Endorsement Of The Day: Pessimism In Paradise Edition

Edward Niedermeyer
by Edward Niedermeyer

Mickey Kaus and TheBigMoney’s Matthew DeBord joined in the recent kerfluffle over GM’s market share predictions, Kaus on the side of TTAC’s pessimism, and DeBord on the audacity of hope against hope side. DeBord grabs his spade and starts digging, and it only takes a paragraph before he strikes a vast reserve of bubbling… excuses.

declining market share has been a GM reality for decades—the company at one time had so much share that it really had nowhere to go but down or into anti-trust prosecution. The Old GM was so preoccupied with holding share that it neglected what was obviously more important, profits. New GM has a reasonable opportunity to take its smaller portfolio of brands, several relatively successful new products, and given a recovery in the truck market in 2010, book some profits ahead of an anticipated pre-midterm-elections IPO.

Still, there are plenty of critics who have it in for GM, notably The Truth About Cars, which has been heralding GM’s demise since gas was 30 cents a gallon and Sinatra was headlining the Sands. (And yet … GM lives! This has to be something like being Cuba, grimly eyeing the United States across that brief expanse of ocean, waiting decade after decade for the imperial giant to finally fall.)

So grab a Pina Colada and pull up a chaise lounge, comrades… the glorious revolution waits just behind the jump!

Obviously we’re flattered that DeBord thinks so highly of our prescient foresight. After all, who would deny that GM has been in steady, unchecked decline since Sinatra last thrilled The Sands? More importantly, the comparison of GM to the United States totally ignores the reality that GM failed, went into bankruptcy and was bailed out by the unwilling taxpayers. Unless of course DeBord is making some kind of meta-point on the irony of an ostensibly Communist nation (China) bailing out our bailout-weakened federal government by buying an endless amount of US Treasury bonds. But that’s a generous assessment in light of his vague optimism on The General’s prospects.

GM no longer needs the kind of share it sustained even 10 years ago. It just needs its share to involve products that make money. GM was making money before 2005, on declining share, because it was selling a lot of profitable trucks and SUVs.

So GM doesn’t need the increased market share, but it will get it anyway. Just because it’s building a lot more cars than it can realistically sell? Where are those profits now?

If you look at what it has now, in terms of divisions, it could make money again. Cadillac, Buick, and GMC all have good profit potential based on new product introductions. Chevy is a question mark, but it also has the burden of selling more cars and trucks than the other GM divisions—and the advantage of having GM’s top-selling vehicle, the Silverado pickup. Chevy will also have the most important car of 2010, the Volt extended-range electric vehicle, a halo car if there ever was one.

For some reality-based context, take a look at this chart of GM sales by brand. Chevy’s the clear volume leader, but it’s also showing the most precipitous declines. Anyone who wants to believe that a pickup and a $40k profitless halo will turn that around is free to do so, but the theory needs… fleshing out. Meanwhile, Buick, GMC and Cadillac are bouncing along the bottom of a weak market that is increasingly willing to buy their luxury vehicles from brands like Hyundai. Add that to undeniable indications that GM is falling into the overproduction trap, and you’ve got a picture. And it ain’t pretty. The fact that DeBord agrees that Fritz should go seems to be a sign that even he knows better. Perhaps he’ll come around when GM fails for a second time.

Edward Niedermeyer
Edward Niedermeyer

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  • Tparkit Tparkit on Oct 20, 2009

    Mr. DeBord hears, sees, and speaks no Washington. To help the rest of us do likewise, this dutiful servant of power lays down a steady flow of red herrings:

    "I’m also starting to see some typical GM executive moves, with a Bob Lutz-Bryan Nesbitt GM, driven by PR and media, up against a Fritz Henderson GM, motivated by cost-cutting, against an Ed Whitacre GM, propelled by the notion that GM is a trustworthy entity deserving of patriotic consumer support."DeBord is inviting us to direct our attention, worries, and uncomfortable inquiries to an ever-changing pagent of front men, pseudo-initiatives, and straw issues. Not coincidently, when GM is the only performer allowed on stage it has the only microphone. This leaves the audience with only empty questions, such as "What is GM's plan?" "What is GM's understanding of its challenges?" "What will GM's leadership do?" The way to deal with DeBord's intricate knot is to step back, then slice it. The way to deal with the political fraud that is Government Motors is to stop buying its cars and force it to close its doors. Nothing -- absolutely nothing else -- will end this raid on the American people.
  • Newcarscostalot Newcarscostalot on Oct 21, 2009

    Government Bailouts. So GM, in some form, survives.

  • Mike Some Evs are hitting their 3 year lease residual values in 6 months.
  • Tassos Jong-iL I am just here for the beer! (did I say it right?)
  • El scotto Tim, to be tactful I think a great many of us would like a transcript of TTAC's podcast. 90 minutes is just too long for most of us to listen. -evil El Scotto kicking in- The blog at best provides amusement, 90 minutes is just too much. Way too much.
  • TooManyCars VoGhost; I was referring more to the Canadian context, but the same graft is occurring in the US of A and Europe. Political affiliation appears to be irrelevant.
  • The Oracle Going to see a lot of corporations migrating out of Delaware as the state of incorporation. Musk sets trends, he doesn’t follow them.