Competitive Connection

May 14, 2007

Then & Now
Buick in China
Buick may be shrinking in the United States, but it's thriving in China.  Last year, for the first time in its history, the brand sold more cars in China than in the United States. Buick, which has whittled its U.S. lineup to three vehicles, sells eight models in China and has more on the way to feed demand from a growing Chinese middle class.

Sales of Buick in China already are a bright – and profitable – spot for GM, which still is working to return its North American auto operations to profitability. Those operations lost $85 million in the first three months of the year, but a $127-million profit in China helped boost the overall corporation to a $62-million profit for the quarter.

Buick in China played a big role, with sales of the brand growing to 303,150 last year from 110,763 just four years earlier, in pace with GM's overall growth in China in the same period and even outpacing industry expansion in the world's fastest growing market. U.S. sales of Buick shrunk to 240,657 last year from 432,017 four years earlier. --Source: Detroit Free Press, May 8, 2007
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A look at the competition
BMW's new plant
The new Leipzig plant is a showcase for BMW's efficiency drive. The factory has a main building with four finger-shaped wings, which make it easier and quicker for trains and trucks to deliver parts. Managers can add modules at the ends of the wings to accommodate a rise in production. They can also adapt the machinery to produce any BMW model.
    
And the Leipzig factory, like other BMW plants, can adjust to new orders so quickly that customers can change their options as little as six days before delivery. To save space, cars in various stages of assembly pass over the heads of managers and workers at their desks. Employees have agreed to flexible work schedules that minimize overtime.
    
Larger forces in the global economy, though, have conspired to thwart BMW from turning its efficiencies into bigger profits. Its profit margin, 5.85 percent in 2006, has moved little since 2001. --Source: Bloomberg, May 4, 2007

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What others are saying . . .
GM’s turnaround
As if General Motors didn't have enough to worry about with getting its car business fixed in North America -- problems at its GMAC finance business have taken their toll on the company.

The bigger problem is that a full recovery in GM's vital North American car business seems a long way off. The biggest cause for concern is that, despite two years of cost cuts and union concessions, GM still isn't making money in North America.

There are a few positive signs, though. GM brought in $21,000 per vehicle in revenue, up almost $1,000. If GM can keep making pricing gains, it could help fuel a recovery. Toyota generally sells its vehicles for $23,000 to $24,000 in average revenue.–Source: businessweek.com, May 3, 2007
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What others are saying . . .
Analysts still concerned about GM
General Motors had a head start in the turnaround race among Detroit's Big Three automakers. But investors looking to buy shares now should beware of looming challenges.

"With GM, the scary thing is they're not even close to the finish line here. They're not generating cash," says Rod Lache, an analyst at Deutsche Bank.

"It's too early to say the worst is over for GM," says Shelly Lombard, an analyst at debt-research firm Gimme Credit who believes the company is about a third of the way through its turnaround.

GM has impressed Wall Street with cost-cutting efforts – such as shedding 34,000 blue-collar workers and negotiating cuts to retiree health benefits in the U.S. The company had a $26 billion cash cushion at the end of last year. But GM lost $2 billion in 2006 despite record revenue. Operating cash flow still isn't sufficient to cover capital spending and the annual interest GM owes on more than $38 billion in outstanding debt.

The automaker needs significant union health-care concessions this fall to keep its turnaround on course, analysts say.–Source: The Wall Street Journal, May 3, 2007
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A look at the competition
Energy diversity assembled in the USA
Toyota took another big step toward advancing its hybrid-electric vehicle strategy with production of the first Camry Hybrid outside Japan. Already, daily production is up to nearly 200 units, and the auto maker expects to build 50,000 of the vehicles in 2007.

Shortly after the Camry Hybrid launch, Nissan built its first mass-produced HEV, the Altima Hybrid, at its Smyrna, TN, assembly plant.

Each auto maker spent $10 million to modify its assembly lines in Kentucky and Tennessee. Unlike the standard Camry and Altima, which source 75% of their components from North American suppliers, most key hybrid systems and parts – such as inverters; transaxles; heating, ventilation and air-conditioning units; and high-voltage wiring – are shipped from Japan. –Source: wardsauto.com, May 8, 2007
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