GM eyes cuts after record half for earnings
First-half earnings for General Motors Co. reached $6.3 billion, reports Automotive News. Yet according to Automotive News, General Motors CEO was not happy. General Motors cutbacks will soon follow. Source for this article: Despite record first-half profit, GM plans major cuts
Cause of slashes at GM
As General Motors is at the lowest in the industry for earnings with the 6 percent margins, which Morgan Stanley calculated before interest and taxes, it will need to cut expenditures, as reported by GM CFO Dan Ammann. There are only a few businesses with lower operating margins. This contains Toyota, Renault SA and PSA Peugeot Citroen.
General Motors spokesman Jim Cain explained what GM’s next goal is on its way to getting to the top of global sales again. He said that the next goal is to beat Ford and Volkswagen AG’s 7 percent margin.
All of the programs are being reviewed by General Motors, as reported by ABC7 Action News Detroit. The company is making cutbacks everywhere. Cutbacks in marketing, production consolidation and jobs will occur probably. Turning down the thermostats in company offices may even happen.
“Ford’s North American margins are easily 2 percentage points better than GM’s,” said Morgan Stanley analyst Adam Jonas. “We think that gap can narrow.”
Low income predictions
A team of industry analysts told Bloomberg that GM’s third-quarter net income would likely drop $2.16 billion from the previous year, to $1.6 billion.
There are increases in commodity costs and engineering and marketing costs. That means earnings are being cut into, as reported by Jonas. Production slashes can be expected with higher dealer inventories, lucrative buyer incentives and production cuts.
Selling fewer vehicles
Automotive News spoke with General Motors Senior Vice President for Global Product Development Mary Barra. She said that by 2018, only 14 models will exist rather than the 30 accessible now. General Motors wants to slow the production of compact and mid-size vehicles since only 31 percent of 2010’s sales came from these cars compared to Ford’s 70 percent of 2010 sales.
Fewer motor models will be used also. There are 16 models right now. By 2018, General Motors will target 10.
“A lot of the cost focus at GM is about discipline,” said Detroit-based consulting firm Principal Jim Hall. “The company has to make a statement to employees. If you don’t, then corporate entropy will creep back in.”
Last quarter was better for General Motors
ABC 7 Action News Detroit