Are GM's financial assumptions realistic?

[HoosierRon]

For liquidity planning purposes, GM is using assumptions of U.S. light vehicle industry volumes of 14.0 million units in 2008-2009 which are significantly below trend. Other planning assumptions include lower U.S. share of approximately 21 percent and continued elevated average oil price estimates ranging from $130 to $150 per barrel by 2009. Based on those assumptions, GM is taking actions to further reduce structural cost, and generate cash, with the goal of maximizing liquidity.

source

I question the accuracy of these assumptions for the following reasons:

First, GM is assuming Americans will buy 14.0 million units in 2008-09. However, last month, the sales rate was 13.64 million units and dropping fast. With Fannie Mae and Freddie Mac being taken over by the government, is it realistic to assume sales are going to start increasing?

Second, GM assumes a market share of 21%. It's market share of trucks is higher than that, but its market share of cars is below 18%. It had a good bounce last month, but only because Toyota and Honda ran out of inventory. Two things are going to happen: the competition will readjust their supplies, and the truck market will continue to fall. When this happens, will GM have 21% of the market?

Third, GM assumes oil prices at $130 - $150 a year from now. The only way this happens is if the U.S. plunges into a recession and demand falls. But if this happens, demand for new vehicles will fall, too.

Is it time for Wagoner to take off the rosy glasses?

[mjd1001]

If things work out well for GM the next year or so...then the economic projections used today are fine. However, if things don't go so well, and the numbers they are using are indeed overly optimistic...it is a PR move for management to say "We made the right decision, but economic conditions deteriorated in a way we didn't expect". So, maybe its kinda a back-door CYA?

[2000GTPBROTHER]

When Merrill Lynch started this latest crisis earlier in the month, they said $15 Billion to get through 2009 in a 14m 2008-14m 2009 market.

All GM did today was try to meet at least some of their numbers.

[dindak]

Given the volatility in the market, it's impossible to make anything that is overly accurate.

You have to go on your best estimate. I think GM is doing the right things and will adjust accordingly in the coming months.

[Ambalanche]

I question the 21% market share now that I just read they arn't bringing the Beat here and the Cruze won't be comeing right away because the Cobalt is "comeing into it's own" and has plenty of life left....So, no, the assumptions, as usual, arn't realistic!

[vcs2600]

When was the last time GM correctly predicted their output and was not over-capacity?

Don't forget Wagoner was the 29% or Bust guy

[big swede]

Originally Posted by HoosierRon

source

I question the accuracy of these assumptions for the following reasons:

First, GM is assuming Americans will buy 14.0 million units in 2008-09. However, last month, the sales rate was 13.64 million units and dropping fast. With Fannie Mae and Freddie Mac being taken over by the government, is it realistic to assume sales are going to start increasing?

Second, GM assumes a market share of 21%. It's market share of trucks is higher than that, but its market share of cars is below 18%. It had a good bounce last month, but only because Toyota and Honda ran out of inventory. Two things are going to happen: the competition will readjust their supplies, and the truck market will continue to fall. When this happens, will GM have 21% of the market?

Third, GM assumes oil prices at $130 - $150 a year from now. The only way this happens is if the U.S. plunges into a recession and demand falls. But if this happens, demand for new vehicles will fall, too.

Is it time for Wagoner to take off the rosy glasses?

Yeah but you forgot about all the new product available this year to make those numbers realistic. um whoops. I think Wagoner is just spewing niceties to buy him some more time. He must be close to another compensation goal that will swell his retirement package to even more astronomical levels.

[markusername]

Originally Posted by vcs2600

When was the last time GM correctly predicted their output and was not over-capacity?

Don't forget Wagoner was the 29% or Bust guy

Ah yes, the 29% or bust Rick the D$#@. Don't be too hard on him though as he has accomplished the following great things:

Rick - now in his EIGHTH year as CEO lets see what he has accomplished in those 8 years as CEO:

a) 10% slide in US marketshare
b) 10's of BILLIONS of dollars of stockholder value gone
c) 10's of BILLIONS in losses
d) 10's of thousands of workers gone
e) Hiring Lutz the Clutz who in 2005 as oil prices were going up said 'rich people don't care about gas prices'. Your right Lutz, but what percentage of the population has the wealth you have? Also noted for claiming that hybrids were stupid.
f) Finally in this year most likely losing title as worlds largest.
g) Stock price at 20 year low
h) Losing money for how many years and blaming everything on the 'environment' while in the same 'environment' Toyota and Honda make BILLIONS of profits.
i) market share at historic low
j) the majority of american won't even CONSIDER GM as an option (from a minority of americans when Rick came on as CEO)

BUT Rick did make sure his pension is BANKRUPTCY proof. I don't know of any other company that would accept such an inept leader.

[mpsrent]

I suspect oil prices will end up on the high end of their projections while market share and total sales will be lower than anticipated. They appear to be optimistic projections.

[zabolots]

I think the 14 million sales in 08 & 09 is way too optimistic given our current financial crisis. It's gonna get a lot worse before it gets better IMO.

[Slideways]

Originally Posted by markusername

Also noted for claiming that hybrids were stupid.

The majority of american won't even CONSIDER GM as an option (from a minority of americans when Rick came on as CEO)

Ok, I've got to agree with Bob that hybrids are pretty stupid, congrats to Toyota for marketing bad economics to the masses.
On your second point, I think that GM's image is better now than it was in 2000.

The rest of your points, well, are good points. I wish that wasn't the case.

[skylark68]

While i'm not a Rick apologist, I believe that he and Bob have made some good moves for GM.

The Malibu is light years ahead of the 2000 model and totally competitive with the Accord and Camry.
The GMT-900's are wonderful trucks and SUV's (class leading IMO) that are unfortunately in a market that has seemingly collapsed.
The Impala is selling in large numbers for a seemingly dated design.
Buick is in the midst of a product renaissance that would have been unheard of in the bargain basement LeSabre/Regal/Century days.
Who would have guessed in 2000 that Pontiac would have a 2 seat roadster that has sold in decent numbers as well as a RWD sedan?
I could go on, but the market is shifting in ways that Rick nor anyone in the automotive marketplace could have foreseen. Obviously Toyota didn't guess right either, or they wouldn't have built a massive facility in my home state to build trucks that very few people want...

[johnnyl321]

BUT Rick did make sure his pension is BANKRUPTCY proof. I don't know of any other company that would accept such an inept leader.[/quote]

Sure you do....The United States of America Inc. elected an inept Chairman....twice. Actually he was only elected once. We all remember what happened the first time.
Wagoner and the other Dubya certainly are birds of a feather. Ostriches to be precise. Every time they see something that they feel may cause them discomfort, they just put their heads in the sand. Unfortunately, unlike ostriches, there is no real predator out there to get them....just have to wait until they're done doing all they're damage.
Isn't it a shame how in just 8 years that both GM and America have gone to pot under inept leadership and the only thing we do about it is complain online? In the 50s, it was said what's good for GM is good for America. Now it seems the only thing good for GM is China, and the only thing good for America is WalMart...where everything is made in China.

[Pinnacle]

Originally Posted by markusername

Ah yes, the 29% or bust Rick the D$#@. Don't be too hard on him though as he has accomplished the following great things:

Rick - now in his EIGHTH year as CEO lets see what he has accomplished in those 8 years as CEO:

a) 10% slide in US marketshare
b) 10's of BILLIONS of dollars of stockholder value gone
c) 10's of BILLIONS in losses
d) 10's of thousands of workers gone
e) Hiring Lutz the Clutz who in 2005 as oil prices were going up said 'rich people don't care about gas prices'. Your right Lutz, but what percentage of the population has the wealth you have? Also noted for claiming that hybrids were stupid.
f) Finally in this year most likely losing title as worlds largest.
g) Stock price at 20 year low
h) Losing money for how many years and blaming everything on the 'environment' while in the same 'environment' Toyota and Honda make BILLIONS of profits.
i) market share at historic low
j) the majority of american won't even CONSIDER GM as an option (from a minority of americans when Rick came on as CEO)

BUT Rick did make sure his pension is BANKRUPTCY proof. I don't know of any other company that would accept such an inept leader.

post 666 LOL

well said

[Buickman]

where are they accounting for the decrease in the lease portfolio? in the last 90 days the residuals on heavy truck product has dropped by $800 Million or so. this is a much bigger problem than most people realize.

as to stemming the market share loss, they haven't been able to that in twenty years. why in the world would anyone believe they will be able to do so now? until the marketing changes the slide will continue regardless of the new products.