GM posts huge loss in Q1 2008
Don’t point your browser towards The Truth About Cars today as it’s likely that Robert Farago’s saliva will end up dripping out of your monitor and all over your desk. It’s just my opinion, but I’m pretty sure the recession in the US is like a godsend to him.
General Motors just posted a huge loss for the first quarter in 2008. In typical GM fashion, the press release accentuated the positive:
- * First quarter revenue of $42.7 billion
* Positive adjusted automotive earnings before tax, with improvement of over $160 million
* Positive reported automotive earnings before tax, down by $118 million
* Adjusted net loss of $350 million, reported net loss of $3.3 billion
* Continued strong results in emerging markets
* Liquidity position of $23.9 billion
Don’t you love the way they slot that 3.3 billion dollar loss in the middle of all that positivity? The elephant in the corner of the room.
Automotive News tell it a little straighter:
General Motors said today it posted a net loss of $3.25 billion during the first quarter — the bulk of the red ink coming from one-time charges for its troubled GMAC investment and for continuing problems at supplier Delphi Corp.
GM also said it lost about $800 million in the quarter because of costs stemming from the UAW’s two-month-long strike at supplier American Axle & Manufacturing Holdings Inc…..
….GM said during the quarter it took a $1.45 billion impairment charge for its 49 percent stake in troubled financier GMAC. It also took a $731 million non-cash charge for estimated costs of supporting Delphi’s ongoing bankruptcy restructuring.
GMAC was once the unstoppable cash cow for GM but in a climate where there’s recession looming and a global credit squeeze, financiers are finding things a lot tougher.
GM say they’re still in good financial shape with decent liquidity and strong performances in places not named the United States. Many of the costs were related to things outside the core business of making cars and should be able to be resolved.
They ought to get things resolved pretty darn quickly, though, as the core business in the US is heading downhill fast and may soon join the non-core business in providing some real trouble for GM. Fuel prices are only going up and GM’s big margin vehicles, the SUV fleet, are about as popular as the guy who did a smelly in the elevator.
The time for big displacement is over. The time for smart engineering is now.
Let Saab run.
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Yeah boy eii think ur riiiiight… lets git sum of them there SUVeeee’s ova dare to that there urope place and let em see some real gurd american steel. that’ll lern ‘em!!!
It will be interesting to see how the next few months go here in the USA. I think the thing that is really affecting the consumer right now is unstable and rising gas prices and that is affecting the sales of everything. And unstable is a large part of the problem.
Robert Fargo and the rest of the GM bashers can point their fingers at GM’s inability to produce a fuel efficient vehicle but that is sort of a moot point now. All automakers are in this boat of slow sales.
Think of it this way – the recent mortgage crises resulted in people purchasing homes that they could not afford and one or two years into the loan (due to adjustable rates) they could no longer afford living in the house.
Same thing could be applied to a vehicle. Lets say two years ago a typical customer with a family buys a something like a Honda Odyssey Mini-van that gets about 19mpg Now that gas is averaging about $3.50 a gallon – that van (along with payments on the 60 month loan) is now becoming unaffordable to drive on a daily basis. Nobody is going to buy a two year old van that gets 19mpg when they could get a new one for close to the same price. The customer defaults on the loan and the rest is history.
Maybe a rash example – but it could happen.
And lets be honest, GM pretty much gives Chevy Cobalt’s away here in the USA and on the average they get fairly decent fuel economy and you can get a new one for next to nothing (not that $14,000 is nothing). But they are very affordable. Just like not everyone wants a Toyota Corolla and buys a Tundra truck, lots of people purchase a Tahoe over a Cobalt because it is something they wanted. And now they pay for it.
As for the automakers – energy prices are raising too quickly for them to shift to more fuel efficient vehicles overnight. They need time to adjust to consumer demand.
In the end, until the dollar stabilizes and recovers the price of oil is going to continue to rise and the consumer is going to bear the brunt of it which is slowing the recovery here.
Get the TTiD cars here QUICK!
GM, like everyone else, wants to sell cars that are profitable, meaning decent margins and decent volume. In its home market, consumers like to buy trucks and relatively larger, more powerful cars. They do this pretty consistently……until credit or gas get too expensive. Neither have been until recently, thus the emphasis on big iron. When things go south, as they did in the 1970’s, the cry goes up about GM being out of touch. However, if GM stuck with smaller cars back then, they would have lost out when gas and credit got cheaper a decade later.
Along with econo-cars, the Japanese have been selling increasing numbers of large vehicles here, and for the same reason as GM. They only stay ahead of the game because of lower unit costs. If GM enjoyed the same cost structure as Toyota, it might pay to place greater emphasis on the low end of the market. Since it doesn’t, it can’t.
GM correctly perceives that Americans are fickle when it comes to economical cars. We demand economy for a while, then ease off when gas prices drop. With 70% of our gas coming from overseas, we control neither supply nor price. If gas was made permanently expensive, as it is in much of Europe, then we’d see a corresponding emphasis on small, efficient cars. Our leaders could impose permanently high taxes on fuel and punish large displacement engines, but they would not stay in office very long if they did.
Given GM’s specific circumstances, shifting more of its production to lower-cost countries offers one way out. Selling more diesel vehicles is another, since diesels enhance the economy of all types of vehicles, not just small ones. Both are better than trying to make money on low-margin small cars that folks here tend to abandon as soon as gas prices and the economy get better.
On a cash flow basis, given the economy, the strike, and the Delphi stuff, that’s not a bad result at all.
And it’s a good time to take one-time charge offs. That way when they have a really good quarter, all that stuff will be off the books and won’t spoil the party.
From what I’ve heard, thats actually much better than what was anticipated.
GM stock is up over 10% today. GM units are up 20% every where in the world except the US. If it was not for the labor strikes there would have likely been a small profit for the quarter. I am no GM apologist, but they are getting closer to turning the corner.
Where is the TTiD? How about the plug in hybrid? Tesla motors has one coming out this summer, and you mean to tell me that the batterries haven’t matured yet? Please!!
Plug in hybrids are a great idea until one realizes the demands on the electrical grid will increase and it really cannot handle that sort of capacity at this point. Think about a hot summer where everyone’s home A/C is on. Plugging in cars will place far too much demand and the car chargers would get shut down. A small amount is not a big concern, but widespread use of plug-in hybrids is not going to solve the problem.
As for the Tesla Roadster – that is great. But how many people are going to spend $100,000 on one to drive back and forth to work? Not me. You can buy a lot of gas for that kind of money.
@Tedjis
Too bad a plug-in hybrid would place less strain on the electrical grid than your average air conditioner, fridge, or dryer. The “the grid can’t handle the extra strain” story is one of the lamest excuses I’ve heard for why people aren’t selling plug-in hybrids or electric cars.
And I’m willing to bet that alot of the Tesla’s cost comes from the fact that it uses short production-run batteries and a motor that might as well be custom made in a custom-built chassis based on a $50k car.
Engineering a powertrain from scratch isn’t cheap, and trying to divide that investment across a 3 or 4 figure production run is obviously going to lead to a much higher unit cost than you could have with a bigger production run. Economies of scale, you know.
Now if I was going to try to make a real difference with an electric car, I’d base it off of something like the Nissan Versa or the old Scion xB. Give it ~50 hp (which would drive like a 100hp gas car), a range of ~150-200 miles, and a pricetag of less than $25k and you’d have something truly special.
GM’s SUVs “about as popular as the guy who did a smelly in the elevator.” Seems like the worst possible time for Saab to introduce another SUV? Maybe GM will finally think about the 9-1 and it’s potential in the USA. I’m only dreaming though!
Richo - What you said was about the same as me coming up to you and yelling CRIKEY, THAT’S NOT A KNIFE, THIS IS A KNIFE, PUT ANOTHER SHRIMP ON THE BAHBIE. I mean, Christ, have you noticed where GM is sourcing all of its performance cars from? AUSTRALIA. New Camaro? Pontiac G8/El Camino? GTO (though that’s old)? All from Holden. Australia is the world’s capital of bat-shit crazy hoon-mobiles. Hoon is an Australian term! Glass houses…mate.
Tedjs - Alex is right (though snarky), having a lot of cars plugged into the power grid is about the same as having a lot of cellphones plugged in, it really doesn’t make a difference. They’re just Li-Ion batteries, not inverters (inverters might not be what I’m thinking of, you get the idea though).
Every major car company isn’t doing as well as they were a few months ago. That’s what happens in a reccession. I don’t think it has anything to do with GM selling SUVs and other cars with crappy MPGs, because GM has a lot of cars that get great mileage, and most of their SUVs are pretty old at this point and make a ton of money when they DO sell (think 9-7x and the 9-5). It was right in the report, the losses can pretty much all be chalked up to the recession and the strikes.
I don’t see how plugging in your car at night is going to “trip the grid” with power outages. Its the big oil companies and those in the pockets of the oil companies that don’t want this technology to come out. Thats the truth. GM needs to hurt a little more with high gas prices, soon even the red necks in Texas wont be buying pick-ups and SUVs. Although it wont be GM that will come out with the first big plug in hybrid. It will be Toyota or Honda, thats my bet..
The question of whether the load from a large plug-in hybrid fleet will ‘trip the grid’ or not depends on when peak electricity demand is. This is because the capacity of the electricity system is designed to meet the peak load. If the additional demand makes that peak demand larger, then this will eat into the capacity margin between peak demand and peak capacity. But if the additional demand comes when the load from other sources is lower, it will be using capacity which is already in place to meet the peaks.
I would expect that most plug-in hybrid owners would charge up their vehicles overnight, and in most countries power demand during the night is a lot lower than it is during the day, even taking into account domestic air conditioning in warmer latitudes. So it’s unlikely that plug-in hybrids would have a significant impact on capacity margin or make a network outage more likely.
I guess I should have been a bit more accurate during my initial posting. The concern is during peak demand periods when people would be charging their vehicles at work. One of the problems has always been with an all electric vehicles is their range, so if employers provided an outlet for owners to charge their vehicles (at a small cost of course) would be rolling blackouts.
The college I work at has been ‘shut down’ several times during the day in the summer due to the fact that homes and small business are at a high demand for power (central A/C), so if I was charging my new plug in hybrid – I might be walking home.
Certainly this is not a concern with a small amount of cars charging, but if gas goes up to $5.00 or $6.00 a gallon as predicted an electric vehicle alternative (if widely available) would become popular as fast as you could say ‘Bush Tax Rebate Check’…