Globalist Factsheet

General Motors on the Skids

What are the root causes of the troubles of this venerable American icon?

Takeaways


  • In 2008, General Motors sold 610,000 fewer cars than Toyota — marking the first time in nearly 80 years that GM was not the world's top automaker. (CNNMoney.com)
  • In the last quarter of 2008, General Motors reported a net loss of $9.6 billion, compared to a net loss of $1.5 billion in the same period of 2007. (Automotive Business Review)
  • GMAC, the lender in which GM owns a 49% stake, has a big exposure to home mortgages. In addition, signs of difficulty are spreading to auto loans. (Wall Street Journal)
  • As of 2008, sales outside the United States accounted for 64% of GM's sales — up from 60% in 2007 and 55% in 2006. (MarketWatch)
  • GM's labor and medical costs averaged $81.18 per hour per worker — as compared to $47 per hour for Toyota's North American plants (as of 2006). (Wall Street Journal)

In recent years, U.S. automakers have been in a tailspin. Rumors have swirled for months that General Motors may file for bankruptcy — and the company’s stock recently reached its lowest point in 75 years. Our Globalist Factsheet takes a closer look at the troubles of this venerable American icon.

Is GM still a U.S. corporate icon?

Of the first 50 years of Fortune's annual rankings of the top 500 U.S. companies — which measures total revenues — General Motors was first for 37 years. As of 2008, it ranked fourth, with revenues of $182 billion — behind Wal-Mart, Exxon Mobil and Chevron.

(Fortune)

Is GM an industrial icon?

General Motors has been a continuous member of the Dow Jones Industrial Average since 1925, giving it the second-longest continuous tenure in the index. It ranks behind General Electric (which has been a member since 1907) — and just ahead of Exxon (which joined in 1928).

(Dow Jones & Company)

How long has it been around?

While the world’s first mass-produced car, called Benz Velo, was developed in France, the first U.S. Oldsmobile factory — ancestor of today’s General Motors — began production in 1901.

(International Organization of Automobile Manufacturers)

How has GM been an integral part of American society?

For the better part of the 20th century, GM had as much as a 50% share of the U.S. auto market. GM customers were "lifers." A young man was introduced to GM with his first car, often a sporty Chevy. As he aged and advanced in income and status, he moved up the GM ladder, trading in his Chevy for a Pontiac, then Buick, Oldsmobile — and, once he reached the upper-middle class, a Cadillac.

(Washington Post)

How is GM's stock performing?

GM shares fell to $1.27 on March 6, 2009, their lowest point in more than 75 years, amid fears that the company would file for bankruptcy despite receiving government help.

(Associated Press)

What is the root cause of GM's financial woes?

GM's labor and medical costs averaged $81.18 per hour per worker — as compared to $47 per hour for Toyota’s North American plants (as of 2006).

(Wall Street Journal)

What accounts for this disparity?

GM spends $1,635 per vehicle on health care for active and retired workers in the United States. In contrast, Toyota pays next to nothing for its few retired workers — and only $215 for its active employees.

(Fortune)

Is GM having success outside the United States?

As of 2008, sales outside the United States accounted for 64% of GM's sales — up from 60% in 2007 and 55% in 2006.

(MarketWatch)

Where in particular has GM enjoyed the most success?

GM is among the top three carmakers in Russia, Brazil and China — three of the world’s fastest-growing car markets — and is in the top ten in India.

(Financial Times)

Is GM still the world's largest car company?

In 2008, General Motors sold 610,000 fewer cars than Toyota, with the U.S. car company’s sales having fallen 10.8% for the year. It was the first time in nearly 80 years that GM was not the world’s top automaker.

(CNNMoney.com)

When did GM sales peak?

General Motors recorded peak sales in 1978 — with 9.55 million vehicles.

(Financial Times)

How has it been performing recently?

In the last quarter of 2008, General Motors reported a net loss of $9.6 billion, compared to a net loss of $1.5 billion in the same period of 2007.

(Automotive Business Review)

What is a major albatross around GM's neck?

From 1993 to 2007, GM spent $103 billion to fund legacy pensions and retiree health care — an average of $7 billion per year. In comparison, during those 15 years the company paid only $13 billion in shareholder dividends. The company has agreed to invest more than $30 billion in a fund to cover future health care expenses.

(International Herald Tribune)

Has the company done anything to change that?

In July 2008, GM announced it would cease medical coverage for its salaried retirees aged 65 and above.

(Wall Street Journal)

Is the subprime crisis affecting GM?

GMAC, the lender in which GM owns a 49% stake, has a big exposure to home mortgages. In addition, signs of difficulty are spreading to auto loans.

(Wall Street Journal)

Who is the most famous GM CEO?

Back in 1950, the president of General Motors was Charles E. Wilson — known as Engine Charlie. Wilson was one of the highest-paid corporate executives in the United States. He earned $586,100 — and paid $430,350 in taxes.

(The New Yorker)

What is unique about the present CEO?

Rick Wagoner, chairman and CEO of General Motors, is the only head of one of Detroit’s Big Three to have more than one year of experience in the auto business. In contrast, Ford’s Alan Mulally and Chrysler’s Robert Nardelli were previously top executives at Boeing and Home Depot, respectively.

(New York Times)

Has that worked in his favor?

When Rick Wagoner became the chief executive of General Motors Corporation in June 2000, he predicted that GM’s global market share would increase from 25% to 28%. However, as of mid-2008, GM’s global market share was 12.5%.

(Wall Street Journal)

What was perhaps the height of GM's shortsightedness?

At the auto show in Detroit, Michigan in 2007, General Motors unveiled a high-performance Cadillac CTS-V, with a 6.2-liter V-8 engine and 550 horsepower and the Corvette ZR-1, expected to get at least 600 horsepower.

(New York Times)

Is the company investing in more environmentally friendly vehicles?

In August 2008, GM finished designing its first plug-in hybrid car, the Chevy Volt. The Volt can travel at least 40 miles, or 64 kilometers, on battery power alone.

(International Herald Tribune)

And finally, what is GM doing to reduce its carbon footprint?

The world’s largest rooftop solar panel will be on a General Motors assembly plant in Zaragoza, Spain. The project will be 12 megawatts. A one-megawatt installation will run about 1,000 window air-conditioners simultaneously — at least as long as the sun is shining.

(International Herald Tribune)

Tags: , , , , , , ,

Responses to “General Motors on the Skids”