GM cuts jobs and Truck/SUV production

Funny thing that will lead to further decline.

I thought Kenworth, Mack and Freightliner were the leaders in FULL SIZE TRUCKS not the silly toy truck like Chevrolet Silverado and GMC Sierra.

 

I've been hearing radio ads for current GM owners of 1999 vehicles or newer - buy a GMC Sierra get $4000 back and a new high-def TV. They're sounding desperate...

 

Here in Central Flah they're advertising $30K full size trucks for $21.9K. All the while the Volt is still years off.

 

They are beyond desperate.

Two years ago, before I bought the Prius, we were at a local Ford dealer looking at a Ford Focus (due diligence to check out all of the cars capable of +30 mpg before buying one). They only had one 5 door Ford Focus on the lot, color was dark grey (not desirable for Sacto summer time heat bake) and GF didn't like it anyway.

But they literally had a hundred full size trucks to choose from, all were available with your choice of 0% Financing for 72 months or approx 11k off the MSRP. Many were previous years models which had not sold. I think even with the inflated EPA ratings for 05 -06 they were rated 12mpg city, 17 mpg highway.

Dodge has a similar 0% for 60 months on any of their full size trucks which also have dismal mpg ratings.

Its going to be really bad for them now that ~$4 gas is here.

 

Hmmm. Maybe GM should use the existing assembly plant and trained workers to make cars that consumers want to buy instead of just shutting down the plant and laying off everyone. Oh wait, that's takes some vision and ability on the part of GM management. By vision, I'm referring to vision of the dumbest elementary school student that knows GM factories should be making affordable cars with high fuel efficiency - instead of gas hog SUV's and Trucks. Ok, maybe I'm being too hard on GM, possibly 1st or 2nd graders might not know. At least the dumber ones. But any 3rd grader certainly could do a better job running GM than the current bunch of clowns.

Why not retool these existing car plants to build fuel efficient cars? I guess that GM thinks gas is going to get cheap and plentiful again and they're just planning on idling the plant (instead of implementing expense retooling) and planning on making the same big SUVs and Trucks in the not too distant future. So why keep those expense workers around sucking up money - when you can just lay them off. Good riddance. After all, most won't be able to find decent jobs and will come begging for their old job back (at lower pay) when the plant reopens. Guess what GM, I just asked my third grader for some management advice and he thinks that you're still a bunch of idiots. Gas isn't going to get much cheaper and you'll never reopen the plant unless you retool to build fuel efficient cars.

 

I'd imagine cost has something to do with them not focusing on fuel efficient cars. I believe the big 3 have built their business models around large body on frame vehicles because they have the highest profit. Trucks are very profitable and with increased competition on the fact that they pay more in salary to retired unionized workers than they do to their existing work force they're in a very bad situation. As a business owner, I could never imagine being in the situation our domestic automobile manufacturers are in.

Mike

 

If trucks are so profitable then why are they drowning in red ink? Do they also believe gas is still going to drop 50c this Spring? A product line is profitable only if the manufacturer can find someone to pay more than cost. How long before the "twofer" sale?

Here's a free marketing idea for GM: Pay for your Volt now and we'll give you a truck and a Volt from the first shipment.

 

Sure. Demand for big SUV's (made by GM) will be rebounding soon.

 

Obviously the demand has decreased which is why it's no longer profitable but if you took fuel prices out of the equation and compare the production cost of a truck they sell for $30k and compare it to a car they sell for $30k you'll find the truck is much cheaper to build. The truck divisions of the big 3 have carried the rest of the divisions for a long time. Unfortunately this business model was formulated when fuel was much cheaper. Due to recent fuel prices this model is no longer working for them. It doesn't mean that building a truck is more expensive than a car now... it just means there's no longer a demand for the truck which means they can't mark it up like they used to (which has led to the red ink you described).

Use this analogy. You're a widget builder. You have widget A and widget B. Widget A has a profit of $100 and widget B has a profit of $20. Many would say ramp up production of Widget A and abandon widget B since it's not as profitable. A smart way would be to continue building widget B (assuming it at least covers it's own costs) just in case for some reason Widget A is no longer desirable (for whatever reason. The reason isn't important). It's the simple matter of not keeping all your eggs in one basket.

 

rule #1: diversify, diversify, diversify!

it's not just for investing anymore.

 

Or, if you are clever, you build Widget A and Widget B in whatever proportion is profitable and makes other business sense, but you look at the the needs of your customers and what they are likely to want/need to buy in the future. You still work on A and B, but you now start to develop Widget C. You don't talk about Widget C outside the company and you don't advertise Widget C as the next big thing, you just get it done. And then you introduce Widget C when it is available for sale. And it changes the industry.

The Prius is Widget C.

 

I've looked into this before and think part of the problem (besides high labor and legacy costs) is that GM seems to have few flexible factories: ones that that can build several different unrelated models and easily adjust output based on demand.

There's a reference to this at GM may close more factories - 04/26/05 and an article about it at Flexible Factory Reveals Future of GM - Archives - ASSEMBLY.

You can see evidence of what seems like the lack of flexible factories when you look at the Production Results by Plant at GM | General Motors: Investors: Sales and Production Reports: Historical Production. I wish I could find the report but the former Harbour-Felax group has put together reports showing factory utilization is just all over the place for GM (say from <30% to >100%) whereas Toyota keeps them all in the 90s. I wouldn't be surprised if UAW contracts are partly to blame for the lack of flexible factories.

The Mazda and Toyota plants I visited in Japan all hit totally different models going down the assembly line. Some were left hand drive and others were right hand drive. This is the right way to do things vs. idling/laying off people at one plant vs. paying overtime to folks at others.

Some of the others in the thread ARE right about GM's business model. They're being propped up by and assume sales of higher margin trucks and SUVs and don't want to sell too many less profitable/unprofitable small cars.

 

BRILLIANT!!! ound:

But, it would move the trucks and increase their sales figures. Sadly, it's their best option.

 

It's sad to hear about people losing their jobs. I feel bad for all those people.

I don't feel bad to see truck/SUV sales going down though. I have a friend who drives an SUV and recently stopped driving to work and started taking public transportation. It seems they figured out that their SUV costs more to operate. I had to restrain myself from saying "duh!"

 

This is sad for those workers, yes, but when I went car shopping I was stunned that only foreign automakers were making hybrids. I mean, come on! The Prius has been out there since what 2001? It's not a big secret. Toyota even made the plans open source so crazy people could make their own Prius.

Now not only are the US automakers coming out with a hybrid car (with 10,000 units the first year). The problem is, the car seems to be in the $35,000-$40,000 range, far from affordable for most people. Why get this car when you can get a Prius for 1.5 the cost?

The Volt won't come out until 2010. Now, I don't know about you, but I've been seeing a TON of Prii on the roads. Just an incredible amount. Even when I got my car a month ago, I didn't see that many. Now when I park at the store, I see at least 4-5. Course, maybe it's because I notice more Prii now that I have one. The point, though, is GM is losing out on market share the longer it waits to launch. I know they want a good launch, but all of those people buying Prii now, they're probably hooked for life. I know I am.

Unless Chevrolet comes out with a fantastic design, I do not see Prius owners switching.

 

On Wednesday, Henderson let the cat out of the bag, in effect saying that it wasn't the strength of the brands that kept them in business, but the cost of getting rid of them. As a business proposition, the cost of doing away with a brand is too rich for GM, he said, adding: "Oldsmobile was pretty painful." GM's approach since then, he explained, was that "instead of ending the brand," it decided to slam them together into single distribution points and shrink their model lineups.


He admitted that doing away with a laggard brand (you can insert Buick, Pontiac, Hummer, or Saturn here) would cause a big splash and might feel good. But it wouldn't be cost-effective, in his view. GM spent nearly $1 billion on Oldsmobile in 2001 alone buying out dealers and shutting down operations.
More confessions were forthcoming from Henderson and chief financial officer Ray Young:

Facing reality at General Motors - Apr. 30, 2008

 

What are the legal obstacles to converting everyone into a "GM dealer"? Each GM dealer could order whatever they believe they can sell. Whatever doesn't get ordered dies.

 

I think it's more a "branding" issue than a legal one. People often buy a brand (e.g. Mountain Dew) sometimes not even knowing the parent company (e.g. Pepsico).

It's easier to market a Hummer than a GM.

 

GM layoffs ?!?
How can this be? GM 'says' they're going to be making 100,000 Volts per year, starting next year (2010 coming out the Fall of '09).

We obviously need Malorn to spin us a spin. "We need more tariffs on imports" he'll say. Of course his tariffs won't apply to the GM's coming in from overseas.

GM actually made a few million the fiscal quarter before last ... which doesn't offset the BILLIONS of losses of this RECENT quarter. Not that Lutz won't still get HIS huge salary. No need for cuts in THAT area of GM, eh Lutz?