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New markets won’t save GM

New markets won’t save GM

Viknesh Vijayenthiran January 30th, 2008 Viknesh Vijayenthiran By Viknesh Vijayenthiran Author January 30th, 2008
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December 31st, 1969 Dwindling sales in the U.S. has carmakers looking to new emerging markets for the next wave of growth but according to one GM exec that alone won’t help to achieve financial success. GM, like most other carmakers, will have to improve its performance in the U.S., the world’s biggest car market. GM has seen sales in foreign markets increase by a whopping 59% over the past 12 months but this is still not enough to turnaround GM’s fortunes, the carmaker’s CFO Fritz Henderson told Reuters reporters. GM is still recovering from a $12.4 billion loss back in 2005-2006 and last year it reported a $39 billion net loss (although this is primarily because of a tax accounting rule). In the meantime, closest rival Toyota has posted about $36 billion in profits over the past three years. "What I do know is, in profit, cash flow, market cap, we're not the biggest automaker," Henderson said. "I spend my time thinking about that." Turning around its fortunes back home won’t be easy. During the same interview Henderson also warned that car prices are likely to rise in coming years. A jump in raw material prices, looming CAFE regulations and new labor rules will all put upward pressure on car prices in the U.S., Henderson revealed.
New markets won’t save GM

New markets won’t save GM

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Dwindling sales in the U.S. has carmakers looking to new emerging markets for the next wave of growth but according to one GM exec that alone won’t help to achieve financial success. GM, like most other carmakers, will have to improve its performance in the U.S., the world’s biggest car market.

GM has seen sales in foreign markets increase by a whopping 59% over the past 12 months but this is still not enough to turnaround GM’s fortunes, the carmaker’s CFO Fritz Henderson told Reuters reporters. GM is still recovering from a $12.4 billion loss back in 2005-2006 and last year it reported a $39 billion net loss (although this is primarily because of a tax accounting rule). In the meantime, closest rival Toyota has posted about $36 billion in profits over the past three years.

"What I do know is, in profit, cash flow, market cap, we're not the biggest automaker," Henderson said. "I spend my time thinking about that."

Turning around its fortunes back home won’t be easy. During the same interview Henderson also warned that car prices are likely to rise in coming years. A jump in raw material prices, looming CAFE regulations and new labor rules will all put upward pressure on car prices in the U.S., Henderson revealed.

Tags: Industry, General Motors

Posted in: News


Comments (4 total)

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  1. By chris #1, Posted: 1/30/2008

    ahhh yes.... lower the quality of cars to compete with japans prices or charge more for the same quality of car.......... sounds like the same problem that USA has had with dealing with japan for the last 30 years. Either more automotive workers are going to lose their jobs or theyre going to have to take a huge pay cut.

    I'd like to see the yen get inflated in value while the US dollar is down... drive up the price of the imports... just to see how much more incentives toyota is willing to put on the tundra to move it.

  2. By Gus #2, Posted: 1/30/2008

    I was wondering the same thing.
    How much of this is really about quality and how much of this is about borders, policies and currency values?
    I agree with a free world market, but I don't agree with lowering wages to match those in Banglamexibeijingdesh or whatever slum people buy their next car from.

  3. By ohmy #3, Posted: 1/30/2008

    how much is there a difference in "quality"?

    Really, in terms of QC, i think the japanese have it down in their american plants, but im sure all carmakers use pretty much the same raw materials, with the exception of the higher end models getting premo interior ish.

    So when I hear these "quality" survey's come out, how much is there a difference between US and Japanese (even German) automakers?

    Is it that huge of a gap, I feel its not that big....

  4. By chris #4, Posted: 1/30/2008

    ohmy.. your right.,.. there isnt a huge gap in design quality, but these quality surveys concern build quality which is an issue with american auto workers because of the unions "screw the system" additude and general hatred for work. theres no pride in american factories any more and as stupid as it sounds you have cars that are coming out of factories that any blind man could see have problems... improperly aligned gaps... switches that arent seated properly, etc.. these are things that ive personally seen. generally, this stuff isnt an issue with japanese workers, germans, even the mexicans are doing good work. I hate to generalize but even in canadian plants, the problem isnt as predominant.

    I really think the biggest problem in the big three is that the people arent motivated to really pay attention to that 40,000$ car and make sure that everything looks right. This is probably because of the lackluster view of their products... from their own employees. If no one cares about your product then why should you? if the designers and engineers arent putting some soul into their work, then why should you put sweat into building it?

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