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GM slashes earnings forecast
Friday, March 18, 2005 7:04 AM
Declining sales and production cutbacks in North America are putting a huge crimp in General Motors’ earnings. That prompted the automaker on Wednesday to slash its expectations for this year.

GM expects to lose about $848 million, or $1.50 per share, in the first quarter excluding special items. In early January, the automaker had said it expected to break even for the quarter.

For the full year, GM now thinks it will post earnings in a range of $565 million to $1.13 billion -- or $1 to $2 per share -- excluding special items. That is a dramatic reduction from its earlier earnings forecast of $2.26 billion to $2.83 billion, or $4 to $5 per share.
In addition, GM foresees a $4 billion swing in its operating cash flow for the year -- from $2 billion to a negative $2 billion.

The automaker blamed lower sales in North America and a shift in the sales mix away from high-profit trucks to lower-profit cars for the earnings falloff.
GM's previous first-quarter earnings expectations were based on North American volume of 1.25 million vehicles. Since then, production schedules have been reduced by approximately 70,000 vehicles.
GM also expects negative operating cash flow in 2005 of approximately $2 billion, before the Fiat settlement and GM Europe restructuring, versus the previous target of positive $2 billion.

"Clearly we have significant challenges in North America. The rest of our automotive businesses, and GMAC, are running in line with, or ahead of, our expectations," said GM Chairman and CEO Rick Wagoner. "But North America is our biggest business, and the key driver of automotive earnings and cash flow. So it's important that we get this business right."

More cutbacks appear to be on the way.

"The competitive environment that we face in North America means we must continue to find ways to reduce our costs and grow revenue," warned GM Vice Chairman and Chief Financial Officer John Devine. "While we have made good progress in reducing costs over the last several years, the projected loss in North America reinforces our need to do much more."

"One of the issues we've had for North America is the increasing drag of health-care costs on North American profitability," Devine added on the conference call with Wagoner.

"I don't have any silver bullets on heath care … but clearly I think the weakening profitability this year has focused on our need to make progress on health care."

GM, the largest private provider of health care in the United States, had warned earlier that its medical expenses would increase by about $1 billion this year.
GM said its other automotive regions and GMAC are all on track to meet or beat their 2005 net income targets.

Euro bonds of GM plummeted after the company announced its profit warning.

Standard & Poor's on Wednesday revised its rating outlook on GM and its finance arm to negative from stable, setting the stage for a downgrade of the world's biggest carmaker to junk status.
A downgrade to junk status would likely significantly raise GM's borrowing costs. GM and its finance arm had about $300 billion in debt at the end of last year.
S&P said it views the rating as "tenuous" and could cut it at any time if it looked like GM was not on a trajectory to improve its financial performance in 2006 and beyond.

Moody's Investors Service put its ratings for GM and GMAC on review for a possible downgrade after the automaker made its announcement.
GM's long-term credit is rated Baa2 by Moody's, two steps above junk status. GMAC's long-term credit is rated at Baa1, three steps above junk.

Fitch Ratings, which has GM's debt rated 3 notches above junk, is likely to reconsider their ratings as well, analysts said. Fitch rates GM and GMAC as a triple-B with a negative outlook.





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Re: GM slashes earnings forecast
Friday, March 18, 2005 7:38 AM
Well hopefully this'll just prod them into putting more and more effort into producing better cars rather than relying on rich idiots buying SUV's to feed their coffers.

So far, the future looks good. I mean, with the new Cadillac lineup and cars like the Cobalt, G6, and Sky coming out... hopefully they've seen the bigger picture and we'll all benefit.





Re: GM slashes earnings forecast
Friday, March 18, 2005 10:20 AM
^^^Actually latest reports by Robert Lutz show that the G6, Cobalt, LaCrosse are creating "little buzz" and sales are not what GM expected.
If you remember, GM was trying to do away from rebates and try to sell on merit, turns out plans are changing because of the slow sales.

Maybe the Sky/Solstice can help? But for sure they need to update the large trucks (which they are in 2007m/y), they are GM's cashcow.



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Re: GM slashes earnings forecast
Friday, March 18, 2005 10:46 AM
I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.



Re: GM slashes earnings forecast
Friday, March 18, 2005 10:56 AM
Brett wrote:

I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.


I agree with that 100%.
Re: GM slashes earnings forecast
Saturday, March 19, 2005 9:10 PM
GM's just closed the Janesville, WI plant until mid-April due to poor sales. The Janesville plant is where the SUVs come from. This is the second time that the Janesville plant has closed this year last time being in January.

What's funny is that even though they're closing for the time being the employees still get 90% of their pay. AND THEY DON'T HAVE TO WORK! I should really get a job there.




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Re: GM slashes earnings forecast
Friday, April 08, 2005 9:38 AM
With the $2 billion GM just paid Fiat, somebody should be shot up in Detroit. Hopefully they won't kill the Solstice/Sky program now.
Re: GM slashes earnings forecast
Sunday, April 10, 2005 1:53 PM
Brett wrote:

I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.


absolutely the best answer ever, this hits it right square on the head. couldn't agree more.

but i'd like to add. while i lived in Detroit it seems every other loser you meet there is a GM employee out on disability. and it usually lasts months. then when they are ok they go back to work and are lazy and/or complain about EVERYTHNIG! because the've grown accustomed to months on end of doing nothing and still getting paid. now that they need to actually work they hate it and everyone has to suffer through it till they hopefully get fired. i know people that have been on disability through GM for over a year or even more, i @!#$ you not! so i agree that heathcare may be "A" problem. it is not "THE" problem. the problem is GM and their lack of a solid business plan, and solid product porfolio.



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Re: GM slashes earnings forecast
Sunday, April 10, 2005 2:50 PM
Brett wrote:

I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.


100% right! This is what Scion right now is doing to perfection. Luring younger people in with Quality, inexpensive cars which leads people into buying a Toyota and a Lexus. i wish i could say the same about my Cav, but its just the opposite, everything about it is pushing me to another brand

And the guy up top talking about disability. You are 100% right too. The company I work at, so many people go on Bogus Medical Leaves that the company gives pay for that they have moved entire depts overseas to get rid of the hassle. And i dont blame them



Re: GM slashes earnings forecast
Friday, April 15, 2005 3:38 PM
Man, i agree 100% with the points in this thread. GM is the largest automaker and should be the one who has the money to push new technoligies and take some risk. That lack of innovation has hurt sales to the point where now they can't afford to take the risk they desperately need to try. They stick with older technology that causes people to question whats going on. Putting leaf springs on a c6 and a supercharger on the redline shows their reluctance to change. People want percieved interior luxury, customization options, RWD and AWD, turbocharged 4's and supercharged v8 options. Not 25 different cookie cutter SUV's and a car w/ a base 4 cylinder and a v6 for the "powerful GT option". Other companies might have a turbocharged 4 as their "fast car", and a v6 in the base model. Gm just groups cars as slow, medium, and fast, with an i-4,v6,and v8 in their respective cars. Now with rising gas prices and the SUV "fad" dying, they decide they want to get rid of their new RWD platform to build more SUVs? what the hell, its like there loading up the chamber of their own gun.

Some things are looking better, I think cadillac has done a great job, especilly w/ the v-series. Redline and cobalt SS are steps. The two new roadsters had me lusting after a GM car for the first time in years. IF they take their head out of their ass and build a "redline" saturn sky WITH A TURBOCHARGER that has a strong eco I'll buy one today. If they put a supercharger on that I'll never buy a GM again as a company that stupid doesn't deserve my money. I'm sure they will disappoint as the steretypical american "likes there torque down low". Then they'll wonder why toyota, honda, and nissan are kicking there ass.
Re: GM slashes earnings forecast
Saturday, April 16, 2005 12:38 PM
really i don't think it's performance and torque that gives toyo/honda/nissan their distinct advantage over the big three. it's ALL ABOUT build quality and reliability. we as tuners are the minority that desire performance first. but what makes the imports better cars is they take a balanceed approach to building their cars. they give it equal parts of everything 1 part performance/ 1part quality/ 1 part comfort....and so on. they may not be the fastest or torquiest cars, but they leave that to aftermarket companies. they simply worry about building the car well, and let the owner personalize it to make it faster or more comfortable.

and also that's where imports are better than the GM....especially GM. the import automakers actually embrace the aftermarket. and fuly co operate with them to put out great stuff that meets or exceeds OEM quality. GM scoffs at the aftermarket. they are greedy and don't co operate with the aftermarket. they'd rather produce their aftermarket "in-house" via GM Performance Plus. so most aftermarket companies build products for GM cars at a higher R&D cost because they get support from GM Corporate....hence many companies instead decide to not invest time & $$$ in GM aftermarket. GM needs to get real and realize nobody will buy their overpriced supercharger kits from an over priced rude dealer. they'd rather be like import tuners and go to a store and buy it at a realistic and competetive price. otherwise i'll just wait till Toyota buys them and buy the first quality built Chevy in 3 decades with amazing aftermarket support.

Re: GM slashes earnings forecast
Saturday, April 16, 2005 1:33 PM
Yah, I didn't mean to imply that GM needs faster cars as sports cars aren't what makes company's money. Its the trucks and plain jane family sedans that bring in the loot. It was more their general lack of innovation overall with the strong emphasis placed on performance because thats what I individually knew examples about and care about. I agree that 90% of consumers don't really care "fast" there car is.
Re: GM slashes earnings forecast
Saturday, April 16, 2005 7:22 PM
Brett wrote:

I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.


i do agree with that to some extent....exsept consumer reports rated the focus the best small car, better then civic, corolla etc, so ford is doing a decent job at keeping up

i still say GM cuts a few brands and puts more emphasis into the ones tthey keep



Re: GM slashes earnings forecast
Saturday, April 16, 2005 8:55 PM
People still buy GM cars everyday though the parts, insurance, and prices are ridicusouly cheap compared to imports. Plus if you add in maintance on the imports it costs alot more to own especially with things like VTEC. Sure Toyota is getting bigger but I still see 3/4 cars being GM cars on the road. Toyota is getting bigger but with that the problems in their cars are growing, has anyone looked at toyota forums they have the same troubles we do. I will still buy GM cars no matter what because to me GM makes pretty decent cars. I agree GM should cut a brand, i'm thinkin Buick, either have a an affordable cadillac and make a car in the chevy family that would fill the place of a buick for old people.
Re: GM slashes earnings forecast
Sunday, April 17, 2005 1:50 AM
97cavy22 wrote:

Brett wrote:

I don't see it getting any better any time soon. Now that more import makers are putting out trucks you will soon see the truck sales fall down a lot more. As the younger people get older and start buying more expensive cars most will be buying imports because they have seen the quality of the big three through the cavalier, neon, focus, and other entry level cars compared to the imports. The big three needs to understand that to gain the market for the future you need to build better entry level car because that is most people’s first impression of a car company. The big three seam to be taking a step in the right direction but I think it is too little to late.


i do agree with that to some extent....exsept consumer reports rated the focus the best small car, better then civic, corolla etc, so ford is doing a decent job at keeping up

i still say GM cuts a few brands and puts more emphasis into the ones tthey keep


The focus was then removed from the list read this report.

"Consumer Reports has removed the Ford Focus as its Top Pick for small cars because it performed poorly in insurance industry crash tests that were announced on Sunday," said a news release. A replacement for the Focus was not announced.

LINK





Re: GM slashes earnings forecast
Sunday, April 17, 2005 10:48 PM
Jacob B wrote:

People still buy GM cars everyday though the parts, insurance, and prices are ridicusouly cheap compared to imports. Plus if you add in maintance on the imports it costs alot more to own especially with things like VTEC. Sure Toyota is getting bigger but I still see 3/4 cars being GM cars on the road. Toyota is getting bigger but with that the problems in their cars are growing, has anyone looked at toyota forums they have the same troubles we do. I will still buy GM cars no matter what because to me GM makes pretty decent cars. I agree GM should cut a brand, i'm thinkin Buick, either have a an affordable cadillac and make a car in the chevy family that would fill the place of a buick for old people.


YES! Thank you! Everyone swears that Toyota vehicles are God-like and can never break down. I don't think many of you have been around other boards much. Most Toyota's have a huge oil sludge problem and seem to get so bad that the entire motor needs to be replaced. Most Honda's now have oil leaking problems, some which catch the entire car on fire. Every car has it's problems, even GM. I wont deny that GM does have its share of problems, but imports are not invincible and I guess I just have low expectations, but most entry lever cars even from imports have 'cheap plastic interiors' just like the Cavalier does. All entry level cars honestly feel the same to me... import or domestic. i'm talking civic/corolla/cavalier/focus.



Re: GM slashes earnings forecast
Monday, April 18, 2005 1:00 AM
I just want to say that I work in the Oshawa Ontario plant. Its the biggest plant that G.M's got. It is a world class autoplex and produces best in class cars and trucks. I would also like to say that G.M employees are not lazy, and they are union workers. The Jap's are not. The Big Three also pay their employees much better then the Jap's pay their American and Canadian employees. factor in that the big threes car's are a much better value for the money ie cavalier vs civic. I may be rambling but stop dissing G.M Honda's and Toyota's and all the rest of that Jap Crap is not pushing our economy all the money they make here goes to the @!#$s that dropped bombs on usa. When people start talking @!#$ on a jbody web site it is bad business for G.M


Jap Crap SUCKS
Re: GM slashes earnings forecast
Monday, April 18, 2005 11:11 AM
If GM made quality cars to start with the so called Jap crap wouldn't move. it's a hard pill to swallow when your right in the thick of it but the fact is a cavalier will never be better than a simular import. especially in terms of value. the cavalier is a great value because it's cheap...but the flip side is it's built & engineered cheap as well.

when your UAW or CAW your direct livelyhood is threatened when you hear or see that the mas public buys import. but there is a reason the big three have yet to meet or beat imports for over all quality or reliability. that goes double if your comparing a cavalier to a civic. now if you want to compare a Cadillac CTS or STS to a civic...then you may have a case. but don't even try to put a cavalier up aganst any othe import and claim that the cavalier is the "better" vehicle....we've all owned or own a j-body and full well know what they are like.



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