Lagging sales and lower-to-flat net vehicle pricing has General Motors searching for ways to trim costs, but the world’s largest automaker doesn’t expect drastic operational changes anytime soon, chairman and chief executive Rick Wagoner told the Associated Press (AP).
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Wagoner, in an interview at an event to launch the new Pontiac G6 sedan, reportedly said reducing expenses remains an important dynamic in today’s ultra-competitive market place.
“You know how the math works for your business,” Wagoner said. “If you don’t get revenue, which is volume times price, and you want to continue to run positive net income and generate cash … then you need to keep cutting costs.”
Wagoner told AP material costs remain a focus, and he cited the consolidation of the company’s engineering operations as an example of how to cut costs. But he said other factors largely are out of GM’s control, such as the skyrocketing tab for health care, which amounted to $US4.8 billion for the automaker in 2003.
“It’s not unhealthy at all to go back from time to time and say, `OK, we’ve moved to this structure, that’s been working, are there areas where we’re still a little bit heavy?'” Wagoner said without offering specifics. “I think that’s going to go on. We’re going into our budget cycle, and that’s always the time we ask these kinds of questions.
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By GlobalData“But I don’t expect any major changes in strategy.”
Despite spending an average of more than $4,000 per vehicle on incentives, GM had its third straight month of negative US sales in August, when business was down 7%, the Associated Press noted. For the first eight months of 2004, GM’s business was off 2%, compared to roughly flat sales industry-wide.
In a move that could hurt profits, GM said it was cutting its fourth-quarter production forecast by roughly 7% because of inflated vehicle inventories, and Wagoner acknowledged to AP that producing fewer vehicles has placed “a little more pressure on the cost side of the business.”
GM’s profit rose 49% in the second quarter, but it relied heavily on record earnings at its financial services arm. Despite lower production forecasts, the company has not wavered from its 2004 earnings estimate of approximately $7 a share. Wall Street’s current estimate is $7.05, the Associated Press said.
