Jon Coifman's Blog
GM Flag Waving: Read the Fine Print First
July 31, 2007
Posted by Jon Coifman in Moving Beyond Oil , Solving Global Warming
General Motors posted new earnings numbers this morning to mostly rosy headlines. Drudge Report is running the story under the banner "USA! USA! GM posts $891-million profit…"
But all is not well for the big automaker, which lost its status as the world's top carmaker earlier this year. Open the hood on the financial report, and you will quickly find the company continues to suffer badly from the same guzzler-based business model that has wreaked havoc on Detroit's Big Three over the past several years.
This is the same strategy that automakers are touting on Capitol Hill in their efforts to weaken and delay stronger fuel economy performance standards passed by the Senate and now under consideration in the House.
In fact, GM's June sales in North America are off 21 percent from last year (a year that was no picnic for the company either). At the end of the month the company was carrying 30 percent more unsold pickups and SUVs than in May, and 40 percent more than the industry as a whole. The vaunted Chevy Silverado pickup, which went through an extensive redesign that GM execs promised would build sales, sits on company lots an average of 142 days; a Suburban 124. That's about three times as long as a Toyota Tundra.
What profits the company is making are coming from outside the United States, particularly China and Latin America (where GM cars are mainly produced locally, which means they don't add much to the US manufacturing base).
Meanwhile, Reuters is reporting today that fuel economy -- and hence global warming emissions -- of all cars and trucks on the American road is the lowest in the industrial world.
The bottom line if you are watching this critical US industry crumble in the hands of poor management strategy is that American carmakers are hemorrhaging precisely because they bet the farm on cheap gas and ancient technology (GM's principal V6 is derived from an engine first build in the 1950s).
By slacking off on sensible fuel economy performance requirements, Washington helped put the industry and its shrinking force of blue- and white-collar employees alike in the fix they are in today.
That, Mr. Drudge, is nothing to wave a flag about.
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