General Motors CEO Dan Akerson was quite straightforward in his assessment of General Motors when he reviewed the third quarter financial results.
“They are solid. But we have more work to do to be sustainable,” he said.
The troubled group has very obvious problems: the mix is poor as people choose cheaper cars. Foreign exchange is poor. There is extra cost in engineering as technology change speeds up. Demand and profit in Europe for the Opel and Vauxhall badges is poor.
The man who came from the telecoms industry would like to be ringing the bell a bit more often than he is in the big subsidiary markets. South America will only break even at best this year in contrast to earlier indications that it would help swell the coffers. Europe won’t even manage that. “Europe is not sustainable and not acceptable.”
But the third quarter of the year did generate both positive profit and cash for the group as a whole so there are still indications that the veteran underperformer lives in hope and hopes to live. The holy grail, says Akerson, is better sales in the emerging markets.
The message that went out to analysts toying with the idea of forecasting a better fourth quarter was: “Don’t.” Quarter four has fewer selling days than the rest of the year and there are two new models coming which mean extra stocking costs and heavy marketing.
His inquirers from the financial institutions sensed the nervousness over Europe and produced a volley of questions. Was it going over a cliff? “Your crystal balls are the same as ours,” was the opaque answer. But the common ground seems to be that European market will not improve. GM’s market share was down in Europe by 0.3%.
GM acknowledges that it has to “get costs down again.” That means that Nick Reilly, GM’s most senior Brit with 37 years in the GM group, will have to go back into slash and burn mode once again. No wonder that the 62 year old stalwart has announced that he will retire in March.
Akerson sees some opportunities to crank up prices. The quality of the cars has improved such that the residual values are better. That means that the fleet buyers might be persuaded to pay more for them. But he will not be asking them to buy huge quantities. “We want price and profit; we are not going for market share.”
The group’s US$1.7bn of profit in the third quarter was down 15% from a year earlier. But almost all the profit was from the US homeland… which is a shame. GM is at the point in its recovery where it needs to see export markets taking to its new products. It has been unlucky in the UK – its third-largest market in the world – because the pound sterling has been so weak that Vauxhall sales have not fully converted to profit.
GM’s third quarter financials also make uneasy reading for the US Treasury which bailed GM out when it first went bust. Because the Treasury has already sold some shares at a loss, it needs to be able to sell the remainder at no less than $53 a share if it is to break-even on its investment. That is not going to happen any time soon. On Wednesday, the stock price was $23…