsubishi Bank) to bail it out, which seems to be working.

    Where are GMs white knights? They do not exist.

    May I add one more interesting parallel? I was quite shocked to see your comments about GM “mortgaging” so much. To quote: ???certain??? North American accounts receivables, unspecified vehicle inventories, the entire Saturn brand, its Canadian operating unit (plants and property) and 65% of GM de Mexico.

    Well, the parallel I would make is that of MG-Rover literally selling off the land under their own last remaining UK factory. Not forgetting, that the Rover line held some of the UKs best selling cars a mere 8 to 10 years ago. As of last March, it was completely “kaput” – ran out of money – did the equivalent of a US Chapter 7 bankruptcy. All gone. No more. Doors closed. No warrantee work on all those nice shiny cars still sitting at the dealers, which were going bankrupt left, right and center, as well. (Some new old stock Rovers and MGs are still on UK lots, I understand).

    The MG “brand” may have survived under Nanking of China but that is not the MG-Rover company of old.

    This is GMs sad future. Chapter 7, not Chapter 11.

    But if any company “deserved” it, it is GM (and also, Ford). Huge amounts of arrogance and greed over the years is coming around to bite them – big time.

  • avatar
    imageWIS

    JP: What about an Audi A4?

    Jon.

  • avatar
    nweaver

    One comment on financing:

    On paper, these discount loans probably cost less than in reality: they are probably undercharging for the credit risk. THIS is much of what sunk mitsubishi, not that they did loans to everyone with a pulse, but didn’t properly account for the cost of it.

    On paper, these discount loans probably cost MORE than discounting: Net Present Value of a 0%, 6 year, 40k loan on an SUV is major owchage, $6k and change, and thats assuming a 0% default rate! And so these are booked as expenses.

    But one of the key factors being overlooked is that discount financing is something GM has to pay later, not immediately. So it conserves cash.

    (RF: If you want, I can run some more through spreadsheet numbers for this)

  • avatar
    nweaver

    JP: Mazdaspeed 6. You lose the passthrough, but gain AWD, sports suspension, 40hp over the V6, and the fastest 0-60 of any Mazda on the market.

    Otherwise, look at the Mazda6 hatchback (5-door). I have one and am very happy with it, although it is a bit of a gas-sucker. :(

    (If I was buying again, I’d probably get the Fit instead. Cheap, frugal, penalty-box).

  • avatar
    Dr. JP

    Jonny:
    You’re right, I should put it on the list. It is just out of the price range I want to pay; although the IS 350 is right there about the same price (the IS 250 is closer to my range). I really don’t want to go above $35K, and would prefer under $30K. Thus the Altima at the top of the list, and the used C-class and 3-series. The Infiniti, Acura, Lexus, et al., I’m willing to go look at, but there is probalby a less than 20% chance I’ll actually drop the money on them.

    But you do have a good point and, dagnabit, I might actually have to set foot in a GM dealership.

    As to the CTS interior, what is the deal with an 8-way button on the steering wheel? And yes, the rest is not real good.

  • avatar
    yournamehere

    the only GM car i would consider right now (im 21) would be the Cobalt SS s/c. it???s a really fun car to drive and is quick and i think it actaully looks pretty good (minus that spoiler). This was on the top of my list while i was car shopping. a friend called me and said he was at an accident seen (he is an EMT) with a Cobalt SS, the dash moved back nearly 2ft. both of the drivers legs where broken and he had some other serious injures…so after that i didn???t go back to the GM dealers. And i wont consider them until they make a turn around in every aspects of there cars, and the sustain it for a few years.

  • avatar
    gbh

    The faithful don’t get distracted by facts.

    The GM loyalists are still out there now, desperately dropping on all fours to lap up whatever the spinmeisters pour onto the dirty floor for them. They just can’t stand to see their once mighty producer of schlock for the lowest-common-denominator finally succumbing to those pesky Jap-o-nese. They will deny the ship is sinking, even as the hull settles into the muck on the bottom of the ocean floor.

    How dare someone make superior product and be rewarded with market share and customer loyalty? That’s so, I dunno, American.

    I guess the real visceral reaction from the GM lap dogs comes from the fact that they don’t get it, they know it, and nobody likes to be the last one to get the joke. The rest of us have laughed at the design/build of F-Bods, J-cars, and every grandma car Buick/Olds/Caddy put out for the last 30 years. These folks do not have the discimination to tell the qualitative differences between a Honda Civic and a Cavalier. And it hurts.

    I guess if my taste buds couldn’t tell 20 year old Scotch from dog urine, I’d be a bit on the defensive as well.

    The reality, of course, is that the problem is/was/always will be GM itself.

    Executives never had to wash, maintain, or service their own cars. They’d park in the garage and come back to a perfect car. If the techs couldn’t fix it, a brand new loaner was there. Any wonder these clowns were disconnected from reality?

    The rest of the corporate culture that has been widely known as a disaster since, oh, the early 70’s. It’s only gotten worse, by the way, as everyone scrambles to try and save their own arse.

    Don’t worry, something called GM still be here after the bankruptcy. As a ~10% market share seller of trucks, a few mediocre cars, the ‘Vette, and distributor of replacement parts for the legacy stuff. It’s just that the creditors might sell it to the Chinese…

  • avatar
    rohman

    Over 25 yrs I’ve driven a lot of GM product as company vehicles and rentals. I’ve even owned a few. They have all been mediocre at best. A 2000 GMC Sierra Classic made me a GM hater for life. A bad truck that neither the manufacturer nor dealer wanted to take responsibility for. To relate the history of problems I had with that truck would put me in a foul mood for the rest of the day and require a post much to long. I want GM to die and the sooner the better. I know I am not alone.

  • avatar
    Don Whitefield

    I sure wish you guys would stop discussing GM’s product or think about it’s purchase without considering how you will get warranty coverage, parts or money (once you try to unload it) for your BARGAIN after GM goes under.

    “These folks do not have the discimination to tell the qualitative differences between a Honda Civic and a Cavalier.”

    Well said. And that is why all accounting magic in the world can not save General Motors or Ford.

  • avatar
    nweaver

    Parts will still happen. Its too big of a market not to.

    Warantee coverage? Well, the warantee is a joke anyway (3 years/36k miles), even a GM product is going to last better than that.

    And resale value? Its a GM, it tanks like a stone ANYWAY, its not going to tank that much faster with GM in Chapter 11.

  • avatar
    trosselle

    Robert, I love these articles. Keep them up.

    I wonder why in all the GM hype going around these days I don’t seem to hear much about changing the dealer structure. It would seem that as market share declines so should the number of the dealers.

    I don’t know if this is just me but it seems that the advertising I hear, especially on the local stations here in Kansas City by the GM dealers, is targeted to get you into one GM dealer over another. Terms like “Nobody sells Chevy’s for less” or “Nobody in KC has more Silverado’s then us” doesn’t seem to target the competition. My feeling is that they are advertising to the buyer who has already made up his mind to buy a GM product and then want that person to come to their dealership.

    I think that if GM had fewer but higher quality dealers they would sell a lot more units then they do now. When recently shopping for a car I noticed that many of the Toyota and Nissan dealerships were owned by the same people that owned GM dealerships. In most cases they shared the same lot as well as the same name. Wonder where the loyality is?

  • avatar
    starlightmica

    Karesh mentioned on GMI.com about how hardly any domestic car brands get cross-shopped on his own board. Registration numbers also suggest high brand loyalty, percentagewise.

    The problem with that is the dwindling number of buyers for the big 2.5 aren’t going to keep them afloat for long. It won’t take more than a loose nuke a successful Saudi refinery attack to scare up oil prices and put a dent in GM/Ford/DCJ’s future plans.

  • avatar
    Yuppie

    yournamehere, I am not in anyway defending GM products, but your 2nd hand account of the accident scene is kind of irrelevant without more details about the accident. How fast was the Cobalt going? What did it hit?

    Dr. JP, at $30K, you can also look at an Audi A3 2.0T FSI or an Acura TSX. Up to $35K you can get an Audi A4 2.0T FSI or a Mercedes 230 Sport Sedan (Sport used loosely). And that’s tax included!

    But none are as roomy as the Altima.

  • avatar
    imageWIS

    If you consider an A3, then I would go for the 3.2 with auto (6-speed DSG), which comes with Quattro and the S-Line kit.

    Jon.

  • avatar
    Claude Dickson

    The Audi 3.2 is the wrong call. The consensus I’ve seen from Audi sites is a chip and rear anti-sway bar. A good chip has programs that vary with octane AND keep the original program for servicing. Total cost for this is probably in the $1k range and quattro is all you have lost out on. Actually the “right” call is the Golf GTI 4 -door when it becomes available. You can do the same thing to it as the A3 and save yourself around $3k. Or you can wait for the new Mazdaspeed 3 which looks to be a beast. It has more hp than the 3.2.

    As for GM, the General is not willing to make the really tough decisions. Look at all the brands RF listed: Buick, Chevy, Cadillac, Saab, Pontiac and GMC. Who thinks GM needs more than Cadillac, GMC and Saab?? But even, then you have to make cars people want to buy and the days of GM snookering the public into buying their cars with slick PR is over.

  • avatar
    stryker1

    Yeah, I’m getting ready to buy a new car. And the prospect of going for ANY GM vehicle is laughable. At least volkswagen makes desirable cars (if horrendously unreliable).

    and I’m with you nweaver. I could get a used accord with leather seats, but I’ll be god damned if there isn’t something about the FIT that just screams at me.

    Also those paddle shifters look fun.

  • avatar

    Hooray….we’re dead!

    The automotive press in Detroit have bought the GM turnaround hook, line and sinker. Meanwhile, in realityville, the working stiffs are shitting the proverbial brick.

    Reporting that “GM is turning itself around” (Detroit News) or “GM turnaround is working” (Detroit Free Press) is overly optomistic at best and unethical at worst.

    GM accountants seem to be embroiled in game of corporate 3-card monty, or hide the weenie! This is nothing more that an eloborate juggling act to stall for time to figure a way out of the mess.

    Until, as you have said numerous time, GM improves quality, curb appeal and fuel consumption, I remain skeptical.

  • avatar
    montess

    Glenn-
    What are you smoking? It must be really good. You’re comparing General Motors to MG-Rover? While you’re at it, why don’t you just say that The US economy and Great Britain’s are comparable. C’mon if you’re going to make a statement, at least compare apples to apples. Face it, GM will never go under, it’s worth more than the GNP of any third world nation and more than some developed nations- think small European nations i.e. Luxembourg, Belgium, etc.
    Hey Glenn and Robert- sorry to disappoint you guys but as long as there’s a United States, there will be a GM.

  • avatar
    Jonny Lieberman

    Real fast — which Volkswagens are desireable?

  • avatar
    stryker1

    montess. Maybe its just me, but tying the Fate of the US to GM seems like really bad Mojo. Not to get overly political here, but management on both ends is fairly wanting.

  • avatar
    stryker1

    I just test drove the rabbit, and liked it alot.
    More power than the matrix, which was my choice up until I actually drove the damn thing.

    and I meant desirable in the high priced vegas call girl sense. Its all romance until she breaks your heart.

  • avatar
    qualityg

    Wall Street says GM Leadership restructuring is “Like Putting Lipstick on a PIG” – Update 7/26/06 – Wall Street Loves You Today GM, but will they tomorrow?

    http://qualityg.blogspot.com/2006/07/wall-street-says-gm-leadership.html

  • avatar
    stryker1

    Listen to Jim Cramer. He's all over GM. Which is unfortuneate, cause until that point, I thought he might actually know what he was talking about.

  • avatar
    airglow

    Will Bob Farago still be doing these "GM Deathwatch" articles in 2016? What number will he be at by then? Bob, you just can't stop yourself from screaming "The Sky is Falling" every time any news comes out of GM, good or bad. I'll accept the judgment of Wall Street on a highly liquid stock like GM over an internet automotive journalist on this one. Bob, this "GM Deathwatch" series is beginning to remind me of the "Apple Deathwatch" internet sites the Microsoft and Dell lovers used to run. We all know how sanguine their predictions turned out to be. To all of you GM haters/bashers who have posted replies, have any of you actually driven a GM vehicle lately? I have, and almost all of their direct competitors courtesy of Hertz, National, etc. I can't imagine buying a 2006 Camry or Sonata over an Impala. The Impala is so much larger than those two, drives just fine, and is thousands less equivalently equipped. I find it especially amusing when someone says they are considering the triple vanilla Camry, or the "our interiors make GM's look good" Altima over any and all GM sedans. Are automobiles the only purchase people make where a 2k to 5K price difference isn't significant? It is to me, which is one reason I'll be at least semi-retired in ten years at around 50 years old. And before someone replies with the hackneyed "GM's resale values suck", remember, only true spendthrifts buy something new, own it when the depreciation curve is steepest, and then sell it just as the depreciation curve starts to flatten out. Also, based on actual new car transaction prices (not window stickers like Kelly and Edmunds use); GM vehicles are competitive with most others in depreciation. I would also much rather have the savings up front, and invest it at 5% or better interest, rather than pay more and have my money invested in a rapidly depreciating vehicle.

  • avatar
    Dr. JP

    Great discussion. And it kind of makes my point and Mr. Farago's final paragraph. In the most competitive segment in the industry, (mid 20K to mid 30K sedans) GM really has no vehicle that can match its competitors. At the high end of that range is the Cadillac CTS. But what goes upagainst the A3, Altima, TSX, TL, etc.? Or even the Camry or Accord (but we already know GM can't compete here)? I beleive that this is the single biggest segment in the consumer autospace (although some data could convince me otherwise) and the largest US automaker can't compete.  Sad, really.

  • avatar
    FINANCEGUY

    Robert is right about the SUVs sitting on dealer lots.GM is blowing smoke about these things selling so great, they record profits when we get them not when the public buys one.You can get  one  for invoice all day long as the demand does not seem to be there  supply is backing up and payments are HUGE.The $2000 rebate on a red hot product says something about demand.

  • avatar
    Glenn

    airglow, you can talk all you want but go down and look at any GM dealer lot.  I did so, just for morbid laughs.  My local dealer has several hundred SUVs and pickups – and maybe 6 Malibus and 10 Impalas, fewer Cobalts.  People are obviously moving to cars, even GM crap, and trying to trade off their SUVs.  The once-protifable SUV market has T A N K E D.  So, if GM was losing $2800 per car sold world-wide even before the "grand-giveaway" related to "Employee Pricing" last September, what in hell are they losing now with tons of these "high-profit" trucks sitting on the lots? Yeah, GM sold them to dealers, but they aren't moving on – so how many dealers are going to be ordering hundreds more, now?  Seems to me that the "problem" of too many GM dealers will soon be sorted out because tons of them are going to go bust about the time gas prices hit $4 a gallon. We drove past our local station and premium was at $3.84 the other day, aren't we lucky here in northwestern Michigan?  We get the highest gas prices and lowest wages in Michigan, the only state in a recession.   

  • avatar
    geozinger

    Damn, I hate to be last to the party… While I would not characterize GM USA's disposition as rosy, the General Motors Death Watch title is becoming tired. After 85 installations, maybe it should be changed to another title. How about the General Motors Lame Watch? It's a little closer to what you're really complaining about. I believe I understand the Mr Farago's point of view about GM and he's certainly entitled to his opinion. There has definitely been enough animosity between GM and it's executives, line workers, supplier and even customers, to go around. And Mr. Farago certainly knows how to play to his crowd. But I've been reading this thing for the last year (or so?) and it looks like they're not much closer to the apocalypse that has been predicted (hell, even prayed for) since the 80's. Some of this stuff is correctly labeled as rumor or more like 'ominous rumblings', but really, what is being said here that isn't known, even by casual observers? The bankruptcy judge for Delphi keeps pushing back the deadline every time we get close to one. Who are these other suppliers that may or may not make it? Information please. Financial maneuvering aside (which it seems every company is participating in these days) they're still doing business. Maybe not the best business, I agree, but still standing. You have to give the board of bystanders credit, they will not be cowed, even by Captain Kirk. They know how to stay the course. I'd be wiling to bet that most of the people who complain about GM cars (not just on this blog) don't and have never owned one. I could start a one man rant about some of the bad business practices I have dealt with from dealers of all stripes. As for me, I just signed up for a Chevy Malibu Maxx. Why? Where else can you find a 5-door car in that size class? And with a huge discount? Maybe the Mazda 6, but I think that's it (without Googling). No discounts on those, either. I have had a mid-size 5 door car before, and I missed having a car like that, but again, that's just me. i was very happy to find another one.

  • avatar
    Glenn

    Locally, the GM dealers are awash with SUVs, and have few cars available.  The "faithful" GMers are obviouisly "trading down".  Thus, if GM were losing $2800 per vehicle sold new before last September's "fire sale" (Employee Pricing), what on earth will their loss per vehicle be now?  Because I can tell you that the "overage of GM dealers" is going to be fixed real soon, like about the time gas gets to $4 a gallon and the dealers go belly-up.  So, who will be ordering hundreds of yet more GM "high profit" SUVs and pickups then?  Answer: nobody.  Gas prices locally went to as high as $3.84 a gallon for premium (then retreated) a few days ago.  As for my comparing GM to MG, and the UK economy to the US economy – well, the UK population is about 1/3 of the US even though they live on a small island – and MG Rover sold vehcles all over the world not just in the UK – so it is not such a poor comparison as you make out, friend.  The point is – GM is getting as desparate to clutch onto any money by putting everything left into hock – since they've gone ahead and already sold the family silver, gold, pearls…. (like Subaru, Suzuki, Isuzu, Detroit Diesel, Electromotive locomotive operations, and now most of GMAC, the only thing which actually makes them any money). I said it in September 2005.  The GM Titanic has hit the iceburg.  The ship is listing, taking on water.  Keep on thinking it's unsinkable and we'll see what happens next.  

  • avatar

    Just think how many episode there'd be by now if I'd started back in the 70's, when GM lost the plot. Or, if you prefer, the chickens may be flying slow, but they're coming home to roost. 

  • avatar
    stryker1

    the fact that GM is in such a miserable state as it is, is evidence enough of ongoing failure. If GM actually made great cars, cars people wanted to buy, instead of settling for because of insane discounting, this website wouldn't be called the truth about cars. It'd be called the truth about GM, and there would be just one post that read "Well, what are you waiting for? Go buy one!"  

  • avatar
    David

    May I be blunt? Many of the comments posted to “General Motors Death Watch 85: The Calm Before the Storm” are off subject. The editorial was written about the fall of General Motors, not the purchase of a Lexus, the illegal use of hand-held cell phones, or various other topics. Responses such as these are symbolic of the fall of GM – a lot of good discussion but a total lack of focus to the subject at hand. Maybe the people at The General aren’t the only ones headed for the skids.

  • avatar
    Yuppie

    To: Airglow – Re: your quote "To all of you GM haters/bashers who have posted replies, have any of you actually driven a GM vehicle lately? I have, and almost all of their direct competitors courtesy of Hertz, National, etc. … The Impala is so much larger that those two, drives just fine, and is thousands less equivalently equipped." Your quote points out the exact problem with GM and other Detroit automobiles; that they are fleet/rental vehicles that are 1. big, 2. OK (subjective), and 3. cheap.  I am guessing that your experience with Camrys and Sonatas are not via rental, correct?  If so I would love to know which chain rents them so I don't have to drive a GM next time I have to travel. Your analogy of Foreign v. GM = Microsoft v. Apple is inapplicable in so many aspects.  Apple purports to be an innovator selling something different for a higher price.  GM has not innovated since about 1990, maybe earlier, and is selling most of its products at a lower price.  Except for the Corvette, GM has no unique products.  Even the Solstice / Sky convertibles, while styled very attractively, is just a me-too after the roadster revival led by the Miata. You may think the rest of us are in some sort of conspiracy against GM, but supply and demand don't lie.  The fact is, consumers are voting with their $$$, and GM is losing market share. P.S. The latest Macs are using Intel chips, and Boot Camp allows these Macs to run PC OS, drivers and software natively.

  • avatar
    stryker1

    It could be alot worse, David. Mr. Farago has yet to recieve the pleasure of watching his comments database ballon as someone's bot network broadcasts 10,000,000 consecutive games of tic-tac-toe in ASCII to the site. A few off topic paragraphs with his number of reader ship ain't bad.

  • avatar
    Ron

    Yes, GM's second quarter numbers were a prime example of lying with statistics. However, stocks move on incremental news, and the incremental news appeared to be good. I say "appeared", because you did a better job of breaking apart where the earnings came from than most on Wall Street. This is because the best Wall Street auto analysts have either retired (e.g., Maryann Keller, Ann Knight, John Casesa) or moved on to hedge funds (like Nick Lobaccaro or me, for that matter), now that their pay isn't being subsidized by investment banking. The youngsters haven't heard this song before. The old timers have.

  • avatar
    montess

    Robert- GM is not going under, period.  Here's a question- how  many Dow Jones blue chip companies have gone  under recently?  None that I know of.  Maybe you need to take a basic economics course so you can understand the sheer size and staying power of a major international player like GM.  Again, GM is not comparable to MUCH smaller CAR companies like Rover, they are much more diversified.   by montess

  • avatar
    Greg

    Dr. JP Have you thought about cross-shopping a Saab 9-3?  Particulary the SportCombi model – 210 hp, lots of turbo torque, less than $30k?   Much more fun to drive than a Camry/Altima/Accord.  

  • avatar
    jerry weber

    Farago's last comments about the junk credit buying of gm is on target. Years ago, in the car business, good credit risks got the low and 0% rates. A second tier of lenders was available to the bad credit business, they were called the "rat banks". These finance companies charged State maximum interest rates (many times 18-22%) to finance used cars for "rats". GMAC in the old days would never touch a rat, or sell him a new car. (Besides low credit scores, rats have a propensity for reposesions. Repos are the kiss of death, because usually all or most of the loan is lost) If Gm and I don't know this personally gave new cars (10,-20,000) in value to rats, they will certainly reap the rewards from the first few months they put these cars out. This would be far worse than the cheap leases of the 90's which didn't see the losses for 24 or 36 months when the residuals (remaining value) of these cars was far less than the stated value on the lease. Yes, the big three did this and lost millions, and this goes to the essense of what another blogger wrote, what is the difference if American cars don't have good resale value? It is an error to believe that what you save on a super discount will offset poor resale value. Not only will the foreign buyer win here, at trade in time he will be far ahead even if he got a small discount up front. Try and sell a used chevy toa college student, then have a toyota or honda for such a sale. The valuation books don't lie and they don't have opionions just facts.

  • avatar
    jerry weber

    Yes, Farago's comments are still correct. If you lower your lending beacon scores and allow buyers with previous repossesions to purchase new cars you are asking for defaults within the first months of purchase. I don't know how much gm did of this, but we all will know if they take huge chargebacks next year on loans. This will have to be verified. What is even more damning is that GM can still not sell it's cars straight like Toyota and Honda. Take the fire sale deal away and the cars back up on the dealers lots. (ford and chrysler are in this too). In the 90's  the big three used cheap leases, and within 24 to 36 months when the cars came off lease, the losses due to a residual that was thousands too high, were staggering. It seems that you can't get around one fatal flaw with gm, corvette an exception, no gm car can hold any decent resale value from year one to twenty. For the critics of Farago, do the taste test at home (anywhere you live in America is fine) put a used gm car in the local paper, then put a used honda or toyota of the same comparable model and vintage. Not only will the foreign car sell quickly, it will be for a much greater price.I don't care what your other blogger says, you can't make up the discount gm gives at resale time. (remeber the competition gives some discounts . If this could ever be changed gm and other American cars will have a future.

  • avatar
    gcmustanglx

    GM may be bigger and more diversified, but they can still go under in a heartbeat.  If they make a product that does not sell for a profit, then the income is not there to remain in business.  It's as simple as that.  And with their current product line, there is no way to sell these vehicles for a profit.  GM vehicles sell on lowest price and that's the bottom line.  I have driven GM vehicles recently and there is no way in hell I would ever buy one.  If I am spending time in a car it has to be at least a fairly pleasant place to be. GM's low buck interiors are more prison than posh.  It is not a place I want to spend more than 30 seconds.  And they will set some records when they finally do file for bankruptcy.  Without the federal government stepping in, it will be the largest bankruptcy filing in history. 

  • avatar
    ktm

    Apparently the folks complaining about the deathwatch series don't realize that they only started late last year.  While many of the editorials could be combined as they reiterate the same message again and again, the editorial series itself is relatively young. Both Wallstreet and business rags like Fortune and Business Week are calling it like they see it with GM, and they are painting a similarly gloomy picture. In my opinion, GM's bankruptcy would not adversely a majority of the US regional economies.  Stop kidding yourselves, GM is not that important, they are not a GE.   GM would continue to exist as a corporate entity and their plants would continue to operate under Chapter 11.  There would be massive layoffs of overpaid union workers and corporate executives, but it would only impact the local economies. montess, I don't believe that Robert is saying that GM would disappear, but that it would most certainly go into bankruptcy (you need to read the series from the beginning).  Oh, and here are two blue chip companies that recently went under: Enron and Worldcom.

  • avatar
    qualityg

    montess, AT&T is a prime example of a Blue Chip Stock that went under until it was saved by SBC and kept the brabnd name, not the company. Of course it was not Blue Chip when it was removed from thr Dow in 2004. You said “Maybe you (Robert)?need to take a basic economics course so you can understand the?sheer size and staying power of a major international player like GM.” You said to:??Glenn- What are you smoking? It must be really good. You?re comparing General Motors to MG-Rover? While you?re at it, why don?t you just say that The US economy and Great Britain?s are comparable. C?mon if you?re going to make a statement, at least compare apples to apples. Economics, Apples to Apples? Please, don’t embarass yourself. Like I said before GM should trade the Bob Seger song “Like A Rock” to Bob Seger song “Ship of Fools.” Oh yeah, Bob is from Michigan too. Read “End of the Line ” The Rise and Fall of AT&T” by Leslie Cauley. DO not be fooled, Ma Bell Died, what you have now is “Fake AT&T” and the so-called merger with BellSouth it will then be called “BS AT&T. http://qualityg.blogspot.com/2006/07/quality-leadership-update-72606-bs-att.html More proof come to Detroit, I’ll be glad to drop you off downtown at the RenCen Building so you can see for yourself. Greg

  • avatar
    geozinger

    Glenn: I really don't believe that GM is putting everything into hock, as you say. I think the ending of cooperation with Subaru, was due to the fact there was little they could really share, other than the WRX. Isuzu, is on the ropes, at least in the US. Not one of the models they offer here are Japanese. Although, it seems at least for the time being, they don't mind being a customer of GM. The Suzuki's we see in the US are not even Japanese, they were designed (largely) by Daewoo of Korea. GM's acquisition of Daewoo  is a stellar move. The Koreans have proven to be master cheap car builders, something that will serve GM well over the next several years. Saab is their new technology developer, for example, they  developed the Ecotec engine. The Trollhattan Saab website outlines their efforts, it's been a very interesting read lately. How long ago did the General (Roger Penske) buy Detroit Diesel from GM? That's been a while now. They seemed to have survived the sale of that division pretty well. In the aggregate it looks like they're focusing their more narrowly on their own product lines instead of entangling themselves in other car companies business. GM globally has the resources to do whatever they need to get done on their own. That's why the proposed alliance with Nissan-Renault was so roundly criticized, IMO. That said, I would like to see more Opels over here (yes I know the new Saturns are just that), maybe a Chinese Buick, too. Not for the price, but the design. Their version of the LaCrosse is beautiful, much better looking than our domestic one, again IMO. The SUV's remain an albatross, but I believe the pickup trucks will regain sales again. Maybe not to the levels that we saw with cheap gas, but those are needed by folks who work for a living. I would like to believe 'the smaller the woman, the bigger the SUV' days are over. But we seemed to have absorbed these higher gas prices already (with the exception of the car dealers) according to the government. If they don't go up for an extended period of time, this will become the new normal, and we may fall back to our excessive ways again. Again, I'm not trying to paint a rosy picture. The Chevy dealer where we bought our Malibu Maxx had a ton of SUV's on the lot. But, I'm willing to see what's around the next corner.

  • avatar
    rohman

    I too think GM will probably survive but not as a major force in the industry.  They can't say it but I think that GM management knows that they are destined to be a much smaller company.  It just can't happen all at once.  They can't spin-off non-auto holdings, downsize their workforce, shutter excess manufacturing facilities, close unnecessary divisions and get rid of 50% of their dealership network overnight.  Doing so would panic shareholders, employees, current and future customers, suppliers and much of th public.  What we are watching is a juggling, three card monte, plate spinning act by GM management designed to give them time to go bankrupt without going bankrupt.  There will eventually be parity in the world auto industry and GM will survive a just another car company.

  • avatar
    sleepingbear

    Montess—- Woolworth was dropped from the Dow and Declared Bankruptcy in the same year- i believe 1997 – there's your precedent- <it’s worth more than the GNP of any third world nation and more than some developed nations-> what economics school did you graduate from? GNP is top line,  and Gm is'nt worth Much(16 bil) — so what DEVELOPED nation has a GNP of only 16 billion?? the number's you need rely on are simple- $17eps,$20 divdends , $100 cap-ex

  • avatar
    stanshih

    GM and Osama Bin Laden… They're both in bad shape, but may or may not die soon.  As juicy as the news posted in Mr. Farago's deathwatch articles is, the info is one sided. Everyone out there and here at TTAC knows that GM is in bad shape. The question is whether or not the situation is terminal. As bad as GM's situation is, they actually do have some things going for them (and I'm not talking about the GM-Nissan thing).  So who's gonna kick it first? GM or Osama?  I'm gonna bet…errr…"subscribe" to TTAC according to the following: $150 if GM goes bankrupt before Osama is captured/killed or if GM goes bankrupt within 18 mos. The check isn't in the mail…  =)

  • avatar
    FINANCEGUY

    Jerry …GM was giving loans to RATS as you call them during the 72 hour sale and lots of them.The majority of people out there vehicle shopping right now seem to be mostly marginal to very bad.I think thats because we put so many people in cars in the last couple of years that they arent ready or cant trade in 1 or 2 year old vehicles .GMAC has tightened up a little on buying since the sale is over but they have to deal with whats coming in so they are still doing less than perfect loans.I guess a bright spot is cars are selling better but theres very little profit there.

  • avatar
    Stephan Wilkinson

    It's interesting to me that aside from the several (few) "you're-full-of-its" from private individuals who are optimistic about GM, there's not a single response from any of the hundreds, probably thousands of GM middle managers and top execs who I'm sure read this blog.  And they do.  I have yet to meet anybody in the car biz to whom I mention TTAC who says, "Never heard of it."  They all, without exception, either say, "Farago's fulla shit" (meaning they read it) or, "Yeah, it's interesting" (also meaning they read it). Have the GM people been told not to respond except through official channels?  Probably.  Are they well-informed enough to make a case against Farago if there is one? I'm sure they are, and I'm sure a smart GM exec could demolish a lot of the postings above, if they were demolishable.  Maybe they aren't.  In any case, I'm intrigued by the lack of artillery from the other side.  Lutz?  You out there? 

  • avatar
    montess

    AT & T wasn’t killed by complacency or greed or whatever reason du jour you GM bashers prefer. Instead, the government forced them to break up, any of you know it all’s ever heard of the Sherman Anti-trust Act? As far as Woolworth goes, we’re back to comparing apples to oranges. You’re really going to compare a 5 and 10 store to a company that is STILL THE WORLD’S LARGEST AUTOMAKER? Methinks that last fact is what really pisses you GM bashers off the most.

  • avatar

    How can GM be hurt by bad credit risks? Is it because many of them were financed by GMAC? But isn’t that company being sold for a big number?

    I don’t believe either GM or its dealers sell recourse paper.

    It really seems like maybe they were smarter than we gave them credit for being. Let the new GMAC and the banks deal with the deadbeats, and GM sells more cars.

  • avatar

    only two GM products that have caught my interest lately have been the 9-2x (a slightly less ugly WRX!) and the GTO. both now gone, both very untypical of GM. I also have some respect for the corvette and some of the cadillacs but can’t see myself in one — if I had the money for a corvette or a really fast caddy, I’d probably end up in a BMW or porsche.

  • avatar
    ktm

    montess, did you miss the fact that Worldcom and Enron both disappeared and they were considered blue chip?

    I agree that GM will survive, but that does not mean that it will not enter bankruptcy. United, Delta and Northwest all entered bankruptcy and they are still around. Bankruptcy will give the company the relief it needs to make the tough calls (i.e., massive layoffs, shedding onerous union contracts, pension funds, and health care costs).

  • avatar
    qfrog

    GM should focus on emerging markets… like china. The Chinese probably don’t know what a quality interior looks like just yet. If your options are a horrible “cherry” or a dullard but reliable GM vehicle… I’d imagine that the chinese might give strong consideration to the GM.

    I say give up and toss in the towell here in the states… go fight for market in China and India etc etc etc… places where the local cars are so horrible they make GM’s cars look brilliant.

  • avatar
    kablamo

    I think the “deathwatch” series is still quite appropriate even if it gets to 200. It only emphasizes that some people had the foresight to see what was going on, despite all the noise (BS) that comes up. Sure there are bright moments on the way down, that doesn’t change what’s really going on.

    FINANCEGUY – Great commentary, I hear various rumours from friends who used to work for GM and are still in contact…however it’s nice to get educated, concise and relevant commentary from someone who knows what’s going. Ditto with RF’s deepthroat.

    montess – GM is too big to fail? GM’s future is tied to America’s? Those are pretty big leaps in reasoning and overlook plenty of contrary evidence. No company (or country) is guaranteed to last forever.

    My take on this: GM’s currently *brittle* financial position could collapse very easily if any of the factors still holding it together (affordable gas prices, dealers moving product, interest rates staying low, competition staying put, etc) give. They are literally walking on thin ice, and they are nowhere near solid ground.

  • avatar
    qualityg

    montess says …

    “AT & T wasn???t killed by complacency or greed or whatever reason du jour you GM bashers prefer. Instead, the government forced them to break up, any of you know it all???s ever heard of the Sherman Anti-trust Act?”

    AT&T was killed by bad Leadership/Management (management owns the system just like GM, not the government) which included greed and complacency. Like I said do some research, read the book I referenced or any other reference about what really happened.

    Oh, by the way I was there before divestiture, after divestiture and …

    Please provide your facts, data and information, anything but your opinion and stating Sherman Ant-trust Act is lame, very lame.

    I will joust no more with wht you “think.”

  • avatar
    rtz

    The problem with the automobile market these days is: No compelling products. Expensive vehicles. No performance. No economy.

    We need “must have” vehicles.

    Remember when the 1964 and a half Mustang came out. Everyone wanted one. It was affordable, sporty, fun, and had appeal. It sold really well as a result.

    Remember why GM quit making the Camaro/Trans-AM/Fire-Bird/Z28/Iroc Z? They said ‘people weren’t’ buying them. Well gee, for ~$10,000 more dollars, one could just buy a new Vette instead! The ‘people’ that bought all those Camaros would have bought the new ones too, except that it had gotten so expensive they either couldn’t afford it, or didn’t want to pay that much money for a car that they’d never had to pay that much for in the past!

    When(if) that new Camaro comes out, if it’s top dollar, don’t expect it to sell well or in large numbers. Gear heads are perpetually broke by nature of the hobby(money pits). The 1987-1993 5.0 Mustangs were like ~$12-$14k were they not? Sold pretty good too did they not(I’ve still got mine…)?

    Let’s see what’s wrong with GM:

    Avalanche? Too much money. I’ll admit, the ” 8.1-liter V8″ was cool. But NOBODY KNEW ABOUT IT!! Hello!? Anyone I’ve ever mentioned it too had no idea it even existed, let alone in THAT vehicle of all vehicles. Can I get a diesel Avalanche? A hybrid Avalanche? How about a supercharged model that will give Lightnings a run for their money? How about a stripped down model for about ~$14k? Anything but the boring run of the mill models you’ve got now at the price their at.

    Aveo: Well, it’s kinda ugly. It needs to be “sporty” looking. The price is decent. It needs to get way better fuel economy. Can I get a hybrid model? Put a hot little turbo 4 in it and make it an absolute screamer out of it and keep the price the same. That would sell. The key is maximum performance at a low price. Make this little car beat Mustangs. Forget about the Focus.

    Cobalt: The price is OK. But either give me extreme fuel economy or extreme performance. But don’t give me middle of the road! That’s what’s wrong with all the cars. Average(or below) performance, average price, and average mpg. Why would I want to buy one of these cars? Turbo this little car and make it scream! Make every gear head in the world want one of these little cars. I want a rocket not a Pinto!

    Colorado: It’s too big to still be a mini truck. People buy those at an attempt at having a truck with some economy to it. Plus it’s just fugly. It’s dimensions and proportions are all wrong. Read up on the “Golden Rectangle and the Golden Ratio”. Like that tail gate on the F150’s. Ugly. Too tall or too wide for that height. Skewed proportions. Remember the Typhoon and Cyclone? Wicked little trucks. I think they were a little too pricey though. They weren’t around long enough to really sink into the market either.

    Corvette: It can absolutely ALWAYS be improved upon. Lighter weight, lower cost, more performance. Work on those always. Why make it out of Aluminum, fiberglass, carbon fiber, and magnesium if it’s still hundreds of pounds heavier then my stock all steel 1987 Mustang!?! The point of those exotic materials is to make the car light! Aim for 2500 lbs or less.(then I will be impressed). Bring the price back down to sub $40k for the ZO6 and we need more power. Whatever it is, it will never be enough. 500 this model, 525 or 550 the next, 600.. you get the pattern. I suppose you could maintain a number once you get to 600 or so. 500 is decent though I will give you that. It’s so heavy though!

    Equinox, TrailBlazer, Uplander: These little things are just flat out lame. They have nothing going for them. Totally average, mediocre, middle of the road, plain boring. Either make them sporty or a hybrid or both, but not what they currently are.

    HHR: It’s retro and that’s all it’s got going for it. Hybrid or performance. Take your pick(or both). But it needs something to sell. I see about 1 per day on my 50 mile round trip commute.

    Your trucks are insanely expensive and that SSR is hella overpriced! The people who want and need these work trucks can’t afford them.

    The mark ups on the Burb and Tahoe are insane.

    Low volume at high prices or high volumes at low prices. Which one do you want? You currently have low volumes at high prices. Hows that working out for you? :)

  • avatar
    chanman

    qfrog – don’t bet on it. There’s already a Corolla plant in China, although when I was last there 3-4 years ago, the most common cars (at the time) were Volkswagons.

  • avatar
    nweaver

    a: If you don’t want to be stuck with Ford & GM, go rent from Enterprise. They buy on the open market moreso than the other rental agencies, and tend to have a nontrivial amount of Camrys and (used to at least) Civics and Mazda3s. Also, their upgrade policy can allow you to pick from the lot.

    b: The cobalt sucks. Why should the successor to the SC1 hamstermoblie get 5+ MPG worse mileage? Has GM gone backwards? The civic STILL gets 30/40 MPG, has the same horsepower as the Cobalt, and costs the same!

  • avatar
    aakash

    @qfrog

    FYI….
    Toyota and Honda have entered the Indian car market since quite a few years now. And the Camry’s,Accord’s,Corolla’s and Civic’s in India are the same models as sold in the US

  • avatar
    rtz

    I can’t believe after all these years that Ford and GM can’t reverse engineer or even clone the Honda motor. How hard is it too copy that cylinder head and cam shaft profile?

    How do they get the quality/reliability that they do? Make or buy the same parts they do!

  • avatar
    jnik

    Dr. JP;
    After looking at your list of possible new cars, I find it interesting that neither you, nor any of the other posters, saw fit to mention the Saturn Aura. Here is a car that is being looked on as one of GM’s new hopes. An American Opel with a modern drivetrain, a really nice interior, Saturn’s excellent dealer reputation, and a hybrid version in a few months. And NO ONE mentions it! This is BAD news!
    And with the Camry having reliability problems, I would think this would be an opportunity for the Aura, especially the hybrid, to shine! But NO ONE on this page even gives it a mention! Now I know all is lost.

  • avatar

    From Deep Throat, confirming our research: “GMAC bought all the way down to 450 FICO’s with 130% advances. [A 450 FICO is junk and these people got wheels with no money down.] GM stores did nothing but resurrect dead deals and put every breathing customer into a car. Even employees that couldn’t get a loan before had new wheels. Clearly the dealers jumped on the 0% program and moved metal to a bunch of deadbeats. This why GM sold so many passenger cars during the month: all end of month deals to deadbeats.”

  • avatar
    Dr. JP

    jnik:
    I don’t think the Aura is released yet, so it is hard for me to test drive it. When is it coming out?

    My father had an Opel Manta (a ’76 maybe?) and loved it. 1.8L 4 cylinder, 4 speed, made about 80 hp. No acceleration, but handled great. Also got good fuel economy for the mid-70s. It was before all the computer stuff, so got top help rebuild the motor once or twice, since he put about 250K miles on the car.

  • avatar
    jerry weber

    to mfaulkner: If you believe that the company purchasing GMAC is so stupid to not have recourse provisions for bad paper (at least that which would be considered above normal losses in the financial industry) then you assume that these GMAC buyers are a shell corporation which will allow GM to transfer it’s credit losses off their books to the new company. I don’t think so, the losses will be backcharged to GM. However, they won’t showup this year. As for recourse or non-recourse, when signing up a “rat” credit risk, you have no assets to attach when things go to repo other than the car. Sometimes the car is hidden, destroyed (as in put in a lake) or gone. These people don’t have permanent addresses and they need the car for transportation, even if that means to another State. There is good reason that Top shelf finance companies do not sign these people to any contract with their name on.

  • avatar
    starlightmica

    I’m guessing no one mentioned the Aura because it’s not out yet, and also because it’s Epsilon platform siblings, Malibu and G6, are good examples of why GM is where it is now. The base powertrain is the good old 3.5L V6/4 speed auto, and the uplevel powertrain has the completely new 6 speed transmission.

    Want to be a guinea pig? Like what GM did with the Saturn Ion CVT?

  • avatar
    Schmu

    im an honest guy….usually. I love the deathwatch series, not becasue I root for GM to die. I very much want GM to propser. There are extremists on both sides of this issue, but you cannot ignore the facts. For someone to say the GM bashers never set butt in a GM, or they would love them is just too easy a cop out. I have GM, and Honda. My in laws are die hard GM’ers. I have had plenty to sit in. Some have strengths, most do not. But that is in the past. All any of us need to see is just a few facts. 1) GM is losing market share, but barely #1. 2) GM doesn’t make profit on most of its lines. 3) there is a finite amount of resources in any company. add 1 2 and 3 together, and it is nothing but logical to see how a company can find themselves in bankruptcy. It is that simple. In order to avoid banruptcy, said company must change 1 or 2 to keep 3 from killing you. The bulk of these posts is pointing out why 1 and 2 are happening, and what GM should do to keep 3 from happening. They said the Roman empire was the best, and would always be dominate too……………hmm.

  • avatar
    montess

    Let’s clarify (for the umpteenth time) several key points so I can punch more holes in the hull of your argument- to borrow the sinking ship analogy you GM bashers love.
    First off- Enron, Worldcom are not comparable stocks rather they were relative newcomers that were unable to weather shocks like the famous “cooking of the books”. Are you suggesting that GM is in trouble because of similar malpheasance? I thought the problem was low quality and poor sales.
    Secondly- Name another multinational corporation that has been the world’s largest automaker for decades and has been in business for close to a century that has gone belly up recently.
    BIG PAUSE
    Guess what, there hasn’t been one. The closest we came was Chrysler back in the 70’s and even they managed to come back with some government assistance.
    Sorry but even though you guys hate GM and feel that they will go under for reasons I can’t comprehend like their interiors are sub par, it’s not happening. Don’t be blinded by your hatred, to quote Michael Corleone:
    “It’s not personal, it’s just business”.

  • avatar
    dean

    Montess: if you’ve read the entire deathwatch series (you have, haven’t you?) you’ll know that Farago does not expect GM to go tits up for good. By death he means that the current incarnation of GM will die, and a new GM will emerge from the ashes.

    Despite what you think, Chapter 11 is virtually inevitable. It is the only way GM can get out of their labour contracts and pension and health obligations. Certainly Rabid Rick hasn’t shown that he has the leadership ability to negotiate concessions with the UAW. Frankly, I’m not sure anyone could.

  • avatar
    Dr. JP

    montess:
    Name another multinational corporation that has been the world’s largest automaker for decades and has been in business for close to a century that has gone belly up recently.

    Wow, interesting question. Let’s see: Public corporations were a development in the late 1600s, so that is only about three centuries, so not a lot of companies have been in business for close to a century. Automobiles were beginning to be developed in the 1870-1880 time frame, so not a lot of companies have been the world’s largest automaker for decades. Mutlinationals are an even more recent invention. Add all three of you criteria together and the answer is a really, really small number from which to try and draw any meaning. In other words, this is a completely inane question, and would probably be more accuratly phrased as “when was the last time GM went belly up?” because you have eliminated all other possibilities.

    I will submit the opposite: The overwhelming vast majority of auto manufacturers in the 130+ year history of the automobile industry have disappeared, and it is a rare event when one survives for a reasonable time. Why should GM be different? Why did those other manufacturers (effectively*) die? Maybe because people did not want to buy the product they were offering at the price they were charging? What makes GM immune to market forces? Just because it is (currently) the world’s largest automobile manufactuer?

    And finally, I would love to buy a GM product. I want to buy an American car. I have a Ford truck (and really like it), so I have bought American in the past. But I am currently seeing few products fiting my criteria that I think are giving me the value I want.

    *effectively because some flat out died (bankrupt) while others disappeared after being purchased

  • avatar
    montess

    Maybe it’s semantics but there’s a big difference between bankruptcy and death. Bankruptcy is kind of like having the flu whereas, well you know where I’m going with this. Jeez- I could book a flight on several formerly bankrupt airlines right now if I wanted to take a trip to visit my good buddies in Motown. All I know is that I’m driving a 2006 Monte Carlo and it’s the best car I’ve ever owned.

  • avatar
    Don Whitefield

    Montess- You are guaranteed to watch GM go into bancruptcy in the very near future and in case you have been doing drugs you have been watching GM’s demise since more than a decade!

    Yes, I owned planty of GM’s and yes I workes for GM and this looks like pretty plain math to me.

  • avatar
    starlightmica

    montess –

    Think Big Steel, a former American industrial group of giants. They were felled by low prices, foreign competition, high wages, high pension obligations. What happened were bankruptcies, foreign takeovers, dissolutions, with no government bailouts save pensions, but Little Steel companies are around and doing okay.

    And Steve Miller of Delphi was involved, too.

  • avatar
    Martin Albright

    Starlightmica: Your comment prompts an interesting thought. Given that some significant changes are going to have to be made in Ford/GM, it’s an interesting question to ask what the “death” (or reorganization, whichever you prefer) is going to look like.

    For example, is it possible that as gas prices continue to rise and GM profits start to tank, the creditors call in their loans? And what then? Does GM start to sell off some of its subsidiaries to generate cash (I mean, subsidiary divisions like Pontiac or Saturn)? Or do they run straight to the bankruptcy court to get protection (and also to give them the mechanism they need to void their union and dealer contracts?)

    And what emerges from the ashes? I agree that some form of GM cars will continue to be made into the forseeable future, but is it likely that GM might be broken up, a la AT&T, into smaller divisions? Would we end up with true competition between GM brands? Could they even do that, with so much badge engineering and parts sharing between divisions? Will the bankruptcy judge end up portioning out pieces of GM like a judge in a divorce case (“Okay, Chevrolet gets to keep the trucks, SUVs, Cheap cars and the Corvette. Pontiac gets all the other sporty cars. Caddy loses the Escalade and only makes luxury cars. GMC Trucks only gets commercial vehicles” – etc.)

    I think that’s a more interesting question than whether GM will “Die” in any certain time frame. It doesn’t take a rocket scientist to see that a company that has so much of its potential profit invested in gas guzzlers is going to be in bad shape when gasoline prices hit $5/gallon, which they very well might before the end of the year.

    Also, to answer the question of “When was the last time you drove a GM vehicle”, for me the answer is on Wednesday night. I test drove an HHR because I was intrigued by their appearance and wanted to see one up close. The short version of my review is that it was that it was better than I expected, but still not something I’m going to drop 20 large on, for a number of reasons. Still, I think it demonstrates that GM at least has the ability to do something innovative and different, even though the vehicle is derivative in just about every aspect.

  • avatar
    montess

    Interesting, how come nobody comments on my positive remarks about my Monte. You folks still can’t admit that there are still a large number of people who buy GM cars and like them. I consider myself to be reasonably intelligent and progressive and I don’t live in the Midwest which is still strong GM country. Rather I live in a “blue”, liberal state and I find the number of foreign cars on the road around here to be both puzzling and depressing. I still can’t figure out why a Honda or Toyota is better than my Chevy. Man, you guys need to get off your elitist horses and be more forgiving of GM’s past mistakes. Dissenting opinions are healthy, otherwise TTAC will wind up like Jonestown with Mr. Farago dispensing the Cool-Aid.

  • avatar
    airglow

    Where do I start to respond to all of the interesting comments received since yesterday?

    First, as a frequent car renter (30-40X/year) I can assure you that with the exception of Honda, and the German luxury brands, all car companies sell significant quantities of vehicles to the rental agencies. From my anecdotal observations, the Sonata may have the highest percentage of any newer vehicle going into rental fleets right now. I said newer vehicles, because obviously the Taurus and the Sebring/Stratus are very common too, but much older designs. I’ve seen a number of Azeras in Hertz lots recently, so if high rental fleet sales are a sign of problems, Hyundai looks to be in deep trouble. From my anecdotal observations, I’d guess a higher percentage of Sonatas are going to rental fleets than any GM vehicle, even Cobalts, Malibus and Grand Prixs.

    As for the whole GM Deathwatch thing, it is dangerous when Automotive Journalists with unknown accounting and/or math skills start reading 10K filings. At GM’s lowest point back in late December, the credit default risk markets were assuming about a 20% chance of a GM bankruptcy. That has lessened considerably to somewhere in the mid teens today. That is still a very high risk, and it’s why you can still buy GM’s exchange traded debt with yields over 10%. However, GM’s debt has gone up significantly since I bought some back in December when it was yielding over 13%. If you look at yields on debt, the global debt markets think GM has a materially lower chance of BK in the short to medium term than Ford, whose exchange traded debt is still yielding nearly 12%.

  • avatar
    Don Whitefield

    Montess- Yes, there are lots of folks driving GM’s and they are for the most part very happy with the bargain they got. Honestly, if you can ‘t tell much of a difference between a BMW and a Chevy then there is no point in spending the extra money.

    It is also a fact that people get more and more educated about their rides and many folks these days can tell a world of difference between the two, their value and their re-sale value. And that is why GM is going belly up. It’s pretty simple.

  • avatar
    FINANCEGUY

    Montess
    I dont think the Monte is a bad car but I will say this,If someone is trading one in we will not keep it and always get a number from a wholesaler or
    try to sell it to a Chevrolet store.At a recent GM auction the fastest way to clear the line was to run a Monte through,it was like someone farted in a small room.They will sit on the used car lot untill they have to be written down as a loss

  • avatar
    starlightmica

    Martin –

    Due to GM’s ownership of GMAC Bank, owning more than 10% of GM automatically triggers oversight by the Office of Thrift Supervision. Kerkorian has 9.9%. That arrangement rules out buyers who value their privacy, like the Kirk. There’s also that $200 billion dollar pension obligation that a buyer would have to assume. Any takers?

    There are a few other auto breakups, notably RR and Bentley going separate ways with the physical facilities going to Bentley and RR rebuilt from scratch by BMW. Also, BMW bought the Rover group, developed a couple of cars, then shed MG-Rover to a private interest, keeping Mini, the Mini factory, and some brand names. MG-Rover then went under, and the name got sold to a Chinese company. So those names might have some value, but will GM brands be worth enough to separate from the physical plants? None of GM’s brands made Businesweek’s top 100 earlier this week, heck Ford was in the top 50.

    montess-

    The survival of GM is about cold, hard numbers. Emotion and opinion certainly count but take a back seat to the financials. It’s fine you enjoy your MC SS, but recognize that affordable large coupes haven’t gotten much interest or attention from the car buying public, and even less so on this forum.

  • avatar
    montess

    Resale value, huh? Everyone knows a car is the worst investment you can make. You lose literally thousands as soon as you drive it off the lot and that goes for Chevys, Fords, Toyotas, Porsches, etc. etc. Real simple- a car is a MACHINE designed to get you from point A to point B in the most economical way possible. In my experience, GM cars have covered that mission just fine. If you’re looking for inspiration and something to worship, a car is a bad idea, try going to church. There are some cars that appreciate after a number of years- check out the Barrett Jackson car auction and you’ll see plenty of GM, Ford, and Chryslers selling for 10 + times their original selling price. Funny, I haven’t seen any 1957 Toyotas on their auction block.

  • avatar
    Glenn

    montess wrote: “you guys need to get off your elitist horses and be more forgiving of GM???s past mistakes.”

    Why, montess? Why should I be more forgiving of GMs past mistakes, which have cost ME tens of thousands of dollars in excess depreciation, not to mention having to fix stuff that their virtually worthless warrantee was supposed to have covered but did not?

    Why should I give them a 10th, 11th, 12th chance when in fact, I’d “stuck with” GM, Ford, Chrysler and yes, AMC, for some 30 years – buying used and new alike, and escewing “foreign” cars?

    Besides which, what is a “foreign” car now, anyway? A Hyundai Sonata, Toyota Camry or Subaru Impreza built in the USA with a USA built engine may be considered “foreign” to you, but is a Ford Five Hundred built in Mexico an “American” car? How about a Chevrolet Equinox built by Suzuki in Canada for GM with a Chinese engine, is that an “American” car?

    We aren’t being “elitist” at all, montess. We’re being REALISTIC. I’m just sorry it literally took me 30 years to finally wake up and smell the coffee.

    Go down and test-drive a Toyota Camry Solara with an open mind and you may be in for the shock of your life, man. The scales may fall off your eyes.

  • avatar
    Glenn

    Oh yes, montess? Your snide comment about there not being any 1957 Toyotas at Barrett-Jackson was funnnnnyyyyyyy.

    Rich guys reliving the glory days of their dreams from 35 years ago now that they can afford to show off and spend way too much for Hemi Cudas is what is really going on.

    Toyotas of the 1960’s through 1980’s were generally functional – the modern equivalent of a Model A Ford, not a “show-off-mobiles” for guys who are – um – not well endowed enough and who require compensation under the hoods of their cars.

  • avatar
    craigefa

    True montess, if you are going to buy a car and keep it until “the wheels fall off and burn” (Bob Dylan), then resale value does not make a difference. But, if you are planning on getting rid of it while it still has some value, then it’s resale value does matter. Don is not suggesting that a BMW will appreciate, rather it will depreciate slower than a Chevy.

  • avatar
    montess

    so what do you drive now Glenn?

  • avatar
    montess

    craigefa said: “Don is not suggesting that a BMW will appreciate, rather it will depreciate slower than a Chevy.”

    What about cost of ownership, i.e routine maintenance- have you priced a set of BMW brake pads lately?

  • avatar

    to jerry weber

    I hear what you are saying, but I can not believe that any company would buy GMAC without some sort of review of the quality, as well as the quantity of the loans. I am sure that this would be figured into the price.

    I can not imagine even GM’s board agreeing to a sale where they will be contingently liable for these loans. I don’t have any details, but I am willing to bet that the GMAC sale is an “as is-where is” deal. Think how much more it would have been worth without all those upside down deadbeats. But it is still worth a lot. Whether the new owners’ investment will pay off is a gamble that they take.

  • avatar
    airglow

    Glenn Wrote:

    “Go down and test-drive a Toyota Camry Solara with an open mind and you may be in for the shock of your life, man. The scales may fall off your eyes.”

    The Solara is a very poor example Glenn. The Toyota Camry Solara hasn’t exactly lit the sales charts on fire, or gotten too many great reviews, except maybe from Consumers Reports. The convertable version of the Solara even gets ripped as worst in class by many reviewers.

  • avatar
    dhathewa

    Montess, nobody’s talking about cars as though they were investments (collectibles are a tiny part of the market). We’re talking about minimizing automotive expense and minimal depreciation is a huge factor in that, especially for people who like to drive relatively recent cars.

    If I spent $20K for a Toyota in 2003 and trade it this year for $11,720, I’m looking at $8280 in depreciation (lost value). If I bought an Impala in 2003 for $19K and I trade it this year for $7352, my depreciation expense is $11,648, an extra $3368 over three years.

    At trade-in time, I have to find this extra $3368 someplace. I either bring more cash to close or sign on to a bigger loan.

    Even if you buy a car planning to drive it into the ground, depreciation can be important. Situations change. Maybe you bought that Monte Carlo and then discovered you’re suddenly in a familiy way and need a minivan or 4-door sedan. High resale value offers a measure of protection against uncertainty.

    By the way, I’d like to know, just what is the attraction of the Monte Carlo? It’s as big and thirsty as a sedan, performs no better than a sedan and is awkward and unpleasant for 4 adults to use. What’s the point? Is there some sort of sporting image to the thing that escapes me?

  • avatar
    montess

    It’s funny, either a GM car is too functional and not snazzy enough (I’ve heard the term “appliance” used on this website before) or its too sporty. So what is it? Also, people on this site constantly deride FWD, I guess they’ve never driven in the snow because a little torque steer is better than winding up going in circles or not being able to get out of your driveway.

  • avatar
    FINANCEGUY

    Another factor in residual value is if your car is totalled and the insurance companys says its worth $10000.00 and you owe $1500.00 or worse

  • avatar
    craigefa

    I’m ashamed to say I didn’t consider the cost of routine maintenance and the price of BMW brake pads montess. In my defense, I haven’t done this because I haven’t cross shopped a Chevy and a BMW lately. Because I was defending Don’s argument I thought I would use his example.

  • avatar
    porker

    The only reason to purchase any car new is to drive it until the wheels fall off. Then, you put the wheels back on and drive it some more. This is where GM products really shine. You can pick them up for cheap because of the elitist krautmobile and japmobile lovers, and have a truly comfortable and affordable car that will coddle you as you travel down the road, and serve you better than any of the foreign makes. And, yes, a Toyota is still a foreign car, regardless of where it’s assembled. Is a Dell computer a Malaysian make? How about a Gateway? IBM?

  • avatar
    montess

    Porker-
    Glad to see you made it, I’m getting tired of fighting this battle alone, I’ll just sit on the sidelines for a while and watch you fend off these jokers.

  • avatar
    FINANCEGUY

    Damn looks like the UAW and Detroit News racist bloggers have found their way here.Im ready to pay monthly to weed out that kind of trash

  • avatar
    porker

    dhathewa- maybe the attraction of the Monte Carlo is that it’s a comfortable, easy-driving car that won’t cost an arm and a leg in repair work, (unlike the krautmobiles of the same ilk) over its lifetime.

    FINANCEGUY- I’m very anti-union. I’m just a southern redneck that happens to believe that the American auto industry is getting a bum rap from the elitist left-wing press that dominates on this board. I once sold Datsuns for about five years in my admittedly misguided youth, and I can speak from intensive knowledge about the auto industry. I don’t get my opinions from the toaster testers, I formed them from hard- real world experience. I was even one of the unfortunate few who had purchased the 1988 Nissan Van, you know, the one that was so horrible that Nissan bought ALL of them back? I don’t hold the blind, anti-American opinion of most of the posters on this board, and I’m not afraid to say so. Neither do I care what you purport to think of me. If this site goes to pay only, I guess I’ll buy in and keep posting.

  • avatar
    dhathewa

    The Monte Carlo won’t cost an arm and a leg in repair work? Is there some other “Monte Carlo” on the market besides the one made by Chevy? If not, you might surf over to Edmunds and check the owner reviews on the CHEVROLET Monte Carlo and reconsider your comments.

    Or are all the reviewers on Edmunds “leftists,” too?

    And “comfortable” does not apply to any car which requires you to twist yourself into a pretzel to get into the back seat. A car the size of the Monte Carlo should justify that size and weight by being comfortable for 4 adults. A true sports car, with a negligible or nonexistent back seat and real road performance is another matter.

  • avatar
    montess

    dhahewa-
    I just went over to Edmunds and I’m wondering whether you bothered to read the reviews or if you just shot from the hip with your anti GM reflexes. The reviews I read were outstanding, in fact here’s a link for all the GM bashers so they can get outside of TTAC’s warm, fuzzy cocoon and realize that GM still builds a great car.

    http://www.edmunds.com/new/2006/chevrolet/montecarlo/100624417/ratings_consumersdetail.html?dcr_sid=100624490&dcr_usein=n

  • avatar
    Glenn Arlt

    Well, guys, I’m neither “leftist” nor “elitist” but I bought a Prius for a lot of reasons, including sending “digital communication” to OPEC. Yep, made in Japan, the first Japanese car I’ve ever owned, but hopefully not the last since it has been the best car I’ve ever owned.

    By the way, montess? Your Monte Carlo is built in CANADA, isn’t it? So, do you consider that an American car?

    I’m just curious.

    Go ahead and double-check me. If the VIN number starts with a 2, it’s CANADIAN, brother, not American. American cars start with 1, or 4 in their VIN numbers (assuming they are 1981 or newer, that is).

    My LAST GM car (except for the collector car I own) was a 1997 Cavalier grocery getter and commuter car. Long story short? I found out the hard way that GM won’t stand behind their cars, and it was the last straw. Next, I bought a Dodge Neon grocery getter and commuter car. Wow, talk about going from the frying pan into the fire. I’d already completely given up on Ford for the 2nd (and this time, permanent) time.

  • avatar
    dhathewa

    Montess,

    Oh, no! Not the reviews of the 2006 Monte Carlo written when it’s right off the showroom floor! No… Go look at the reviews of, say, the 2001 Monte Carlo. After people have had a real chance to fully experience its reliabiity.

  • avatar
    ktm

    montess, back peddling now are we? You challenged Robert to name a recent blue chip company that ‘disappeared’. You said that you could not remember one in recent times.

    “Robert- GM is not going under, period. Here’s a question- how many Dow Jones blue chip companies have gone under recently? ”

    You asked for an example and you were given two. Now you are saying that Worldcom and Enron are not comparable to GM and hence not good examples.

    Keep back peddling everytime you are wrong. It makes for really strong arguments.

  • avatar
    miked

    rtz: “I can???t believe after all these years that Ford and GM can???t reverse engineer or even clone the Honda motor. How hard is it too copy that cylinder head and cam shaft profile?

    How do they get the quality/reliability that they do? Make or buy the same parts they do! ”

    I’m a little late to the party for my reply, but maybe you’ll see it.

    It’s not all about design (of course some designs are better than others) when talking about longevity, sometimes it’s about the quality of the materials or even just the tolerance to which the part is built. Say a measurement of a part is supposed to be 1 inch. Well it’ll never be exactly 1 inch, so the engineers say it can be 1 inch +/- a couple of thousandths. The smaller the tolerances the harder and more expensive it is to make and in lots of cases will work better.

    So it’s just as hard for GM and Honda to make the same engine to the same tolerances out of the same materials (and both will be good), the difference is that GM’s expensive union labor (and bloated infrastructure) cost more, so to “save” money, they loosen the tolerances and everything sucks.

    An example: A year or so ago I read a post by a guy who works at a catalytic converter factory. The factory supplies the exact same catalytic converter to both Ford and Volkswagen. The ones that Ford buys are cheaper because after a part is made it goes into inspection, if it passes VW’s strict requirements it goes to VW, if it fails VW’s test then ford will take it.

  • avatar
    montess

    Dhathewa-
    I’m a little tired today and I don’t have the energy to scour the net for bad reviews of used Monte Carlo’s so could you please return the favor and send me a link to some bad Monte reviews.

    Glenn-
    So what if it’s made in Canada? The R + D is still American and they’ve been building GM cars there for decades. I remember looking at a 57 Chevy fixer upper in high school that was built in Canada. How about Ford, ever heard of the Windsor engine?

    And last but not least KTM-
    I already addressed the difference between Worldcom and Enron and GM. No comparison. I’ll tell you what, let’s stick to facts here- the main one still is GM builds a solid, reliable car. My mother had a Monte back in the 70’s, the car I have now is a huge improvement over that one. Not that her car was a lemon by any stretch, I mean given a choice what would you rather have driven, a 76 Monte or a 76 Honda Civic?

  • avatar
    starlightmica

    So, porker, since a Kentucky built, >90% US parts Camry is clearly Japanese, that means that these following cars are as American as apple pie that you would be proud to have in your driveway:
    – Chevy Aveo, Captiva, Epica, Lacetti, & Optra
    – Buick Excelle, Royaum, & Sail
    – Pontiac G2 & G3
    – Saturn Astra

  • avatar
    montess

    Come on Porker, zing him good

  • avatar
    starlightmica

    Why, montess, troll got your tongue?

  • avatar
    montess

    With the exception of the Aveo, I don’t think I can buy any of those cars here. The others are all built and sold overseas. This only goes to prove my original statement about GM being a multinational capable of surviving a few downturns. I think other American companies also make and sell products sold exclusively overseas. Porker, I’m still waiting for you to fire back.

  • avatar
    montess

    food for thought, enjoy

    http://www.msnbc.msn.com/id/13972069/
    http://www.msnbc.msn.com/id/13953387/

  • avatar
    oboylepr

    “By the way, montess? Your Monte Carlo is built in CANADA, isn???t it? So, do you consider that an American car?

    I???m just curious.”

    Yep you are correct, it is made here in Oshawa along with the Grand Prix/LaCrosse/Allure/Impala. BTW, we were just informed that the GMX367 (Grand Prix) and GMX231 (Monte Carlo) programs are ending earlier than originally planned in November 2007. So if you want one, you might want to get yer order in! As I understand it, GM Canada are re-tooling for……….drum roll please: The new Camaro. Where I work, we make the Monte Carlo’s headliner. The numbers sold are good for about 2 workers on each of 2 shifts, that’s all. I guess the Monte has run it’s course and very few want it anymore. Ah well, it happens all cars at some point. On the other hand, we can’t build enough Impala door panels!!

  • avatar
    dhathewa

    Montess:

    http://www.edmunds.com/used/2001/chevrolet/montecarlo/100000612/ratings_consumer.html

    Are they all universally bad? No. Are there enough bad ones to keep me from buying one? Yes.

    Wagoner’s forever telling people that GM’s quality and reliability are right up there. You and Porker are here telling us this. If so, where’s the 5/60 or 10/100 warranty on the powertrain? If I could buy a GM and be assured I wouldn’t have to pay a fortune for engine/transmission repairs during a normal cars’ lifespan, I’d buy it. If GM believed, in hard dollars-and-cents numbers that the cars were going to be reliable, they’d be able to offer a long warranty because it wouldn’t cost them anythnig. No repairs to cover = no warranty expense.

    But they don’t, so I’m drawing my own conclusions here.

    By the way, an earlier writer mentioned quite a few GM cars that apparently aren’t available here. Sold overseas? Well, if we shouldn’t be buying cars built by companies HQ’ed elsewhere, should Europeans, Asians, etc, be driving cars built by a company not HQ’ed in their own countries?

  • avatar
    ktm

    Let’s really stick to facts here montess, as you are skirting the issue again. Read my last post again. I even quoted your statement that I was addressing. You asked for examples and were given two. Now you want examples of companies similar to GM that have ‘gone under’.

    You are correct in that Worldcom and Enron are not similar to GM. I freely admit that. However, in addressing your question, I pointed out that two very large companies have, in fact, recently gone under. Regardless of the circumstances, they went under.

    GM is under investigation for some of their accounting practices, and it is the same accounting practices that caused them to make their rather large adjustment. This adjustment caused their losses to ballon to upwards of $10 billion dollars.

    No one is saying that GM will file Chapter 7 and disappear off the face of the planet, but you seem to think that we are. Just about everyone acknowledges that GM needs a Chapter 11 to help them restructure (not just folks on this site either).

    Oh, and your argument about which car would I rather own, a 76 Monte or a 76 Civic is rather weak. I sure as hell hope that a 76 Monte is not on par with a 2006 Monte, just as a 76 Civic is not on par with a 2006 Civic. However, look at which company has come farther since 1976.

    I want GM to succeed, but they honestly do not build a single car I find desirable. Before you say that I am a GM hater because of that, let me say that Toyota does not build a single vehicle that I find desirable either, including Lexus. Of Honda’s cars, I only like their Acura line and even then the TL, though I wish they offered it in RWD or at least AWD. I can’t stand Ford’s line up either, but I like DCX and the 300C/Charger/Magnums.

    First and foremost I am a pistonhead and hold no real grudges against any car company.

  • avatar
    montess

    WTF right back at you. Do you really think that’s me? Buddy, I don’t know how you found that but it’s called a coincidence. Since you’re so good at research on the computer, maybe you can help the other guy find some bad reviews of the monte. Still waiting.

  • avatar
    montess

    to review, worst case is bankruptcy but that does not equal death. See- Chrysler, United Airlines, Delta Airlines, etc.

  • avatar
    montess

    Ktm-
    You obviously have no use for FWD, but have you ever been stuck in the snow? If you had, you wouldn’t mind a little torque steer.

  • avatar
    ktm

    I lived in Alaska for 7 years, Germany for 3, and Indiana/Michigan for 5 (among many, many, MANY other places). I know and laud the virtues of FWD as well as AWD.

    However, I now live in Orange County, CA. I have no need for the benefits of FWD and I prefer performance oriented cars. Today’s FWD cars are a far cry from those of the 1980s, but they still do not perform as well as their RWD competitors.

  • avatar
    NamDuong

    Omg! JP!! Lexus ES350 all the way! screw a used C-class. That thing is for poor people who try really hard stretching their budget just to say they own a Benz.

  • avatar
    dhathewa

    Montess, are you blind? The very first review on that link (for the 2001 Monte Carlo) read:

    Battery was bad at 10,000 miles. Head gasket blown at 45,000 miles (constant low coolant light on = expensive repair). Fuel injectors bad at 25,000 miles (cleaned). Engine mounts replaced at 60,000 miles (very expensive). AC controls bad at 40,000 miles. Electronic module computer bad at 60,000 miles (replaced = very expensive) Mechanic at the dealer’s said he has seen these problems repeated over and over with this model. Who pays for it? Who did you think? GM? Naahh… I had mechanical breakdown insurance, but had to pay $250.00 for each incident. What I saved with 0% finance, I have spent in repairs that one would never believe to occur in such a new car. No more GM! Enough!

  • avatar
    sleepingbear

    major Conglomerate= WOOLWORTH- declares BK

    monte carlo- great car- but why dos it rent for $20 a day in FL-
    I was in Juno in FLorida, felt that it was a great car, but not a chance I’d ever buy it- because of-1) resale value(even though i lease) 2)Gm neg perception 3) better value in other makers forign and domestic(mostly perception)

    http://www.newscientist.com/contents/issue/2562.html

  • avatar
    kablamo

    Urgh this thread has gone to poop.

    Look montess – you may like your Monte Carlo, that doesn’t mean everyone else does. You may not be able to tell the difference between Chevrolet and a Honda or BMW, but I notice one, and so do lots of other people.

    Just because you don’t value, perceive or care about something doesn’t mean everyone else is the same. Telling people what they ought to think and value is not a good approach to arguing. You must think you are pretty smart, knowing what others should want and need out of their car.

    Clearly GM is not responding to the desires of consumers if their market share keeps sliding. Clearly they are not running a good business if they are losing money. Clearly many people feel imports are sufficiently supporting the national economy (if not their own wallet). Clearly this can’t go on forever – and every action taken by Detroit to reverse this in the last 30 years has only yielded temporary results.

    I would never buy a Monte Carlo. Standard transmissions aren’t even available!

  • avatar
    jnik

    Porker, your point was best of all- At least Nissan had the decency to buy back the ’88 van when it turned out to be crap. Have GM or Ford ever done that?

  • avatar
    Point Given

    At my former dealership we called them roaches instead of rats. Credit Criminals occasionally as well.

    Companies that give loans to the less than optimal risks charge huge interest normally (up to 29.5% I’ve seen) and will have repos – no doubt about it. I would imagine there is some loan insurance out there, but, given that the risks are quite poor that the loan insurance would be cost prohibitive.

    What really shocks the sales world is when financing arms open up and let lower scores get vehicles at regular financing amounts. The Mitsu’s and Kia’s of the world are well known for taking on less than stellar risks. Kia for instance commonly gives subvented rates up to 84 months up here in Canada.

    If GM has taken on some less than stellar risks to move the metal (or plastic if your Saturn) it may be a sign of problems moving product and lowering inventories. Last summer, we had the employee pricing move out, this year the sale was a bit less aggressive, but, they (apparently) offered the sale to more people of poorer credit. What’s the step for next summer?

    It would seem that at some point in the future we can look back and say that it was GM’s Last Gasp sale. Is this it? I’d tend to think not but there does seem to be a clear trend.

    As a note, last summer during employee pricing bonanza’s, we at Nissan were crossed shopped quite a bit versus GM (tis true), the people would come on the lot and ask us if we had employee pricing. I got tired of it and just told people that no, the price you see is what you pay. This quickly changed peoples minds and they left almost right away. What GM had successfully done was sell a price – not a product. This is the crux of why they are and will continue to struggle.

  • avatar
    fishiftstick

    Here’s GM’s sharp end: my mom. She’s 60, and (despite my pleading) has always driven American cars. Her last two cars were Chevy Malibus, so when the lease expired, she went to the local GM dealer, with every intent of leasing another Malibu.

    But GM redesigned the Malibu. And that’s a good thing, in most respects. But there were three problems.

    First, the new Malibu featured forward-tilted headrests that only Quasimodo could find comfortable.

    Second, the interior was available only in gray–dismal acres of cheap, rough, poorly finished gray plastic.

    Third, was the seat fabric. Mom (as you have probably noticed) is not a maven on the finer points of automotive performance. But she does insist on leather seats. According to GM, leather seats were available on the Malibu–for an extra 2K.

    The final straw? Those $2000 leather seats were covered in a mix of leather (a thin stripe around the edges) and something called “preferred suede,” which upon inquiry turned out to be not suede at all, but an artificial fabric with the approximate texture of mouse-fur-upholstered cardboard.

    Mom leased an Accord, with real leather seats in a nice warm beige, for about as much as the Malibu. How’d she do that? She got the Accord EX 4 cylinder.

    Aha, you say, that’s not a fair comparison: the Malibu has a V6, with more horsepower and torque. But Honda’s DOHC VTEC 4-banger runs smoother than GM’s antiquated pushrod V6, the Honda’s tranny is a 5-speed instead of GM’s antiquated 4-speed, while the Malibu is 200 lbs. heavier and less aerodynamic. Meanwhile, the Honda has far superior steering, suspension and brakes.

    On paper, the Malibu wins: 200hp. v. 161, 220lb.ft. v. 160. In reality, for overall driving dynamics the 4-pot Honda still beats the 6-pot Malibu, and in other areas, like quality and comfort, the Malibu isn’t in the same league.

    For all its size and resources, GM doesn’t make a credible competitor in the family sedan market, the bread and butter of any mass-market automaker. GM’s labour costs are so high, it spends too much of its development resources on creating duplicate cars in the same sector, and it is wedded to poor design and outdated technology. It just can’t deliver as much car for the dollar. Over the last 20 years, more and more of its customers have learned that.

  • avatar
    nino

    Jonny Lieberman writes;

    JP: If you are considering Infinit, Acura and Lexus, why not a Cadillac CTS?

    (I know, I know ??? the interior, right?)

    I am cross shopping both cars at the moment.

    Acura dealer – $31,800 for the car. We have white, blue, and silver in stock, but I’ll have a few black ones in about two weeks.

    I’m looking for a CTS 3.6 with the sport package.

    Cadillac dealer – Why do you want the bigger motor? the 2.8 is very peppy and really is all you need for this small car. And I don’t recomend the sport package either. It will take away the “big car ride” Caddys are famous for. I can get you the car for in and around thirty, but I can see you’re not ready to step up to a Caddy if you don’t know how to properly equip it. What do you mean about the radio buttons on the steering wheel being incomplete? That’s just a gimmick anyway as all the right buttons are on the radio itself.

    Is it any wonder that GM can sell ANYTHING when this is the attitude at many GM dealers.

    (this wasn’t the first salesman to tell me that getting the sport package will take away from the “big car ride”)

  • avatar
    nino

    fishiftstick:

    That comparison is right on.

    I had a similar situation with my father-in-law.

    He didn’t want to look at the Accord 4 cylinder because 4 cylinders have no guts, so he was going to go for the Malibu as well. We forced him to go see an Accord EX V6. He liked the car, but bitched about the price. The salesman then pulled around in an Accord EX Leather that had the 4 cylinder instead of the six for him to test drive. Needless to say, my father-in-law LOVED the car thinking that it was the V6 model. He was genuinly shocked when told he test drove the four.

    He wound up getting the Accord.

  • avatar
    nino

    In my previous post, I meant to say that I’m cross shopping a CTS along with an Acura TL.

  • avatar
    jerry weber

    back to faulkner & point given: It isn’t the details of all this bad credit and discount mess that concerns me. It is that GM and the other two in Detroit cannot sell any car straight. ie. It costs 20,000 and you get an extra 500 or 1000 for the used sled outside as a discount but not 25% off sticker. Honda & toyota whether you think their stuff is worse or better than gm’s can make the deals that dealers call “holding gross” they actually can score 2 to 3 thousand gross profit per car. Then you add to this that they have fewer and larger dealers selling perhaps 100 new per month, (buick dealers sell 8 per month), and you get the big picture. The Asians are here for the duration building stronger businesses every year. If you think the Asians cars are worth more used, price a honda or toyota franchise then an American one, same story.

  • avatar
    montess

    Kablamo-
    I’m not trying to convince anyone that they should buy American vs. Japanese. Rather, I’m just offering a counterpoint to the seemingly endless negativity regarding GM on TTAC. The fact of the matter is that I have always owned GM, I’ve been driving for 20 + years , and for the most part they have treated me well. I’ve had problems with my cars, who hasn’t?, but I’ve always been able to either fix them myself or have a garage do the repairs for a reasonable price. I’ve said it before and I’ll say it again- a car is a MACHINE designed to go from point A to point B and in my book GM cars accomplish that mission more than adequately for a reasonable price.

  • avatar

    OK Montess, you’ve made your point.

  • avatar
    FINANCEGUY

    Jerry Weber

    You make some good points.I have worked in a GM store for 15 years and for the last couple I wonder if it was a good career decision.We lost some good salespeople during the employee pricing debacle and have yet to replace them.At GM functions I hear the same story.I cant really say I blame them with GM dictating what they can make. A friend of mine is at a Toyota store that does over 300 new units a month and as you say grosses are good.There are 4 Toyota stores here and they are all doing very good business.Saturday is a big day for sales but its not unheard to sell 1 or 2 units and sometimes nothing.On a recent Saturday I drove by my buddys store and it looked like an ant farm with all the activity.I dont want GM to fail obviously but the way they have degraded our reputation with all the gimmicks is very frustrating as it seems no one will come in without selling the deal.I have watched our customer base age over the years and I see the same faces over and over with not a lot of new blood coming in.I dont know how to fix it but it has to get fixed

  • avatar
    Point Given

    Finance Guy – The market for Nissans where I sold is extremely competitive – far too many “flats” for my liking. I choose to go work for Nissan as I figured it was a premium brand that would sell quite well. It sold well but because each of the dealers in town is at each others throats it was tough to get big grosses on any machine. I did sell out of 120 machines 1 Maxima, 2 Muranos and 2 Xterras at full retail. Same sort of thing with the GM dealers, they fight each other like mad to get any sale. I think that dealers must exist on holdback alone, as I can’t fathom too many of them making big grosses on the front end.

    It made me decide that if I was to remain in the game that I was goign to find a premium brand (BMW, Lexus…) dealership to sell at b/c (perhaps incorrectly) I think they sell at full price.

    Given the fact that there is money in selling used cars I don’t think the GM on the ground guys will ever completely starve.

  • avatar
    FINANCEGUY

    Point Given

    You are right about the flats.We have too many dealers in my area and we are forced to give most stuff away.The problem with used cars is while there is money to be made, these factory programs kill the used side so with a lot of salespeople if you factor in the hours which as you know suck there are plenty of opportunities at those pay levels where you dont have to grind out 65-70 hours a week.

  • avatar
    jerry weber

    Let me tell you a story of 40 years. When my father bought his first cadillac, he was a general motors man all the way, he was told by the dealer, there is a new 1956 upstairs unspoken for, it is not the one you want it was a fleetwood with all the bells and whistles, do you want it or not. I think it was $5500 and he paid it no discount. (along the way it swallowed automatic transmissions like candy, he never held it against cadillac, even though the 90 day warranty had expired). At least the dealer prospered, and my father could be seen in a cadillac the standard of the world.
    Now it’s 1998 and I was involved in selling cadillacs in a small town multibrand gm agency. The local comes in with a paper from the big city store about 15 miles away. They will sell him a new Deville listing for $44000 for invoice and half of the holdback, of course if we would match it he’d rather by locally. We had about thirteen hundred 3% of holdback on the deville. So out the door goes a deville at gross profitl $650.00. The same deville was costing over 300.00 per month in floor plan alone. We had a building, salespeople, and othe extravagent overhead like lights and heat. Needless to say you do the math on no profit deals like that. If we had a honda or toyota store the profit on cars costing a third the deville would have been far greater. And yes the buick and chevy cars had the same public response, give them away or we’ll go elsewhere. Is this the model for the future of gm?

  • avatar
    nino

    You two guys are probably really nice guys, but whenever I’ve walked into a GM dealership, be it a Cadillac, Pontiac, or Chevy dealer, I feel like I’m in some 1960s “Twilight Zone” where the salesmen use old, hackneyed phrases, treat me as though I know nothing about the car, and act as though they’re doing me a favor.

    In ANY GM turnaround, the first thing that must change is the attitude of the dealers towards the customers. This includes both the sales experience and the AFTER SALE experience.

    Somebody posted that cars are just machines and that thongs go wrong. True, but when you spend a good chunk of change on that machine, you don’t want your time wasted by excuses on a technicality why they won’t fix your car. I have a whopper of a story on a faulty airbag sensor in a 2000 Grand Prix that you just won’t believe.

  • avatar
    Point Given

    The hours did indeed suck, but since I own my own business now the hours have remained pretty much the same. end result is different though.

    I know that GM dealers (and ford, and Chrysler and Nissan, and Kia and Mitsu etc…) are constantly fighting with each other. It’s sadly, capitalism at it’s finest with heavy price competition being the differentiator. I read Tascas’ book when I first started in this biz. I sure think that menu pricing with super service would be the way to go but unless there is major upheavel it isn’t going to come easy.

    At least you are in the finance office. At my old dealership Finance cleaned up. Sell a car for 350 over invoice, finance would whack them for a 1500+ propack and whatever else they could sell.

  • avatar
    jerry weber

    Nino: Point given :It is profits or the lack therof that make gm delaerships seem retro.First salespeople who are knowledgable and aggresive will go to the hot brands,leaving the 60’s guys to stay behind in the gm store. Second, gleaming showrooms and modern shops are built with dealer profits, thus the foreign brands have the most of these. As for fixing problems, gm needs profits to do this and yes speed up introduction of really new models. The action goes to those with product and sizzle who then plow the profits back into cars and buildings to get even further ahead, leaving gm look even more retro. As for finance making up all of the difference on profit, there are times you can put a package on buyers and score, it is equally possible they heard about phony upolstery and wax treatments and will decline.You cannot make up in the finance office what you didn’t get in holding gross in the first place. Real money is made when you have a car so hot you can put on an add on sticker for these fraudulent extras and collect it up front. Try that with a chevy or pontiac (solstice excluded every rare time the dealer gets one)

  • avatar
    nino

    jerry weber says:

    Nino: Point given :It is profits or the lack therof that make gm delaerships seem retro.First salespeople who are knowledgable and aggresive will go to the hot brands,leaving the 60???s guys to stay behind in the gm store.

    I understand what you’re saying, but it doesn’t explain everything.

    I have a friend who works in a Chevy store and has been there 30 years. I’ve bought 3 Chevys and a used Toyota Supra from him. Every time he respected my time and knowledge and never wasted it. Our deals were straight forward and we either agreed or disagreed, but there was a mutual respect. When I did buy a car, the service department would bend over backwards to take care of me. In the days before the internet, I could use a phone call to check inventory and get pricing. Did I pay a little more? Probably, but the dealer experience more than made up for it.

    What’s probably even more true is that the majority of consumers won’t pay for good service. They go out of their way to squeeze every last cent out of a deal figuring no one is entitled to a profit.

    This dealership is on the verge of closing because the real estate it sits on is worth more than the business it generates

    I’ve built up a pretty successful business based on value and customer service. Price has been taken out of the equasion. I still feel that while the product needs to be upgraded, an attitude upgrade doesn’t cost anything. When the better products do arrive, the dealer experience needs to keep up.

  • avatar
    nino

    “Real money is made when you have a car so hot you can put on an add on sticker for these fraudulent extras and collect it up front. Try that with a chevy or pontiac (solstice excluded every rare time the dealer gets one) ”

    But is this the way it should be?

    The use of the term “fraudulent extras” smacks of the dishonesty that many people associate with dealers.

    Why not sell the cars for the MSRP and price the extras at fair market price?

    Selling bogus alarm packages for $1,000 won’t win any friends and will lose customers, in my opinion.

  • avatar
    Frank Williams

    Getting back on topic…

    The treatment you get at domestic vs. import dealerships doesn’t end at the sales department. There’s also a big difference in the ways the service departments treat you. I have an American car (Corvette) and a German car (Audi A4). Unlike most combinations like that, the American car cost more (about $10K more) than the German car. However, when I take them in for servicing you’d think just the opposite.

    At the Chevy dealership, I stand around waiting for someone to get off the phone or finish their donut to help me, even if I have an appointment. At the Audi dealership they’re there before I can even get out of the car. At the Chevy dealership they ask me “do you want to wait or is someone coming to pick you up?” At the Audi dealership, they say “just a moment and we’ll have your loaner car up here for you.”

    When I come back to pick up my car, at the Chevy dealership the radio has been put on a different station, all the mirrors have been moved, and the seat has been readjusted. If I’m lucky they put paper over the carpets – and sometimes even remove it before I get in the car. At the Audi dealership, they return my car to me with everything just as it was when I dropped it off, AND they’ve washed it.

    The Corvette came with a 3 year/36K mile warranty. The Audi came with a 4 year/50K warranty. I have to pay for all routine service on the Corvette. The Audi warranty covers all maintenance during the warranty period.

    At the Chevy dealership (and I’ve used several different ones) I’m treated like just one more widget on an assembly line. They could care less that I purchsed their flagship model At the Audi dealership I’m treated like a valued customer even though I bought their bottom-line model.

    Guess where I’ll go next time I need to buy a car?

  • avatar
    nonce

    Wow. So much wrongness from both sides.

    I love the GM DW series, but Mr. Farago’s tendency to try to read bad news into absolutely everything is a bit distressing. The sweeping-under-the-rug of “a loss is still a loss” wrt GM’s financials makes me not trust his analysis. In any industry, if you would normally have a $1.2B profit, but you spent $4B to reduce future costs or increase future revenue, that’s a good move. At the very worst, if the reducting in costs are zero, next quarter will still be a profit. And “declining market share” isn’t the same thing as “declining revenue.” If GM’s revenue were decreasing, Mr. Farago should’ve said that, since it’s the more important figure for their survival.

    (This isn’t to say that GM isn’t cooking the books, and the poorly rated blokes that GM is extending credit to could easily make a bump up in revenue entirely temporary.)

    As for big companies that’ve gone Chapter 11, don’t forget K-Mart and Dow Chemical.

  • avatar
    Muzman

    RF & TTAC Contributors;

    Great dialogue! I look forward to your comments everyday.

    Robert’s already stated the obvious, “Theres only one way out of their current death spiral: produce enough vehicles that people want to buy at a price that makes the company enough profit to stay in business. It still aint happening”.

    GM has been restructuring for 30+ years. Consolidating operations (BOC, CPC), reducing staffing (early retirements, buyouts), delayering management, selling assets (EDS, Hughes, Delphi, GMAC, etc.), rightsizing capacity (30+ plant closures in 20 years), reducing brands (Oldsmobile), restructuring staffs (engineering, sales, powertrain, etc.) And for 30 years, their costs have continued to out-strip consumer demand.

    GM’s problem is simply lack of customer focus. Too many products drawing on too many internal resources (engineering, capital, manhours), too few products in demand (quality issues, design issues, car/truck mix issues, etc.), poor dealer service, complex option content/pricing, long delivery leadtimes, investor relations, supplier relations, employee relations, etc. More time and resources are being spend on internal company issues with the end customer being an after-thought.

    Despite all GM’s efforts for the last 30 years, customer desires are still not reflected in the product portfolio, or in the dealer retail experience. The “shot-gun” approach to product planning, and the “hands-off approach” to dealer retail experiences continues as a significant problem. Of further concerns, this same mind-set has been adapted throughout the world regions.

    Thus in Robert’s words “It still ain’t happening”. When a company does not have the products and/or services that are in demand, financial initiatives can simply delay the inevitable. True for any industry.

    PS…..don’t think for a moment that Nissan or Renault will aid the turnaround. N&R have their own issues for which a GM partnership could not possible help resolve.

  • avatar
    n2f

    Muzman, I could not agree with you more. Growing up, my family ALWAYS had a GM car in the garage, often two. But when it came time for me to look at buying my own car, I looked elsewhere because the economy and reliability of the imports were markedly better than the domestics of the day (this was back in the late 1970s).

    Since then, I have been fairly open-minded in my car buying and have owned several American made cars over the years, the stand-out being a 4.0 liter V-8 Oldsmobile Aurora.

    But, by in large, the imports still offer more of what I want and expect from a car; performance, ride dynamics, economy, quality of materials and over-all assembly, reliability, and last but certainly not least, style (‘style’ being completely subjective I realize).

    It pains me a great deal that the American car makers are so far behind in the areas that matter most to me (an admitted gear-head for sure). But what would it take for GM to offer a rear-drive, Northstar V-8 Buick Riviera coupe (based on the Cadillac CTS maybe?) priced under 30 grand? Or a clever, well-built diesel or alt-fuel small car to take on the likes of the Volkswagon Jetta?

    I guess that is what makes this whole GM Death Watch thing so depressing; I know good and well, as do we all, that General Motors has got the know-how and engineering skills to compete with the best auto manufacturers the world has to offer, and yet they simply founder year after year because of management, or the unions, or the pension plan, or the relevant excuse du jour; it doesn’t really matter because the end result is always the same.

    But I guess we have always got Chrysler. Say what you will about their styling… At least they have got the guts to try something different instead of the re-hashed, fit-for-the-rental-fleet-only stuff GM floats by us on an annual basis. I mean I would buy a 300C before I would even think about buying a GM anything.

    Or how about a Ford Five-Hundred? Great looking interior, reasonably well equipped, and you would be hard pressed to spend more than 30 large on the top-of-the-line SEL.

    O.K, I am sorry – end of rant ;-) (And yes, I have driven a GM product lately; had a 2006 Chevrolet Impala SS with 10 miles on the clock as a Loan Car for three days while our 2004 Saab 9-3 was in for its 60K service).

    Please GM, get well soon…

  • avatar
    jzc2rv

    To all those who have a strong opinion on the issue of a GM bankruptcy: How about a friendly wager? Would you be interested, Mr. Farago? Farago wins if GM files somtime before 1 year from today. GM believers win if otherwise.

  • avatar
    kablamo

    There’s some great discussion here… If I could make a suggestion, it would be nice if some members could write articles about the nitty-gritty functionning of a dealership, how they make money, what they have to spend on, etc. I still have no idea what “holdback” is or why it’s relevant – but I’d love to know.

  • avatar
    jerry weber

    to kablamo:Dealerships have high overhead because they are large several acres usually. They have highpower lights, expensive ads in papers and radio and tv, large buildings that are hard to heat and cool, a large staff that is between front: sales, back office, parts& shop. as to the business:
    When a new car is unloaded the wholesale price is deducted from the dealer account instantly. Years ago it was 25% margins on American cars, now it can be 10% the one thing the dealer has is a 3% credit on the cost of the car which is not paid until later, quarterly or the end of the model year. This is why you need to pull out the 3% to get to dead cost the real cost to the dealer. Unfortunately magazines and the internet have exposed this reward of the manufacturer for selling a lot of cars. Now people tell the dealer, I don’t want to pay invoice (wholesale cost) but dead cost. Since floor planning can cost you 1/2 to 3/4% per month per car,(this hidden cost is never seen by the customer but it can be tens of thousands per month in a large agency) if you have three rows of something and say 07’s are on there way in, you may take the hit and sell at cost. Sometimes the factories to help dealers will add “spiffs” or added incentives to clear out invenory especially this time of year. The final formula is simple, if you can hold gross profit high on enough units, you can take some deep discounts on others, if your whole line is weak you cannot make money in sales. lesson one

  • avatar
    pariah

    Just a minute ago I saw a flash ad on Yahoo! that had a big Chevy boytie logo with the word “CHEVROLET” nest to if, and on the two lines below that it said “CLAIM YOUR ’06 CHEVY BEFORE IT’S THEY’RE GONE”. I chuckled and thought of TTAC and Mr. Farago’s Death Watch articles.

  • avatar
    airglow

    Jerry Webber Wrote:

    “The same deville was costing over 300.00 per month in floor plan alone. We had a building, salespeople, and othe extravagent overhead like lights and heat. Needless to say you do the math on no profit deals like that. If we had a honda or toyota store the profit on cars costing a third the deville would have been far greater. And yes the buick and chevy cars had the same public response, give them away or we???ll go elsewhere. Is this the model for the future of gm?”

    I hope it’s the future model for everyone. If I had bought an Accord and given the dealer 3K Gross Profit, I’d feel like a sucker!

    The current automotive retail model, with its independent dealers protected by anti-competitive franchise laws is an anachronism. Thank God the internet has given consumers access to at least some cost information. I’d love to order the car I want on-line, and would be quite willing to pick it up at a mutually convenient distribution center. For warranty service, the manufacturers could have service centers or license authorized independent shops. It’s time to cut out the middle man, traditional new car dealerships are a total anachronism.

    After reading about the profits many of the Japanese dealerships are making, buyers of GM cars are looking smarter all the time.

  • avatar
    dhathewa

    Pariah, I went by the Chevy dealer recently. That ad could just as easily have said “Claim your ’05 Chevy before it’s gone. Please!”

    That’s right, unless I misunderstood the salesguy, the dealer still had zero-mile ’05’s in stock. That’s gotta hurt.

  • avatar
    jerry weber

    airglow, I am not defending the oversized dealer network of gm and others. I feel besides just thinnning it out more radical ideas could happen like internet ordering with service at select centers operated by the factory. However, dealers have been a local place to take your car back to without going 40 miles to a large metro area. Dealers have also (at least the better ones) fought the gm warranty and parts system to get a better deal for their customers when the factory had declined the warranty work. Further, if the dealer does his job (not all do), then why is a two or three thousand dollar gross profit so outlandish? Say 10% ona major purchase that has to be cared for by the dealer for years after. Remember, the dealer would never average 10%. He will always have to clear out inventory at cost or worse at the end of a model year. He also has to dispose of the mistakes ie.purple cars now not in favor. Remember the dealer not the factory owns these cars, they are his ticking time bomb. I do believe, if all of the over supply goes away, everyone will pay more for each car. After WWll, there were way more buyers than the factories could product, all cars were sold until 1953 at either sticker or for hundreds over retail. We the customer, benefit to a point by having so much iron to unload at the end of every year by the dealers.

  • avatar
    Glenn

    I can see how some GM, Ford and DCX dealers may wish to hedge their bets in small town America, by adding "foreign" brands (many of which cars are built in the USA, while big 2 1/2 cars often are built in Mexico and Canada). 

    Perhaps Mitsubishi, Suzuki, Kia, Hyundai, Nissan, Toyota, Subaru and Nissan had better start cherry-picking the better small town dealers before the Chinese do. 

    This will make the demise of the big 2 1/2 faster, but will hopefully ensure that tens of thousands of jobs survive throughout the US when (not if) GM, Ford and DCX go under. 

    Just a thought.

  • avatar
    dhathewa

    Strangely, no one here (or anywhere else that I've noticed) has recommended GM put more resources into building trucks.

    Which, of course, is just what they've done.  GM is rushing their new Silverado/Sierra trucks into production to get them on dealer lots this year.

    Wagoner and a few other execs talked at the product intro (which was webcast) yesterday and three things occurred to me:

    1. Sure.  Accelerating large truck to market.  This will help.  Not.
    1A. And it will probably do wonders for the build quality.
    2. The sucking-up should never be done on-camera or at least not broadcast to the public.
    3. Wagoner should stop talking about their "hybrids" as though they are actual hybrids.

    Is it time for Death Watch #86?

  • avatar
    Gardiner Westbound

    Meanwhile, the list of assets GM put on the line for its new secured credit facility should give GM boosters pause for thought: “certain” North American accounts receivables, unspecified vehicle inventories, the entire Saturn brand, its Canadian operating unit (plants and property) and 65% of GM de Mexico.  In short, The General has wandered into the pawn shop with a large list of assets to secure credit it once enjoyed on the back of its income. – GM Death Watch 85, 7-27-06

    I doubt creditors with first call on Canadian assets will roll over and play dead if a Canadian government attempts to step in front of them. There’s no need for U.S. creditors to institute a court fight. They will run to Uncle Sam for political muscle.

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