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GM's 1st-quarter profit to take hit from recalls

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#1 ·
GM's 1st-quarter profit to take hit from recalls
Automotive News
April 23, 2014
by Tim Higgins

DETROIT (Bloomberg) -- This was supposed to be the year when General Motors made a record $10 billion in profit.

Now, CEO Mary Barra will be hard pressed to avoid posting a loss when GM announces its first-quarter earnings on Thursday.

The cost of recalling 2.59 million vehicles linked to the deaths of at least 13 people -- combined with continued losses in Europe and new challenges in Russia, Australia, Asia and South America -- have prompted analysts to downgrade their earnings estimates.

"It's certainly been a trying 100 days" since Barra started on Jan. 15, said Brian Johnson, an industry analyst with Barclays Plc. This week, Johnson lowered his earnings estimate to a penny-per-share loss from a 20-cent profit.

He predicted that the company would have its worst results since the fourth quarter of 2009, when GM was fresh from its U.S. government-backed bankruptcy reorganization.

Over the past four weeks, 12 of 14 analysts surveyed by Bloomberg lowered their estimates for GM's first-quarter adjusted EPS, bringing the consensus estimate down 88 percent, to 6 cents a share.

A year ago, GM reported an adjusted 67 cent per share profit, and a first-quarter net profit of $1.18 billion.

This quarter, it has forecast taking a $1.3 billion loss for costs related to recalling 7 million vehicles, including those with faulty ignition switches. It has also said it will take a $400 million pretax charge for changes in Venezuela's currency. That will come on top of any losses in Europe, which have totaled more than $18 billion since 1999.

Full article at link.
 
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#3 ·
this new reminds me of pre Bankruptcy GM , I wonder will the senate call good old Rick Wagoneer and Fritz Henderson to the stand because this happened under their watch
 
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#8 ·
as I wrote in another post, for me it is very strange the sudden retirement of Dan Akerson about 3 weeks before hell went loose on GM, I got the feeling that he must have known something and he took his hiney out of the way before it got burn
 
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#13 · (Edited)
Read this on CNN - GM recall issues run long, deep, and wide

So General Motors' Dan Ammann says the recall of 2.6 million Chevrolets and other models has made no dent in GM's car sales so far. Citing his company's 4% U.S. sales gain in March and a "decent start" in April, the new president says, "It's hard to say there's a measurable impact there."
Ammann may be singing a different tune in 10 days or so when GM (GM, Fortune 500) reports April sales results. Its performance so far in 2014 has been shaky, with market share seven-tenths of a point below 2013 and overall sales down 2%. Some brands are already showing weakness. In March, sales of high-profit Cadillacs and pickup trucks looked shaky. GM finished the month with just 16.7% of the market, less than a percentage point ahead of Ford Motor (F, Fortune 500). GM investors aren't waiting to see the numbers and are already heading for the exits. They have sold down GM shares 17.3% since the beginning of the year.

All shoppers, even weekend tire-kickers, should be paying attention to the recall. While none of the recalled cars are still in production and they are long gone from dealer showrooms, there has been a steady drip of disturbing information about what really goes on inside GM. It brings back memories of the company that investigated Ralph Nader in the '60s and quietly put Chevy engines in Oldsmobiles in the '70s, and suggests that GM is not nearly the upstanding corporate citizen it has portrayed itself to be for more than a half-century.
Critics have been unchained. In a blistering broadside posted on the investor website Seeking Alpha, Michael Blair, retired CEO of Canadian parts supplier Automodular went right to what he sees as the heart of the GM problem. "In my view," he wrote, "GM has a culture that is puerile, focused solely on short-term profits and replete with bad practices and weak governance."

Blair knows firsthand. He says Automodular got burned after it invested millions of dollars in equipment and training to fulfill a contract for the subassembly of ****pits for the Chevy Camaro. As soon as production was about to begin, by his account, GM demanded a 50% reduction in price or threatened it would move the business to another supplier. When Automodular refused, GM dropped the hammer, and it was forced to shut down production -- at a loss of millions of dollars. He concludes: "It seems that GM knew of the [ignition switch] problem, hid it from sight until it could not be hidden any longer, and now profusely apologizes for the "terrible things" their actions gave rise to. The apology is likely hollow."

Blair isn't the only one who doesn't think GM walks the talk. Similar examples dot the 619 pages of GM engineering documents released by the House Energy and Commerce committee that I first saw posted on The Truth About Cars website.

Here's just one: Less than a year ago, a member of NHTSA's Office of Defect Investigation wrote an unusually candid memo to GM about its tardy response to NHTSA inquiries. "The general perception is that GM is slow to communicate, slow to act, and at times requires additional effort that we do not feel is necessary with some of your peers."
That's a damning assessment for a company that purports to be a responsible corporate citizen. But it came after GM has spent the better part of decade sidestepping responsibility for the faulty ignition.
Like Captain Renault discovering that there is gambling going on in Rick's Café, Mike Robinson, GM's vice president for environment, energy and safety policy, is shocked, by the criticism. "This note from NHTSA, both the content and tone, comes like a bolt out of the blue," he states in reply. "We worked way too hard to earn a reputation as the best, and we are not going to let this slide."
MORE: 10 things I learned at the New York auto show
To me, the most shocking disclosure in the documents is not that GM prevaricated owning up to the defect, then decided that a fix was uneconomical, and didn't move on a recall until the evidence of a safety danger was overwhelming. GM is, after all, a large, lumbering, corporation under acute financial pressure. Budgets -- and, more important, careers -- were at stake with the small cars, and GM was determined to make them successful. The evidence in the accident reports was confusing because many of the fatalities involved alcohol and improper use of seatbelts. NHTSA isn't blameless either, since it needed years to get to the root of the problem.
No, what really worries me is evidence of deliberate fraud by a GM engineer. In a violation of standard industry practice, the engineer signed off on a design change that included a stronger spring and a longer plunger -- and didn't assign a new part number to the switch -- thus covering up the defect. Since there was no documentation of the change, GM didn't find out about it until a lawsuit led to a junkyard investigation of discarded models. During depositions in the suit in 2013, the engineer responsible for the Cobalt switch said he didn't recall ever authorizing such a change. (He has since been suspended).
MORE: The General Motors you want to sue no longer exists, says GM
CEO Mary Barra, a GM lifer, has vowed to fully vet GM's failures, and to do so, she has named another GM lifer, Jeff Boyer, to the newly created post of global safety chief. His experience may be valuable, but to some observers his appointment is like asking a goldfish to critique the water it swims in. "When people are within an organization for a long time, there is a certain institutional myopia that sets in" says Gary S. Vasilash, longtime editor of Automotive Design & Production. "There is a certain ingrained notion of "this is how we do things."
Barra is going to have to dig deeply to find out what is rotten at GM's core.
And car buyers are going to have to play close attention. To top of page.
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All the recall problems seen to come to from old GM cars that have one thing they are nearly all "FWD" Ion/G5/Cobolts that were made in that one last decade of "crappy cars" that dragged GM down into Chapter 11, that poor ole Mary Barra got slated for being totally brutally honest and true for saying "No more crappy cars".

GM need to advertise the hell out of the fact the new Chevrolet cars are near the tops of a lot of owner satisfaction surveys at the moment in the US, and are not the same crap car FWD Saturn brands Ion crap & Pontiac (Use to be an awesome brand) brand crap FWD Pontiac G5 that is now a gone out of business with crap steering problems that is the route cause of the nasty mud that is starting to stick to GM, which is sad to watch.

With GMs huge wealth creators the trucks & Caddy sales slipping a little this year, GM are going to start struggling a bit this year with profits, its a shame GM does not invest a bit more in a fuel efficient more durable reliable RWD platform that could be used in Opel's in Europe. Huge loss FWD Opel have lost $18 billions in the last decade, all they keep punching out is hard to make a profit on the roof small tiny FWD cars, you would have thought just one high profit margin durable RWD car thats fuel efficient and fun to drive thats a wealth creator is something Opel might have been looking to bring in rather than loads of the same FWD small car that they can't make profit on.

GM need to get more into Motorsport as a way of shaking down all new cars each car should complete at something, that give the cars a good early warning system when cars are driven to the extreme limits they quickly show up a lot of defects in Motorsport shakedowns rather than a hermetically sealed FWD Saturn Ion or Pontiac G5 laboratory, GM need to enter cars like the Astra platform in Europe in the World Rally Championship if it managed to topple VW steal their crown not only a lot of sales would be gained, a lot of early warning shakedown steering problems with the cars platform would shown up almost instantly in the tough extreme environments conditions that a WRC operates in, it could be the best bit of cash GM ever invested, a much better investment the $500 millions wasted by Korean made Chevy UK who struggled to hit 200 sales some month sponsoring Manchester United who are probably the most hated team by the vast majority of soccer fans in Europe that did not fix their low sales numbers.



GM needs to give cars like the Astra platform a good secondary feedback early warning system shakedown in WRC in the real world. GM need to supplement the primary testing system of computer simulated, hermetically sealed Ion/G5/Delta labs & rolling roads of the past, and do real world in service testing in something like WRC as well, it will show up all the problems a lot earlier. All GM have do is act quickly fix the problems rather than their time honoured Wagoner way of burying their head in the sand and hope all its problems it will go away..
 
#15 ·
Interesting comment, at this point I don't think it means much, and a play on words, for a few reasons; the first 1/2 of March the weather was still pretty crappy for a lot of the country, which depresses sales, and we all know a higher percentage get booked in the last days/week of a month, even during normal times anyway.

At this point GM has to do and say everything it can to keep the perception up, opinions/sediments tend to snow-ball.
 
#16 · (Edited)
I hope all those brilliant businessfools present and future learn at least something from this. Next time beancounters and lawyers come up with the brilliant idea to save 1 cent on some part, and that it's cheaper to pay for lawsuits and settlements resulting from the deaths and damages consequence of saving that 1 cent, have security escort them out the door.
 
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