GMs best seller is Green Cars…Just Kidding!

Monday, November 16, 2009

Remember when GM went bankrupt?  If you can't remember, Obama and the entire leftist echo chamber blamed SUVs on GM's failures.  It was GM's abstinence in entering the hybrid market that caused their collapse, but not union contracts.  Don't look at the union contracts.  Anything but big labor, because there is nothing to see here.

Thanks to the wonderful strategy of the left, GM's best sellers since bankruptcy are hybrids;  Just kidding!

AP reports:

"GM said its improved performance was fueled by new products including the Chevrolet Camaro muscle car, and the Chevrolet Equinox and GMC Terrain midsize crossover vehicles. The company's top sellers through October were the Chevrolet Silverado pickup truck and Impala full-size car."

Good thing we screwed the bondholders, AP goes on:

"The better showing also reflected lower debt payments. The automaker paid $250 million in interest for the latest period, far lower than the $1.1 billion it had to pay in the first quarter, before it went into bankruptcy protection. Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion that has since been cut to $17 billion."

Too bad the government still has its hands in GM's pocket:

"Although GM reported positive cash flow for the third quarter, it does not expect that to continue into the fourth quarter because of the government loan repayments and a $2.8 billion payment to help Delphi Corp., its former parts division, out of bankruptcy protection."

And, union workers are going to love seeing their retirement fund diluted by:

"GM has said it plans to sell stock to the public late next year so taxpayers can recoup at least part of their remaining investment."


CJ said...

IMHO both political explanations are wrong. The unions are a minor factor. GM's labor being cheap wouldn't solve its problems, and an increase in labor costs wouldn't hurt it competitors that much. The key is producing products that people want.

The SUV argument was only right for psychological reasons when fuel costs spiked last year. People's fuel costs went up a $100 or so, and they acted like this was breaking their budget. If those families can't afford a $100 fluctuation in fuel costs, they had financial problems before fuel went up. How many people who said they couldn't afford the extra $100 of fuel costs bought a new car that depreciated at $200/mo during its first two years of service?

The other psychological component is the impact of large cars on the environment. Someone concerned about the environment could do more by reducing his number of trips than by buying a smaller car. If everyone in the world buys small cars of today's design and drives one, it will hugely damage the environment. The problem is getting around by carrying 1000kg of metal with you, powered by burning fuel. How efficient the motor is or carrying around a few hundred kg more or less will not save/destroy the environment. (I ride a bike. Mfg parts for it has an environmental impact, but its way less than a car. There's a product that will save the environment.)

GM needs to make products people are excited about. I am not sure how to do this, so I'm not eligible for a seat on its board. I agree that political pressure from gov't loans will be a bad thing for them. Business is about making products that people love, not politics.

November 16, 2009 at 6:49 PM

CJ - I think that you would see the biggest benefit as far as being eco friendly would come from improvements in manufacturing and not mpg. That's my personal thought on it.

I've been reading the financial news for a while and I clearly remember reading articles as far back as 2000 in WSJ regarding the per unit costs of labor benefits.

The truth is, they were not minor. You need to have good operating margins to run a business. You need profit to continue doing business. Smaller margins means less capital to invest and more pressure to need to leverage the company with debt and equity financing. GM sells more cars than any other manufacturer and yet, they couldn't make a profit. That's not the result of poor products.

November 16, 2009 at 7:32 PM

its called Gangster Government my friend!!

November 16, 2009 at 11:03 PM

WHT - I feel like it's more like Barney Fife trying to oust Sheriff Andy.

November 17, 2009 at 12:55 PM
CJ said...

I am not knowledgeable enough about the car business to be sure unions are not a major factor. I think, though, that if they had an exciting product they could get their margins up and labor costs wouldn't be a big factor. Labor costs are a big deal for high volume low margin mfg. Maybe the problem is GM is trying to be high volume low margin when that's not their strength.

I agree completely that improvements in mfg are at least as important as mpg. That's why I opposed the cash for clunkers prog. I do think even things that don't make perfect environmental sense, such as recycling things other than Al and battery hybrid cars, are good things in general. They pave the way for new technologies that do make economic and environmental sense.

November 17, 2009 at 9:55 PM

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