The Future of GM: What Lies Ahead

[ChevroletRevived]

The Future of GM: What Lies Ahead

"A ChevroletRevived Editorial"
www.gminsidenews.com
March 30, 2006


The American media loves bad news. Why? It's a simple reality: bad news sells. It seems that every auto journalist is following one another in fantasizing of the doom that GM will "surely meet". This ''journalism'' is being fed to the American public more and more each day. The juicy story of GM, the world's largest automaker, in distress and losing money, is the delight of the opportunistic and anti-American media. This being a reality, what really is the straight up truth and financial outlook of GM in the years to come? GM does have problems, and they can't be overlooked. And sorry to bring it to you, but they're not going to go away any time soon. This article points out the facts of the present, and what's set to happen in the future. 2006, 2007 and 2008; Where will GM be? Let's take an unbiased look into the scenario of GM in the years to come.



The Year Ahead



2005 was, anyway you look at it, an awful year for the General. $10.6 billion dollars were lost, mainly due to the burden of legacy/healthcare costs, which average at around $1600 per vehicle. Some things were set in order that will help GM in it's pursuit for more efficiency and profitability. In an effort to shed weight, ties were severed, assets were sold and a restructuring of GM's North American Operations took place. Moving into 2006, we won some critical concessions in the form of worker buyouts and more liquid funds in the form of selling the mortgage/commercial portions of GMAC. Welcome to the new GM, where an emphasis is placed on profitability, not marketshare. This new emphasis is personified in fleet sales reductions and the cap on 2006 Impala production. Taking a look at the sales position for 2006, retail and car sales will be getting a lift from the DTS, Lucurne, HHR, and Impala, which are now out full swing in terms of sales and production. Small car sales will be getting a boost from the highly competitive new Chevy Aveo, which will be arriving in mid-2006 as a 2007 model. In 2005, sales decreases were primarily due to the lower sales of SUV's and Trucks. With the introductions of the Tahoe, Yukon and Escalade, the load placed on the 2006 model cars to perform is decreasing dramatically. The truck end will be covered with the introduction of the important GMT-900 trucks at the New York International Auto Show. Also set to be introduced at the New York show are two very important Saturn models; the Aura sedan and Outlook crossover, based on the Lambda platform. The overall picture for 2006 starts to look brighter when you take into account that 1. GM's new pricing strategy is working; incentive amounts are down, fleet sales are decreasing, and average transaction prices are up $240, 2. Car/retail sales are going up, 3. SUV sales are increasing dramatically, 4. Truck sales will be on the rise with the introduction of the GMT-900 trucks, and 5. The Saturn Aura will be going on sale. Financially, the cost reductions, sale of assets and increased sales hopefully will equal less of a loss for the year 2006.



What's in Store for 2007



Moving into 2007, GM's outlook will be on the rise. In January, the contract with the UAW is set to expire. The outcome of this event determines the fate of GM; if the path we are on continues, it will lead to bankruptcy. The crossroads in a sense; in order to become competitive, union costs need to decrease dramatically. NYAIS in January will bring the introduction of the 2008 Cadillac CTS and possibly the production version of the 2008 Buick Enclave. 2007 is an important sales year; Aura, Outlook and Aveo will be out full swing, as will all variants of the GMT-900 SUV's and Trucks. 2008 models coming into dealers in 2007 include the Buick Enclave, Cadillac CTS, GMT-360 SUV's and a rumored large luxury sedan from Cadillac. Financial information for the year 2007 is hard to pinpoint. Depending on UAW concessions and sales of important new models, the margins could vary wildly. Say what you will, but I predict that GM will post a small loss for the year 2007. It's hard to say, because a steady uprise in global sales could help to change that outlook.


2008; a comeback year?



The year that things are really going to start looking for the better is 2008. Enclave, CTS, and the GMT-360 SUV's will be out in full, with the GMC Acadia and Cadillac BRX debuting at the NYAIS show with the possibility of a new Camaro and retro themed re-design of the Impala, based either on Chi or Zeta Lite, depending on if it goes FWD or RWD. The first full year after the union concessions, in 2008 some major new models are going to be hitting their sales stride. The possibility of a Cadillac introduction of an ultra luxury sedan still continues into the 2009 model year, should it not debut in 2007 as a 2008 model. 2008 should be a good year for GM, and I fully expect GM to post an operating profit not only globally, but for the North American operations also.



Conclusion:



The fate of GM hangs in the balance. The next few years are critical to GM's survival. 18 month GM stock insurance is currently going for more than 5 year insurance. It seems the the general consensus is: "If GM is still around in the next 18 months, they're not going anywhere''. Stock is trading at all time lows, and while there is room for things to get worse, GM has pretty much hit rock bottom; there really is nowhere to go but up. The message to GM: Stay the course on pricing, cost reductions and new models. The message for fans and America: we need to stick it out with GM during these tough times, and expect that GM will deliver in the years to come. Things are going to get better, and the most important vote is to vote with your money. GM's product position is being enhanced continually, and Saturn is poised for some major sales increases, due to the arrival of some competitive new models. While the long road ahead is rough and bumpy, that road leads toward a brighter future, with a stronger, healthier GM residing at the top of the automotive world order.

[Xenon]

Nice article. After reading this, it kinda gives me more faith in GM. But GM's main focus should be on small, entry-level cars. Small cars can easily create brand loyalty if done right.

[CobaltSScrazy]

agreed my gen, gen y is going to be buying cars now and forever. build them a cobalt/hhr that they love and have no problems with and they will be a customer for at least one more car sale ( i would say for life, but its just not true for most people, there is no loyalty sadly, at least not non-toyohonda loyalty)

[ChevroletRevived]

True. People seem to be loyal to toyotahondassan but not GM. Hopefully the Cobalt/HHR sales will make a difference though.

[69Firebird400]

There are some inconsistencies between your future model mentions and nsap's Future Product Guide (http://www.gminsidenews.com/index.ph..._Product_Guide)

The GMC's Lambda crossover is the Acadia, not the Graphyte.

It's uncertain whether the GMT-360s will be continued beyond 2008 model year.

The Aveo is tops in its class for sales right now and the new one is the best looking vehicle in its class, including the upcoming Japanese competition from Honda, Toyota, and Nissan. However, I hope its crash test results don't hurt it in the marketplace...

You're right that the next 18 months will be very interesting. It will probably be either great after that, or the end of GM as we know it. (Actually, we could already argue that GM "as we knew it" is already gone, since it doesn't have 50% market share or all the other conglomerated businesses anymore.)

[ChevroletRevived]

My mistake. I edited it to say Acadia, which is what I meant.

[mgescuro]

Originally Posted by ChevroletRevived

Say what you will, but I predict that GM will post a small loss for the year 2007. It's hard to say, because a steady uprise in global sales could help to change that outlook.

Perhaps. But the "small loss" will be padded by the subsequent sales of Suzuki, Isuzu and GMAC.
One would need to take into account that and see where GM stands.