One More Thing About January ...

"We used to grab every sale, including daily rentals, no matter how unprofitable or ultimately deteriorating to the value of vehicle and brand."

Please be so kind as to educate me.

Why are fleet sales and daily rentals "deteriorating to the value of vehicle and brand?"

On the contrary I should think that an excellent opportunity to get your brands out where people can test drive them gaining a favorable experience.

If I take the wife and kids to Orlando to go to Disney World and end up renting an Impala, it seems that should be rather good for your firm.

Shouldn't I be so favorably impressed driving that rental Impala around central Florida, that once home, I might go to my local Chevrolet dealer and say, "Say old chap, while on vacation I drove an Impala that was surprisingly good. What kind of deal would you offer me on one?"

Unless you fear a negative impression when people rent your brands, I should think you'd be in favor of sales to rental companies.

Bob,

The retail numbers are encouraging, and I don't want to rain on the parade. However, an even more telling stat from a financial perspective would be average profit per vehicle for the period. Increased retail market share is only good if you're making money on the vehicles that you're selling. Obviously there aren't any incentives on the Malibu, CTS, or Enclave, but there are large incentives available on the other models mentioned. According to Edmunds.com, the current incentives on the Aveo, Cobalt, and Impala are in the range of 5-10%, with the Cobalt and Impala offering closer to the 7-8% range. The statistic that I'm sure interests your financial operations group the most is the average net price to the dealer for the period, and the margin associated with that sales price. That's how you know if your retail gains are translating into increased profitability, or if you're simply "moving metal" to show sales growth. I think the most telling stat in the financials was the overseas growth and FX gains because your loss in North American operations (stripping out one-time items) was virtually unchanged from 2006 to 2007.

I like to look at like this. Rightly or not, General Motors must make cars that are compelling enough to overcome biases. The Malibu certainly does this, so do the Lambdas. Keep it up and the world will soon b beating a path to your dealreships.

Nigel, fleet cars are eventually dumped into the used car market 12 months (+ or -) later at very low prices. If there are too many of these bargain fleet cars, this hurts the overall resale value for that vehicle. Thus, decreasing fleet sales some helps to stop deteriorating the value of the vehicle and the brand.

GM has beautiful designs but most are still just concepts, here in so.cal. people mostly are cool-aid drinkers by that I mean drive imports a lot of hybrids, GM does not have any on the market that compete with junk toyota, but the media when ever it has the chance will slamm GM but always support the import, we MUST stop this! this country is the real loser if we continue to purchase impots on this scale.
Hey Bob can you give us a Trans am along with the Camaro? keep up the good work.

thanks

Quite simply, the most crucial part of this report are of losses stemming from GM's 49% ownership of GMAC, which to my understanding had some exposure to the subprime mess still unfolding. As we all know, financials are getting slammed as the market continues to correct.

In my mind, this in many ways is actually less worrisome then if it had been the result of poor vehicle sales and a continued decline in market share. The nature of the financial market fallout is that sooner than later, a bottom will be reached in which further losses will come to a halt. From there the opportunity to report positive growth is far easier.

I have no doubt that GM is poised in a positive position in the market, Out here in Cali, I am starting to see A LOT of new GM products on the road. This is a good sign and I've also run into quite a few people who seem to be pleased with the growing lineup of GM.

Anyhow, thanks for once again being entirely transparent on the inner workings of your company. I tell everyone I know that GM is perhaps the best example of an old company adapting extremely modern business practices more like a Web 2.0 tech business.

Mr Lutz said: "And it’s the same story across the board… Malibu, CTS and Enclave are all selling almost as soon as they come off the haulers."

Mr Lutz,

Is GM making any progress in allowing us to order a car on-line built exactly to our specs; then tracking the progress of the car as it's being built; and finally having you (the builder) deliver it directly to our doorstep? (If I ship a package around the world on FedEx, I can track its progress every step of the way.)

A new model of car buying

Don't you think it's time for a new model of car buying? A model where instead of you, Ford, and Chrysler building huge numbers of vehicles and pushing them out to dealerships where they sit moldering on the lots waiting for someone to come along and buy them, you instead shift to a customer demand driven-system?

A system where we tell you on the Internet exactly what car to build for us, and then you build it, and deliver it.

Respectfully,

Gary Dikkers

hi Bob! Please listen to me. Forget about America. Just focus on China. China's auto sales are going to surpass 10 million, and within the next 10 years, surpasses the US market. Bring all your models to China, including the soon-to-be-anounced Opel Insignia and Opel Meriva. It's very important to win China. The Chinese consumers have high savings and are not suffering from subprime woes. They have unsatiable demands for cars. Remember we used to fight for China in the "Flying Tigers" during the WW2? China will prove a salvation to GM, which I strongly believe. Just build a Buick Riviera on the Kappa platform or Y-body. If you lose sight of China, Toyota would probably catch up there.

Bob,
You state that retail sales are up. I have owned 12 GM cars since I began driving.
I will never buy another GM car again.
My experience with GM customer service (Cadillac specifically) with my current car (Cadillac CTS) will keep me from ever buying another GM car again. If you want to keep people buying GM again and again, you had better offer decent customer service after the sale, or those retail sales increases will be short lived.

Somebody has to say it.Some of what GM is going through has been of it's own fault. Some has not. Rather than hash out GM's "faults" again, why can't other factors such as the ridiculous handling of trade be addressed? Anybody that says there is a "Global Economy" has not paid attention to trading partners and their handling of capital. For nearly 15 years, Japanese industry has been enjoying interest rates that are based upon a prime that is below or near a half percent. Yet we get politicians that "give" us a solution of a check depending upon our earnings. Why aren't these representatives putting real issues out in front us instead of buying our silence? Can GM compete in climates that are friendly to business? Results say yes, sadly those results aren't here.

And it really sucks that it isn't and can't be up to the guys that run GM to make this an issue.

GM can compete, can the United States?

Have a great idea. That guy who put a 1000000 miles on his truck, why not give him a new truck and take his old one? You would get so much word of mouth from it, you would be shocked.

Thanks
Bill

You're doing good for now, but some signs show GM heading swiftly back to the bad old days. Recent comments about multiple RWD projects being canceled due to CAFE are very worrying. RWD only takes away 1-2 mpg and they would all be pretty low volume cars anyway. The 260 hp 4 cylinder used in the Solstice GXP, Sky Redline, HHR SS, and upcoming Cobalt SS is powerful and fuel efficient. The DI 3.6L making 300 hp is pretty fuel efficient. So why not use these engines in smaller RWD performance cars sold under the Pontiac and Cadillac lineups. The plan was to make Pontiac the "excitement" division again by making it all RWD, but putting all these RWD projects on hold leave it with a mediocre family sedan, a rebadged Cobalt, and worst of all, a Toyota reject. Would it really derail GM's plan to meet CAFE by giving Pontiac a limited, all RWD portfolio (Solstice, RWD G6, G8, and G8 ST) to sale alongside a mostly FWD Buick and a GMC lineup? The bad old ways of thinking are creeping back up. Watch out Mr. Lutz.

I am one of those converts taking a look at what GM is offering. Long time Toyota fan. Malibu looks like its a great car. Congrats on developing a great product. I am going to take a look at it for my next purchase. Also waiting for Volt.

-Uday

Nigel, additionally, fleet and rental cars are typically bought with almost no options, they are the basic bare bones automobile that is repeatedly ragged on by it's drivers. I know whenever I have gone to the dealership and had to have service on my owned car, being issued a rental from Enterprise always results in the thought "BORING", "where is the power?" - these cars are typically not high performers but they are available options for people/companies who don't care to have all the bells and whistles. They are never out to impress and they never do.

ETB,
You might want to see precisely what happens when countries lower interest rates to lower levels. You seem to be suggesting that Japan's lower interest rates has been universally beneficial to them. The contrary is actually true.

What's interesting is that Japan had an almost identical property boom in the 80's. Remember when Japan was buying up real estate all over the US? That's how crazy things got there. They introduced 100 year mortgages and at one time, the property around the emperor's palace was worth more than the entire state of California.

Just like here as a result of our housing boom, people over-extended themselves and used risky loan products. When the boom reached it's peak and the inevitable fallout occurred, Japan lowered it's interest rates to zero in an attempt to stop the fall. This did absolutely nothing except launch them into a 15 year recession which they've just now started to recover from.

Lowering interest rates are ultimately bad for the average consumer because they cause rapid and massive inflation. Don't believe me? What happened when the rates were lowered last time? Housing prices went through the roof creating an unhealthy bubble in which we are now feeling the effects. Just like Japan, there were many "solutions" devised in an attempt to stem losses. Interest rates were slashed and so forth. Again, this only prolonged the inevitable fall and correction.

You'd think that by now we would have learned our lesson, but as anyone can see from past experiences, lower interest rates are not the golden opportunity for business or consumers in many aspects.

I don't see GM or any car company benefiting from interest rates. Ultimately the success of GM relies almost entirely on the products themselves as well as the average consumer's ability to afford and own them. I would argue that partaking in what I deem as destructive economic band aids causes more problems for manufactures and producers of big ticket items such as automakers and home builders.

gary, you can still order a custom built car from GM. i do it every time i order a new corvette or the mrs get a new ride. you just can't eliminate items that are standard equipment. most people buy car on impulse so they just go to the dealer and drive it off of the lot. the dealer can give you the production week and tell you the shipping date all from his computer. to have JIT parts delivery and to be able to tell suppliers how many of this or that GM needs they need to build cars for dealer inventory.very few people like to wait 6-8 weeks for their new car to show up at the dealers so they buy out of inventory and the dealer can dealer trade with other dealers to get the car you want even if he does not have it on his lot.

Gary,
I asked for that same thing back when this blog first started. I think GM has some agreement with the dealers that forbids this kind of transaction :-( ?
But, maybe there's a way to still order online and have it go directly to the dealer for pickup and payment thru the dealer still?

Nigel, additionally, fleet and rental cars are typically bought with almost no options, they are the basic bare bones automobiles. They are never out to impress and they never do.

It does seem the automakers are missing an opportunity to make a favorable impression on rental customers.

Might it be worth the car makers providing the rental companies with a more impressive car -- even if the rental companies don't ask or pay for it -- in order to increase the chance of making a favorable impression on renters?

Could it be that car makers should make a specific brand or model of car to sell to rental companies and fleets? A basic car that meets rental customer requirements, but that wouldn't leave a bad taste in the mouth of rental customers for the maker's other brands. Perhaps something like the old Checker car that was made exclusively for taxi cab fleets?

Could GM build a sold, reliable car and offer it exclusively to rental companies and corporate fleets that wouldn't detract from the brands they offer the public?

It seems passing odd that GM doesn't want their cars to be available as rentals because people would get a bad impression of them.

I would also argue that rental sales serve a purpose for GM. While in Hawaii last year, I rented an inexpensive car for the week, a Chevy Malibu. At home, I was driving a Mercedes 320e and my wife was driving a Cadillac DHL. I was so impressed with the Chevy that it kind of made me mad because I was having issues with my Mercedes. I told my wife that I liked the Malibu better than the Mercedes. Long story short – I decided to look at the Saturn Aura when I was ready to replace my Mercedes and low and behold, it was equal. So I bought and saved about $25,000. I might not have considered doing such a thing if it had not been for that rental car in Hawaii.

Keep up the good work on the Volt development – I’m on the waiting list. Make sure you set production high enough to fill demand because it’s going to be a grand-slam home run for GM.

Yo Bob what's up? I can't wait for GM to show the design sketch for the next STS, the ultimate S-Class killer! You don't want to be the second best-you want to be the best! The keywords are bulging fenders and coupe-like profile! Even Lincoln now has the mid-size MKZ and the full-size MKS, although they are both RWD, which limit their potential(translation: not BMW killer!) Having only the mid-size CTS is not enough! And you don't have to wait until 2010. Just release a concept to gauge potential interests from rich buyers. I would like to congratulate on the bold face-lift you made on the Aveo5: a large twin-port grille, just like an Audi! It's a bold step, and it looks good! As for me, I will just settle for the Cadillac CTC coupe.

Gary Dikkers, 2/12, 6:06 PM:

Roger Penske is actually doing something very similar to what you describe with the Smart. And they are made in France!

My younger son recently bought a Mini Cooper, which was built to order in England. They have a website which allows the buyer to track the progress through manufacturing, shipping, and delivery. It took about 8 weeks, which is about the turn around time as the Smart as well, if memory serves.

You spend all this money on advertising the new Buick with Tiger and then you don't have any for the dealers to sell. The cart is out there and the horse is no where to be seen so the customer hops a ride with the next cart that passes by.

One more thing, Bob! I checked
out the Holden website for the Statesman full-size LWB, and it is absolutely gorgeous! Just what the Impala should be like! Although the next Impala will look more like a Camaro. Although I don't agree GW is "crock of s**t", I am also angered that GM has to sacrifice its V8 program and base its Impala on FWD to meet the CAFE requirement. It's such a huge waste! I will rather pay 70 million in fines like Daimler and make billions of euros. I like the Statesman name. It has the grandeur of a republic! Although it's not wise to sacrifice the Impala brand equity.

I guess now people are catching on to what then 20 year plus Ford empoyee Clifton Lambreth said in his 2007 Amazon Best selling Auto blockbuster book - Ford and the American Dream about the future of the American Auto Companies - NOT JUST FORD!!!
I recommend every GM employee read Ford and the American Dream and then no one will be surprised by what the next moves must be!

Sometimes doing the right thing hurts!

Why can't inexpensive fuel additives be used instead of premium fuel as other countries do?
There are better ways.

The total economic impact of capturing every sale in GEN environment might not be so bad afterall!

Allright Bob, it's time for your annual Camaro update - we haven't had one for a while. All this blah blah blah about all your other cars is just fine and dandy, but I'm getting antsy because I've seen enough stuff about the Traverse, Malibu, and Volt to just about last me the rest of my life.

I'm very active on a number of Camaro enthusiast forums, and have seen all the spy pics (both authorized and unauthorized) a hundred times. Now it's time to let a little more of the cat out of the bag......

Is there (and if there is, when?) a formal production date set? When can I expect to place an order at my local Chevy dealer? Is it true that, for the first time in automotive history, you will offer remote start as a factory installed feature ON A MANUAL TRANSMISSION????

C'mon Bob, just a little bone, please?

Bob,

Great of you to point out the retail success. And its also good to see that the cars you are selling to the fleets are better editions of the models. Keep that going.

One question - where can I find a list of GM's car and light truck sales year-over-year, per model? I like to track my Pontiac to see how good/bad they are doing.

Thanks,
Eric

One thing GM needs is to succeed in small cars. You should not only concentrate on big cars like the Impala and Malibu, and muscle cars like the Camaro. You should concentrate the production of small cars(Cobalt, Astra,Beat,Corsa,Aveo) in Mexico, since the exchange rate is favorable (1usd=10.76). With a growing population, the US market will reach 18 million. If GM can achieve 33% market share out of a 16 miliion market, GM needs to sell 5.3 million vehicles. And if you can make $500 out of every car, you could make 2.65 billion operating profit a year. The North American fourth quarter loss of 1.1 billion is simply unacceptable. You always have base prices that are lower than the competition. Just compare the base price of Aveo and the Honda Fit. It's a difference of more than $3,000!!! Never underprice your products, and don't leave the money on the table. Profit is the lifeline of every business. These are the 3 golden rules.

Edvard, it seems that the result of Japanese interest rate cuts is that they have managed to export thier financial woes to us.

Low cost capital is a desire of any corporation. But the country that has it needs to understand moderation and avoid predatory actions.

Lets get the GM stock up, its killing me, I was going to take the buy out, but I own a ton of GM and it has taken my 401k south. Can not do it now. Love your new products hate your stock price.

There's a sensational column called "GM Death Watch" at thetruthaboutcars.com, which I am not very happy about. These are some of the words they say. Make your own decisions whether you think they are right.

"The General's recently released Duramax diesel V8 delivers a nearly identical 25 percent reduction in fuel consumption as the two-mode hybrid. Thanks to its particulate filter and NOX after-treatment system, the Duramax oil burner meets 50-state, 2010 emission standards. While the Duramax doesn't grab the green-friendly headlines which seem to motivate every GM efficiency development, it does provide 310 hp in a package the size of a small-block gas V8, with comparable noise vibration harshness levels, without the two-mode’s colossal price tag.

It is precisely on the point of profitability that GM’s green dreams have been faltering. Rather than cut bait and fish, GM is once again displaying copious quantities of its patented arrogance and preference for PR over hard graft and long-term thinking.

Not to put too fine a point on it, GM is ignoring the old maxim: when you’re in a hole, first, stop digging. The automaker is continuing to spread its hybrid efforts thin with its (rushed and compromised) mild hybrid Malibu. It continues to pursue the hugely expensive, untried and untested Volt electric – gas plug-in hybrid. And it refuses to abandon its two-mode snafu. Meanwhile, Toyota is plugging away at its Synergy Dive, steadily lowering costs, bringing the fuel efficient drivetrain within the price range of similarly capable gas engines."

Lutz said: "We used to grab every sale, including daily rentals, no matter how unprofitable or ultimately deteriorating to the value of vehicle and brand."

Mr Lutz,

Apparently there are some daily rentals you like. I just watched an Avis commercial in which they touted the fact one could rent a CTS from them.

Aren't you concerned that when Avis rents a CTS to someone it would be (in your words), "...unprofitable or ultimately deteriorating to the value of vehicle and brand?"

You seem to be concerned that people who rent a Cobalt or Impala will get an unfavorable impression of those GM brands. Why do you apparently feel differently about the CTS? (Am I wrong, or does it almost seem as though you are ashamed to have people rent a Cobalt or Impala?)

Respectfully,

Gary Dikkers

Kudos for Impala, but a RWD would be so sweet. I saw that new Holden Coupe 60 concept,a knockout like the new CTS coupe. With the weak dollar, doesn't it make more sense to build the G8 and a Coupe 60( new GTO)as well as the Astra here or in Mexico?