Competitive Connection

February 18, 2008

What others are saying . . .
GM’s financial performance
·   Even as sales go gangbusters overseas, General Motors posted a fourth-quarter loss as North American operations continued overshadowing the rest of the company.

"North America is obviously the most difficult place for them to turn a profit because it's where all the costs are," says Kevin Tynan, an analyst with Argus Research.-Source: USA Today, February 13, 2008

·   In a fresh sign that its turnaround plan is sputtering, General Motors reported a staggering $38.7 billion loss – believed to be the largest annual loss ever by an automaker. In the past three years the company has lost nearly $50 billion, more than all the profit it made in the preceding decade.

GM's auto operations burned $2.4 billion in cash in 2007, a $2 billion improvement compared with the end of 2006. The cash burn is expected to continue in 2008 at about the same pace.—Source: The Wall Street Journal, February 13, 2008

·   It's a foreboding sign given all GM has done to bolster revenue and cut costs in the struggling but critical region. The automaker is commanding higher sticker prices on average for its vehicles and making fewer low-profit sales to daily rental firms. At the same time, painful production cuts have brought the automaker's vehicle supply more in line with reduced demand.

"GM isn't standing idle," Bear Stearns analyst Peter Nesvold wrote in a research note. "However, we believe something's happening that continues to erode GM's earnings power faster than the restructurings can offset."--Source: The Detroit News, February 13, 2008
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Around the globe
Experts underestimate GM
About six of every 10 new GM vehicles are now sold overseas.

``The market had underestimated GM's ability to grow,'' said Lehman Brothers analyst Brian Johnson in New York. He said the company is poised to outpace the industry in some of the fastest-growing auto markets, including China and Latin America.
    
Toyota has focused most of its expansion in North America, which accounts for 30 percent of global sales. It is playing catch-up to GM throughout Asia and eastern Europe.  General Motors is also ahead of Toyota in India and outsells its Japanese competitor by more than 2-to-1 in China.—Source: Bloomberg, February 11, 2008
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A look at the competition
Toyota dealers unhappy
 It’s bad out there when Toyota dealers complain about slow sales.  That’s what is happening, demonstrating even the strongest automotive brands aren’t immune to the nation’s economic slowdown.

“When good Toyota dealers say some sales are off 60%, I know things are out of kilter,” said James Lentz, president of Toyota Motor Sales U.S.A. “We’ll get through this year, and the challenges will make us stronger.”

He cites a growing population and Baby Boomers living and driving longer as reasons for declaring good times are not gone forever.

“By 2011, we’ll be selling to five generations at the same time,” he says. “That has never happened before in the U.S.” —Source: wardsauto.com, February 12, 2008
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What others are saying . . .
Perspective on the SAP
General Motors has offered buyouts to its entire unionized work force.

''A buyout that broadly based is a surprise and a very bold statement about the condition of the American auto industry,'' said Harley Shaiken, a labor professor at the University of California, Berkeley.

The range of offers may be tempting for workers who see GM, Ford and Chrysler in a continual cycle of downsizing as they lose more market share to foreign automakers.

''These buyouts are a watershed event in the industry that defined U.S. manufacturing for most of the 20th century,'' Professor Shaiken said. ''The question is, Do you stay with one of the best-paying jobs anywhere, or get out of an unstable industry and a troubled company?''—Source: New York Times, February 13, 2008
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A look at the competition
Chrysler offering less?
Chrysler is laying out a turnaround plan based on a radical idea: Offering a smaller number of models will lead to bigger profits.

Over the next three years or so, the automaker plans to drop as many as half of the roughly 30 models it now produces, a move likely to cut sales at least for a while.

"We're going to be the best little car company in America," Chrysler Vice Chairman Jim Press said.

The U.S. has become a mature, slow-growth market, and competition is so fierce that no automaker can count on rapid increases in sales, which were a key component of the previous turnaround effort at Chrysler and are still a goal of many automakers.

The company believes it can be more profitable if it spends money producing fewer, but better, vehicles, Mr. Press said. The current product line includes cars and trucks that are essentially identical products, differentiated only by their brands. It makes two minivans, the Chrysler Town & Country and Dodge Caravan, that compete for the same customers, Mr. Press said. —Source: The Wall Street Journal, February 11, 2008
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To read previous editions of the Competitive Connection or to access other information about manufacturing and labor at GM, visit http://www.gmmanufacturing.info