Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

GM posts big loss as U.S. sales hurt

with 4 comments


I could have chosen one of 580 articles from the Google News engine – this one just happened to be top of the list.

The main reason that GM is not doing well is that it is having a hard time selling big trucks for use as passenger vehicles – something they have pursued aggressively ever since the introduction of the Corporate Average Efficiency Standards in the US. Trucks do not count towards that target, and in very crude terms, the bigger the vehicle, the bigger the profit margin. Or, as Henry Ford II put it, “minicars, miniprofits”. In fact a recent prolonged strike at one of its parts suppliers helped, since there was excess inventory in trucks, SUVs and minivans (which of course are not “mini” in any meaningful sense).

GM did try to sell small cars – and built the CAMI plant in Ingersoll Ontario as a joint venture. But sales of the Geo Metro/Suzuki Swift never met expectations. I suspect because of the market sentiment their own campaigns had created. I have always been surprised at the persistence of the “bigger cars are safer” myth. The plant now builds “crossover SUVs”

Both Toyota and Honda are doing better, but both sell large trucks to households too. They just concentrated on building cars that met the increasingly stringent California standards, rather than fight expensive court battles against them. If GM had spent as much on R&D as it did on lawyers, it might have done better. And it has certainly woken up recently

“Four dollar gasoline won’t kill the industry, but it will force it to change,” said Tynan [an auto analyst at Argus Research]. “Demand for hybrids will grow, which will force GM and Ford to compete with Toyota and Honda’s new technology.”

So far as I can see, the US makers would rather put hybrid drives in their bigger vehicles and make them more fuel efficient first than go head to head with the Prius and Civic hybrids. But they also have very little to offer against conventional smaller engined cars that get very good fuel economy at much lower prices.

Underneath the restyled front fascia, hood and fenders is a powerful 320-horsepower 5.3L V-8.


It does not say anything about gas mileage

Written by Stephen Rees

April 30, 2008 at 9:51 am

Posted in cars

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4 Responses

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  1. yup they posted a year over year loss of 3.25 billion——-one year earlier they posted a profit of 62 million dollars—–funny thing the stock surged upwards by over 11% —apparently investors were expecting a bigger loss—–I know not the games wall sreet plays, but I have seen that before companies lose billions and the stock price rises, ceo s with 100million dollar plus salaries, company in the dumps,stock rises, I blame the wall street players their quite happy with the status quo——–signed…………………………….money is the root of all evil

    grant g

    April 30, 2008 at 11:49 am

  2. Does this mean GM *knows* the Japanese build better cars, so they’re not
    even going to bother trying to beat them anymore?

    Paul Holden

    April 30, 2008 at 12:51 pm

  3. It would appear from the CNN piece that they think they can sell Hummers and other monster trucks to the newly wealthy in the emerging economies. After all, since they are priced in US dollars, they will be cheaper than vehicles from places with stronger currencies. So they may not be able to beat the Japanese but the Euro denominated builders like BMW and MB could be in for a slower time

    Stephen Rees

    April 30, 2008 at 2:25 pm

  4. The ads on US teevee do seem to be getting desparate…. $5000 cash back, “free” gas for a year…. please, buy…


    May 1, 2008 at 12:03 am

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