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In an industry as highly competitive as is automaking, "not sinking" and treading water are essentially the same as failure.
The competitors are continuously improving, so GM has no choice but to strive for continuous improvement. If the world keeps turning, while you insist on either staying still or not running as quickly, you will still end up falling behind.
2014 Malibu 2LT, 2015 Cruze 2LT,
The math is what it is -- GM couldn't turn a profit even without the legacy costs, while a company such as Toyota would still make plenty of money even if it had those costs. A bit of arithmetic makes it pretty clear that the legacy cost argument is mostly PR fluff, not a viable explanation of what's wrong with General Motors.
If you are going to denigrate a fellow poster, it would help if you look at the real figures and not do calculations based on media and PR reports.
GM's annual report, free and on line, shows its biggest expenses are for pensions, health, and labor costs.
Other union related costs that are not so obvious include the pool of UAW labor GM is required to pay even though they are not working. Moreover, GM was keeping a number of obsolete plants open, again, to accomodate UAW obligations.
GM's more recent plants are among the more efficient - and thus profitable to run - in the US. GM is in fact working to reduce labor and white collar redundancy -- ie the whole Saturn/Opel thing will allow GM to reduce North American engineers and use the EU engineers it has on the payroll anyway.
GM's new products are selling well and, on whole, getting decent reviews.
Labor did hurt. It was not the only problem, but a big one. GM is addressing labor and other entrenched issues as well.
I do find it sad that Kia/Hyundai now makes better minivans, mid-size and full-size sedans than Chevy/Buick/Pontiac/Saturn.
Nobody was denigrated, but if one is going to cite this tedious "legacy costs" argument, then someone should know what it really means.
GM's annual report, free and on line, shows its biggest expenses are for pensions, health, and labor costs.
As any automaker's would be. You people comment about labor costs if GM is the only company on earth that has to pay its workers.
Every automaker has high labor costs, because auto manufacturing is a labor-intensive process, so of course its costs are going to be high. Those still don't explain why GM can't turn a profit, while Toyota can.
Let's take this one step further: Last year, GM booked total OPEB (pension, retirement, etc.) expense of $5.3 billion. Now, let's pretend that for whatever reason, GM had been able to transfer this entire burden over to Toyota, so that GM would be off the hook and Toyota would get hit with the entire bill. Here are the results:
- GM would have had pre-tax losses of $15.2 billion on its automotive operations ($20.5 billion in pre-tax losses + $5.3 billion gained from wiping out the retirement costs =
<$15.2 billion>)
-Toyota would have had a pre-tax profit of $8.2 billion (based upon pre-tax net income on automotive operations of $13.5, less the $5.3 billion hit from GM.)
So there you have it -- Toyota could carry all of its existing obligations AND every single penny of GM's retirement burden and still make a $5+ billion profit.
In contrast, you could completely eliminate GM's pension burden and it would still lose over $15 billion.
That alone should tell you that something is very wrong with other aspects of GM's operations. Now add to this that GM revenues per unit are well below those of its main rival, and the problem becomes obvious.
You are ignoring the $5.5 billion loss GM took for Delphir. As almost all of that relates to pension and benefit guarantees for former GM employess it is the same difference.
GM's total losses last year were approx 13 billion.
Moreover, GM has been operating antiquated plants mainly to meet its UAW employment obligations. The main component of the plan announced last month is to close the antiquated plants, a move that will greatly enhance operating costs.
You are also ignoring several hundred million GM pays every year for UAW workers on the books who do not actually work. Again, a UAW legacy cost.
GM has work to do in other areas, but all in all, it appears to be addressing them. It has greatly reduced its expenses in Europe, and may even show a profit there. Its new US plants are highly efficient. In fact, GM has 4 of the top ten plants in the US.
The most intractable expense relates to the work force and their medical and pension benefits. It is obvious from the books. The WSJ, Economist, Business Week all agree with my position.
Here, you are confusing an accounting charge with an actual cash loss. This is just a write off of items on GM's balance sheet -- not only did GM not write a check for this amount, it actually got back $1.9 billion from the IRS (yes, you and me) for taking the writedown.
You are also ignoring several hundred million GM pays every year for UAW workers on the books who do not actually work. Again, a UAW legacy cost.
I just showed you that Toyota, a company smaller than GM, could have absorbed the entirety of GM benefits payments and still made a profit, while GM would have still lost billions even if it didn't have the obligations.
Let's go further: If Toyota had to pay for its own current payroll and benefits, and absorbed both GM's pension obligations and the Jobs Bank, it would be the same situation -- Toyota would be in the black, while GM would still be in the red. And that's despite the fact that worldwide, GM built almost 1.8 million more cars last year than did Toyota. Despite being a smaller company, Toyota still manages to outperform the General by a wide margin.
This situation is actually worse than that. During FY 2005, GM built approximately 9.2 million units, while Toyota built 7.4 million vehicles. Yet despite the 1.8 million vehicle gap, Toyota actually generated over $1.1 billion more in revenues (not profit, but revenues) from vehicle sales than did GM.
How does this happen, that Toyota pulls in more cash while building less? It's fortunate that Toyota is actually making money, as its profitability allows it to pay taxes to the US treasury, while the US taxpayer has to subsidize GM with billions in write-offs each year. Unfortunately, these failures at the management level cost all of us personally, it isn't just an abstraction.
Personally I find this talk a bit odd, because this is the same litmus test that we have in the U.S., more or less. Illegals and transient/work-visa employees are rightfully treated as outsiders and scabs.
If you are a citizen and assume a normal life there, they accept you, though like in the U.S. - some areas won't ever accept you - but most of the southern states aren't exactly free of redneck biggotry, either. If you act like a permanent leech/visa scab, yes - they get treated like illegals in the U.S. are, more or less. Fair enough.
Now, talk to peolpe who go on about Japanese biggotry while over there and ask them if they tired to become a citizen - 99% of them react like you are crazy for suggesting such a thing.
Duh.
No, you showed that Toyota could absorb GM's OPEB costs. OPEB stands for "other postemployment benefits" That is only the money that GM is putting away for its employees health care after they retire. It does not include the cost of their ongoing healthcare while employed, which is far more generous, and has much lower copays (Both for services and premiums), than what virtually any other employer is offering. It does not include pension costs. It does not include the costs of jobs banks. It does not include the base wage differential. It does not include the cost of keeping outdated plants running because they would still have to pay all of the employees if they closed them.
To become successful again, GM needs to make adjustments across the board, from upper management to the newest line worker. It's happening at most levels. The stockholders have seen their dividends cut in half, and have seen their stock lose 70% of its value since 2000. The top executives have all taken substantial pay cuts. The salaried workers are undergoing several rounds of layoffs this year alone. The union.... thinks it's business as usual.
I showed you that Toyota could give the OPEB costs AND the Job Banks expense to Toyota, and Toyota would still turn a profit, while GM would still be losing money.
At this rate, everyone is going to have to work for GM for free before it is going to turn a profit. Somehow, I doubt this would be a realistic business plan.
But since you're so concerned about expenses, let's look at expenses. If you take GM and Toyota's 2005 annual reports, and calculate the expenses of their automotive operations on a per-vehicle basis, here's the math:
Item / GM / Toyota
Expenses, excl. depreciation ($B)/ 165.4 / 138.8
Number of vehicles built ($MM) / 9.17 / 7.41
Expenses per vehicle / $18,025 / $18,736
Funny how Wagoner et. al. never showed you this math that reveals that Toyota spent about $700 more per vehicle building its cars than does GM -- it's GM that has the cost advantage, not Toyota. (Thanks to the smoke blown by GM management, I seriously doubt that any of you GM fans had any clue that GM is already spending less than its main competitor.)
Yet despite its cost advantage, GM still can't make a profit. I wonder what excuses will need to be dreamed up now?
How much 'better' could GM make a car if they simply spent the same amount of money building one as Toyota does.
Would $700 get GM a better interior, engine, transmission, suspension, and brakes?
---
I've always found GM products to have institutionalized a poor design philosophy.
Soft handling, weak brakes, 'floaty' suspension, and far too much play in the steering wheel
That defines GM cars. While some may find that to be a 'plus', I don't. I find that design philosophy to be 180 degrees opposite to what I desire in a car.
And from my experiences in Japanese, Korean, and European cars... there aren't many that follow that design philosphy.
With the way GM market share is dropping, perhaps GM should consider revamping their core design philosphy and build small and mid-sized cars with a tighter suspension, better brakes, harsher ride, and less play in the steering wheel.
Save the original design philosphy for only those cars that have been shown to be popular with elderly car buyers.
So Toyota could take some of gm's excess expenses. THAT MEANS NOTHING. GM has many other expenses besides the two you state that Toyota doensn's have because of the UAW contract. They have the cost of ongoing employee benefits, and their health plan is far more generous than what anybody else offers. They have the cost of employee pensions (not included in OPEB). They have the cost of keeping old, inefficient plants with low per-worker yields open because it would cost them more to not make any cars there due to the jobs bank requirement of the UAW contract. They have the cost of an oversized white-collar workforce - which they are correcting.
But since you're so concerned about expenses, let's look at expenses. If you take GM and Toyota's 2005 annual reports, and calculate the expenses of their automotive operations on a per-vehicle basis, here's the math:
Item / GM / Toyota
Expenses, excl. depreciation ($B)/ 165.4 / 138.8
Number of vehicles built ($MM) / 9.17 / 7.41
Expenses per vehicle / $18,025 / $18,736
Funny how Wagoner et. al. never showed you this math that reveals that Toyota spent about $700 more per vehicle building its cars than does GM -- it's GM that has the cost advantage, not Toyota. (Thanks to the smoke blown by GM management, I seriously doubt that any of you GM fans had any clue that GM is already spending less than its main competitor.)
Ok, so Toyota spends $700 more per car on GM. Between all of the factors stated above, how much more does GM spend per car on labor costs? $2,000? $3,000? more? If toyota spends $3,000 less per car on labor costs, and $3,700 more on parts, that would explain why Toyotas sell at much higher prices. If GM spent another $700 per car, they still wouldn't sell at Toyota prices because they'd still be spending so much more on labor costs, and so much less on quality components.
Let's step back and look at the big picture -- despite all of GM management's efforts to spin stories and craft a shell game by yammering on about its expenses, the numbers tell the story: GM's overall expenses are comparable to those of its competitors.
The complaints that GM has a uniquely high cost structure is a lie. Its overall per-unit expenses are roughly the same of those of Toyota's, a company well known in the industry for being highly profitable.
So how is it that Toyota can actually have higher expenses per-unit than GM, yet still make a profit? The key difference is not in the expenses, but in the revenue.
Again, look at the revenue numbers: Worldwide, GM sells its vehicles for an average wholesale price $4,300 below that of Toyota. GM sold 1.7 million more units last year than did Toyota, yet made lower revenues doing it!
So it's no wonder that GM is in deep trouble, for it is unable to command wholesale prices of its prime competitor, yet its overall costs are about the same. The major gap between the two companies is in their ability to generate cash. The ability to cover that gap can only come from product, and a look at the GM lineup will tell you that no increase in revenues will be forthcoming. Without a solid lineup of products that can be sold in large quantities to retail buyers, this is not going to happen.
By the way, this is not an argument that GM shouldn't cut its costs, but merely illustrating that cost cutting by itself won't lead to profitability. There does need to be a costcutting program, but without revenue increases, those cuts won't provide the sources of revenue that GM needs to turn a profit.
How much you spend doesn't determine its worth. It's what you spend it on. If I pay someone $5000 an hour to build a car out of cardboard, That doesn't mean I'll be able to sell it for as much as a Lexus, even though it probably cost more to build. GM has much much higher labor costs than its competitors. To have comparable expenses, they have to cut costs elsewhere, and it shows.
Again, look at the revenue numbers: Worldwide, GM sells its vehicles for an average wholesale price $4,300 below that of Toyota. GM sold 1.7 million more units last year than did Toyota, yet made lower revenues doing it!
Everywhere except North America, GM IS doing well. It's the fastest growing automaker in China. The cars GM builds in China are built cheap and sold cheap. Toyota has almost no presence there, or in other emerging markets with extremely low labor costs and low transaction prices.
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I agree. The real problem for GM is that its products aren't designed to meet the needs and wants of consumers. They sell at a discount because they aren't worth buying at a higher price.
For you, it's handling and styling. For others, it's reliability and fit-and-finish. For others still, it's a lack of brand image that makes its badges seem stodgy and tired, rather than interesting, sophisticated or youthful. Whatever it happens to be for you individually, the collective problem comes from the fact that these products are largely designed to be purchased in bulk by volume buyers (fleets), whose priorities are centered on price, rather than the consumer who will willingly pay more if the product provides other benefits.
I seriously doubt that GM would end up with a better car simply by spending a bit more on the same old dreck. Putting a silver lining on a sow's ear doesn't change what is fundamentally wrong with the products. And the fleets aren't going to start paying more for these cars, as the fleet operator's priority is to maintain low costs, not to get a better interior or nicer design, so there would be no point in improving if GM can't bring back more retail customers.
My point here has been to illustrate that GM's costs are not exceptionally worse than anyone else's. It is not their costs that prevent them from selling their cars to retail buyers, but their products. The Solstice is a move in the right direction, but they need to create designs like that in mass market segments, not just speciality niches that won't ever generate high volumes.
If GM could capture that same energy by creating products for the bread-and-butter segments and win back the respect of retail consumers, then it might stand a chance. The Malibu, Cobalt and Impala are three examples that make it clear that this time has not arrived, and won't be happening soon enough to rescue the company, i.e. even if the next models were fantastic (and they probably will be anything but), the money from the GMAC sale will run out before those next models arrive.
Compared to Toyota, that's obviously a false statement. GM spends less than does Toyota.
I've shown you the numbers from numerous angles, and the evidence is clear:
-If GM could unload all of its benefits costs, it would still be losing money. Reducing those costs would reduce its losses, but it wouldn't make it profitable.
-GM isn't spending more than does Toyota to build a car, it's spending less. The argument that Toyota has enjoyed a cost advantage is simply a lie -- it doesn't.
-The greatest disparity is not in expenses, but in revenue, which goes back to product and branding. There is no plan in place to fundamentally fix this problem. You could build every single GM car in Mexico, and that still wouldn't fix what really ails the company. Where is the gameplan to improve the product?
It has been shown that consumers overwhelmingly number one criteria in a new vehicle is reliability, which makes complete sense. If you care about performance, you certainly will be dusted by even a Kia Rio because your american vehicle will be non-funtional and need towing to move.
The fact of the matter is there are thousands that were defrauded by the BIG 3 in the 80's and 90's. They sold lemons which they claimed were vehicles. Unless the Big 3 can issue refund checks for all those lemons they sold, I think there are a lot of people out there just like me. I will not even consider purchasing another vehicle from an american auto manufacturer until Chrysler pays me back.
Fool me once, but not twice! Pay me back... and I will CONSIDER your inferior vehicles. Right now, because of one ludicriously fraudulent new vehicle sale, the big 3 lost my business for life. A shame... because I'm a young guy who graduated from college 4 years ago. I like cars, and have spent and will be spending much more than I lost on my first vehicle.... or should I say first and last lemon purchase.
Yes, they do spend a little less overall worldwide, but they spend a lot more on worker compensation in this country, where the bulk of their business is. That means, in order to spend less overall, they have to SPEND MUCH LESS ON MATERIALS.
-If GM could unload all of its benefits costs, it would still be losing money. Reducing those costs would reduce its losses, but it wouldn't make it profitable.
How do you figure that? GM lost about 10 billion last year. According to your own numbers (the OPEB figure) They spent 5.3 billion putting away money for their current employees' retiree health benefits alone. How much more did they spend on CURRENT health care costs? pension costs? jobs banks? inefficient plants they can't close? Wage differentials? Employee buyouts?
-GM isn't spending more than does Toyota to build a car, it's spending less. The argument that Toyota has enjoyed a cost advantage is simply a lie -- it doesn't.
Yes, Toyota spends a little more overall. They spend a lot more on the actual cars, and they spend less on labor. Labor costs are largely irrelevant to how much a car sells for, but material costs aren't. GM spends a lot more on labor to build cars. Toyota spends lot more on the materials in them.
And let's not forget, GM's average cost and wholesale prices are also dragged down by their success in emerging markets, where a brand new car can be bought for as little as $5000, and costs even less to build.
That's false. The vast majority of GM's sales are in the US, Canada, Australia and Western Europe. Get out your spreadsheet and see that sales in China and Latin America come nowhere close to explaining the revenue discrepancy between GM and its rivals.
How do you figure that? GM lost about 10 billion last year.
You need to study some basic accounting principles here. GM's pre-tax losses on its automotive business was about $20 billion. The amount nets out to about $10 billion post-tax because the losses create a writeoff that effectively subsidizes the loss, and because GMAC made a profit that offset the loss.
I'm comparing apples to apples, namely the automotive businesses of GM to Toyota, because our goal here should be to understand why Toyota makes money selling cars, while GM does not. And it is obvious that the main difference is in revenue generation, not in overall costs.
Speaking of costs, let's look at Nissan-Infiniti's automotive business. During FY 2004 (FY 2005 data is not yet available), Nissan's costs on its automotive business amounted to about Y2.19 million / $20,495 per unit.
That's almost $2,400 per unit higher than were GM's costs. Yet Nissan still managed to make a pre-tax profit on its automotive business of $7.2 billion.
Once again, GM has lower expenses than a primary rival. Once again, the main gap comes from the revenues: the difference between these two is more than $5,300. I would hope that this pattern should be fairly clear at this point.
To be fair, not all of the cars have been bad, and the quality gap is being reduced. (Of course, that means that there still is a gap.)
But your point is basically sound -- the American automakers have burned a lot of people, and they will have to work very hard to improve the products on many levels before they can hope to win back the retail buyer. IMO, that is going to require a few basic things: a vastly improved (and simplified) product lineup, in which every single vehicle is of stellar quality and provides the customer with a satisfying ownership experience, as well as some admission from the top that they acknowledge the past mistakes, and are ready to make good on them.
I remember Lee Iacocca's Chrysler ads back during the early 80's, when he effectively begged Americans to give them a second chance, and it worked. (Even with those awful K-cars, it still worked -- I'm pretty sure that cars of that quality wouldn't have cut it today.) I see GM needing to do the same thing: stop pretending that the quality problems weren't a legitimate gripe, admit their mistakes, build some fantastic products, and then stand behind them 110%.
Instead of showing me ads that try to convince me that GM products are just as trustworthy as are everyone's elses (sorry, but being allegedly "born from jets" just isn't a compelling value proposition), take out some TV ads in which you beg us for forgiveness and ask us, the American consumer, to give you another chance.
Do you see a day when Wagoner will do this? I sure don't. His solution is to build mediocre cars in Korea and Mexico, instead of just building a better car. Is it any wonder that they can't make any money?
I know enough about accounting to know that the bottom line is what matters, and it was around 10 billion. And, that included one time expenses like $3.6 billion for delphi bailout costs. Companies go through all sorts of accounting gimmicks to show a bigger loss than actual on a pre-tax basis to lessen their tax burden. The government didn't give GM 10 billion last year to make up the difference between their "pre tax loss" and their actual loss.
As you yourself said, GM's OPEB - "other postemployment benefits" make up more than half of that 10 billion. Hard numbers are hard to come by for exactly what thir costs are in current helathcare costs, pension costs, jobs bank costs, the cost of higher base wages, and the costs of continuing production at inefficient plants. Isn't it concievable that all of these things together just might come up to as much as retiree health care?
Once again, GM has lower expenses than a primary rival. Once again, the main gap comes from the revenues: the difference between these two is more than $5,300. I would hope that this pattern should be fairly clear at this point.
Once again, how much you spend on the actual cars themselves is what matters in determining how much they sell for, not how much it costs you to build them. I'll repeat myself: If I pay someone $500 an hour to build a car out of cardboard, and it costs me $700 less to build overall than a Lexus, designing it better, but with the same build materials cost, wouldn't make it sell at the same price point.
I'd be willing to bet that the difference between what GM and Toyota spend on materials per car is probably pretty close to that $5,300 figure you're so fond of stating.
--First, you want us to compare the pre-tax OPEB number to a post-tax loss that includes non-automaking business, in order to inflate the relative appearance of the OPEB number.
--Then you've continued by trying to equate an accounting charge-off with a bona fide cash loss.
Sorry, but I know far too much about finance to be fooled by that. You need to make apples-to-apples comparisons, and you've decided to lob in a few kumquats, instead.
Once again, how much you spend on the actual cars themselves is what matters in determining how much they sell for
Hey, you're the one who keeps complainig that GM's costs are so much higher than are everybody else's. I'm pointing out how bogus an argument that is, clearly GM is not spending what everyone else is spending. What they spend it on makes no difference when it comes to debunking this bogus "legacy costs" argument.
If you're now in agreement that GM builds an inferior product, then I'm in full accord with that. But I have yet to see any evidence that spending more money to build the same dreck that GM produces today would yield a higher sales price. I don't see a Cobalt being an appealing alternative to a Corolla, no matter how much you'd spend on it.
Do you see a day when Wagoner will do this? I sure don't. His solution is to build mediocre cars in Korea and Mexico, instead of just building a better car. Is it any wonder that they can't make any money?
http://www.findarticles.com/p/articles/mi_m0NTQ/is_2003_May_30/ai_102612765
--First, you want us to compare the pre-tax OPEB number to a post-tax loss that includes non-automaking business, in order to inflate the relative appearance of the OPEB number.
--Then you've continued by trying to equate an accounting charge-off with a bona fide cash loss.
Sorry, but I know far too much about finance to be fooled by that. You need to make apples-to-apples comparisons, and you've decided to lob in a few kumquats, instead.
You're right. The pretax numbers don't mean anything, and the inner workings of financial statements are such a tangle of accounting gimmicks they're next to impossible to get useful infromation out of. You're the one who brought them up. The bottom line is what matters, and it was about 10 billion.
Why don't we go back to basics here. This article has some pretty interesting numbers. The actual difference in transaction price in the US (the number you keep citing is a global number) for the same class of car is about $1500. According to the numbers, GM's health care and pension costs are about $1900 more per car, and its legacy costs are about $2250 more. that's over $4100 higher in costs, far more than the price differential.
If you're now in agreement that GM builds an inferior product, then I'm in full accord with that.
They do build an inferior product on smaller vehicles where that $4100 can't be easily absorbed by smaller profit margins and unnoticable cost cutting. But the bigger and more expensive the category you're looking at, the more competitive GM's vehicles become. While it may not be your style, and it certainly isn't mine, the Escalade is king of the hill as far as luxury SUVs go.
I don't see a Cobalt being an appealing alternative to a Corolla, no matter how much you'd spend on it.
There's no point in GM building a corolla quality small car if it would cost them $4100 more to build than it costs Toyota. The profit margins on compacts aren't nearly that high.
"The text of the first ad details the company's long journey on the longest road in the world - the `Road to Redemption,' " Cowger said. "Now, with a lot of great-looking, high-quality products and higher levels of customer satisfaction, we want to persuade consumers to consider GM products in a different light."
The campaign complements GM's other ongoing efforts designed to let consumers experience how good GM products really are: the GM 24-Hour Test Drive program, which offers potential customers the opportunity to take a test drive of a new GM car or truck and return it the next day; and Auto Show in Motion, which since 1998 has allowed non-GM owners to test drive GM vehicles against competitors' products in a relaxed, outdoor setting.
The campaign's initial ad is scheduled to break the week of June 2. The ad template features a four-color, two-page spread, which includes a technical story, product examples, and detailed copy that supports each particular focus. All GM brands in the United States, including Saturn and Saab, are featured in the ads, which will run in national and regional newspapers and magazines.
Sorry, but that sounds more like the Speedway to Spin than it does a pathway to true redemption. For this to work, it would need:
-A Lee Iacocca-style personal appeal for forgiveness. Come right out and tell us that you blew it, and that you know that you blew it. Don't just try to convince us that you are "born from jets" or that the quality is high, when we won't believe you.
-Introduce a few undeniably great new mainstream products -- let's try passenger cars for a change -- that are absolutely competitive in comparison to their rivals, not just better than the most recent inferior GM version. Selling the same stable of products as before does not send a message that the commitment is genuine.
-Back those new cars with a 100k mile warranty, and then honor warranty repairs without a fight. (If you build them right, there won't be all that many warranty repairs.)
Trying to talk out of one side of your mouth while pitching a Cobalt out of the other just isn't going to cut it. The products need to be worth buying, and the appeal to forgiveness has to be personal and compelling. Otherwise, why should anyone on this thread who has been burned by GM even consider bother giving them another shot?
Of course they do -- they are the most meaningful numbers. Your game of playing with the retirement figures was an effort was an attempt to double their relative magnitude. Sorry, but anyone with an understanding of finance won't be fooled by that.
The actual difference in transaction price in the US (the number you keep citing is a global number) for the same class of car is about $1500.
There's no mystery to how I calculated this figure -- take the revenues from the automotive business of each company, and divide by the number of vehicles sold or produced. Both are in their annual reports, and I've reported those amounts here -- there's no need to estimate the figures, when they're reported.
They do build an inferior product on smaller vehicles where that $4100 can't be easily absorbed by smaller profit margins and unnoticable cost cutting.
Of course, the margins are lower -- the sales prices are far lower. (I will continue to go with the data available from the annual reports, not the shorthand in your article.) And figures from Deutsche Bank, which found a difference in average US wholesale prices of almost $5,000, not just $1,500, are more in line with the data in the annual reports than in your cite.
Actually, though you are completely correct, IMO, I think one reason Toyota outperforms GM, is exactly that they are smaller. They make 3 lines of cars, instead of 8, and frankly, I'm sorry they started their third line (Scion). It's a good car and a success, but it reminds me of Saturn - a brand GM never needed. Smaller is better, more nimble, more adaptable, etc. GM is just too big an elephant to turn on a dime..... It needs some drastic, draconion downsizing, and Toyota should stay nimble.
Absolutely agree. GM is so large and cumbersome that at this point, its size just creates diseconomies of scale. I've said repeatedly on these forums that I'd consolidate or eliminate badges, reduce the number of nameplates by about half so that there are fewer products to promote and manage, and dump all of the fleet sales into one badge (I'd choose Buick) so that the fleet business doesn't continue to stigmatize the other badges.
I'm sorry they started their third line (Scion). It's a good car and a success, but it reminds me of Saturn - a brand GM never needed.
Here, I differ with you, I think that it is a brilliant plan that has achieved what Toyota failed to do with the Echo -- to create a gateway to the youth market. The Echo has never met its goal of reaching out to young people, but Scion has struck a chord with that demographic and should help to create brand loyalty that can move Scion buyers to the Toyota-badged nameplates as they age.
Saturn's mission was different, it was intended to be GM's version of the Japanese car, coupled with a friendly sales model. In my view, Saturn has failed in large part because the products didn't deliver on the promise, and were quickly left behind their rivals who started out ahead, and improved more quickly than did. The no-haggle pricing wasn't such a bad idea, but in order to maintain those prices, they would have been better off creating a car that was so hot that it just wouldn't have been subject to much haggling. (From what I hear, a lot of Scion buyers are paying close to full sticker.)
Of course they do -- they are the most meaningful numbers
Oh come on. You know corporations play all sorts of games to show lower profits/bigger losses before their taxes are calculated.
There's no mystery to how I calculated this figure -- take the revenues from the automotive business of each company, and divide by the number of vehicles sold or produced. Both are in their annual reports, and I've reported those amounts here -- there's no need to estimate the figures, when they're reported.
You're quoting global price differences overall, and US non pension retirement cost differences from some obscure part of the annual report. Talk about apples to apples. The problem isn't a global one. It's a US one. Gm's doing just fine everywhere else. Do you dispute the $1500 price differential figure for the US? check this out. I see a $1500 TMV price differential between a base cobalt and a base corolla. Let's try something a bit bigger. Or how about a SUV? Can you find anything that has a $5000+ price difference?
And figures from Deutsche Bank, which found a difference in average US wholesale prices of almost $5,000, not just $1,500, are more in line with the data in the annual reports than in your cite.
Oh, so now we're going with figures from a german bank?
Argh, that comment shows that you can't read a financial statement. You obviously don't realize that post-tax figures are simply pre-tax figures, reduced by the bracket of the corporate tax rate.
You need to compare apples to apples. If you compare a pre-tax loss to a post-tax loss, you are comparing one number that has been reduced by over 35% to one that hasn't been adjusted. Then you went further by offsetting GM's losses from automaking with its profits from GMAC.
As a result, you've erroneously tried to make the legacy costs appear to be equivalent to half of the losses, when they are equivalent to but one-quarter of the loss. So you've overstated it by 100%.
You're quoting global price differences overall, and US non pension retirement cost differences from some obscure part of the annual report.
Again, you are showing a lack of knowledge about how to read a financial statement.
For one, I'm citing both global and US price differences. For another, both sets of figures tell the same story -- GM prices are well below those of its competitors, both in the US and globally. The annual reports make this clear.
The cost figures for wages and benefits that you are complaining about are already included in those per-vehicle figures, so these figures are directly comparable. You are attempting to double-count these by adding them to the per-vehicle expense figure that already includes them.
GM's costs are obviously below those of Toyota and Nissan, no matter how you'd like to spin it, and again, the annual reports spell that out.
I see a $1500 TMV price differential between a base cobalt and a base corolla.
Strike three -- You are confusing retail prices commanded by dealers on retail sales with the wholesale prices earned by the manufacuturers.
The effective wholesale (invoice-holdback) prices paid for cars sold to fleets are below those for cars ultimately sold to retail customers. Fleet prices are additionally discounted below the "invoice" that serve as the basis for prices paid by consumers. So no, you have this one wrong, too, more apples and kumquats.
Oh, so now we're going with figures from a german bank?
That's simply ignorant and verging on racist. DB is a multinational investment bank, a completely respectable source. It is also a better source of data, because it provides two data points, not just one, and those data points happen to correlate with what is in the company's annual reports. Your effort to use TMV as proof shows that you don't quite comprehend the subject matter here.
So if a company loses money, the government gives them money to reduce their post-tax loss? I call BS, and I get your schtick. You quote meaningless numbers (your phantom $20 billion loss) from the bowels of a financial statement that takes a rocket scientist to decipher, then you use partial figures (the OPEB number - not including most employee benefits, or legacy costs) to "prove" that GM couldn't possibly make a profit even if they eliminated "all" employee benefits. Then you claim GM could make a profit if they built a car people wanted, and that car magically wouldn't cost GM anything more to build in material costs than one of their current cars.
Strike three -- You are confusing retail prices commanded by dealers on retail sales with the wholesale prices earned by the manufacuturers.
While they're not the same thing, retail prices are tied to wholesale prices. If we assume that the numbers you stated are accurate, GM's average fleet price was about $15000, and the average overall price was 18,861. If we assume 25% fleet sales, that means the average non-fleet price was about $20,100, still $3700 less than toyota. So the wholesale price differential to dealers is $3700, but the retil differential is only $1500? That would mean GM dealers are making $2200 more per car than Toyota dealers. Again, I call BS.
The effective wholesale (invoice-holdback) prices paid for cars sold to fleets are below those for cars ultimately sold to retail customers. Fleet prices are additionally discounted below the "invoice" that serve as the basis for prices paid by consumers. So no, you have this one wrong, too, more apples and kumquats.
So now we get to a huge part of the problem. Fleet sales. Why do you think GM sells so many cars to fleets? Are the greedy executives pumping up their stock options by selling millions of vehicles below a price where they will ever make a profit? Maybe they enjoy destroying the resale value on their vehicles. (Which is another factor depressing ALL transaction prices) Or maybe they want to strut around and beat their chests sayin "we're number one" like a bunch of high school jocks. OR maybe it would cost them more to not build the cars because they can't scale production to meet actual demand due to labor contracts. Which do you think it is?
That's simply ignorant and verging on racist.
You went halfway around the world to find a source that supports your argument, and now you accuse me of being a racist for questioning why it's being used?
-You are free to either compare two pre-tax numbers with each other, or else compare two post-tax numbers together, just don't mix them up as you have chosen to do.
Honestly, I don't expect everyone on this site to be a financial guru, but I hate it when people try to fake their way through it. If you want to learn some basic finance principles, that's no problem, but don't start throwing around accusations about something you clearly don't understand.
-You are confusing the retail and the wholesale. The dealer sells at retail; the manufacuturers sell at wholesale.
If you understand the problem with fleet sales, then you'd realize that the wholesale price of a fleet vehicle is often significantly lower than what it is for the same vehicle that is sold to a retail consumer. TMV has absolutely nothing to do with that. Again, that's OK if you didn't know that, but don't fake it and make stuff up just because you're embarrassed.
You went halfway around the world to find a source that supports your argument, and now you accuse me of being a racist for questioning why it's being used?
You can't expect to have any credibility if you're going to make comments like that.
For one, it really wouldn't matter where he is based just so long as he is a competent analyst. As it turns out, he's DB's automotive analyst, and is widely quoted in the business press on matters concerning the automotive industry. He's certainly not lacking in credibility on this subject.
For another, DB is a multinational, with offices throughout the world. Most likely, Rod Lache (a good American name, by the sound of things), is based in New York, along with most of the other Wall Street analysts. But even if he was in Outer Mongolia, what difference would that make?
Just how long is GM going to wait before releasing those 'apology' commercials?
:confuse:
I don't doubt your claims a second. The 3800 is one of the greats of all time. Some will knock it because it's old technology, but if it's not broke why fix it ? i also do agree with some of the bashers GM does need to keep the R&D investments for engines. I think just as important of a topic is technology (Gadgetology)
What kind of ride is your 3800 in again pal ?
Happy Easter,
Rocky
I don't always agree with you pal, but I do respect your research.
Great Post and Happy Easter
Rocky
Rocky
This is exactly the mentality that GM is suffering from. They don't try to improve their offerings to 'OUTSHINE' the competition. They just keep the same platforms and engines years and years, because they are 'not broke'. No one ever said Toyota's 4.3L V8 engine is broke, which is only 5 years old. Yet, this engine will be killed by 2006, replaced by an engine that has 100 hp more horsepower and yet better fuel economy. Where is GM from that? If GM keeps thinking that if it ain't broke don't fix it, then GM does not deserve to survive in this ever-competitive market.
You may or may not be aware that GM is now apologizing for their lack of quality over the years through two-page spreads in major newspapers around the US and on their website.
You can read about their "Road to Redemption" here: http://www.gm.com/vc/story/home_flash.htm
When compared it with 3.5L with Toyota/Nissan/Acura which offer close to 300HP, 3800 only has 20% deficit - nothing a few rebates can't fix though. Even 3.8 from Hyundai and Mitsubishi offer better output.
i also do agree with some of the bashers GM does need to keep the R&D investments for engines
UAW would rather have job banks open than unnecessary expenses like R&D for product improvement.
Let's NOT turn this personal. Time to drop the comments about others not comprehending, etc.
2003 LeSabre/Michelin Symmetry tires
I just found today that the tires were at 38 pounds front and 35 pounds rear. They had gained air pressure because the last time I checked it was probably 20 degrees and during the trip was 55-70 when driving. That high pressure may have helped!
Even if the DIC is off by 1 mpg it still got good mileage as I drove past signs declaring $2.899 for gasoline along the interstate!!!
Never found any deficiency of power. I probably don't demand in the same manner I did when I was 20 and for this trip I did attempt to cruise at 68-72. I think some who don't like the 3800/4-speed auto would get used to controlling what the trans does re unlocking torque converter for more power with increase motor speed and downshifting smoothly into 3rd for more torque. Trans is so smooth at doing these things it scares me at times. The lockup and slip control is well-engineered.
Of course those critics point out that the car needs a 10.85 liter motor and a 12 speed trans to be competitive!!!
I agree motor research needs to be continual but the latest from one company can be bad technology 2 years from now after the motors are in the public's hands and driven. Can you say sludge? Can you say Honda transmission? Can you say hesitation in Toyota engine/trans controls? Can you say 4-6-8? Can you say 4100? Can you say Ford?
2014 Malibu 2LT, 2015 Cruze 2LT,
http://www.pistonslap.com/
http://www.gmproblems.com/38.htm
http://www.gmproblems.com/
http://www.lemonlaw.com/gm-engine-problem.html
http://www.consumeraffairs.com/news04/2005/gm_piston_slap.html
The piston slap is not supposed to be damaging IIUC from radio talk show discussions.
How about sludge on VW motors that don't use a synthetic oil from Europe specs and the dealers didn't install that oil at oil changes!!!
Do you have links to sites other than those that focus on GM/s problems. Other makers also have problems...
2014 Malibu 2LT, 2015 Cruze 2LT,
It is one thing to a problem for a particular engine for 1-2 model years; if you have problems from 1999-2006 across 9 engines variants, it becomes a 'feature' not a defect.
http://www.pistonslap.com/
GM Consumers, do you have a 1999-2005 (2006?) 3.1, 3.4, 4.3, 4.6 (Northstar), 4.8, 5.3, 5.7(LS1), 6.0 or 8.1 liter engine that displays any of the following problems?
If GM could spare a dime for R&D in the engine field, they could come up with the greatest engine, but....alas, they soldier on with the 75 231CID.
Honda & Toyota have VVT. Ford at least, has OHC and coil on plug. Pushrods are inefficient and a thing of the past, and the 3800, while good, isn't quiet, or smooth.
Man, you should have felt them idle in 75 when they first came out! I had one in a Buick Skylark, and it would jar your teeth idling. Still, that was a nice car - one of my favorites.
What's a 75 231 cid?
2014 Malibu 2LT, 2015 Cruze 2LT,