The main source of the GM decline was its European operations.
Its future results are questionable as USA sales forecast predicts declines. Both
of which are understandable in this difficult economic environment.
But, Toyota reported a huge increase for the same time period. Its Net Income was $3.17 billion on robust sales growth – profit was
111% greater than GM’s. Its sales forecast expects substantial increases.
Can GM be successful up against Toyota and other Asian manufacturers?
Toyota’s USA based operations have lower product costs
compared to GM because their hourly factory labor wages are lower – further
compounded by lower health care and retirement costs. Toyota has a leaner
salaried organization and thus lower overhead costs. These significant issues
were not dealt with during GM’s bankruptcy.
GM is not the best cost producer in its industry and, as a
result, will decline. Its profit margins and free cash flow will be squeezed
resulting in less capital available to develop new products and productive
manufacturing systems and equipment.
Will this bring GM to its knees again?
Most likely.
Click on the following links to read my earlier posts with greater details of GM’s issues:
General Motors - Industry Leader?
Most likely.
Click on the following links to read my earlier posts with greater details of GM’s issues:
General Motors - Industry Leader?
UPDATES:
On August 15th Forbes published a thorough analysis of General Motor’s declining performance entitled GeneralMotors Is Headed For Bankruptcy – Again - a worthwhile read.
A September 10th Reuters’ article, Insight: GM Volt: the ugly math of low sales, high costs, details General Motors costly failure with
the Chevrolet Volt – a loss of $49,000 on each car. Couple this failure with the
Chevy Malibu being rated dead last versus five competitive vehicles in Car and Driver magazine’s comparison
tests raises two questions: Is GM well
managed? Can it succeed?
These product failures signal the absence of coordination
and cross-functional communication among GM’s operating functions. In
particular, for these two product failures, are product engineering, marketing,
manufacturing engineering and cost accounting working in sync?
In
my experience there is an absence of open and candid communication through all
levels of distressed, troubled companies. Cross-functional communication is
always missing. Consequently mistakes mount, problems fester.
Cross-functional
communication requires that the CEO uses it and demonstrates that it is an
integral part of the company’s culture. Absent that it is difficult for
functional officers and mangers to use it – the negative politics of some human
beings results in certain people being unwilling to participate in this style
of management. Need a fully competent and self-confident CEO - highly knowledgable of what goes on in the bowels of a manufacturing company.
October 31 and November 5. Toyota’s net income tripled and market share increased while General Motor’s net income declined12%.
