GM faces long, slow climb in US General Motors Corp. is blowing the proverbial doors off the world's emerging markets -- necessary, as Chairman Rick Wagoner would say, but not sufficient. The automaker said Tuesday it booked pre-tax profits of $1.35 billion in Latin America last year and held its market share steady. Sales in China topped 1 million cars, contributing to earnings of $744 million. In Europe, a black hole in the late '90s and early this decade, GM's business is growing faster than its rivals', especially in Russia.
All good, considering the General sold 60 percent of the 9.28 million cars and trucks it produced outside its domestic market. Credit GM for beating competitors to leading shares of foreign markets once closed to outside investors -- all while fierce competition and an anachronistic, if transforming, business model bedevils GM at home.
The rest of the world may be the future, but North America is still the Big Dog in GM's firmament, as its senior execs often concede. Its restructuring won't be -- cannot be -- deemed close to complete until it replaces the cash-eating red numbers with hard black ones. That's not likely this year, or the year after that, or maybe even the one after that, to hear CFO Fritz Henderson's qualified explanations of the numbers. It's not that GM isn't making progress, only that it's taking so long to slough off decades of cluelessness and denial in management and union both.
Cynicism runs deep
Despite acclaim for its Chevy Malibu and Cadillac CTS and full-size crossovers from Lansing and a clutch of others, GM is the archetype that explains why Detroit's automotive renaissance long ago became a miserable exercise lasting decades, not years, and why the cynicism that it can ever happen runs so deep.
When the net loss for '07 is more than double the $15 billion market capitalization of Detroit's No. 1 automaker, who could blame the cynics (if they gave it that much thought)? Do folks with a vested interest in Detroit's automotive world -- jobs, mortgages, pensions, retirement, nostalgia, a twinge of patriotism -- want GM (and its local rivals) to succeed? Sure, mostly. Do those without vested interests? Not if car sales and the political tenor of the times are any indication.
A measure of the never-ending restructuring of Detroit's auto industry is that a $38.7 billion net loss for the year, thanks to a third-quarter allowance for tax-deferred assets, and another buyout offer to all of its hourly workers in the United States drove GM shares higher Tuesday until they closed down at $26.51.
We'll be into the next decade before GM's sprawling North American operations are positioned to make the kind of money that can be made building cars and trucks for Americans. It'll be after the next slug of high-priced auto workers are gone -- some 20,000 more, UAW President Ron Gettelfinger predicted on WJR -- many of them replaced by folks earning a lot less.
More dealers likely will be either sweated out of their stores or persuaded to marry up with others, a harsh reality that needs to happen to right-size dealer networks shaped for a market that no longer exists in locations that no longer draw much traffic.
More job cuts possible
If the market stays soft deeper into this year, more production capacity is likely to be cut, too. GM's new contract with the United Auto Workers gives the company the green light to, in Henderson's words, "align our production capacity and volumes in line with demand."
And if the softness lasts long enough, there's always the chance GM will do itself a favor and euthanize a brand or two, the better to focus its limited marketing and engineering dollars where they would do the most good. But don't hold your breath.
A viable GM, well-positioned around the world, is likely to exist when the worst of this long slog is over -- even if it'll take most of the working life of an auto worker, community dislocation and billions in losses to get there. The Detroit News