General Motors Monica Taylor Critical Issues in Business 9/25/10
General Motors Quick Facts Found by William Durant in 1908 World’s second largest automobile manufacturer behind Toyota Headquarters located in Detroit, Michigan, the hub of the US auto Selling its vehicles in 31 countries, GM’s largest market is China and the US, the second largest. GM Brands: Buick, GMC, Cadillac, Vauxhall, Opel, Daewoo, Holden, FAW, Wuling, and Jiefeng
General Motors Quick Facts cont’d A full service automobile manufacturer offering: General Motors Acceptance Corporation: finance and insurance OnStar: safety, security, and information Service and Parts division: GM Performance Parts, GM Goodwrench, ACDelco, and GM Powertrain
General Motors Q2 and Q1 2010 : Earnings Per Share
General Motors Q2 and Q1 2010: Free Cash Flows
GM Comments Regarding Quarterly Results In their press statement for Q2 of 2010, GM’s Chris Liddell (vice chairman and chief financial officer) states: “I am pleased with our progress on achieving our business objectives,…We have delivered strong product, maintained cost discipline, progressed strategic initiatives such as restructuring… and delivered two consecutive quarters of profitability and positive cash flow” (2010, GM.com).
GM August 2010 11% drop in sales for its core brands Buick, GMC, Chevrolet, and Cadillac compared to last year 7% decrease in sales compared to last July 2010 61% YTD sales hike for Buick 50% YTD sales hike for Cadillac 37% sales hike for Buick and Cadillac combined over last year
GM’s August 2010 Sales comments As per Don Johnson, vice president of US Sales Operations explains the results thusly: “Last year’s Cash for Clunkers program spiked industry sales in 2009, so results this August were not surprisingly a bit mixed… Importantly, three of our four divisions showed solid gains. This is further evidence that our performance is the result of balanced contributions across our brands” (2010, GM.com). Johnson remains optimistic for the remainder of the year due to the release of new products such as the new model launches for the Chevrolet brand: the Cruze and the Volt. Additionally, the continued expansion of the Buick Regal and Cadillac CTS Coupe will continue GM’s momentum (2010, GM).
BanruptcyBailout Highlights GM reports at the time of filing, total assets of $82.3 billion and liabilities of $172.8 billion; Government bailout that made the American taxpayer a 60% stakeholder, Canada a 12% stakeholder and the UAW a 17.5% stakeholder of the new and reorganized GM; The divestiture of Pontiac, Saturn, Saab, Hummer brands leaving US core brands: Buick, Chevrolet, GMC and Cadillac; Idled and closure of several plant facilities throughout the US;
BankruptcyBailout Highlights cont’d More than 2000 reduction of its 6000 dealerships; The initial shedding of 20,000 jobs that might top 100,000 after the completion of the aforementioned reduction in facilities and dealerships; Cutbacks in health insurance for 650,000 retirees and their families; GM bondholders’ investments converted to stock in the new and reorganized GM which is worth a fraction of their original investment;
BankruptcyBailout Highlights cont’d GM stock holders complete loss of investment; GM’s removal from the NY Stock Exchange and the Dow Jones Industrial Average. (2010, Isdore)
GM Here and Now GM proudly reported that it will have completely paid back the initial government loans (independent of the bailouts) it received from US and Canadian governments in June 2010.
GM: Future GM has announced plans of a mid-November initial public offering (IPO) of government bailed out stock. It is expected that the American and Canadian governments will promptly make portions of their shares to facilitate a repayment of bailout funds. Q1 and Q2 results saw the return of profitability in GM which will definitely play a part in making an attractive IPO and generating demand for GM stock.
Conclusions GM bankruptcy/bailout lessons: “Problems denied and solutions delayed will result in a painful and costly day of reckoning In corporate governance, the right people count more than the right structure Appearance can be deceiving” (2010, Ingrassia).
The Era of the New GM Begins
References “General Motors Corporation”, (n.d.). Fundinguniverse.com. Retrieved from http://www.fundinguniverse.com/company-histories/General-Motors-Corporation-Company-History.html Gomstyn, Alice and Jaffe, Matthew. “GM Under Fire for ‘Misleading’ Bailout Ad”, April 3, 2010. ABC News. Retrieved from http://abcnews.go.com/Business/general-motors-fire-misleading-bailout-ad/story?id=10513568 “Humbled GM files for Bankruptcy”, June 1, 2009. MSNBC. Retrieved from http://www.msnbc.msn.com/id/31030038/ Ingrassia, Paul. “Get Ready For the GM IPO”, September 13, 2010. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052748703453804575479621995344834.html “Investor Relations”, (n.d.). General Motors. Retrieved from http://www.gm.com/corporate/investor_information/earnings/ Isiodore, Chris. “GM Bankruptcy: End of an Era”, June 2, 2009. CNNMoney.com. Retrieved from http://money.cnn.com/2009/06/01/news/companies/gm_bankruptcy/
References cont’d Kim, Soyoung and Lawder, David. “GM Repays U.S. Loan, Government Loss on Bailout Falls”, April 21, 2010. Retrieved from http://www.reuters.com/article/idUSTRE63K56920100421 Meyer, Warren. “The High Price of the GM Bailout”, August 9, 2010. Forbes. Retrieved from http://www.forbes.com/2010/08/09/general-motors-finance-bailout-opinions-columnists-warren-meyer.html “The Lessons of the GM Bankruptcy”, June 1, 2010. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052748704113504575264641145227612.html