Future of GM.. uh.. I mean DiTech

I think they will still be able to make decent enough cars. A lot of businesses have this approach. Well I won't say alot, but the big ones. Retailers like Best Buy make their money off services plans, not the products(third party products that is. They make a killing on the products that have their name on it.) Movie theaters make money off their food, not the movies. Periodicals make their cash not on the sale of the mag but on sales of the ad. And you might already know this in which case maybe I'll be giving someone else some food for thought. The main thing is, its no longer about making the money off a product, but things around the product.

 

What they need to do is to start an accessories division like Harley Davidson so once you get it home you can turn it into what it should have been in the first place. That part of Harley is massively profitable.

 

Have interviewed Prez Gary Cowger and have seen much of the "New" GM product. Caddie is an excellent example of what they can do when they know the old stuff is crap... unfortunately they didn't follow through on the Buick and Pontiac styling... The deficit per car is not as bad as it used to be.

Their pension funding is simply the thing that is going to kill them. when roger Smith and company mired the corporation in this problem they were rousted by a boardroom coup from the outside directors.

GM of the 80's 90's was a teetering dinasaur with no chance of being profitable in cars or even in trucks... GM today is a lot closer.

Their share evaluation is poopy right now and the main reason is the pension funds... but their product is (quality wise) really up there these days.

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a little from the article

"A team consisting of Rick Wagoner Robert Lutz and Cowger ascended to the top of the GM heap with a heady task ahead of them. At the time, GM was struggling with focus loosing money on their cars but making billions as a bank through finance arm GMAC.
Things had improved considerably from the darkest days in the ‘80’s but just prior to their arrival in the executive suite the worlds largest automobile company was hammered by a massive strike. The poisonous relationship with unions, dealers and to certain respect the general public was told in the documentary “Roger and Me” by filmmaker Michael Moore.
It was also described by Car and Driver editor at large Patrick Bedard in his book “The Decline and Fall of the American Automotive Empire” as fraught with infighting and company politics. For a while there was a stench of death in the halls in Detroit.
Unfortunately this all happened at a time the Domestic, European and Asian competitors all seemed to be ganging up and whittling the companies market share down to percentage points never seen in the history of the business.
“If you look back at that devastating strike we took in Flint (Michigan) back in 98,” Explained Cowger, “all the party’s decided we really needed to change the communications. I came back from Europe at that time and we started a very sincere effort to change the way we did business.”
Changing the corporate culture in most organizations is a daunting task but when you are trying to refocus one of the world’s largest corporations with over 325,000 employees there were a lot of people who skeptically said it could not be done.
Cowger and Wagoner began the task under Jack Smith; at that time Bob Lutz was running Chrysler. “Rick Wagoner and myself spent a lot of time with Dick Shoemaker and Steve Yokich from the UAW.”
“There was a major trust issue where communications had broken down to the point where people didn’t think we would ever recover. So we had to spend the time on communications and getting the facts on the table with the UAW leadership, we had to earn that trust again.”
The difference in attitude on the floor of the plant is remarkable. “Both on the local and national Unions have done a fantastic job implementing the processes to change our quality. We went from basically being the worst domestic auto company for quality and productivity. Today we are best. It’s now imperceptible between us GM now and the two leading competitors who are still ahead of us.” Cowger adds with a great deal of personal pride “In fact if you look at J. D. Power 8 of the top 12 plants, for productivity and quality, located in North America are GM.
“In any of our plants that you go through in GMS or our Global Manufacturing System that effort is everywhere. We are very proud of the fact that the number one plant foreign or domestic in productivity is a GM plant in Oshawa Ontario.”
Productivity and quality are one thing but Cowger looks over the product mix and is happy with what he sees coming down the road.
“If you look at Cadillac I mean it started with Escalade and something about that vehicle resonated into sales performance with professional athletes in all leagues. It took off. The CTS was fresh look and it genrerated a buzz. Following with the XLR and STX have brought people not only out of other luxury brands but brought people back who may have left.”
The most important part for General Motors is that buzz (the Escalade generated) brought in young people who probably would not have considered Cadillac an option and other GM product was being mostly sold to fleet and rental companies.
“So it starts with “gotta Have It Product” and if you look at what has happed with Cadillac with 7 new products since 2001 Chevrolet with 10 new products in 20 months.”
Sales numbers for Cadillac, Saab, Hummer, and Chevrolet reflect this increasing this year and spreading a positive vibe across the industry GM has not felt in a long time.
For the other brands “The formula is there” says Cowger. “What we have to do is the same thing with our other three brands Pontiac Buick and Saturn. We are going to do it with product.”
Skepticism is starting to be replaced with optimism in the media, investment community and the car and truck buying public. GM had been faulted many times for designing cars that at the concept stage were stunning but by the time the accountants got a hold of them became less than inspiring. The new trend at the General seems to remember that the product has to inspire the consumer to buy. There is simply too much good competition out there.
“Pontiac is doing it now with the new Grand Prix (Bob) Lutz and I believe this is the best front wheel drive product out there. Then we have the GTO that is one sweet ride… The new G6 is coming in 3 varieties a sedan coupe and hard top and then we get the Solstice. So when you roll in the Bonneville getting a v8 in the GTP package then Pontiac is going in the right direction.” Adds Cowger.
Next on the list is Buick ”Rainer has been going along well and now we will be bringing in the new Terrazzo, a kind of a sport utility van crossover, and then the Lacrosse the new Regal replacement then next year we have another new entry and then we have an all new entry after that as well.”
“So you do it with product...”

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They really seem to Get it now... I don't know if they got it too late.
If i were steering the first bit of flotsam off the ship would be Saturn then Buick... Consolidate the redundant devisions like GMC and Chevy truck and then poke the eyes out of the guy who restyled the Morano to the GTO... and have a public beheading of the LaCross team...

 

I think what you wrote is true of GM a couple of years ago. However, they have some good product coming out. The Cadillacs that come out of Lansing are as good as anything out there. Chevrolet is finally turning the ship around - look at the interiors of the new HHR and 2006 Impala. The Cobalt, suprisingly, has been getting excellent reviews.

Saturn is next - they are moving the brand upscale in 2006. The Sky and Aura are two good looking cars, again, with interiors that will be top in their class.

I have my doubts about Buick. Lutz has said that he wants them to be the "American Lexus", but the LaCrosse doesn't exactly inspire. It's a competent car, but not exactly class leading.

The Pontiac G6 is also at least competitive in its segment, but doesn't appear to be priced competitively. That may be the pension liabilities rearing their head. Lutz at least got rid of all the ridiculous cladding, now they need to follow up with better interiors. I think the G6 convertible that is coming out will be a hit.

GM has proven with the C6 Corvette, STS, CTS, and other cars coming out that they can make good to great cars when they want to. Their foray into brand management in the 90's was a disaster. It probably put them 5 to 10 years back in building truly great products. However, I believe that they are turning the ship around. I don't know what it will mean in regards to market share. I think the best they can hope for is to stop losing it.

At this point, they are certainly in better shape than Ford is.

 

I don't understand how Cadillac can be the American Lexus..

Lexus is the Japanese Cadillac!

 

The only real question will be whether they will call it, "General Toyota" or "Toyota Motors."

Dr "Goodbye yellow brick road" Who

 

That quality comment is totally off base. In recent years GM has made INCREDIBLE strides in reliability! Unfortunately the incorrect impression of GM cars being crap is a stigma that is ingrained in people’s minds and will follow GM for years to come despite the facts; and it's hurting their market share.

I had a 1997 Malibu and in over 100 000 miles, I never had a SINGLE problem with the car. Too bad I could not say the same for my 330Ci, so much for the myth of German cars being reliable. Even my friends have had more problems with their newer Honda’s and Toyota’s.

Here are some statistics some of you may find interesting.

http://www.cars.com/go/advice/Story.jsp?section=buy&subject=most_depend&story=topDependBrd&referer=advice

Nameplate Score
Lexus……….….162
Buick………..…187
Infiniti……….....189
Lincoln……..….194
Cadillac……..….196
Honda…………..209
Acura…………...212
Toyota…………..216
Mercury…………224
Porsche………….240
Chevrolet………..262
GMC……………262
BMW……….…..264
Saab…………….265
Saturn……………267
Industry Average 269
Ford……………..276
Nissan…………..280
Chrysler…………285
Mazda…………..285
Subaru…………..288
Plymouth*………289
Audi…………….295
Pontiac………….297
Dodge…………..298
Jaguar…………..310
Jeep…………….314
Oldsmobile*……314
Mercedes-Benz….327
Mitsubishi……….327

 

The GM strides in reliability are not just this year but in previous years as well. Some makes are slipping down the quality pole, notably my marque which was above BMW the previous years but the X-Type has dug a big dent in their reliability rating by cranking out a baby/economy Jag.

Ford is profitable, the Premier Auto group was not in 2002 with a near 1 billion dollar operating loss. This year, they managed to squeak by for the first time with an operating profit of 150 million. Unfortunately, Jaguar is in the red by 300 million and will not break even until 2007. If the new XK is a performance oriented car more than the previous models, then they are well poised to raise their profits the next 2 years as the car attacts more buyers to the marque.

There is a big push to make Aston Martin into a volume manufacturer. 5,000 cars a year is a big target and the good reception being given the DB9 is a step forward, but not a very big step. The AMV8 would be a slam dunk if done right.

Sunny

 

Bob Lutz is at GM now & he certainly is doing a great job. The C6 is the finest Vette ever bcus all the top brass was on board instead of trying to kill it as usual. You cant build a car that good, especially the Z06 without a lot of motivation & pride. For the first time ever I am tempted to buy a Caddy 4 door , the 1 with the corvette engine, thats a cool ride.
Then there is the Pontiac Solstice/Saturn Sky which is a very nice little roadster.

Ford also has some great products like the T Bird, Mustang, GT, & that Cobra Daytona coupe prototype not to mention the new AM DB9 & Shaguar.

I think they are both doing very nicely, for the moment

 

Consumer reports isn't immune to bias? They still "recommended" the Sienna minivan, even after their engines developed a sludge problem and Toyota wouldn't take care of their customers. They also "recommended" the Odyssey, after common reports of exploding power steering pumps and transmissions that decided to shift themselves into Park (a problem shared with the Acura TL).

For an organization that claims to be unbiased, they sure seem to have it out for domesitc manufacturers.

 

they wont do good untill they get rid of the majority of there 50 billion different car brands.

 

I don’t know about you but I simply cannot take the opinion of anyone whose expertise lies in reviewing toasters and hairdryers. Additionally I have stopped taking that publication seriously while they continue to insist that VW's and BMW's are quality vehicles. Particularly after my personal experiences with the latter. No GM car in my family has ever been as troublesome as their VW and BMW counterparts.

 

That there is one of their biggest problems. They rely too much on the feedback of owners who for the most part couldn’t tell the difference between a crankshaft and a camshaft. I recall reading an article about how Consumer Reports evaluates vehicles and how they factor in these owner reposes. It was outright laughable! One example in particular regarding the Hummer H2; owners were complaining about fuel economy, ticked that off as a reliability issue and CR used it as such in their final ratings for the H2!!!! They also let feedback on subjective aspects like the look and feel of the materials used in the interior of vehicles be used as judgment of the vehicles reliability. I just feel that CR's evaluation methods are much too flawed to be used to form a conclusive opinion.

 

GM's Recovery Still Revs Despite Fears of Stalling

http://www.latimes.com/business/la-fi-flan30jan30,1,5741812.column?coll=la-headlines-business&ctrack=1&cset=true

 

What name did you use, "Pulina Wanker?"

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GM's Recovery Still Revs Despite Fears of Stalling
James Flanigan

We are at a moment in history when some of the most venerable names in American business — AT&T Corp. and UAL Corp.'s United Airlines, among them — may well be on the verge of disappearing.

But at least one corporation that some have placed on the could-soon-be-extinct list — General Motors Corp. — should be scratched right off it.

Yes, credit rating firms have spoken openly in recent weeks of downgrading GM's bonds to less-than-investment-grade, or junk, status. And Fiat has threatened, under terms of a 5-year-old agreement, to force GM to buy the Italian company's heavily indebted auto business, a move that could further imperil GM's financial standing.

It's also true that the world's largest automotive company last year made less than 2 cents of profit for every dollar of its $193 billion in revenue. And those scant earnings came principally from the company's finance division, GMAC. Overall, GM's automotive operations posted a slim profit last year.

What's more, as it tries to move forward, GM faces formidable headwinds.

GM once set the pace for all of American industry, pioneering pension and healthcare coverage for its employees. But now, what was a model program has come back to haunt GM. The company faces an estimated $50 billion in future healthcare liabilities for its 425,000 retired workers and their spouses.

GM's annual medical bill for active and retired employees tops $5 billion. That amounts to $1,500 more per vehicle than its rivals in the U.S. market have to pay, a considerable disadvantage against Japanese rivals Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.

So is the onetime flagship of U.S. industry headed for the corporate graveyard, like some of the major airlines and old "Ma Bell" may be?

The surprising answer is no. Far from it.

"The largely unrecognized fact is that GM has been in a remarkable turnaround since 1992, when the board of directors took charge," says Vincent Barabba, who was general manager of strategic planning for GM until his retirement two years ago.

Barabba is referring to a dramatic episode when directors, watching GM lose money year after year and seeing it crushed by debt, made bold changes at the top.

They brought in Jack Smith, then head of GM's European operations, to run the whole shebang. And the bleeding quickly stopped.

The next dozen years saw GM raise productivity steadily, according to Harbour Consulting Inc., a Troy, Mich., firm that keeps track of efficiency statistics for the industry.

In fact, GM is now the most efficient of the U.S. automakers (although it has yet to match the productivity levels of the Japanese manufacturers' nonunion American plants).

The big automaker also has improved the quality of its cars and trucks. J.D. Power & Associates, the Westlake Village firm that keeps track of customer satisfaction, says GM is winning high marks these days.

"They've done an impressive job of revamping whole product lines," says security analyst Ivan Feinseth of Matrix USA, a New York-based brokerage.

And the company is not done yet. GM sees itself as having achieved only 70% of the quality it needs.

To foster its recovery, GM has gone back to basics. It adopted the formula of Alfred P. Sloan, the company's longtime chairman, of producing cars for five economic strata — from Chevrolet through Cadillac — and then updated it.

On the factory floor, GM "now uses a single production platform to produce a variety of models and values," Barabba says. New Pontiacs and Chevrolets are thus all born of one chassis. The base of the Cadillac Escalade is the same as that of Chevrolet sport utility vehicles.

Cost savings are wrung out of such processes, which is why GM's auto business is in better shape than it appears. Were it not for the healthcare cost burden, GM's automotive operations would have cranked out enough profit to have more than doubled the $3.7 billion in net income the company reported for 2004.

Which may well explain why GM's Rick Wagoner, who became chief executive in 2000, seems so calm amid all the current fears about the company's future.

When asked whether he is seeking U.S. government relief from GM's healthcare burden, Wagoner, a onetime star basketball player at Duke University, shrugs like a guy who has been through a few pressure situations.

"The reality is we have the legacy costs," he says. The company will get some break, he adds, when Medicare assumes prescription drug coverage for seniors next year.

Wagoner knows that GM's greatest challenge remains producing models that excite customers. That hasn't changed for 100 years.

The aim now is to get folks to buy cars and trucks without offering the big discounts to which the company has resorted of late.

"For us, the incentives have sort of leveled out," Wagoner said recently. Still, he cautioned, "we have to be realistic about competitive conditions for 2005 — or to be honest, for the rest of our lives."

Tough conditions aren't stopping GM from investing $8 billion this year in plant improvements and research and development. At the end of the decade, the company foresees bringing to market a hydrogen fuel-cell vehicle that will give it, once again, the technological lead in the industry.

Meanwhile, Wagoner stresses the firm's successes in China and the rest of Asia, where its automotive operations are profitable. And he talks of new SUVs and other models coming out next year that could spark a vigorous period of growth for GM.

It is more than just spin. Despite some negative headlines, GM is hardly stuck in reverse.

 

Duly noted. We'll see.

 

Counterpoint to the above article. Speculation only.

http://subscribers.wardsauto.com/Microsites/Newsarticle.asp?newsarticleid=2738616&srid=10088&instanceid=52775&pageid=784&magazineid=1004&siteid=26

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Chapter 11?

By John McElroy

WardsAuto.com, Jan 31 2005

Airlines and steel companies are declaring bankruptcy; soaring health care costs could make it irresistible to auto makers as well.

The steel industry did it. The airline industry is doing it. Will the Big Three be next?

The American auto industry is caught in a soaring cost spiral. Back in the days before foreign auto makers swarmed this market and GM, Ford and Chrysler still commanded 90% market share, they agreed to give their hourly and salaried workers generous benefits – so generous they became the envy of industrial workers the world over.

But now that generosity is coming home to roost. GM’s oldest retiree, Ernest Pusey, who lives in Florida, punched his last time card in 1958. He now is 109 years old. He worked for GM for 32 years and has been retired for 47 years. Who ever thought people were going to live this long?

Pusey is hardly alone. The fastest growing segment of the U.S. population comprises people who are 85 years old and older. Up 38% in the last decade! That means there’s going to be a whole lot more people who will be retired longer than they worked.

And starting in 2011, the leading edge of the Baby Boomers will begin to retire at a rate of one every three seconds.

The Big Three also agreed to virtually guarantee the jobs of their UAW workers. Those men and women cannot be laid off. Even if they’re sent home, they get 90% of their take-home pay. This is one of the key reasons why we’ve seen such generous sales incentives. The no-layoff policy makes it cheaper to put big rebates on a car than not to build it in the first place.

These benefits are no longer sustainable. Or to put it in plain English: The money is not there.

But the Big Three can’t legally walk away from this burden…unless they declare Chapter 11. In the past, declaring bankruptcy carried a social stigma and generally represented the ruinous end of a corporation. Not anymore. Now it’s viewed as just another management tool.

Chapter 11 was enacted by Congress to allow a company to reduce its debts or drastically lower its operating costs so it can return to being a viable enterprise. That means a company can dump its pension liabilities, slash its health-care benefits and tear up its union contracts. Voilá, no more legacy costs!

So far the Big Three and several suppliers burdened by the same legacy costs – notably Delphi and Visteon – have managed to keep their cash flow one step ahead of the bill collectors. They’ve come up with some creative ways to keep their pensions funded. And they’re getting louder and louder in their cries for a national-health care plan.

But time is not on their side. That’s why they are quickly backing off the juicy profits they promised for the middle of this decade (which means now). And why they are ruthlessly slashing operating costs.

But their market share, their market cap and their profitability continue to sink. So you have to wonder: Will the siren song of Chapter 11 ultimately prove irresistible?