Tag Archive
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.
See Also
Problems and possible solutions concerning diesel engines.
Last week I discussed the possibility of diesel engines becoming more popular in America, this is something that has already happened in Europe. I mentioned one setback was the fact that diesels emit nitrogen oxides and emission standards in this country are continuing to crack down on those.
Some of these new standards will soon be taking effect and will most likely hurt Volkswagen, who is a leader in the area of diesel passenger cars. They will not be able to offer diesel versions of several popular models in 2007. However, they hope to be up to the standards by 2008.
In last weeks blog, I mentioned a few options for automakers to use when lowering nitrogen oxide emissions. Honda has just announced a patent for new technology to do just that.
In Honda’s treatment system, exhaust flows through a plasma reactor, or gaseous layer of electrically charged atoms, according to a U.S. patent obtained by Bloomberg News. That separates out harmful nitrogen oxides and forms nitrogen dioxide that’s then reduced or absorbed by alkali metals and silver.
It looks like the diesel models will have to stick to the other side of the Atlantic for now. However, in time they might make the jump to our shores in full force.
See Also
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.
See Also
Hillary Clinton proposes cut our addiction in half by 2025
Senator Hillary Clinton is pushing for a major reform with dependence on foreign oil; she proposes that we cut our dependence in half. That would be 8million less barrels a day, and she proposes that we should be at that point by 2025.
Now, there are two ways to interpret this “reform” of hers. We could say she is legitimately concerned about our dependence on foreign oil, or she’s making a political stab at George Bush. There is a small chance that she wants people to see that she has a date that we can look ahead to and marvel at and then realizes that not much has happened since GW announced his concern. And, do remember that she is one of the leading candidates for the Democratic nomination.
Nevertheless, she thinks that tax credits, private investment, and new research will push our country into a heavenly bliss when it comes to being dependent on foreign oil. She hopes that these incentives will help auto makers to bring more fuel efficient cars to the U.S. and help scientist make ethanol more useful.
The “new research” that she wants to occur would be in ethanol. Ethanol defiantly has a future in the U.S., but it’s taking a long time to become popular. Clinton wants ethanol gasoline or E85 to be in at least 50% of America’s gas stations by 2015. While this is a good goal, E85 currently is only at 1% of all America’s gas stations. If E85 was at 50% of all gestations in a few years, I can almost see this goal being met.
"Senator Clinton’s energy policy consists of a unique balancing act involving partisanship, political pandering and yesterday’s mistakes," said Tracey Schmitt, press secretary for the Republican National Committee. "Voting against meaningful legislation that would increase domestic production is harmful enough, but adopting the energy policies of the 1970s is a price Americans cannot afford."
Clinton also begged automakers to migrate toward higher fuel standards and incorporate more fuel flex vehicles. We have to realize, most of the technology is out there. Brazil already has a large majority of their vehicles running on ethanol. Why is it taking America so long to catch on?
See Also
Honda jump starts its plans for the future.
Honda is currently over half-way toward the deadline of its “2010 Vision.” This vision was first stated in 1998, and with only four years left the Japanese auto maker recently announced its plans to complete the process.
Honda’s 2010 Vision is a long-term corporate initiative "to become a company that society wants to exist." Initiated in 1998, this three-part 2010 Vision calls for the expansion of Honda’s global operations through the year 2010 through "creating new value" for the customer, expanding local operations through "glocalization" and advancing environmental and safety technologies through a "commitment for the future."
Honda has two main points of focus during the next four years. They will increase their presence in North America and further lower emissions.
To accomplish the first goal they will build new plants in the U.S. and Canada starting in 2008. Honda already produces 1. 4 million units in North America. These proposed expansions will bump that number up to 1.6 million. Even at this time almost 8 out of 10 Hondas and Acuras sold in North America are made here.
The other focus will be to lower emissions across the board on all of their vehicles. Honda already has the current lowest Corporate Average Fuel Economy (CAFÉ) but they are not satisfied. Their goal is to lower emission by 5% by 2010.
Honda has increased its North American sales for 9 straight years and it doesn’t look like they plan on breaking that trend any time soon.
See Also
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.
See Also
Criticism from some Ford shareholders.
This country’s second leading auto maker has had a tough time over the last few years. Ford lost over $2.5 billion in the first quarter of this year. As with most companies, when things are going wrong you look to the person at the top. In this case it is Bill Ford.
He may have seen this coming or he might just be a generous guy because last year he pledged not to earn a salary or accept a bonus until Ford was profitable again. However, that move did not silence the critics for long.
"Mr. Ford is a failure. He has put shareholders and the company at bankruptcy’s door," said Sam Joanette, a Ford retiree and shareholder from Miami Beach, Fla., who said he has lost more than $1 million since investing most of his retirement money in Ford in 1999.
"Mr. Ford knows he is not qualified, that he is in over his head."
There are plenty of critics, but he has supporters as well. There are many shareholders standing behind him.
"He’s been a chairman who’s very responsive to small shareholders," Davis said.
Ford hopes that the restructuring plan and a move away from a more bureaucratic setting will help the company get back on the profitable side. I’m sure he loves this company and has many reasons why he wants it to become profitable again, but I’m sure the resumption of his salary has to be one of those reasons.
See Also
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.
See Also
What’s next for hybrid vehicles?
Lately hybrids have been a hot topic in the auto world. Spurred on by the price of gas, many auto makers have begun to focus aggressively on producing and marketing them. However, discerning consumers may have seen that in some cases the purchase of a hybrid will not save them much or any money at all.
It is true that you will save money because of the increased fuel efficiency but a hybrid car will cost around $3,000 more than its standard gas powered equivalent. So, your driving habits will determine how much money you will save in the long run. Most of the time it will end up being a wash.
Up to this point, most hybrid owners purchased their vehicles because of environmental and social reasons. If the hybrid is to make it big, it’s going to need to become cheaper.
However, for hybrids to take a major slice of the mass market, it will require the ‘hybrid price premium’ to be slashed from it’s current $3,000+ level to less than $1,000. Toyota, for one, is focusing on achieving this as soon as practicable.
Better technology and more efficient manufacturing techniques will be needed to bring the hybrid price down. However, there is another option. Flex fuel hybrids may help consumers get the most bang for their buck.
What makes real sense is the upgrading of current hybrid offerings to become ‘flexible fuel hybrids’, and full support from manufacturers that all new hybrid models will run on any mix of gasoline and E85. Less than $200 is added to the production cost of a conventional gasoline vehicle in upgrading it to handle E85. Congress, realizing that we are confronted by Global Warming, Peak Oil, and Energy Insecurity, has put the necessary ethanol pump-priming into the new Energy Policy Act.
Saving the environment is a very noble and worthy reason to own a hybrid but most car buyers are looking for one thing: A cheap fuel efficient car. Hopefully, that option is on the way.
See Also
A top advisor leaves after less than a year.
It seems like every other day somebody important is stepping down or leaving a company. Late last week is was Stephen Girsky’s turn. Girsky was a full-time advisor for GM for a little under a year. Before that, he was an analyst on Wall Street.
As usual he cited family/personal reasons for his departure. He wanted a job closer to home. He was currently having to commute from New York to Detroit on a regular basis, and felt good about leaving at this time for business reasons.
Simonetti [GM Spokesperson] also said Girsky felt it was a good time to leave GM because the automaker’s North American turnaround plan is on track. GM narrowed its first-quarter loss to $323 million, down from $1.3 billion the year before.
That is definitely an improvement, but his replacement and the rest of the GM brass have their work cut out for them to get back to positive numbers. It just makes you wonder sometimes when people just leave for “family reasons.” However, GM shares rose 9 cents after the news became public.
See Also
