GM going BK opinions?

Fiveofeen · August 4, 2008

A couple articles from "Automotive News" you need a subscription to access this so I'll copy and paste it. Two different articles one on GM the other on Chrysler, it also touches on Ford and Mazda.

DETROIT — A $15.5 billion loss is bad enough, but that may not even be the worst news in General Motors' abysmal second-quarter earnings report.

Here's the really bad news: General Motors' North American quarterly revenue totaled $19.8 billion, down nearly $10 billion compared with the same period a year earlier.

Revenue is a strong indicator of an automaker's health because it does not contain any one-time items, says Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

Revenue shrinks

GM second-quarter results showed sharp declines in North American and overall revenues

Q2 2008 Q2 2007

N. American revenue $19.82 billion $29.66 billion

Revenue $38.15 billion $46.67 billion

Adjusted net income - $6.34 billion $1.30 billion

Reported net income - $15.47 billion $784 million

'In a battle for their life'

"Revenue is a measure of the business going forward," Cole says. "They're in a battle for their life."

GM attributes about $1.8 billion of its revenue downturn to production lost during the strike at American Axle & Manufacturing Holdings Inc. And the slow economy also took a toll. But disappearing sales of high-profit trucks — a problem that will continue as GM continues to change its sales mix — played a major role.

Cars and crossovers accounted for 58 percent of GM's July production, and GM will continue to boost production of cars and crossovers in the third quarter.

But even with more cars in its lineup, GM will struggle to replace the revenues lost when sales of full-sized SUVs and pickups collapsed.

Consider the Chevy Malibu, one of the few GM nameplates selling well this year. The Malibu's average transaction price is $22,329, according to data from the Power Information Network. That's what consumers paid for the vehicle from July 1-27.

By contrast, the Chevrolet Silverado 1500 pickup sells for $26,326, and the Chevrolet Tahoe averages $38,264.

So even a fully loaded Malibu can't touch a Tahoe.

More cars

But GM doesn't have much choice. CEO Rick Wagoner has declared that the consumer shift away from big trucks is permanent, and his product plans reflect that.

Over the next year and a half, GM says it will introduce 19 new vehicles, 18 of which are either cars or crossovers. The first one to come will be the Chevrolet Traverse crossover next month.

In 2011, Chevrolet will add a minicar, and GM is considering small cars for its Saab, Cadillac and Saturn brands.

The highest-profile car in GM's future is the Chevrolet Volt, a plug-in hybrid that will debut in 2010. But this compact sedan will carry a hefty price tag approaching $40,000, so it may be fated to remain a small-volume niche vehicle.

In his conference call with reporters and analysts last week, company CFO Ray Young said he is confident GM can stabilize its cash flow. In June, GM disclosed plans to close four truck plants by 2010, and reduce annual truck production capacity by 500,000 units.

All these cost-cutting moves will conserve precious cash. But Young added: "Ultimately we're going to have to grow the business."

While the market for full-sized pickup market will rebound, it will never return to its former glory, says Jim Hall, a former GM employee and managing director of 2953 Analytics, a consulting firm in suburban Detroit.

Hall and Cole say GM can survive, provided the economy doesn't crumble between now and 2010. Says Cole: "If we don't have a recovery in the next year or so, then we're really in trouble."

This is an article about Chrysler and their struggles.

Consumers are bailing out on Chrysler LLC — the sign of a company in crisis.

Despite a four-day flurry of leasing to beat Chrysler Financial's exit from the sector, Chrysler still posted the biggest loss of any automaker in July U.S. sales.

The company's overall 28.8 percent plunge to 98,109 light vehicles slightly exceeded General Motors' 26.1 percent decline.

But the July results exposed the weakness of Chrysler's car lineup in the glare of the U.S. market's abrupt shift away from gas-guzzling pickups and SUVs to fuel-efficient cars. Chrysler LLC truck sales fell 29.0 percent in July, close to the industry's 25.8 percent truck slide. But while industry sales of cars were flat in July, Chrysler LLC car volume fell 28.2 percent.

"More than (GM and Ford), Chrysler let its cars go while everybody focused on trucks," said Doug Scott, senior vice president for automotive at GfK Custom Research in suburban Detroit. "As trucks are punished in the market, Dodge suffers disproportionately."

Hammered

The U.S. marketplace hammered most automakers in July. Sales fell 13.2 percent to 1.14 million units, bringing the first seven months down 10.5 percent to 8.55 million units.

Toyota Motor Sales U.S.A. Inc., Ford Motor Co. and Mazda Motor Corp. joined GM and Chrysler in posting double-digit losses in July. Honda fell 1.6 percent. Nissan fared best among the top six automakers with an 8.5 percent gain.

During a conference call, Chrysler tried to counter what co-President Jim Press called "a lot of false speculation" about the health of the automaker. For the first time since it became a privately held company, Chrysler revealed financial results.

Through the first six months of 2008, Chrysler had an operating profit of $1.1 billion, and its cash on hand as of June 30 was $11.7 billion, Press said.

'Dancing on the sun'

"We'd like to be judged as a company on how well we do when we're under pressure," he said. "The hardest steel comes from the hottest fire. We're dancing on the sun."

Because Chrysler is privately owned, details of how the company arrived at the $1.1 billion figure are not subject to public scrutiny.

Chrysler Financial's announcement on July 25 that it was ending consumer vehicle leases by Aug. 1 triggered a rush of last-minute shopping that helped many dealers.

"In the last three days we (leased) more than 300 cars," Bill Golling, owner-president of Golling Chrysler Jeep and Dodge in suburban Detroit, said on Thursday, July 31, the final day of leasing.

Golling said he typically leases about 125 cars per week.

George Fetsco, owner-president of nearby Rochester Hills (Mich.) Chrysler Dodge, said: "Since this was announced, we've done about 40 (leases) a day, and we normally run eight to 10 a day. But it's front-loading a lot of business."

In June, the "shopper count" — or number of online product inquiries — on major automotive Web sites fell to the company's second-lowest on record, said Compete.com, an automotive research company.

Hal Wurster, automotive managing director for Compete.com, said:. "The negative word on the street regarding the state of Chrysler and other Detroit manufacturers seems to be keeping the serious shoppers away."

TTS · August 4, 2008

Five-O hit the nail on the head...

In our area we had 1 large ford dealer close forever... and 2 more are deadly close... in fact.. the only reason one of them is hanging on IS because the dude owns a buncha other brands and doesn't need that store to produce income..... but believe youme.. if that thing doesn't turn around.. it'll be axed too...

I don't let ANY of my domestic dealers run over NET 15.... and one day late = credit hold.... These are no doubt trying times....

and just like GM... a dealership can post sales of a few billion dollars... but that doesn't mean they turn a profit! I know LOTS of business who think they are good when in fact all they do is move lots of money... not profit!

LOL.... at least we know why zeus is successful with the dealers...... mommy and daddy own them! :nope

:lol6 Just teas'n ya there dude.... :nope

Fiveofeen · August 4, 2008

The other thing to watch closely is Chrysler dealers. Cereberus gave dealers SIX days to prepare for no longer offering leases, which are a key part of most dealers sales strategy. Because it is a private equity group they can make moves very quickly. Keep an eye on the smaller old school dealers, they could be shut down with less than a weeks notice.

TTS made a great point I didnt bring up about payment from dealers. Watch them closely and dont overextend yourself, it could financially cripple your shop.

TINTZEUS · August 5, 2008

LOL.... at least we know why zeus is successful with the dealers...... mommy and daddy own them!
Just teas'n ya there dude....

My mother and father dont own any auto dealers.

:nope

TINTZEUS · August 5, 2008

TTS made a great point I didnt bring up about payment from dealers. Watch them closely and dont overextend yourself, it could financially cripple your shop.

That is a good point...but....any dealer that is worth anything will have 2-10 million in reserve to weather any storm. Paying a vender for services rendered should never be a problem. And if it is ...it's not a dealer worth working for.

:lol6

Fiveofeen · August 5, 2008

We cant all live near large Auto Groups and I'd love to see a window tinter ask a dealer principle if he has enough saved up to weather the bad times. You know you wouldnt get any answer other than one stating things are fine we'll pay.

TTS · August 5, 2008

Anyone who works with dealerships and hasn't been stiffed is leading a pretty darn blessed life... When it comes down to it... the outside vendors are the last to be paid and first to be stiffed....

Just because a dealer has 2-10mil sitting in the banks doesn't mean you are getting a cent of it!

Perfect example... the last LARGE Ford dealer to close around here stiffed EVERY VENDOR but 1..... and wouldn't you know.. it was the f'n owners nephew who got paid..

Been there,done that, bought the shirt, own the mug....

TINTZEUS · August 5, 2008

I'd love to see a window tinter ask a dealer principle if he has enough saved up to weather the bad times.

Well then you would love to hang out with me and see how I acquire accounts...I can bull :beer a bull :spam 'er....it's a gift........ :lol

I buddy up with GM's and whenever possible the owner......thats how I stay in the loop.

I could most likely teach you a thing or 2...3 or 4.

:lol2

Slick · August 5, 2008

I buddy of mine just took his truck back early off his lease....said he could take it back without penalty because GM doesn't lease trucks anymore (Canada....not sure about anywhere else). Anybody else hear about this???? :spam

August 10, 2008

I'd love to see a window tinter ask a dealer principle if he has enough saved up to weather the bad times.

Well then you would love to hang out with me and see how I acquire accounts...I can bull a bull 'er....it's a gift........

I buddy up with GM's and whenever possible the owner......thats how I stay in the loop.

I could most likely teach you a thing or 2...3 or 4.