Copied this off the AOL site (people who don't use AOL wouldn't be able to open any shortcut to AOL, hence, the whole story below).
Miulang
GM Offers Employee Discounts to Public
by Eric Peters
General Motors has announced it will extend the generous discounts on new vehicle purchases it provides as a perk to GM employees to the general public -- the latest effort to prop up flagging sales and declining market share.
The discount -- approximately 3-4 percent off the dealer invoice price of a new vehicle -- could amount to savings of thousands of dollars per vehicle.
The problem for GM, though, is that new and deeper discounts for buyers means even less profits for GM. And cutting profits won't dig GM out of the hole it's in.
First quarter losses are much larger than expected -- $846 million, according to GM CEO Rick Wagoner -- the largest quarterly loss since 1992. And GM's overall market share has dropped to about 25.4 percent, a dramatic downturn. The value of GM shares has fallen through the floor to junk bond status -- vitiating nearly $13 billion in shareholder equity.
Things are not looking good for the world's largest automaker. Inventories of vehicles are piling up on dealer lots, sales of high-profit large SUVs have fallen off as gas prices have gone up -- and several GM divisions (notably Pontiac and Buick) are close to being on life support .
In response, GM has cut production by 12 percent (with future cuts and plant closings in store) and resorted to extraordinary incentive programs that amount to fire sale prices, while competitors -- most notably Toyota, the world's Number Two automaker -- are selling cars at full mark-up and are awash in profit.
Toyota reportedly has enough cash on hand to buy GM's entire automotive operations outright -- and is gunning to replace GM as the world's Number One automaker within five years.
So what will happen to GM?
Morgan Stanley auto industry analyst Stephen Girsky says GM's declining market share "...doesn't support its size. They have too many plants, too many workers, too many models, too many dealers and their employee benefits are too high.”
In other words, barring a major turnaround in profitability, the odds are that GM will likely retire its poor-performing Buick and Pontiac divisions -- each of which have dwindled to less than 3 percent of the market. The remaining GM divisions will be consolidated and streamlined -- with the number of models reduced. More U.S. assembly and manufacturing facilities will be shuttered -- and more jobs moved overseas to take advantage of cheaper labor and lower regulatory compliance costs.
The sad part is that GM is producing some of the best vehicles it has ever built, with several models ranking as well as top-scoring Toyota/Lexus and other import vehicles in terms of customer satisfaction and the number of problems reported during the first 90 days of ownership. The 2005 Corvette comes standard with a 400 horsepower engine and equals or beats the performance of cars costing two to three times as much. Cadillac is once again a "hip" brand -- and the new Chevy Cobalt is an excellent small car as good as anything from Honda or Toyota.
Maybe even better.
Unfortunately, if may be too little, too late. The iceberg looms large in the lookout tower -- and it may impossible to steer away in time.
For consumers, GM's woes mean some great cars are available at even better prices -- especially if the new employee discounts become available across the board.
The only downside is there may not be a GM around in five or ten years.
Miulang
GM Offers Employee Discounts to Public
by Eric Peters
General Motors has announced it will extend the generous discounts on new vehicle purchases it provides as a perk to GM employees to the general public -- the latest effort to prop up flagging sales and declining market share.
The discount -- approximately 3-4 percent off the dealer invoice price of a new vehicle -- could amount to savings of thousands of dollars per vehicle.
The problem for GM, though, is that new and deeper discounts for buyers means even less profits for GM. And cutting profits won't dig GM out of the hole it's in.
First quarter losses are much larger than expected -- $846 million, according to GM CEO Rick Wagoner -- the largest quarterly loss since 1992. And GM's overall market share has dropped to about 25.4 percent, a dramatic downturn. The value of GM shares has fallen through the floor to junk bond status -- vitiating nearly $13 billion in shareholder equity.
Things are not looking good for the world's largest automaker. Inventories of vehicles are piling up on dealer lots, sales of high-profit large SUVs have fallen off as gas prices have gone up -- and several GM divisions (notably Pontiac and Buick) are close to being on life support .
In response, GM has cut production by 12 percent (with future cuts and plant closings in store) and resorted to extraordinary incentive programs that amount to fire sale prices, while competitors -- most notably Toyota, the world's Number Two automaker -- are selling cars at full mark-up and are awash in profit.
Toyota reportedly has enough cash on hand to buy GM's entire automotive operations outright -- and is gunning to replace GM as the world's Number One automaker within five years.
So what will happen to GM?
Morgan Stanley auto industry analyst Stephen Girsky says GM's declining market share "...doesn't support its size. They have too many plants, too many workers, too many models, too many dealers and their employee benefits are too high.”
In other words, barring a major turnaround in profitability, the odds are that GM will likely retire its poor-performing Buick and Pontiac divisions -- each of which have dwindled to less than 3 percent of the market. The remaining GM divisions will be consolidated and streamlined -- with the number of models reduced. More U.S. assembly and manufacturing facilities will be shuttered -- and more jobs moved overseas to take advantage of cheaper labor and lower regulatory compliance costs.
The sad part is that GM is producing some of the best vehicles it has ever built, with several models ranking as well as top-scoring Toyota/Lexus and other import vehicles in terms of customer satisfaction and the number of problems reported during the first 90 days of ownership. The 2005 Corvette comes standard with a 400 horsepower engine and equals or beats the performance of cars costing two to three times as much. Cadillac is once again a "hip" brand -- and the new Chevy Cobalt is an excellent small car as good as anything from Honda or Toyota.
Maybe even better.
Unfortunately, if may be too little, too late. The iceberg looms large in the lookout tower -- and it may impossible to steer away in time.
For consumers, GM's woes mean some great cars are available at even better prices -- especially if the new employee discounts become available across the board.
The only downside is there may not be a GM around in five or ten years.
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