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  • Is General Motors Headed Back to Square One?

    A glut of unsold trucks sits on General Motors dealers’ lots. Two auto plants in Indiana and Michigan stand idle, and it appears that the taxpayers aren’t out of the woods yet. GM still faces serious problems, being made worse by impending regulations.

    The Detroit Free Press reports:

    “Supply of Silverados has ballooned to 6 1/2 months’ worth at the dealership, a figure [GM dealership manager Mark] Frost calls “a little scary.” The automaker, 33% owned by the U.S. after its 2009 bankruptcy, has 280,000 Silverado and GMC Sierra pickups on dealers’ lots around the country. If sales continue at June’s rate, that would be enough to last until November.

    After GM’s truck inventory swelled to 122 days’ worth of average sales, the company said 100 to 110 would be normal going forward for such a large and complex line of vehicles, compared with 60 to 70 days for most models.”

    Compare those numbers to those of Ford Motor Company—which has a 79-day surplus of trucks—and GM’s numbers from 2002 to 2010, which averaged 78 days. The outlook isn’t good, says analyst Peter Nesvold:

    It’s unbelievable that after this huge taxpayer bailout and the bankruptcy, that we’re right back to where we were,” said Nesvold, who has a “hold” rating on the stock. “There’s no credibility.” In a research note, he asked: “Is GM falling into old, bad habits?”

    Meanwhile, the American taxpayers are left holding the bag. More from The Free Press:

    GM shares have declined 7.3% through Friday from their $33 initial public offering price in November. The U.S. Treasury Department, which still holds more than 500 million GM shares, is waiting until at least August for another stock sale, a person familiar with the planning said last month.

    With the economic recovery continuing in low-gear, a rebound in truck sales might not be likely. And that’s more bad news for U.S. automakers, which depend on sales of trucks—as opposed to smaller vehicles—because of their higher profit margins. Chrysler recently enjoyed a boost in profit just for that reason—its newly redesigned Jeep Grand Cherokee was a consumer hit.

    The Obama Administration’s Environmental Protection Agency is about to make life even more difficult for automakers. It’s continuing a push for higher fuel economy standards in order to drive consumers to smaller vehicles—and that will cost consumers while leaving Chrysler, GM, and Ford twisting in the wind. Heritage’s Diane Katz explains:

    The stricter fuel-efficiency standards require automakers to attain a fleet-wide average fuel economy level of 34.1 mpg [miles per gallon] by model year 2016 for passenger cars, light-duty trucks, and medium-duty passenger vehicles.… The re-engineering required for compliance will add $1,000 or more to the sticker price of passenger cars.

    Those costs would soar even higher under a 62 mpg standard proposed for 2025, which would further drag down auto sales—leaving more vehicles sitting on lots and more workers sitting on the sidelines.

    Posted in Economics [slideshow_deploy]

    5 Responses to Is General Motors Headed Back to Square One?

    1. JQP says:

      #askobama Is Global Warming a scam by Strong and Soros via UN Agenda21? Carbon Offsets = Chicago Climate Exchange $$$$ Was Gore involved in the scam? How abour Clinton, considering he started the process in the USA, or did Gorbachev and Green Cross just use the 'Crisis' to ride the environmental wave in with Communism? Was the fall of communism staged? Did it really fall with the wall? Mr President, are you a Marxist Socialist? Do you support the USA becoming a Socialist Nation, just being one of many in the UN, to be controled by UN treaties and not the Constitution? Mr President will you resign? So many questions!

    2. Bobbie says:

      Yeah, it's really unbelievable. All that money wasted! GM took the hands of government, forcing tax payers to pay GM's consequences to GM's decision making when they could have had faith in the market and their patrons! It's unfair for the government to bail out anyone! THAT'S NOT AMERICA!

      The self reliant people of America are being taken advantage of by government stealing from the self reliant to bail out the irresponsible. EVERYWHERE IN AMERICAN SOCIETY! ex: housing, health, education, government's select private market BUSINESSES!!!! Etcetera, etcetera, etcetera.

      Government holds no accountabilities to the irresponsible! Proof in their conduct, proof in society: government protects irresponsibilities off the backs of the responsible. NO EQUALITY IN EXPECTATIONS OF SOCIETY!!!!

    3. SoapyJohnson says:

      In the aftermath of NASCAR's Chevrolet Volt 400 nightmare, more bad press for GM … http://placeitonluckydan.com/2011/05/nascar-pulls

    4. Joe Commuter says:

      Guzzle Motors meets $4/gallon.

    5. It’s unbelievable that after this huge taxpayer bailout and the bankruptcy, that we’re right back to where we were…..
      Good work BO

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