Posted on 06/26/2008 5:55:45 AM PDT by jalisco555
NEW YORK (CNNMoney.com) -- Why is General Motors still in the Dow?
GM (GM, Fortune 500) may still be the biggest of the Big Three. But it's getting more and more difficult to justify keeping GM in the Dow Jones Industrial Average, an exclusive list of what's supposed to be the 30 leaders in the U.S. markets and economy.
GM confirmed on Monday that it is looking into selling its Hummer brand of monstrously-sized vehicles. And in a major sign of desperation, it also announced that it would offer six-year, zero-percent loans for 2008 models until the end of June in an attempt to clear out inventory.
The stock traded close to a 33-year low on Monday, and the company now has a market value of about $7.5 billion, the lowest in the Dow. The next lowest is Alcoa...and it's still valued at $30.3 billion, more than four times as much.
Heck, even Ford has a bigger market value, at $11.9 billion.
(Excerpt) Read more at money.cnn.com ...
I remember when after September 11 all the auto makers cut their loan rates, etc to help boost the economy. How much of that led to their decline, I wonder?
Consider the source: Communist Negativity Network.
GM's troubles date back at least into the 70's with their refusal to come to terms with the reality of oil price shocks and Japanese competition.
The source doesn't matter. The reality is a stock at a decades long low, a paucity of attractive products, wretched management and nimble competitors.
GM drove away a lot of people with decades of subpar automobiles. Many of those people went to the Japanese and are now quite happy. GM hasn’t yet matched the Japanese in most passenger car categories but they have improved. The problem is that most Japanese, and now Korean with the emergence of Hyundai, customers are satisfied. GM can’t just build an equal car to win them back, they must build a car that is clearly better and they’ve yet to show they can match things like the Accord.
They also screwed up by putting too many eggs in the SUV market. They let those profits keep them going. Once that bubble burst, as you knew it would, they ended up in trouble.
I see where they’re going to offer 0% financing over 72 months.
So on those sales, the revenue will be inflation neutral while costs continue to go up....not good.
“The problem is that most Japanese, and now Korean with the emergence of Hyundai, customers are satisfied. GM can’t just build an equal car to win them back, they must build a car that is clearly better and they’ve yet to show they can match things like the Accord.”
Yup, when faced with a choice between say an Accord and a Malibu...if the prices are similar, people are going to go with Honda. That doesn’t mean that GM doesn’t make a good products but people remember when they didn’t.
This proposal, which is a reversal of a policy enunciated just a few months ago, is a desperation move. They gotta move the metal. They bet heavily on trucks and SUV's as perpetual cash cows and now they are paying the price for their mistake.
Every Japanese car buyer is either a former domestic buyer who was burned or the child of one. Winning those customers back may not be possible, it certainly won't happen if GM's current management remains in place.
Even if they aren’t the same price people will generally go with the Accord because the resale value is substantially better, it drives better, and it has a better reputation for quality.
“Incompetent, entrenched management, market share in meltdown and much better run competitors are killing this once great company.”
Come on! This is FR, get with the program. GM has only one flaw, unions. If union members were summarily shot, there would be cheers here. A less drastic step, that would still be greeted with much glee is to keep the managment here and move all manufacturing offshore. That would get some freepers wetting their pants with delight.
And those same freepers wonder why a putz like Obama is getting traction.
I drove Chevrolets for decades, but recently switched to a Mazda. Given my long experience with GM vehicles and their typical problems, I would find it hard to go back.
LOL. 12 replies and no one has said that yet. Waiting, waiting...
Comparing resale values, an eight year old Accord EX V6 is with $10500 according to the bluebook. Thats MORE than a 2000 Lincoln Town car which is worth $8875. Obviously the Towncar was worth a ton more new.
CNN isn’t always wrong. The last decent GM I sat in was my 77 Nova Concours.
“Even if they aren’t the same price people will generally go with the Accord because the resale value is substantially better, it drives better, and it has a better reputation for quality.”
Agreed except on the “drives better” claim. I’ve driven the new Accord and the new Malibu and it’s every bit as nice to drive as the Accord. I also like the look of the Malibu better.
But you’re right, no matter how nice it drives, the resale value and reputation for better reliability would scare me away from buying one.
Let me know when the rates go negative.
I’ll buy a GM SUV at a -25% / 72 month APR.
I’ve heard anecdotally that some GM vehicles are now seeing 50% depreciation after one year. I haven’t seen data on that, though.
My last GM car was a 1994 Chevrolet Cavalier I bought for my wife. She loved it except about a year into ownership, it began to inexplicably leak oil. We took it to three different dealerships and no one could find out why.
We got rid of it and haven’t owned a domestic product since.
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