Re: Obama XXIV: Forward ... pause ... rewind ... play
Lots of stupid in that article you posted. But on the flip side, its nice to finally learn Old Pio's real name! But since I'm up for a good laugh, lets destroy this guy one point at at time...
1) Qualifications. The bio says: "I have a B.S. in mechanical engineering. I am a software entrepreneur who is currently an investor and board member in three startup companies. I am on the Leadership Council of the Club for Growth." What in any of that has to do with analyzing the auto industry or GM in particular? So he doesn't like their new cars and their market share isn't what it was in 1950? Okayyyy... The "Club for Growth" membership (ie GOP hacks) raises a big red flag.
2) GM fundamentals. 2.8 EPS. Trading 7 times earnings. Hardly seems like a company going under. Yes the stock is down 17% vs prior year, however Ford is down 14% so perhaps its just an auto industry sector thing.
3) Momentum. With this crack analysis GM's stock should be sinking like a stone. Its up 6% today.
Bottom line is, any idiot can blather about this and that no matter how ridiculous as long as they get to earn a living doing it. Raging cokehead Larry Kudlow on CNBC is famous for this. However, when you're not getting paid to spout nonsense, but you use idiocy like this guy's opinion and act like its true, don't be angry when sarcastic liberals come along and have some fun at your expense.
He did point out a ton of FACTS, regardless of how you want to spin it. The GM house of cards may not tumble next year, but it makes sense as a business individual that if your market share is shrinking and you have to offer incentives (which diminishes your net return) to sell your product, then the prospect of competing against other successful car companies that do not need incentives to move their product in that segment is highly unlikely. They certainly are not #1 in truck sales (which is the most profitable segment for any vehicle manufacturer) and Europe is a major drag on any of the domestic auto makers. Those indicators to me signal a business in grave danger compared to their competitors. (Did you order the code RED?) GM also is holding the highest level of days inventory compared to their competitors, and is starting to reduce their manufacturing output.
In a nutshell it tells me that GM is in the " the more they changed the more they stayed the same" category. The focus is on the wrong parts of the business, the hierarchy is in disarray, and the govern, err, beancounters are running the business again. Not that it is a major factor, but as a longtime professional in the auto industry as a supplier to GM, I can guarantee you that their business tactics have not been altered from the first time they went under.
Edit: This, from an anonymous auto insider:
"There’s a tale of two bailouts… One, the money was handed over with no obligations, the other, the money was lent, on a hard schedule to repay. One, the management was picked by politicians, the other, the management was a businessman.
GM, as being discussed, is indeed not succeeding. Rushing a product to market, after spending billions, and coming in less than 2nd in your segment, is a key to disaster.
Speaking of 2008, there was an even worse disaster had been committed by someone else – In 2007, Chrysler introduced the Dodge Avenger. It was already years behind schedule. Chrysler had started designing the replacement for the Intrepid, and it should have been introduced in 2005. But Daimler didn’t like it, so vetoed it, and forced Chrysler to start over, using a Mitsubishi platform (I doubt many know what that means), and then got in the way over and over again. Top down management, arrogance, and using Chrysler’s cash to subsidize Daimler’s inefficiency was all that ever happend, and eventually they PAID to get rid of Chrysler and its accompanying liablities. But Chrysler was left with the legacy of cars that terrible attributes, poor quality, and a bad reputation – all from the guys who are supposedly the premier auto maker?
GM and Chrysler were both given a second chance. Chrysler HAD to earn their future, because they had a debt to repay. It was succeed at the car business or die. GM was handed debt relief and billions, with no obligation.
Chrysler has since displaced two other maker’s places in sales ranking, and instead of losing market share like GM, it’s gained considerably. It went back to the drawing board and introduced new and “top of the game” new vehicles. And it continues to do so.
Why? Because it isn’t “too big to fail” and there won’t be a bailout. The new Chrysler paid back its debts to the Treasury and is making money and stunning its competitors. It is doing more with less.
GM is not. GM hasn’t changed its mode of operation. It hasn’t learned from the past mistakes of producing middling cars by spending more than everyone else does to merely achieve mediocrity. GM has, for the last 20 years, been engaged in a LOT of mediocrity, though it spent hugely more than the competition to bring things to market.
This is why Woodhill is right. By the time GM fails, Chrysler may be able to buy GM out of bankruptcy and turn it around. The mouse stalking the lion. The difference? Management at Chrysler is fighting for their lives, succeed or fail, sink or swim. GM didn’t learn from near death because it was handed a get ouf of jail card from people who were so scared of them dying they didn’t even hold them accountable. They are still acting as if they’re too big to fail and will be bailed out again".
