GAO Report: GM Has Improved Since 2008 But Still Faces Challenges
The Government Accountability Office issued a report on the U.S. Treasury’s investment in General Motors (and Ally Financial, the former GMAC credit arm of GM) which says that the automaker has improved since 2008 but that there still are concerns about competitiveness and market share as well as pension and labor costs. “Although GM’s financial performance has improved significantly since the company initially received federal assistance, questions remain about competitiveness, market share and costs,” the GAO said.
While GM sales were up 15% between 2010 and 2012, the North American market overall grew by more than 23% so GM lost market share. “GM’s North American market share generally has declined,” the report said. “In 2008, GM reported capturing 21.5 percent of the North American market, compared with 16.9 percent in 2012. GM reported that its North American market share was 17.2 percent through the second quarter of 2013.”
The report also said GM’s negotiations with the United Auto Workers when the current contract expires in 2015 will be key to the company’s future. “GM’s ability to remain competitive will also depend on its ability to continue to control costs, in particular its labor costs. Labor costs refer to the costs that GM incurs to pay workers to build its vehicles at factories in the United States and elsewhere. Through its restructuring, GM lowered labor costs, in part by reducing its workforce and making more efficient use of its remaining workers,” the report said. In addition to labor costs, funding pensions could have an impact, “GM’s large pension obligations could have a potential impact on GM’s costs.”
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RE: “A primary implication of cutting back dealers is that fewer vehicles are sold” That isn’t the implication, primary or otherwise." Actually, it is. Even Steve Girsky has come around now that he actually works for an OEM in a management capacity. Toyota builds a pretty nice truck called the Tundra. It sells poorly. Toyota doesn't have a lot of dealers. After all, the Toyota High Throughout Model is named after them. Toyota now has to admit something everyone else has known for decades. Potential buyers aren't going to drive by a bunch of your competitors to get to one of your high throughput stores without some leakage taking place. If Toyota had more dealerships, especially in rural areas, the Tundra probably would have achieved some real traction. You have voiced an opinion no one in our industry takes seriously, sold under duress to a few OEM execs who parroted the Girsky line because that's what they thought they had to say to keep their companies alive. As I mentioned, you might want to read Neil Barofsky's SIGTARP report on the issue. But since you think you know how the auto industry runs better than the folks in it, you'll probably want to lecture him on the business too. The idea that shedding dealers won't impact sales is just laughable. RE: "If the manufacturer wants to increase or maintain steady volume, then the remaining dealers can sell more vehicles per dealership, increasing the profitability of the individual stores." Sounds really good in theory doesn't it. I'd suggest you keep your day job. RE: "In the alternative, if the manufacturer wants to cut volumes in favor of margin, then the remaining dealers can sell the reduced volumes while remaining profitable." Really. Wonder why we haven't figured that out? RE: "Prior to the bailout, GM was building too many vehicles for the market." That can happen when the market takes a sudden turn south. Maybe you haven't noticed, but the auto business is a little cyclical. RE: "GM’s reduction in market share has been positive for GM, because the sales that it is making are now producing a profit for the company. An extra point of market share will do more harm than good if it produces a loss." There are some sales that cost more than they are worth. ANd you have actually admitted that it is gross profit that pays the bills and provides ROI, something dealers have figured out. Adding dealers costs GM nothing. In fact, if they never sold a new vehicle each new dealer is a profit center. GM is currently having difficulty keeping up with the inventory demands of its current dealers. It has curtailed sales to rental companies to keep dealers stocked for the retail market. It is widely known within the industry that curtailing dealers has cost them sales and market sales IF they could have supplied them. IF you get to where you grasp these basic auto industry tenets, I'll take you through the finance part of "incentives." Perhaps you should research the term “diseconomies of scale.” GM had those in abundance.
RE: "The people who got helped are not the people who have to pay for it either. Yet there are probably more people who did not get helped than there were people who got helped." Actually, EVERYONE was helped, some more than others, some directly, others indirectly. You were helped when the economy avoided Depression.