Is The Worst Yet To Come For GM?

[HotCarNut]

Originally Posted by I-Love-Pontiac

I don't understand what they can do to stay in business. With gas prices the way they are SUVs are done with. And SUVs are WAY more profitable than cars.

Everyone is saying "oh they just need to make better more fuel efficient cars". Well I'm sorry but that's not going to do it. First of all when GM makes a good car it doesn't sell (well enough), and what's even worse GM doesn't make money on small cars. They make something like $500 on a Cobalt. On a Tahoe I would image it's closer to $5,000. So just think about that. For every Tahoe sale they lose they need to sell 10 Cobalts to compensate. Which obviously is not going to happen.

Take a good look at MINI. People are willing to pay for a high-quality small vehicle. No, they won't spend 25-35k on an Aveo, but then the Aveo is nowhere near the equal of the MINI. GM's problem is that management perceives that Americans equate vehicle size with price. This trend has been reversing for years, but GM's mindset hasn't changed. No, they won't be making $5,000 per vehicle like a Tahoe, but they could make the same % profit. Remember, GM has a lot of inventory cost tied up in those large SUVs. They cost a lot to produce in terms of raw materials and labor. Small, fuel efficient cars don't cost as much to produce.

For Example:

Average Tahoe costs $30,000 to build and GM sells it to the dealer at $35,000, so GM makes $5,000 or 16.67% profit.

Average Aveo costs GM $11,000 to build and GM sells it to the dealer at $11,500, so GM makes $500 or 4.55% currently.

However, if GM spent a few thousand more and hit it out of the park, the could do the following:
Average Aveo replacement costs GM $14,000 to build and GM sells it to the dealer at $16,500 or 17.86%. MSRP would be around $18,500 - $24,000 for top-end models still dramatically undercutting MINI (yes, I know it's a premium brand) and actually INCREASING GM's margins.

[Blair1955]

I have some questions I hope some of you guys can answer.

When GM says they took a one time charge because they sold or spun off part of the company what does that mean? Sounds like they pay when they buy like EDS then pay again when EDS was sold. Maybe I don’t understand it right.

Moving people to retirement is a cost cutter but how can that be? Pensions are still money that GM is paying out each month.

What about profits made in Europe and Asia is that enough (for right now not long term) to offset money lost in North America?

Is GMAC subprime mortgage count for some of these losses?

This is not a question just an observation, over the years GM has bought companies like Huges, EDS and others that from what I see don’t add to the core business they have wasted so much money I’m surprised they are still in business at all. Look at Fiat (yes could have added to the core) that was the worse move ever.