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Posts Tagged ‘GM’

Volt Jolt

Posted in America, Politics, Technology, tagged , , , , , , , on September 11, 2012 | 1 Comment »

During the recent Democratic National Convention, we heard a lot about how General Motors is back, thanks to its government bailout.  Now Reuters has a report that reveals, again, that things aren’t all that great at GM.

The report addresses the economics of the Chevy Volt.  Using information from industry analysts and manufacturing experts, Reuters estimates that GM could be losing as much as $49,000 on each Volt it sells.  The Reuters piece concludes that the Volt uses complex technology and expensive components and notes that analysts say it is “over-engineered and over-priced.”  GM says the Reuters report is “grossly wrong” because it doesn’t allocate product development costs over the lifetime of the Volt program — but even GM concedes that it is losing money on the car.

Volt sales are poor.  GM forecast that it would sell 40,000 Volts this year; through the first eight months of the year it had sold only 13,500 — and that’s even with an incentive program that allows a Volt buyer to get a two-year lease for as low as $199 a month.  GM has had to halt Volt production lines twice this year due to low sales, and some people question whether American consumers will ever want a plug-in car that takes hours to recharge its battery.

Politicians can argue about whether the bailout and government-sponsored bankruptcy were the best way to handle GM’s struggles and saved hundreds of thousands of jobs or instead simply locked in excessive labor costs and inept management.  Those debates shouldn’t affect a clear-eyed appraisal of GM now, four years later, with American taxpayers having invested billions of dollars in the company.  Let’s not kid ourselves:  successful companies don’t market products that are sold at less than cost.  The Reuters analysis of the bad economics of the Volt helps explain why GM’s stock price is in the doldrums, and why we should all be concerned about the company’s future rather than engaging in empty cheerleading.

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Trying To Look On the (Automotive Bailout) Bright Side

Posted in America, Humor, Politics, tagged , , , , , , on August 19, 2012 | 1 Comment »

In the modern world, we tend to focus on the negative a bit more, perhaps, than we should.  Of course, in some areas it’s hard to find much of a silver lining.

Consider the results of the federal government bailout of GM and Chrysler.  Car sales have been off, and GM stock continues to slide downward to new lows.  As a result, the stock the federal government holds in GM continues to decline in value.  Last week the latest Treasury Department report on to Congress on the potential losses on the auto bailouts was released, and it estimates another $3.3 billion increase in likely losses — taking the projected loss on the investment from $21.7 billion to $25.05 billion.

The stated purpose of the bailout was to save jobs and prevent the ripple effect on suppliers that could have occurred if GM and Chrysler had failed.  Defenders of the bailout say a million jobs were saved as a result and that the move kept us from plunging into a serious economic depression.  Opponents of the action say that the jobs wouldn’t have been lost if a standard bankruptcy proceeding had occurred and that such a proceeding would have allowed stronger companies to emerge, without any need for a federal bailout.  We’ll never know, of course, because the standard bankruptcy route wasn’t tried and billions of dollars of federal funds were spent to prop up GM and Chrysler.

But we do know one thing:  it could have been worse.  Rather than investing our tax dollars in GM, the federal government could have bought Facebook shares instead.  Since that company’s ill-fated initial public offering only a few months ago, Facebook shares have gone from a high of $45 per share to a new low of $19.05 at Friday’s close — which is a drop of almost 60 percent.

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Calling With Another Update On That GM Investment

Posted in America, Humor, Ohio, Politics, tagged , , , , , , , , , , , , , , , on July 26, 2012 | Leave a Comment »

Hello, Mr. Webner.  It’s one of your friendly securities analysts at the Treasury Department.  Hot enough for you?  Ha, ha!

What?  Oh, no!

Yes, Mr. Webner.  It’s me again.  Time for you to get another update on that GM investment.  This time, I’ve got good news and bad news.  Which would you rather hear first?

The bad news, I suppose.

Well, I’m sorry to say that GM’s stock price has hit another new low.  GM has lost more than one-third of its market value since it went public less than two years ago.  We’re shocked.  We thought those great commercials with likable folks talking about how smart they were to buy Chevy Volts would really cause a boom in sales.

So, how much have we lost?

Between the plummeting value of our GM stock and the tax breaks we’ve given the company to try to help it recover from decades of mismanagement, bad decisions, and short-sighted labor contracts, we’re out $35 billion.

$35 billion?!?!  But I thought my Senator was boasting about what a smart move it was to bail out GM?

He’s saying it saved jobs, Mr. Webner.  They just happen to be jobs that have been heavily subsidized by your tax dollars.

Wait — you said you had bad news and good news.  What’s the good news?

Oh, yes!  Right now, it looks like President Obama, the Democrat-controlled Senate, and the Republican-controlled House won’t be able to agree on an extension of the Bush era tax cuts.  So, after the end of the year everyone’s taxes will probably increase, and we’ll have even more of your money to invest!

Click.

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Bolting The Volt

Posted in America, tagged , , , , , , , on January 28, 2012 | 2 Comments »

It hasn’t been easy for the Chevy Volt.  Announced with great fanfare as the electric hybrid, alternative energy car of the future, the Volt has had problems getting traction with consumers.

The most recent news is that some Chevrolet dealers don’t want to take their allotment of Volts.  The sales of the car have been disappointing — only 7,671 were sold last year — and there have been some concerns about the risk of fires in the Volt’s battery packs, which led to a government investigation that concluded the cars weren’t at a greater fire risk.  Whatever the reason, dealers are balking at accepting lots of Volts and devoting precious showroom and on-the-lot space to a car that most consumers apparently don’t want.

Some people hoped that the Volt would lead General Motors back to profitability.  The Volt hasn’t filled that role.  And dealers are pretty reliable barometers of consumer demand.  If hordes of potential buyers were flooding dealerships demanding a Volt, the dealers would be perfectly happy to sell them.  The fact that dealers don’t want even a modest allotment of the cars is a strong indication that America isn’t quite ready to be an electric car nation.

 

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Calling To Update The Report On That GM Investment

Posted in America, Humor, Politics, tagged , , , , , , on November 17, 2011 | Leave a Comment »

Mr. Webner, this is your securities analyst from the Treasury Department.  I wanted to give you an update on your investments.

You again?

Yes, Mr. Webner.  We’re closing in on the end of another banner year, and we just wanted to share the good news with you.

Good news, eh?  Well, what is it?

We’re happy to report that we’ve only had to increase the estimate of our loss on our auto industry investment by $9 billion.

Wait . . . did you say you are increasing the estimate of our loss by $9 billion?

That’s correct.  Unfortunately, GM’s stock price has taken a beating lately.  But let’s not get mired in details, Mr. Webner!  What’s important is that we originally thought we would lose far more money than we now think we’ll lose — so you really can look at what we have done as a gain!

So you’re trying to take credit for a disastrous investment that just might not be as disastrous as many people expected?

That’s correct, Mr. Webner.  And in the meantime, you’ve supported the development of groundbreaking technology like the Chevy Volt!  How do you like the Volts you’ve seen on the streets?  Sweet, aren’t they?

Actually, I’ve never seen a Chevy Volt on the street.  I don’t know anyone who owns one.

Well, take my word for it, Mr. Webner.  That car is poised, in a state of cat-like readiness, to take the country by storm!  Now, can I take just a few more minutes of your time to talk about our terrific investments in Fannie Mae and Freddie Mac and Solyndra?

Click.

Calling To Report On That GM Investment

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Calling To Report On That GM Investment

Posted in America, Humor, Politics, tagged , , , , , , , , , on April 21, 2011 | Leave a Comment »

“Mr. Webner, this is one of your securities analysts over at the Treasury Department calling to discuss the status of your investments.”

I beg your pardon?

“Yes, this is one of your analysts over at Treasury.  You’ll recall that we decided to invest $50 billion in tax dollars from you and other taxpayers in General Motors.”

Who is this, really?

“It’s the Treasury Department, Mr. Webner.  Don’t make me read your Social Security number over the phone.  I’m calling you today to report on the GM investment.  You see, we’ve decided to sell our holdings of GM stock this summer.”

Okay . . . so, how did the investment do?

“Mr. Webner, I’m very pleased to report that, if we sell at current prices, we’re likely to lose only about $11 billion.”

Wait a minute — did you say we are going to lose 11 billion dollars?!?

“Yes, that’s right.  It means we’ve only lost a bit over 20 percent of the investment!  Of course, prudence compels me to point out that the loss could be greater if the share prices fall.”

How is the stock doing, then?

“I’m sorry to say the current stock price has fallen to below the initial public offering price.”

Why?

“Well, Mr. Webner, have you been to the gas station lately?  With gas prices increasing every day, consumers surprisingly aren’t motivated to buy those huge GM pickup trucks.  And during the first part of this year, GM had to offer big sales incentives and rebates to get people to buy those quality cars that your tax dollars helped to manufacture.  Oh, and there’s been some management turnover, too.  Of course, gas prices could go down before summer, Mr. Webner.  And those Chevy Volts could start flying off the showroom floors.”

So, you are telling me that we are likely to lose even more than $11 billion unless gas prices go down and the Chevy Volt takes the country by storm?

“That’s about it, Mr. Webner.  Now, can I talk to you about our planned investments in green technology companies?”

Click.


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Taxpayer-Subsidized Political Contributions

Posted in America, Politics, tagged , , , , , on September 24, 2010 | 2 Comments »

General Motors recently filed documents with the Federal Election Commission disclosing that GM contributed some $90,000 to political candidates.  The GM spokesman quoted in the linked article seemed irked that anyone would think there was a problem with this, saying that GM isn’t going to “sit on the sidelines” while other companies shovel cash at political candidates in an attempt to influence policy.  So, GM will make contributions to candidates who support “a strong auto industry.”

The problem, of course, is that the federal government (that is, U.S. taxpayers) own 61 percent of GM and are subsidizing its operations.  While that is the case, GM shouldn’t spend one penny toward political contributions of any kind.  Any money GM earns should be devoted to paying off its debt to taxpayers and making the company more attractive to investors when GM tries to make a public offering in the near future.

It also is problematic that GM is, in effect, using taxpayer money to pick and choose candidates to support, with the inevitable acid test being whether they support “a strong auto industry” — meaning, of course, candidates who supported the GM bailout and continue to think we should do whatever is necessary to prop up the sagging, poorly managed, uncompetitive domestic auto industry.  In short, even though public opinion polls show that Americans now strongly oppose the bailout culture, our tax dollars are perversely being spent by GM to encourage the continuation of that culture.  It’s just another reason to make a change in how things are being done in Washington, D.C., and in Detroit.

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The GM Shell Game

Posted in Politics, The Economy, tagged , , , on May 3, 2010 | Leave a Comment »

The New York Times recently ran a good article on GM’s blatant shell game in claiming that it had “repaid” “in full, with interest” the loan it received from the federal Troubled Asset Relief Program.  GM ran a TV ad boasting of the loan “repayment,” and Treasury Secretary Tim Geithner also touted GM’s “repayment” as indicating that the company “is on a strong path to viability.”

As the Times article notes, it turns out that the “repayment” was a sham, because GM used money from a taxpayer-financed escrow account to repay the TARP loan.  Check out the protestations from GM and the Treasury Department that their statements about the “repayment” have not been misleading — particularly the statement of a “senior adviser” to Geithner, who says:  “We have never not been clear about exactly what we paid, exactly the terms of the investment. I’m finding it hard to find anyone obfuscating about this.”  Double negative aside, only a federal bureaucrat would claim not to see something misleading about bragging about “repayment” of a loan from the federal government without disclosing that taxpayer funds also were used to make the “repayment.”

Of course, a key remaining question is whether taxpayers paid for the deceptive GM commercial touting the phony loan “repayment.”  Since GM seems to be largely propped up by tax dollars, the answer is probably “yes” — which is itself infuriating.

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Birth of the New

Posted in Politics, The Economy, tagged , , on June 15, 2009 | Leave a Comment »

It will be interesting to follow GM as it emerges from bankruptcy. This article indicates that the individual who has been selected by the government to run the “new GM” is someone who has been a successful businessman in the telecommunications field but admits he knows nothing about building cars. This article indicates, on the other hand, that the new boss is a savvy political operator who had the foresight to set up a sweetheart business deal that resulted in enormous profit to Rahm Emanuel, the President’s Chief of Staff.

The first article linked to above suggests that everyone is eager to get on with a “new GM” — one that is not so dependent on actually building cars. Excuse me, but isn’t that the fact that GM is a large car manufacturer the reason the government decided that taxpayer money should be used to bail out GM in the first place? The argument has been that the domestic auto industry is so important to our economy, employing so many people to build cars and buying supplies from so many other companies that employ still more workers, that it cannot be allowed to fail. If the “new GM” that emerges from bankruptcy doesn’t focus exclusively on building cars, and instead focuses in large part on, say, financial services, the taxpayers aren’t going to get much bang for their buck. Of course, the nature of the arrangement with the United Auto Workers may make it difficult for GM to change too much.

I understand that business is business, but I also think companies and their leaders need to have a good understanding of their industries and their consumers. If GM’s new boss doesn’t know anything about building cars, I hope that he learns something about it pronto. Cars aren’t like cell phones. They are more expensive to buy and more expensive to repair. They are both a practical transportation device and an aspirational item that people often use to help define their personas. There is a romantic component to cars that you don’t find with other consumer goods. People don’t write songs about their cell phones or computers, but they do write songs about their vehicles. If “new GM” is going to be successful — and I’m not really sure that is possible — it is going to need capable people who understand the complex, multi-faceted nature of the process by which consumers make their car-buying decisions and who can create cars that are designed to appeal to those consumers. Sweetheart deals and savvy political maneuvering can’t hurt, but unless the “new GM” can build attractive, high-quality cars that it can sell for competitive prices it is doomed.

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A Green Dream

Posted in The Economy, tagged , , on June 8, 2009 | Leave a Comment »

Here’s an interesting piece on GM and “green cars.” The apparent focus of GM and Chrysler on “green cars” as the lever that will move them out of the ditch is wishful thinking. Sure, there are some Americans who will buy “green cars,” regardless of their quality and reliability, just to say that they are driving green cars. (See the classic South Park “smug” episode.) I think the number of those consumers is pretty small, however. Here’s a method of approximating that market — the next time you drive to work during rush hour, look at how many drivers are content with humping along in the slow lane, and then from that number subtract all white-haired drivers and all drivers who are shaving, combing their hair, fiddling with their Blackberry, or performing other morning ablutions. The remainder is a good approximation of the potential audience for hybrids and electric cars. You aren’t going to buy one if you must have a car that can give you the crucial burst of acceleration that allows you to cross three lanes of traffic and pass that slow-moving panel truck that has been getting on your nerves.

The other change in the car market — and one that has been devastating for GM and Chrysler — has been the increased focus of consumers on buying cars that last. When I was a kid, Americans seemed to accept that they needed to buy a new car every few years, just to have the biggest fins or the biggest engines or the station wagon with the most realistic faux wood paneling on the side. Those days are long gone, however. I’ve been driving my car for many years, have put more than 120,000 miles on it, and hope to continue to drive it for years more. The fact is that consumers don’t buy GM and Chrysler cars because they perceive that many of those cars are poorly made and unreliable. I think even “green” consumers will be looking for green technology that is reliable. Why buy a green car from a company that has a well-earned reputation for building poorly made cars when you can buy a proven green car from a company like Honda, whose reputation for quality is unassailable?

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The Driver’s Seat

Posted in Politics, The Economy, tagged , , on June 1, 2009 | Leave a Comment »

The government’s continuing decision to pour money into GM is looking more and more like a horrible disaster for taxpayers and consumers. Billions of dollars are being poured into an uncompetitive entity that is unable to build cars that people want to buy at prices that people want to pay. As this article points out, the terms of the bailout deal leave the United Auto Workers in the driver’s seat, with a labor agreement that does not require any reductions in base pay, pension benefits, or health care for active workers — and, not incidentally, an agreement that must be renegotiated on the eve of the next presidential election, when demagoguery about the need to avoid job losses will have maximum impact. It is absurd that workers in a bankrupt commercial entity get to keep their jobs, at taxpayer expense, at the same pay levels and benefit levels that helped to drive the company into bankruptcy in the first place. (Let’s hope, incidentally, that the Administration drives a harder bargain in its negotiations with other countries, like North Korea and Iran, than it did with the UAW.)

I don’t know whether, as some are predicting, the federal government will now try to dictate what kinds of cars the “New GM” builds. I’m not sure, frankly, that even a bunch of bureaucrats could do a worse job on that score than the corporate oficers who managed to run GM into the ground. What I do know is that the federal government cannot continue to bail out every failing enterprise in the name of saving jobs. Eventually our federal debt will become too great, and foreign investors will stop buying American debt instruments or will insist on ruinously high interest rates. If that were to happen it would be an economic disaster beyond anything our country has experienced. Weathering the economic dislocation and job losses that would be caused by just letting GM fail are a small price to pay to avoid that eventuality.

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Buy American?

Posted in Politics, The Economy, tagged , , , , on April 5, 2009 | Leave a Comment »

I heard this piece on NPR – www.npr.org/templates/story/story.php?storyId=102728244 — recently and it made me laugh. The point of the story was interesting; it noted that many of the people involved in supervising and monitoring the actions of GM and Chrysler drive cars built by foreign-owned companies, and as a result there is an element of hypocrisy when those individuals, and the Administration and Congress generally, urge everybody else to “Buy American.”

(Of course, “Buy American” itself is a bogus concept for two reasons. First, free people should buy the goods that they think are best for them, regardless of the ultimate ownership of the company that manufactures those goods. “Buy American” is the battle cry of a company that does not sell competitive products. Second, how do you determine what is an “American” company? Many companies that began overseas have significant plants and investments in America. Honda of America Mfg., Inc., which has plants in Marysville, East Liberty, and Anna, Ohio, is a local example of this reality. Those Honda plants employ thousands of people, purchase component parts from other companies with plants in America, and build excellent cars, engines, and other products. Given those facts, why should I feel compelled to buy an ugly, gas-guzzling Chrysler sedan when I can buy a well-made, less expensive Acura that gets great gas mileage?)

The moment that really made this piece memorable, however, came as the story noted that people who live in the midsection of the country are much more likely to buy cars manufactured by Ford, Chrysler, and GM than are those who live on the coasts. The piece then speculated that this discrepancy might be due to differences in “education.” What a great example of the condescension that many East Coasters feel for those of us in the Midwest! We’re just a bunch of ignorant hayseeds out here in the heartland, ready to be gulled by any ad campaign! I was glad to see that some of the internet comments to this piece pointed out this little example of East Coast bias.

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