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The auto industry struggles some more
Back when Ford Motor Co. stated that they would cut 30 thousand jobs, William Clay Ford Jr., chief CEO and great 
grandson to Bill Ford, announced that, in 2008, Ford would be back on their feet (maybe you can guess where I’m going with this article).
It seems, however, that Mr. Ford Jr. might be eating his own words about having the company back on track by 2008. The reason, or at least part of it, is the declining sales of SUVS. The explorer SUV dove 27 percent, and the expedition fell 30 percent, while gas prices rose 34 percent. Not many people are buying SUVs because of economical concerns and high gas prices. And, since Ford’s flagship car was the explorer, there are major problems.
Restructuring a company is a difficult task; however, it seems that the company is doing a good job at cutting jobs. While Ford announced they would cut 30,000 jobs in x amount of years, they’re actually ahead with that statistic.
Ford’s rival, GM, is looking better. GM’s restructuring plan is actually showing progress; because, their money-making-cars were not SUVs. Toyota, on the other hand, is thriving. Toyota can’t stop 10 min from building new factories and producing cars in the US.
The future of Ford is based on the dependence that Ford will “innovate” with cars that actually make money and people want. Times have changed, hence, companies, including Ford need to change. The auto industry is going through major changes, I sure hope the company Ford is build Ford Tough
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GM and Suzuki working together for hybrids
Odd news comes out of the auto world all the time, and today is no different. After selling their shares of Suzuki, GM plans to develop hybrid vehicles with Suzuki in North America. Suzuki and GM both are lacking in thy hybrid department.
GM and Suzuki plan to develop a hybrid SUV in order to break into the American hybrid market. These two companies see the American Market heading into this direction. It is reported that their sport utility vehicles will have engine displacements around 3 liters.
Maybe this is a sign that GM is finally catching on, but why did they choose Suzuki? I’m not sure, but I hope that everything goes well and they’re able to break into the American auto market and combat Toyota.
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Can GM breath some life into this struggling brand?
Recently, GM decided against scrapping its Saturn brand. Instead GM gave it a new image. Once again they face this same choice with their Pontiac brand. Pontiac sales have been declining and many see it as a dying brand.
GM still thinks it has some life left in it. Just like Saturn, Pontiac will get an image make over. They looked to modern European design to infuse Saturn with for new life, but they will take a different approach with Pontiac. They will look back into Pontiac’s past. Pontiac’s new focus will be providing high performance rear-wheel-drive cars.
This plan, which is not final yet, will phase out the front-wheel-drive Pontiacs over the next two years. These will be replaces with rwd models. Some of these models will be brand new, while others will be rwd versions of current ones.
This move may reduce the volume sales Pontiac will incur, but GM is focusing on more streamlined line-ups from its brands.
GM is pressuring dealers to combine Buick, Pontiac and GMC franchises into single stores by cutting the brands’ product lineups.
GM is continuing to get its house in order as they restructure. Saturn and Pontiac are just two of their brands. Look for them to continue shaking things up until they get things turned around.
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Used SUV prices are plummiting
Anyone with any sense knows that the automotive industry is not in the best of shape right now. And everyday it seems as things are getting worse. Yesterday was actually the first good news about the auto industry in a while. However, today we’re back to the problem with American auto makers.
Most of Ford and GM’s revenues come from large SUV sales, and with high gas prices, less and less people are buying used SUVs. This, in the long run will be detrimental to ford and GM, since they have such a high volume of large SUVs. The price for large SUVs has been declining extremely fast over the past few months because of high volume and high gas prices.
Ford Sales analyst said that he expects to see a double-digit percentage decline in 2006 for large SUV sales. So, what does this mean for the consumer? Well, it means if you’ve ever wanted a large SUV now is probably the time to buy one, or you can wait a few more months to see what will happens with the prices. However, I think by consumers not buying large SUVs we’re showing auto makers we want more fuel efficient cars.
Honestly, Ford and GM should’ve seen this coming 10 years ago. It seems that foreign automakers saw it, so why were American automakers oblivious to this trend? Well, I’m not too sure, but I hope that they get the picture soon.
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GM stocks are upgraded
On Wednesday, General Motors Corp. shares jumped. The shares jumped because an analyst upgraded GM’s stock to “buy” status. That’s where a company wants to be. GM’s restructuring model looks as though it is working. The restructuring of most companies is usually laying people off and GM is no different. GM will reduce its workforce by 30,000 by the end of 2008.
After the analyst announced the “buy” status, GM’s stocks rose $1.86 or 7.6% to $26.34 per share. Merrill Lynch’s John Murphy announced that the capacity reduction plan will boost shares by about $4 in the future.
Murphy more than doubled his 2007 earnings estimate to $4.10 from $1.90 and increased his 2008 estimate to $5.25 from $3.15. The increase also accounts for an adjustment for the portion of earnings from GM’s financial arm, which will be sold in late 2006/early 2007, Murphy said.
Hopefully Murphy’s estimates are correct ,and GM will pull out of this slump. That wold greatly boost the economy and maybe GM could higher some of its workforce back once it gets rid of the nasty overhead it’s having to deal with now.
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After their first quarter profit how will GM fair?
On Thursday, I blogged about GM’s first quarter profit this year. They had initially reported a loss of $323 million, but after an accounting change, GM reported a $445 million profit during that time period. This was is a good sign for the struggling company, but does it mean they are back on the right track for good?
Rick Wagoner, Chairman and CEO, calls the first quarter an “important milestone.” However, he is still cautious and maintains that profits are not the only important step needed for the auto maker right now. He is mainly interested in restructuring the company and offering new cars. The redesign of the Saturn brand is a central part of the new plan.
All of this suggests that the company may be back on the right track but there are also negative signs as well. Eric Noble, the President of The CarLab, points out that GM is still heavily dependent on its trucks and SUVs. They make great large vehicles, but they are weak in the mid size and smaller car areas. This could hurt if gas prices drive car buyers to the smaller vehicles.
GM will also lose revenue when the 51% sale of GMAC is complete at the end of this year. They will gain $14 billion from its sale but they will miss out on the steady income it used to provide. Hopefully by the end of the year, when they lose the GMAC revenue, they will be on their way to being profitable without it.
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An accounting change turns loss into profit.
The recent struggles of North America’s leading auto maker have been well documented. From the period of January to March of 2005 GM experienced a $1.3 billion loss. Earlier it was reported that for that same period this year they loss $323 million. That is much better than last year but still a loss is a loss.
The good news for GM is that the loss for this year’s first quarter is now a gain. An accounting change made the difference. When the initial loss was reported, GM was still working through a deal that requires retired workers to pay more for health care.
GM must pay $3 billion into a trust for retirees between now and 2011. In its preliminary results, GM included a one-time, pretax charge of $1 billion to cover that contribution. The revised earnings remove that charge, which GM will now take over a seven-year period beginning in the third quarter of this year.
Other factors in GM’s first quarter profit were its sale of Suzuki Motor Corp. and the finalization of its sale of GMAC Commercial Mortgage. The last quarterly profit GM had came in 2004. They hope to shorten that time between the next one this time.
GM expects to eliminate $4.5 billion in structural costs this year.
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GM CEO thinks so.
We have been talking about the price of gas a lot lately. It seems that everywhere you turn you are reminded of $3.00 a gallon gas and the threat that it might go higher. There are a lot of people afraid of just that happening. However, Rick Wagoner is not among them.
Wagoner, chief executive of General Motors, is optimistic that gas prices will come back down in the future. But how near is that future? I’m not sure but hopefully soon.
"They are too high right now and they will come back down," Wagoner said of oil prices during a conference at the company’s headquarters in Detroit that was broadcast over the Internet. He said consumer behavior isn’t expected to be negatively impacted by current gasoline prices, which are averaging about $2.92 a gallon according to the American Automobile Association.
This kind of thinking does seem to go against the latest trends. Some consumers do seem to be moving toward smaller more efficient cars and automakers like Ford and Toyota are rushing to accommodate them with lots of hybrids. GM is also working on its own share of hybrid vehicles but are not as focused on it as the other two I just mentioned. They are still committed to bigger vehicles as well as the small.
Wagoner said GM aims to keep developing engines for its vehicles with improved fuel economy in mind. He said buyers tend to gravitate to bigger, more-powerful vehicles that typically consume relatively high levels of fuel. GM has touted its new full-size SUVs as being capable of achieving 20 miles per gallon, and the auto maker has a number of vehicles capable of achieving better than 30 miles per gallon.
The truth is that no one can predict exactly what will happen. Each manufacturer will have to make its own adjustments as they go. However, for the sake of our wallets I hope Mr. Wagoner is right.
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Toyota out sells Chrysler in the month of April.
Everyone knows that the North American automobile market has been dominated by the big three (GM, Ford, and Chrysler) for a long time now. Pretty much since people have been driving the things. However, Toyota, Japan’s top auto maker, has been steadily gaining ground over the past few years. Recently, they have benefitted from increased sales among smaller more fuel efficient cars.
This trend has helped them to out sell Chrysler (number 3 of the Big 3) in the month of April as Chrysler’s sales dipped and Toyota’s rose. During this same month, GM and Ford both saw a drop in sales as well.
Does this mean that Toyota will be able to out sell Chrysler for the year and cut the Big 3 down to 2?
To that end, both Toyota and Chrysler spokesmen were noncommittal. "We don’t really care" that Toyota’s sales are increasing, said Jason Vines, Chrysler Group spokesman. Vines noted that strong sales of the new Caliber compact and a slew of upcoming new models would keep Chrysler’s sales momentum strong for the rest of 2006.
Toyota has been equally aloof about this possibility but you know it has to be in the back of their minds. The North American companies have had many struggles of late but Toyota seems to keep expanding its American market.
No matter what happens, hopefully this competition will bring about good result for the industry and for the drivers.
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GM�s hot new concept car.
GM has had its share of bad luck recently. So I guess the company is glad to have some good news, even if it comes in the form of a minor controversy.
In January the auto maker unveiled its new Camaro concept car. The buzz about it has been growing since then. It’s grown so much that people are willing to put down cash deposits on the car. Keep in mind, that it is still a concept car, and GM has not confirmed that it will produce the car.
There has been unsolicited deposits offered, but the controversy surrounds a dealership in Dearborn Michigan which has advertised the coming of the new Camaro and offered to take deposits.
Les Stanford Chevrolet in Dearborn has solicited deposits from enthusiasts who want to order the Camaro. In the May edition of the national car-enthusiast magazine duPont Registry, Stanford published an ad that says “the new Camaro is coming,” advising readers to “reserve yours today.”
The dealership took five deposits of about $1,000 each after placing the ad, owner Paul Stanford said.
However, there seems to be no real intent to scam anyone here. It’s just a case of people getting excited over the car. The Dearborn ads will be modified and any mention of the Camaro will be removed.
There has been similar excitement about concept cars in the past as well. In 1989, Chrysler received unsolicited deposits for the Dodge Viper.
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