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WayFast84 · 04-25-2006, 06:04 PM

http://www.automobear.com/index_home.html

long read.

Tru2Chevy · 04-26-2006, 01:07 PM

Which article are you refering too?

- Justin

WayFast84 · 04-26-2006, 02:16 PM

see Apr 21st article

Tru2Chevy · 04-26-2006, 02:18 PM

Quote:

April 21st, 2006
The State of General Motors: Q1

General Motors reported its preliminary first-quarter financial results yesterday, and these were better than expected, after the automaker lost more than ten billion dollars last year.

GM global sales are up 4.4% for the quarter, and the company experienced record quarterly revenue of $52.2 billion, 14.1% higher than the first quarter of 2005, and with increased revenue per vehicle in North America (from $18,888 to $19,962). GM's incentives per vehicle fell from $4,181 in the first quarter of 2005 to $3,114. Every automotive unit improved upon financial results reported in the same period last year.

GM reported a net loss of $323 million, a substantial improvement on a loss of $1.3 billion in the same period last year. Without a one-time, $681 million (after-tax) payout related to the recently-approved health care settlement agreement for U.S. retirees, the company might have reported a net profit of $358 million.

This one-time payment will be made again in 2007, and once again in 2011, as part of General Motors' agreement with the UAW to make contributions to a new, independent Defined Contribution Voluntary Employees' Beneficiary Association (DC VEBA). Supplemental contributions (profit-sharing payments and increases in the value of GM stock) may additionally be made.

Automotive operations lost $721 million (adjusted), versus an adjusted $1.5 billion loss last year.

GM North America lost $946 million (including $484 million in the retiree health-care settlement charge).

The other three regions - GM Europe; GM Asia Pacific, and GM Latin America/ Africa/ Middle East - were profitable. GM Europe earned $88 million, improved from a loss of $92 million a year ago. GM Asia Pacific earned $81 million, improved from earnings of $70 million a year ago. GM Latin America/ Africa/ Middle East earned $56 million, improved over earnings of $31 million a year ago.

GM's liquidity, including cash; marketable securities, and readily-available assets of the VEBA trust, totaled $21.6 billion. Liquidity has benefited from one key special item: a $2 billion cash injection from the sale of 20% of GM's 24% share in Suzuki. Another $300 million will be added, in the second quarter, from the sale of GM's stake in Isuzu. $565 million will be gained annually from GM's reduction of its common stock dividend by 50%. Over the next three years, $14 billion in liquidity will be gained from the sale of a 51% controlling interest in General Motors Acceptance Corporation (GMAC) to Cerberus Capital Management later this year.

As GM Vice Chairman Robert A. Lutz has noted several times, General Motors is consolidating its four regional and semi-autonomous auto companies into one unit, with one director of global engineering (Jim Queen); another, of global design (Ed Welburn), and two more for global product development (John Smith) and global manufacturing. Some of this restructuring figured into a one-time charge of $111 million. As of January 1st, 2006, the company has had one, single, product design and engineering budget. This integration is Lutz's major task. Lutz, who measures his age in Celsius, has the experience to hone General Motors' often disparate focus, both in its products, and in their engineering within what is a giant global company that has only recently begun to take advantage of its scale and reach. The key is to adapt the global organization to accept and empower people who are able to balance the use of global platforms and parts that are available to them, with an understanding of how to adapt these to the local markets their brands serve.

Not only does this cut costs, but it leverages General Motors' vast global resources.

"The products we've recently introduced, and the ones to come in the short-term, are the best we've ever introduced," Lutz expressed at last week's New York International Auto Show.

"But it's hard to get people to realize that," he added, listing blatantly inaccurate comments about the relevance and competence of General Motors' products in the media; more evidence, certainly, of a perception gap.

This is of concern to General Motors; to the media, and to the consumer.

"It becomes a self-fulfilling prophecy," warned Lutz of the perception gap. Indeed, we've used that very phrase before - and, indeed, there is almost enough negative momentum for a self-fulfilling prophecy.

Few are as yet brave enough to buck the trend. "Don't believe the hype," said Forbes magazine of the idea of GM bankruptcy in mid-November ('Five Reasons GM won't Declare Bankruptcy,' Forbes, Richard Lehmann, November 14th, 2005). The article, written by Forbes/ Lehmann Income Securities Investor Richard Lehmann, is a must-read.

Lehmann explained that, to begin with, GM is not eligible to declare bankruptcy, nor is it likely to be "for a number of years." This alone suggests that some of the recent media coverage of General Motors has been disingenuous (at best).

It also bears noting that no motor vehicle firm has ever declared bankruptcy, post-World War II, on any continent.

General Motors employs - directly - more than 120,000 people across the United States. It provides health-care coverage to 1.1 million employees; retirees, and dependents - more than any other company in the country.

Given this responsibility, what purpose does unbridled doom and gloom serve?

Were such doom and gloom to pan out, it would - as AutoExtremist's Peter DeLorenzo points out this week - "be monumentally counterproductive - if not catastrophic - to the health and well-being of this country if the outstanding pension obligations that hundreds and thousands of people are depending on suddenly evaporated.

"It would affect every citizen of this country, from LaJolla to Washington, D.C."

In one sense, perhaps the specter of Delphi's bankruptcy this past Fall helped GM convey the seriousness of its position to the UAW.

Yet more important is that GM has used the crisis to its advantage in other respects; this company's products are those of a company that is fighting hard. GM's newest cars and trucks accounted for 30% of its sales in its first quarter, "more than double where we were a couple of years ago" (Lutz says).

To General Motors' credit, then, its products have run considerably short of playing to the media's apparent goal of a self-fulfilling prophecy. GM tied Honda for second in Strategic Vision's recent Total Value Index survey, as published in November 2005, of over 69,000 vehicle owners. J.D. Power's Sales Satisfaction Index, also released in November, placed Buick third-highest, with Cadillac fifth, and Saturn ninth; all GM brands but Hummer scored above the industry average.

If you look at Lutz's considerable track record, and at measures that track GM's product spending and productivity, this should be of little surprise. Despite constant surmising about GM's financial woes, the company raised its capital spending in 2005, and will increase it again by approximately $800 million in 2006 (to $8.7 billion). Moreover, Harbour Consulting's 2005 report found GM's Oshawa, Ontario plant to be the most efficient in North America, at 15.85 labor hours per vehicle. Seven of the top thirteen assembly plants on the North American continent, as measured by the survey, belong to General Motors.

This is all the more impressive when one considers that General Motors - unlike Toyota; Honda, and Nissan - reports all its plants to the survey. The three foreign automakers do not report statistics on their newest plants until they are up to speed. Toyota leaves out Princeton, Indiana, for instance; Honda, its Lincoln, Alabama plant.

Meanwhile, GM's Willow Run plant in Ypsilanti, Michigan this past October showed off the result of a 3-year, $450 million investment: its new six-speed transmission, to be produced in as many as 1,500 copies daily.

The Buick Lucerne full-size luxury sedan - new for 2006 - has been building sales momentum continuously since its launch last year. 91% of sales in March were retail, Lutz said, and in addition the Lucerne has reclaimed the place of the LeSabre it replaced as the nation's best-selling (Corrected: front-wheel-drive) full-size car. We'll go so far as to say that the refined Lucerne is our favorite in its segment: ergonomically fluent, with fluid ride and demeanor, and commanding road presence. Furthermore, the Buick Enclave Concept shown at the 2006 North American Auto Show in Detroit suggests that Buick's future is in good hands. No other Buick in recent memory has featured a design form so boldly – so curvaceously – sculptured, with emphasized portholes so comfortable atop such intricate surfacing. Enclave demonstrates that Buick's romanticism can be youthful.

The Chevrolet HHR - new for 2006 - was panned as a clone of Chrysler's PT Cruiser, yet General Motors has raised its annual sales forecasts twice, from 60,000 through to 132,000. HHR outsells the Honda Element - and its best markets are California; Texas, and Florida, broadening GM's reach in regions in which it has traditionally not been strong.

The Chevrolet Impala - new for 2006 - last month overtook the Nissan Altima as the third-best selling car in America. Roll the Monte Carlo in with Impala sales (as Toyota does with Camry and Solara, and as Honda does with Accord and Accord Coupe), and the 2006 Impala/ Monte Carlo combination has outsold Accord and Accord Coupe several times since its launch last year. Impala's fit and finish is superlative inside and out, and its engine was recently praised by Popular Science.

Pontiac's G6 is selling well over last year's figures, now with the benefit of a full line-up that includes the most affordable hardtop convertible in the market. In an independent test by Automotive Marketing Consultants Inc. (AMCI), the G6 GTP sedan recently beat the Honda Accord EX-V6; Mazda6 s, and Nissan Altima in wet and dry cornering; slalom, and evasive maneuvers.

Chevrolet's Corvette; Pontiac's Solstice, and Saturn's Sky are sold out. Saturn launched three new products at last week's New York International Auto Show, thus showing it has no intention of leaving the Sky alone, while plunging into mainstream territory with the Aura sedan and Outlook midsize crossover, both of which tout expressive styling with European restraint, and high content. These Saturns are three of twelve new GM vehicles that will be launched this year, and Outlook is part of a series of new crossover utility vehicles which will help to double GM's line-up in this fast-growing segment to fourteen over the next four years.

Hummer, on the back of the Tonka-like H3, is the fastest-growing brand in the industry.

Yet the biggest current story in the GM line-up is, without a doubt, the GMT900 line. Having fought over panel gaps of half a millimeter, the GMT900 team under Chief Engineer Terry Woychowski has produced the most refined, best-executed trucks in their segment. "We think these are the best SUVs that have ever lived," Lutz says - and certainly, at the products' showing last year, we agreed (see article). The 2007 Chevrolet Tahoe; 2007 GMC Yukon, and 2007 Cadillac Escalade are selling for between $6,500 and $10,000 more than the last-generation models did last year - impressive, particularly given that the uplevel Yukon Denali, which has in years past accounted for up to 40% of the model mix, has not yet launched.

In raw numbers, GMT900 sales are up for March 2006 by between 20% and 45% over March 2005. The full-size utility segment may yet experience a shrinking (as indeed Lutz predicted it would at last year's NYIAS show), but - also as per Lutz's predictions - GM is gaining market share. Year-to-date GM share of the segment is 67.5%, up 8.6 points from a year ago.

These sales are not simply to GM loyalists, either (much as though many satisfied GMT800 owners are expected to upgrade). 29.8% of '07 Tahoe sales thus far; 27.8% of Yukon sales, and 26.4% of Escalade sales are to non-GM owners.

There are those who will cite rising gasoline prices as a caution but, again, if GM captures a greater share of a shrinking segment, then the emphasis on getting the GMT900s out there may well pay off in the long term as well as it has in the past few months. It bears noting that the Ann Arbor, Michigan-based Center for Automotive Research head David E. Cole averaged over 18mpg driving the new, 2007 Chevrolet Tahoe to Florida and back (per his recent comments on Autoline Detroit).

Certainly, the competition is heating up (much as Lutz figured it would last year), with a new Ford Expedition and Lincoln Navigator; a facelifted Dodge Durango; a new Jeep Commander; an upcoming Chrysler Aspen and, no doubt, new Sequoia to follow from Toyota. These full-size vehicles continue to be relevant in today's marketplace, even beyond the heavy duty that they can (uniquely) fulfill in pulling a boat or trailer with up to eight passengers and their cargo, additionally, in tow.

Note, too, that the March turn rate of the Chevrolet Tahoe was 19 days; of the Yukon, 16 days, and the Escalade, 7 days. What was it for the Toyota Highlander Hybrid and Lexus RX400h hybrid SUVs? 34 days.

The upcoming 2008 Chevrolet Tahoe Two-Mode Hybrid, and its sister GMC Yukon Two-Mode Hybrid, are expected to deliver a 25% improvement in composite fuel economy when GM's two-mode hybrid system is paired with Active Fuel Management cylinder deactivation. GM; BMW, and DaimlerChrysler are co-developing the two-mode full hybrid system, leveraging automatic transmission technology and electronic controls in an integrated; powerful, and compact system that can be used with both gas and diesel engines.

GM's Mark LaNeve at the 2006 North American International Auto Show in Detroit promised that GM would move to offer 12 different hybrids. The segment may currently account for just 200,000-220,000 units per year but, he added, "they've captured people's imagination... our strategy is to have a wide range." He was particularly proud of the Saturn VUE Green Line's hybrid system, as shown in Detroit: "it's very elegant, with only six major components... we'll be able to charge under $2,000 for the system.

"I believe it is the first commercially viable system. We'll be able to pay back the customer over the normal life of the car."

The Saturn VUE Green Line - a so-called mild hybrid - shuts its engine off under braking; the hybrid battery boosts power when accelerating, and the battery charges under deceleration or when cruising. VUE Green Line's rear spoiler and tires are said to be designed for efficiency, while its instrument cluster features an ECO lamp (which illuminates when the driver beats the EPA-estimated MPG); an AUTO STOP point on the tachometer, and (like Ford's Escape Hybrid) a CHARGE/ ASSIST gauge - replacing the coolant temperature gauge - which shows whether the system is charging the battery, or providing boost. With 2.4-liter VVT four-cylinder, VUE Green Line joins the 143hp 2.2-liter four-cylinder and 250hp V6 VUE Red Line crossover Saturns, themselves refreshed for 2006.

VUE Green Line is the first hybrid whose batteries are designed and made in North America (in Springboro, Ohio). Ford; Honda, and Toyota hybrids all use batteries that come from Japan.

LaNeve figures that Green Line buyers - for under $23,000 - will save a tank of gas a month, getting 20% better fuel economy (27 mpg in town and 32 mpg on the highway, per the EPA) for a $2,000 premium. Moreover, Green Line's performance is slightly better than that of a regular Saturn VUE - and without the stumbles of rivals. "We want to be silky smooth and imperceptible, from eight to four cylinders; electric, and off electric power," chuckled Lutz, making an obvious jibe at the jerky performance of Toyota's Highlander and Lexus' RX400h hybrid SUVs.

LaNeve remains a major proponent of ethanol as a renewable and sustainable resource: "we pay our farmers not to grow corn... think about that!"

Saab's 9-5 BioPower Concept Car, powered by E85 bio-ethanol, attempted to both showcase this technology at NAIAS, and to emphasize Saab's goal to "work in harmony with the environment." The BioPower Concept Car, a variant of which is in production in the European market (and which has been named to the Popular Science top-100 list of breakthrough products and technologies), produces 20% more power and 25% more torque than its gasoline sister car, while producing fewer greenhouse gas emissions.

As for fuel economy in general, LaNeve summarized at NAIAS, "we're going to make it a top priority this year to get our product story out," surmising that GM has had a hard time in doing this through the emphasis on poor financial results in North America. Promoting incentives, to LaNeve, comes at an "opportunity cost" to talking about products. He is correct on both counts. GM, for instance, has more cars that get 30mpg or better, on the highway, than any other manufacturer - and yet the message has been lost, perhaps, in favor of a low-volume, high-visibility hybrid segment. Congressman John Dingell of Michigan recently (and correctly) wrote that "American manufacturers lead the industry in fuel economy in nearly every segment." GM - n.b: not Toyota - is the leader in advanced environmental research.

In terms of reassurance, Onstar is an industry-leading service, and is (largely) available only on GM vehicles. Buick has placed within the top 5 in J.D. Powers' quality surveys for eons.

"We have to get word out that we've improved, and that the marketplace bears us out," Lutz concluded. At some point, much as AutoExtremist's Peter DeLorenzo predicted last year, the positives of GM's resurgence may well belie the negative press - and it will be a sad comment on the state of today's media.

Without proposing a mercantilist policy, DeLorenzo has also commented extensively about the importance of the American automotive industry (i.e: not including the - largely - assembly of vehicles by foreign manufacturers within these borders). This week, he notes that the domestic automobile companies directly or indirectly account for between 1 of 12 and 1 of 14 jobs in this country.

GM's Lutz has (finally, some might say) offered some figures to back these theories up. We'd like to cite them, as presented, for they are compelling - and no media outlet has ever attempted research of the same:

GM; Ford, and DaimlerChrysler account for 4% of the U.S. GDP and 11% of all manufacturing shipments

GM; Ford, and DaimlerChrysler collectively employ 400,000 people directly (nine out of ten American autoworkers)

GM; Ford, and DaimlerChrysler affect 7 million jobs in auto and related industries

GM; Ford, and DaimlerChrysler provide health care for 2 million Americans, and pension benefits for 800,000 retirees

GM; Ford, and DaimlerChrysler buy 80% of the auto parts sold in the United States

GM; Ford, and DaimlerChrysler have made 85% of the total investment in the U.S. automotive industry since 1980

"So remember those facts the next time somebody says that it doesn't matter what country supplies the cars and trucks we buy," Lutz mused.

This is not a peripheral Buy American campaign. Rather, it demonstrates the need for both the media and consumers to spend as much time and effort as possible to determine the merits - or lack thereof - of what are most peoples' second-largest single purchases.

If General Motors' products - or Ford and Chrysler's products, for that matter - are uncompetitive, then let them sink. However, if they suffer more from perception than competence, then we all lose - particularly (and this is where Lutz's numbers come in) when the stakes are so great.

Again, given the responsibility General Motors bears to more employees; retirees, and dependents than does any company in the country, what purpose does unbridled doom and gloom serve? If GM is to be placed under a metaphorical magnifier that seeks to expose its shortcomings, as many a magnifier will do, should we not ensure that out metrics for measuring inadequacy are accurate?

Moreover, magnifiers have a tendency to focus their range. Comparatively little American ink has been devoted to 2005's 160,000-strong global recall of Toyota's Prius, for stalling engines; to October 2005's recall of 71,000 Scion tC sport coupes for shattering moonroof wind-deflectors, or to the same month's five-country-wide Toyota recall of one-and-a-quarter million vehicles.

Not only do these numbers call for more media and consumer attention, but they also require more study by the government than a simple guess that Detroit needs more relevant products. General Motors wants to reduce structural costs by $7.5 billion on a running-rate basis by the end of 2006. In 2004, health insurance and pension/ legacy costs were said to run General Motors $2,325 per car and truck. Last year, General Motors was said to have endured a $1,500/ vehicle burden over its foreign competition. GM's health care costs were $5.2 billion in 2004, climbing to $5.6 billion through 2005.

"If it were easy to get rid of $6 billion in health care costs, or to turn your back on the burden of close to three retirees for every worker, we would have done it by now," Lutz told us at the 2006 North American International Auto Show in Detroit this past January, predicting that the Japanese transplants might have a wake-up call in about thirty years, when their health care burden would be closer to General Motors'. While simultaneously seeking 100% capacity utilization, GM has done well to reduce this albatross, cutting hourly retiree health-care liability by 25%, or about $15 billion. Pretax savings through the DC VEBA system we referred to earlier will be approximately $750 million per quarter through 2011 - a pretax savings of $3 billion.

Nonetheless, more needs to be done to level the playing field.

Put simply, if Toyota and Honda had been operating in the United States for ninety-eight years, they'd have the same health-care costs. American Honda currently has just 1,700 retirees, with 100 retiring every month. At January's FACS (Foundation for American Communications) seminar held at the Detroit Free Press' offices in Detroit, Michigan, we heard that American Honda - which has considerably more retirees than Toyota in this country - has expressed dismay at the cost of their health care! One can only imagine General Motors' burden - and what Honda must begin contemplating to avoid a similar burden in the future.

The Ypsilanti transmission plant we mentioned earlier may be further expanded to the tune of $407 million, preserving more than 600 jobs. Finally, Michigan has offered an incentive package to keep jobs in-state. "It's about time," as AutoExtremist puts it.

"The core issues facing GM - global competitiveness; U.S. trade imbalances; health care costs, and pension funding - are issues that the nation must deal with right now," wrote AutoExtremist's DeLorenzo last December, noting that Japan's weak yen policy may give its automakers a cost advantage ranging from $3,000 on a small car to $12,000 on a luxury sport utility vehicle, and adding,

"this is not some isolated bad tiding that will only affect the Rust Belt in the forlorn flyover states; no, this situation spells trauma for the entire country.

"The U.S. will either continue to be a vital producer of goods and services and a manufacturing force to be reckoned with in the world, or we'll be relegated to becoming one giant consumer nation with little or no control over the vagaries of the global economy - or our economic destiny."

To observe this phenomenon, one need go no further than across the pond and to last Summer, when Britain lost MG-Rover. A British media that seemed intent on maintaining that national interests had no place in automotive production was thoroughly callous toward MG-Rover's passing from struggling British automaker to company-in-receivership. Only CAR's Gavin Green (formerly the magazine's editor), we thought, articulated the subject with any depth or eloquence. "Most of the pundits who pontificated on MG-Rover's final failure implied that, actually, despite MG-Rover's incompetence, it's going fine for UK Motor Industry plc," he wrote in CAR, July 2005.

"The Japanese are here! The UK now makes more cars than it did a decade ago. Nissan; Honda, and Toyota are the new Austin; Morris, and Rover!

"True, we make them here. But we don't design; engineer, and develop them here. In a neat reversal of 100 years ago, we now provide Asia with low-cost, conveniently located labor.

"They do the high value; university educated; creative, and managerial stuff. We build 'em. The only mass maker with a hefty engineering presence left in the UK is Ford.

"Yes, we have loads of companies making cars here, with good productivity and good quality. But none is British-owned. This matters in the car business. A company's home is typically where it sites its senior management; engineers; designers, and key administrators - the important jobs that young people aspire to.

"A company's home is where it will always, even in the face of low-cost Third World options, locate some of its manufacturing. A company's home is where it has loyalty; political affiliations; cultural empathy, and key suppliers.

"The disparate US; Japanese, and German-owned car makers which assemble cars in Britain help this country, so thanks very much and the best of British to you.

"But when the chips are down... they'll be off. And as we've already seen, not even a call from Tony Blair will make any difference."

It is, certainly, food for thought.

For the record, we do have confidence in GM's ability to differentiate its brands, going forward, under the experienced hand of Vice Chairman Robert A. Lutz, currently helping GM to use its portfolio to fragment its attack in a fragmented market, while harnessing GM's collective global powers to unify the strategy.

"The improvements we are seeing are real," Burnham Securities analyst David Healy told The Detroit News yesterday.

"There are a lot of basic improvements being made that will accumulate in the third and fourth quarters."

As GM gets it together both in its product development process and in the products that process produces, it remains to be seen if our opinion leaders can forgive and forget the 1970s for long enough to take notice.

- Justin