Why Isn't GM Making More Money?

Last year, General Motors (NYSE: GM  ) earned $7.6 billion in profits, while selling more cars around the world than any other automaker.

That made 2011 a banner year for GM – but while the General led in sales, it was out-earned by several of its major rivals, including Ford (NYSE: F  ) and Volkswagen (NASDAQOTH: VLKAY  ) .

That trend has continued in 2012. GM earned $1.48 billion in the third quarter – a decent number, but one that was dwarfed by GM's biggest global peers. Toyota (NYSE: TM  ) came in with a fat $3.2 billion profit – and VW's total was close behind at about $3 billion for the quarter.

That's a huge gap – one that looks even bigger when you realize that the global sales race between those three is actually quite close. GM has sold more vehicles in 2012 than VW, and almost as many as Toyota. Why isn't it making more money?

Why Ford is out-earning GM at home
The answer can be summed up in one word: margins. Ford's operating margin in North America was a whopping (for an automaker, at least) 12% last quarter, while GM's was a much lower 7.8%, down from a year ago.

Ford's margins in its home market are a big reason it out-earned GM last quarter despite selling significantly fewer vehicles. The Blue Oval's "One Ford" strategy has led to a simplified global lineup of (much) higher quality cars and trucks, which it can sell at higher prices with fewer discounts. Even better for Ford, the global nature of its product line gives it better economies of scale.

But the real icing on Ford's profitable cake is its "capacity utilization." Ford closed several of its North American factories during its restructuring last decade. The ones that remain are very busy: Ford's North American manufacturing chief recently said that the automaker's plants here are running at 114% of capacity. That means that some are building cars around the clock.

Slim profits overseas, despite big sales in China
The situation is worse in GM's other regions. While GM is losing a ton of money in Europe, as weak demand has led to underutilized factories and price wars in some regions, that's also true of VW and Ford, its biggest rivals in the region.

Things are different in China, though. GM has been the market leader for several years, thanks to the strength of its Buick and Chevy brands – and thanks to its Wulings, the inexpensive little commercial vans that make up about half of GM's volume in China. Wuling's sales success has been good for GM's bragging rights, but less good for its bottom line: Profits on the little vans are slim, even before they're split with GM's Chinese joint-venture partners.

Contrast with VW and the runaway success of its Audi brand, which is the luxury car brand of choice for China's powerful and well-heeled. VW has gained ground on GM in the Chinese sales race this year, but the profits race has been no contest for awhile: Audis have fat margins in China and elsewhere, enough to account for almost half of VW's global profits.

How GM will up its game
GM's margins are on course to improve over the next few years – that's part of what makes GM an intriguing investment opportunity right now. GM's product chief, Mary Barra, is driving a Ford-like global product consolidation that should save GM billions while improving the quality of its vehicles.

New products will help a lot. Ford's F-series pickups are a big driver of its profits in North America, while GM's pickups – which sell in similar numbers – are less profitable. That's because GM's pickups are older designs, and have needed discounts to keep sales strong.

GM has new pickups coming next year, which should help its margins in North America right away, as will a slew of other new products that are due over the next year or two. GM executives regularly point out that the company will go from having the oldest product portfolio in North America to having the freshest two years from now. Assuming that those new cars and trucks are as good as GM's most recent entries have been, that will improve GM's pricing power – and reduce its reliance on discounts.

Improvements overseas will take longer: Europe will lose money until at least mid-decade. Meanwhile, GM has a long-term plan to overhaul Cadillac and make it a legitimate competitor to Audi in China and elsewhere, but that will take several years to implement.

The upshot: Needed changes are already happening
The reviews on GM CEO Dan Akerson have been decidedly mixed, but broadly speaking he has put GM on a solid course. The company has already set in motion a number of significant changes that should raise its profits significantly in time. Assuming that GM continues to execute well on the product front – and given GM's painful history, that is not  a slam-dunk – patient shareholders are likely to be rewarded in a few years.

It's true that decades of mismanagement of General Motors led to a painful bankruptcy in 2009, but it emerged a leaner, stronger company. GM's turnaround, however, is still a work in progress. Investors around the world are wondering if GM has what it takes to reclaim its former glory. I've put together a brand-new premium research report telling you exactly what you need to know about GM and its turnaround. If you own or are thinking about owning GM, then you don't want to miss this report. Click here now to get started.


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  • Report this Comment On November 28, 2012, at 4:33 PM, erikinthered100 wrote:

    GM is not, and never will be, a good investment. It continues to be crippled by unions. This situation was made worse by a bankruptcy process illegally hijacked by the Obama administration. Unfortunately, the superempowerment of unions by the government and government meddling in the auto sector has made the entire American auto industry a very bad investment. Dysfunctional companies continue to be propped up by government cronyism.

  • Report this Comment On November 28, 2012, at 5:10 PM, eddietheinvestor wrote:

    Erikinthered100 raises an excellent point. The power of the union has cut into profit margins The money GM must spend on retirement funds is significant, and profit margins decrease when companies have very large and increasing expenditures to their employees, even if the employees are fine workers. I think Hector might be correct that erikintheread100's post is emotional and angry, but that in way debunks his argument.

  • Report this Comment On November 28, 2012, at 5:42 PM, emanderso wrote:

    Erikinthered100 does not sound angry in any way he is merely stating fact. What in that comment sounds angry? Let's stop demonizing anyone that points out problems with this administration, we are still allowed to you know. I was thinking the same thing as I read that article.

  • Report this Comment On November 28, 2012, at 5:44 PM, TedKaye wrote:

    I would have like to seen more discussion of relative costs. I have heard that GM's hourly labor costs are well above the industry standards at in excess of $70 per hour and that none of their labor costs, at least the union component, were pared when they were bailed out. On the other hand, if understand correctly, GM's bondholders were wiped out, so they don't have that liability to contend with.

  • Report this Comment On November 28, 2012, at 5:46 PM, gunnboy wrote:

    GM is doomed with legacy union cost and will never be able to compete with the other car makers. They will not be able to pay back us tax payers before they file for bankruptcy again.

  • Report this Comment On November 28, 2012, at 6:08 PM, jaarsrep wrote:

    I have one word for you folks: Volt. Read all about it right here: http://www.reuters.com/article/2012/09/10/us-generalmotors-a...

    Is this more more of the Obama administration meddling in the economy? How can you continue to sell a car that LOSES MONEY??? It doesn't make sense.

    Gunnboy is quite right about the legacy unions, too. I agree.

    And one more thing: Ford stock is less than half price of what GM is. How hard is that to figure out? Ford makes money and has cheaper stock, while GM costs more and doesn't make as much. Let's see... which one should I choose?

  • Report this Comment On November 28, 2012, at 6:09 PM, drhaney wrote:

    erikinthered100 makes excelent points. Only a Koolaid drinker would think otherwise.

    I wonder why the article writer didn't mention the WORST margin of all specifically, the VOLT according to what I have read this car is selling in the $45-50K range (most sales are to the GOVERNMENT I might add) and yet it is said to cost around $90K to build... With those sort of margins GM will certainly never be a good buy. Even worse I saw the other day that GM is doubling down on its ELETRIC cars and going to build all electric in S. Korea! I woun't get into the politics of loaning (losing) taxpayer funds to a private entity creating jobs overseas... ;_)

    Dan

  • Report this Comment On November 28, 2012, at 6:21 PM, TOM48 wrote:

    Having worked for GM for over 30 years, I have more than a little insight. Their are too many levels of management still & the top still does not know what the levels below them actually do day to day. They are investing too much in electric vehicles. Their way to the top is to start producing natural gas vehicles, and to get he public to know they are serious have a natural gas fuel pump at every GM dealer. That way anyone buying a GM natural gas vehicle can buy in confidence that they can drive across the country & be able to find fuel. Until they do this GM stock is on my no fly list.

  • Report this Comment On November 28, 2012, at 6:27 PM, dennyinusa wrote:

    I can understand some of the complaints about the unions.

    But where is the outrage for the overpaid and underperforming CEO’s and upper management than continues to lack vision and competence in doing their jobs.

    Maybe if American CEOs and upper management were not such pigs then unions would not ask for as much.

    If I see my CEO make stupid amount of money for his job, why would I not expect the same as a general employee?

    I have no problem with person who starts business and takes the risks to make as much as possible.

    But a CEO is not same as owner of a company; they are employee just like the rest so are not entitled to so much compensation.

    If anyone of the big car companies had a CEO make $500,000.00 the rest of employees also would work for less in wages.

    They could sell cars for half what they now charge.

    They would own the automobile market.

  • Report this Comment On November 28, 2012, at 6:36 PM, smartgardener wrote:

    I really have to laugh out loud! GM did not go through the normal bankruptcy process, it was handed over to the unions and bailed out, money which we the taxpayers will never see again. I can still remember an owner of a dealership in my area crying literally before Congress because the government took over his 3 million dollar company (he was profitable, duh) and closed it down. WTF?? No one had any say and hundred if not thousands of people lost their shirt and their jobs coutrywide. It should be illegal what our government did. Now GM has a product no one wants except at a steep discount, their name tainted for years.....no I won't be buying any stock anytime soon. The only way they will pull themselves up is to get rid of the unions and fat chance that happening.

  • Report this Comment On November 28, 2012, at 7:40 PM, BentMike wrote:

    This has been true for a couple decades: Strip out labor cost, and overhead, the cost of the component parts that GM uses has been higher than Ford and Chrysler. Maybe Toyota and VW as well, but I don't know that.

    You could say you get more for your money when you buy one. That is not a union issue, or a government issue, it is a design and management problem. The market won't bear it, but they have these old habits.

    I am not an expert on this but I did design engine management sensors and actuators for 7 years. In the business a little bit you could say.

    If GM was showing signs of more success this conversation would not be happening. But you can't sell many cars when there is consumer de-leveraging to take place first. I lay that on the banking and financial industries. And a congress that caters to them. That goes to campaign financing and Citizens United. It is a big sweeping goat party (if that isn't too harsh on goats). Less immigration slow things down as well. Did I miss any hot buttons? Organic labeling?

  • Report this Comment On November 28, 2012, at 8:27 PM, chris293 wrote:

    People always are going to think they are worth more than they really are, me too! And with help from some fat cats in Washington D.C. and some misguided management and union leaders of our major industries the U.S. will always have some cliff-hanger to scare the pants off the general public. The U.S. needs to think better and faster to stay ahead with cutting edge products. The good news is we might still be in the lead, but that could change over-night.

    I was looking to buy a car the other day, what happened to a simple car that that justs starts, goes where you drive it, and then stops without all the bells and whistles. Maybe we'll go back to the days, when all the cars were black.

  • Report this Comment On November 28, 2012, at 8:44 PM, Moatshark wrote:

    After the Federal Government bailed out GM with taxpayer funds, I chose to boycott anything made by GM after 2009. I recently bought a new Kia and a used Ford. I don't know how many more people have chose to boycott GM but, if the numbers are large, an investment in GM might not be profitable for many years.

  • Report this Comment On November 28, 2012, at 9:01 PM, Inquirer17 wrote:

    Investing alongside gov't investments is not good for your pocket book.

  • Report this Comment On November 28, 2012, at 9:17 PM, ebabes wrote:

    Detroit is empty. GM will be soon. Give them 3-4 yrs and they will be under again.

  • Report this Comment On November 28, 2012, at 9:27 PM, eldetorre wrote:

    Why does everyone always blame the unions. Ford is unionized too. Their labor costs are equivalent. Isn't it even remotely possible that Ford is managed better? That they are simply building/selling more desirable higher margin products?

    Please keep you political dogma from clouding your reason.

  • Report this Comment On November 28, 2012, at 10:34 PM, eddietheinvestor wrote:

    GM and Ford are not the same, so the comparison is invalid. GM took millions and millions in bailout money and will never pay the government back. Ford did not take a government bailout. That's a big difference. GM is owned by the unions, who took control of the company and illegally took money from creditors, including teacher retirement funds in Indiana. Ford is not owned by unions. There is more hope for Ford than GM. This matters in regard to investing and is factual, not political dogma.

  • Report this Comment On November 29, 2012, at 12:27 AM, Snodule wrote:

    Wow, there is so much ignorance on this page it makes my eyes bleed.

    You want to talk union liability? Look at VW's numbers. GM makes more cars with less people, probably by a factor of 3.

    Arcane labor mgmt is not a GM problem or an administration problem, it's a US problem. The Europeans are solving theirs. We just have idiots with drums.

    The gist of the story is the nugget you meatheads are missing - GM is into too many low margin segments. They're emerging from that, which is why they will improve in the coming years.

  • Report this Comment On November 29, 2012, at 4:22 AM, Hitchhiker042 wrote:

    Has anyone else read that Chevy loses $30k on every Volt it sells? I didn't see the article address that. Are the losses coming out of profits? Or are the taxpayers still bailing the company out?

  • Report this Comment On November 29, 2012, at 9:53 AM, TMFMarlowe wrote:

    Wow, I don't even know where to start.

    A few high points:

    Despite what you may hear on talk radio, the UAW isn't GM's problem. The UAW has actually given up quite a lot in the last two contract cycles. Labor costs are reasonable now, and will continue to come down over time as more of the new lower-wage-tier workers come in to replace aging veteran workers.

    GM's UAW contract is essentially the same as Ford's, and if you actually read the article you know that Ford is making BIG money in North America. GM DOES have problems with clueless, arrogant unions -- in Europe. But the UAW has played ball for the most part, and isn't the issue here.

    Also: The UAW does not own GM. (You're thinking of Chrysler. Different story.) The U.S. Treasury still holds 500 million shares, a legacy of the bailout. GM has satisfied all conditions of the bailout -- has paid everything back that it can, in other words -- and has nothing left to do except wait for the Feds to sell.

    @Hitchhiker042, I didn't mention the Chevy Volt in the article because the Volt is COMPLETELY INSIGNIFICANT in the context of GM's profits. GM will sell something like 9 million vehicles this year. At most, 30,000 or so will be Volts. Any loss GM might be taking on the project DOESN'T MATTER in the grand scheme of things. Toyota sold the first Prius models at a loss as a way to get the technology established and scaled up. GM is doing the same with the Volt, and GM can afford to do so. It's not a problem, it's not a taxpayer burden, and it's not a scandal.

    @Snodule, you win the thread. Add in the high cost of incentives needed to move GM's dated current models, and you've pretty much got the essence of the story, though I'd quibble over the idea that the European unions are more clueful than the UAW.

    @eddietheinvestor, you are right that investments need to be based on facts and not dogma, but the rest of your post is dogma-driven and almost entirely irrelevant. GM is not owned by unions, and the fairness of the decisions made by the government during the 2009 bailout isn't relevant to GM's current business situation.

    Investing is a reality-based discipline, folks. Talk-radio invective is not a substitute for actual research -- at least, not if your goal is to make money in the market.

    John Rosevear

  • Report this Comment On November 29, 2012, at 11:04 AM, TMFRoyal wrote:

    Hey, John,

    Thanks for the overview on where GM is now. I really enjoyed it.

    Jim

  • Report this Comment On November 29, 2012, at 1:06 PM, 48ozhalfgallons wrote:

    If only GM could produce a reliable, easy to maintain automobile.

  • Report this Comment On November 29, 2012, at 1:14 PM, mclaugph wrote:

    "Investing is a reality-based discipline, folks. Talk-radio invective is not a substitute for actual research -- at least, not if your goal is to make money in the market."

    LOL awesome comment.

  • Report this Comment On November 29, 2012, at 2:40 PM, TMFMarlowe wrote:

    @48ozhalfgallons: At 80,000 miles, my Cadillac CTS-V has been quite reliable and very easy to maintain -- much, much more so (on both counts) than the BMW it replaced. Very solid car. The newest Cadillacs are even nicer: I spent some time looking over a new ATS today and was very impressed by the Audi-like door gaps and overall fit and finish. Give 'em a chance.

    John Rosevear

  • Report this Comment On November 29, 2012, at 3:16 PM, LACEYLEE wrote:

    I feel that GM should have been allowed to fail, as many car companies of the past have shuttered their doors. Just as it is in nature, it is survival of the fittest in business. The computer put the typewriter out of business, digital cameras doomed film cameras, CD's vs LP's, etc. Businesses need to stay competitive in order to play in the marketplace. Had GM failed, there are other car makers out there that would quickly fill the gap. The argument that had GM gone bankrupt, a million+ workers would have lost their jobs. What a pity party! If workers want to keep a job, they need to educate themselves and watch trends in their field. Ford has more foreign parts in their cars than Toyota has in cars produced in the U.S. The U.A.W. helped GM to the path they are on. Just like the Teamsters put many trucking companies out of business with their sky high wage demands. Do you get the connection? It is UNIONS! It was not all the C.E.O.'s that put GM where they are today. At one time unions had their role in American history, bringing better working conditions and livable wages to the workplace. Today, they have outlived their usefulness. Since the early 70's, GM has put out a sub-standard product. It was just recently that their quality has improved. They have won the battle but lost the war. Loyalty to a car brand has changed. Consumer Reports rates car brands and models. Today's car buyer is better educated and informed. But even well- off car buyers are not always wise consumers. BMW, Mercedes and Jaguar are 3 of the least reliable cars on planet earth. When and only when GM produces a car that is comfortable to drive, gets 36 MPG or better and is reliable for 100,000 miles or more without any major or minor repairs will they get me to think about a GM product. Yes, that car exists and I drive one. It is a Toyota Camry Hybrid, circa 2009. The wife drives a 2005 Honda CRV with 120,00 miles with no major repairs. Not bragging, just stating facts. You do the research and ask other consumers about their car experiences. Consumer Reports is an excellent research tool.

  • Report this Comment On November 29, 2012, at 6:17 PM, LoadDrive wrote:

    Government-Motors are Not making money because the Cars are Junk! / The next time you take a drive, keep a close eye on the cars you see broke down on the side of the road; or (And Who build them ;) / Then ask yourself "Why would you want to put money into that company (stocks) : Note: after seeing all the GM cars on the side of the road, I would buy a Horse first! Wishing all a Good Day !

  • Report this Comment On November 29, 2012, at 8:47 PM, carfun wrote:

    I have always owned Chevy products and we usually traded cars every 2-3 years and pickups every 5-7. The problem now is that they have raised window prices, reduced discounts but the value of their used vehicles is awful. We have a 2010 Impala that had a sticker of $29,500 that we bought for about $23,000 just over two years ago. The car value for trade now is about $12,000. An equivalent 2013 windows at around $31,500 and sells for $26,500 after discounts. Even given the 3 year model difference this is nearly $5000 per year in depreciation and based on 2 year ownership is $7000 per year. Add on taxes and fees and this is totally unreasonable. I have a 2012 Camaro that is 10 months old that has lost 25% of it's value. Until GM can find a way to sell vehicles that retain value they will have a difficult time with return sales without substantial discounts. The deep discounts and rental sales of past years have created this issue and will take time to unwind. I think the rental issue is what is presently dropping the value of used Camaros There were very few Camaro rentals in the first couple of years but now most of the used inventory is rental returns. Dealers can buy these rental returns at GM auctions at low prices and don't want to put more into local trades.

  • Report this Comment On November 29, 2012, at 9:46 PM, tbenn210 wrote:

    carfun - Why would you want to buy a piece of s... 2010 Impala? I hope you like the car. It is considered one of the worst recent Chevys out there. Uncomfortable rental car quality. Yech. However, GM is now turning out some preety good cars, including the new Impala (hopefully not as bland as the new Malibu).

  • Report this Comment On November 30, 2012, at 7:07 AM, carfun wrote:

    Pictures of the new Impala look like a Kia knock off.

  • Report this Comment On November 30, 2012, at 11:26 AM, BentMike wrote:

    My car: '05 Scion xB 160k miles. Seven years out and long ago paid for - it still has blue book over 50% cost ($11.9k w/9000 miles). No repairs. Just perishables: brakes, oil changes, tires. With the rear seats out and roof racks it is a serviceable sub compact truck. I am not nice to it because I don't intend to sell it. Some day it will go to a scrap yard. Probably have to buy another one then.

    In defense of US cars including GM, for some time now they have less electrical issues than the German cars. I don't see that the car themselves are not worth buying. They get an undeserved rap for low reliability. They are competitive.

    The issue here is low margins on GM. It starts with the parts they build it from. Their design and supplier management seem to be less than competitive, but they clearly are getting better.

    Once consumer de-leveraging is settled sales will recover and some profits, but I guess they will keep sliding relatively, if they don't improve margins. That seems to be a hard nut for GM to crack.

    Laying it on the union workers is silly. They are just hardworking folk. I am not sure what the beef is with unions owning shares in the companies they work for...sounds like a good idea really. More skin in the game.

  • Report this Comment On November 30, 2012, at 12:27 PM, 48ozhalfgallons wrote:

    Second attempt to post after 15 minutes:

    Rosevear I don't envy your Caddy. I've owned two GM vehicles over my lifetime. One was a 6mpg GMC pickup, another was a Chevy which never ran well after 40K because of oiling plugs. They were wonderful vehicles as they convinced me to avoid purchasing GM stock. I will admit that BMW's are worse still. Boss had one which every Friday required me to drop her off at the BMW garage in my now 300k Cherokee which still goes over all the rocks near Moab, Utah and the shelves high up on top of the Colorado Rockies bringing the family home every outing. I'm amazed at your comment regarding maintenance. I always believed that Caddy owners had others do their maintenance, hence Caddy's are easy to maintain. If one must trade cars every 2 years, I suppose I could imbibe a GM auto, but the flavor just doesn't suit me. All my Fords (new and used) were superb vehicles, easy (for me) to maintain. I drove for two cab companies. One had a fleet of GM vehicles, the other Ford. The Crown Victoria's were routinely sold off running well at a million miles. The GM cab company with its always newer fleet finally relented to Fords. There are Ford people and GM people just as there are dog people and cat people. That $1.70 a share GM stock was fabulous back in Nov '08, eh? Did you know it's still downticking since the reboot back in Nov '10? I just can't figure how a company which allegedly makes the world's greatest cars requires taxpayer bail outs and continues to downtick nearly 30% after its IPO. Just saying...

  • Report this Comment On November 30, 2012, at 12:54 PM, MARKETSURFER wrote:

    Dear Writer,

    You have made an elementary error in financial analysis by saying that GM sold more cars than anyone else yet had less profit and implying that this makes it a weaker company. Your analysis should be based on total sales volume in dollars.

    If you check that out you will see that GM had a sales volume of about $160 billion and VW had a sales volume of about $250 billion. Of course VW should have more profit than GM because profit margin is applied to total sales volume in dollars, not to how many individual vehicles were sold. Additionally, if you check the cash flow for last year you will find that GM had a greater cash flow than VW by about $2 billion. On top of that,

    VW has a debt to equity ratio of 117% and owes $120 billion dollars. GM has a debt to equity ratio of only 40% and they owe only about

    $14 billion. GM also has between $32 billion

    and $40 billion in cash and liquid assets available on it's balance sheet for ready use. In actuality,

    GM is in far better financial shape than Volkswagen is.

  • Report this Comment On November 30, 2012, at 12:59 PM, Bagginz wrote:

    TMFMarlowe sez:

    "Toyota sold the first Prius models at a loss as a way to get the technology established and scaled up. GM is doing the same with the Volt, and GM can afford to do so. It's not a problem, it's not a taxpayer burden, and it's not a scandal."

    Exactly. The first Priuses in America were much more expensive than Corollas. Not many were sold in the first year, but sales kept going up because it was a good car. So it is also with the Volt. Sales have been increasing, despite the FUD that Fox News et al. have thrown at it, because it's a good car as well.

    We own a Volt. We didn't set out to specifically buy a green car last year, but we were surprised at how enjoyable the car was during our test drive, and happy to see how much GM sweated the details in the drive train and handling. I couldn't remember the last time GM got something so right the first time. They made a green car that wasn't boring!

    Yeah, the tax credit helped tip our decision to buy, just as a tax credit helped tip the decision for early Prius adopters. And sure, it's going to take a while for GM to amortize its R&D costs, but game-changers can do that. Just ask Toyota.

    @LACEYLEE: I agree that Consumer Reports is a valuable tool. Guess what car got the highest customer satisfaction of all the cars they surveyed? Not BMW. Not Porsche. It was the Chevy Volt. Second year in a row.

  • Report this Comment On November 30, 2012, at 1:39 PM, donvesco100 wrote:

    Buy a volt, buy stock in GM. Get down to the food stamp line, blame your problems on anything other than government meddling, and taxpayer laziness.

    Fail. Fail. Fail. Fail.

  • Report this Comment On November 30, 2012, at 1:44 PM, Bagginz wrote:

    48ozhalfgallons sez:

    "I just can't figure how a company which allegedly makes the world's greatest cars requires taxpayer bail outs and continues to downtick nearly 30% after its IPO."

    I don't think anybody says that GM "makes the world's greatest cars." I don't think anybody (except PR flacks) says that any one company makes the world's greatest cars. It's too competitive these days.

    Can we make a more fair comparison between GM and Ford? Over the last 12 months, GM is up 20.4%. F is up 7.3%. GM has a current P/E of 9.6, while F's is 2.6. If you compare F and GM since GM's IPO in Nov 2010, GM is down 25%, while F is down 30%.

    And while Ford did not take a bailout as GM and Chrysler did, they did accept $6 billion in loan guarantees to re-tool their plants for more fuel-efficient cars.

    I like Ford, and own shares, but if Ford cars are sooooo much better than GM's, it's not reflected in the ticker.

  • Report this Comment On November 30, 2012, at 2:53 PM, wrhayes wrote:

    John, I agree with much of your follow up, but...

    Wait a minute - I'll admit that I'm no financial genius, but IF the losses on the Volt truly are $30,000 per unit and IF they move 30,000 units a year then my calculator comes up with $900,000,000 in losses. A year. On a single model. If that is "insignificant" to the bottom line, how many other "insignificant" losses at this level can GM sustain and keep their head above water?

    If nearly a billion dollars a year in losses was considered insignificant INSIDE of GM's management, then as a stockholder (or even as a rank and file factory worker at GM) I think I'd be VERY worried. ;-)

    For a lot of different reasons, I'd like to see the Volt be financially successful. But GM can't bleed at that rate indefinitely, and certainly not (at that level) on multiple product plays.

  • Report this Comment On November 30, 2012, at 3:03 PM, WineHouse wrote:

    It's intriguing to see how much of the commentary is based on knee-jerk emotions as opposed to cold calculated analysis. And yes, much of political-leaning is emotional so the "politically motivated" postings fall into the same emotionally-driven category.

    These purely-emotionally-driven commentators are not Motley Fools; they are Merely Fools.

    Cold calculating analysis -- based on reality, I should add (as opposed to "RealityTV") -- will always win out in the end.

  • Report this Comment On November 30, 2012, at 3:46 PM, thesalesman87 wrote:

    All car sales are not sold cars they are lease cars that are counted as sold when clearly they are not and they do come back to the dealer after 39months, so the dealer has two choices sell the car used or send to the auction.Why would anybody buy a new car when you need a lot of down payment plus the car insurance which is a lot,I thought the American public was smart who buy's something that looses money like a new car or truck better off to buy used save on around half the price of the new one and on car insurance, But I forgot look who got elected again. The SALESMAN

  • Report this Comment On November 30, 2012, at 3:50 PM, Bagginz wrote:

    @wrhayes:

    The $30K figure was arrived at by taking the R&D costs, and amortizing it over the number of cars sold to date, not over the lifetime of the model.

    http://www.forbes.com/sites/boblutz/2012/09/10/the-real-stor...

  • Report this Comment On November 30, 2012, at 4:59 PM, bitz101 wrote:

    Ford has the same union as GM, so I don't think this is the big problem. Management is GM's problem.

    They are still running things like Rick Wagner did, and he is and was a sliver spoon looser. Dan is from Ricks coattails, same thinking, same looser.

  • Report this Comment On November 30, 2012, at 6:11 PM, skypilot2005 wrote:

    Why Isn't GM Making More Money?

    Three words:

    U. A. W.

    Democrat President for four more years.

    Democrats currently control the Senate.

    Not hard to find better investments.

    I. M. O.

    I lived in Wayne County, Michigan for awhile years ago.........

    The U. A. W. work ethic is pathetic.

    I buy U. S. made vehicles but, not G. M.

    Good Luck to all that do.

    Sky

  • Report this Comment On December 01, 2012, at 3:13 PM, erikinthered100 wrote:

    TMF Marlowe/John Rosevear:

    "Investing is a reality-based discipline, folks."

    Too bad you don't follow this sage advice yourself John. Claiming "the UAW isn't GM's problem" is not a reality-based statement. And "talk radio" is only one source that has identified the auto unions as a serious problem for American auto company competitiveness.

    I think you fail to see the forest for the trees. There certainly may be other problems at specific American auto companies but the unions are nevertheless, a major problem. Not only that, they will continue to be a major problem since politicians will not let the "creative destruction" of the free market deal appropriately with the auto unions.

    This makes the entire sector toxic for investors.

    If your goal is to make money in the market, to borrow your words, you will not do so by being blind to negative realities.

    And to some other commenters - citing cold hard facts, even if political in nature, does not make a post "emotional or angry."

    Dave

  • Report this Comment On December 02, 2012, at 5:29 PM, RockyTopBob wrote:

    John Rosevear,

    Early on in your article you mention VW. I live in TN where VW has opened a new state-of-the-art assembly plant. They are cranking out a huge number of vehicles.

    Why don't you compare the price of labor between VW and GM? VW is happily non-union.

    Regards,

    Bob

  • Report this Comment On December 03, 2012, at 12:19 PM, U2I2R wrote:

    This is an investment group. Let's look at it as an investment question and stay away from politics and philosophy. Automotive offerings have always been risky investments, They can make a lot of money fast if you guess the right direction. Right now I would certainly not invest in VW or Ford because their margin is too high. A company with high margins is at risk. Plus people have already invested and the price is usually too high. I can't tell whether the GM would be better, because I have no way of knowing the decisions being made and if I did I would not know whether they will be effective or not. Not even the people making the decisions will know until later. Personally I will not invest in the auto industry because it is based on desire driving demand rather than need. Vehicles last far longer than the normal replacement time. They are replace because of desire for a new vehicle. That desire is very fickle. Many very fine vehicles are passed by and auto companies rise and fall based only on the future desire which they cannot very well guess at the years before the decisions are made.

  • Report this Comment On December 05, 2012, at 6:45 PM, larrrup wrote:

    Gm is basiclly controlled by union thugs. This was set up by Obama when he ripped off the bond holders. As long as a almost high school drop out is paid $50 per hour to assemble autos they will never be competetive. They could install more robots and eliminate people but the unions fight this tooth and nail.

    when a former CEO stated he didn't realize he was running the union health plan he was quickly shown the door. I am in favor of the US auto industry continuing to build autos. I drive and prefer US made cars for economic reasons and the fact that during WWII the auto industry geared up and built the hardware to fight the war.

    I want to see some real reform in the auto industry in Detroit and I despise unions.

  • Report this Comment On December 05, 2012, at 11:43 PM, jeffhre wrote:

    "I think", "I heard", and a lot of opinions. This board has always had higher standards than this, what happened today? Comments are really short on facts. I'd like to know how refreshing the product line is going to affect GM's costs, ability to raise future funds and ability to grow revenue forward. Not someone's opinion that the $60 in union costs per vehicle that GM pays is a sign of the apocalypse.

    Anyone have some relevant facts...

  • Report this Comment On December 06, 2012, at 12:08 AM, TheDumbMoney2 wrote:

    I dub GM comment threads the new Sirius. "You will never find, a more wretched hive, of scum, and villainy."

  • Report this Comment On December 06, 2012, at 12:33 AM, kthor wrote:

    my friend can't take it anymore working for one of the

    dealership Customer Service that he ended up quitting ... it's really a sad story when people call in and basically cry on the phone on a complete stranger just because the GM brand are lemons

  • Report this Comment On December 08, 2012, at 11:09 PM, SkepikI wrote:

    I am long F, the taxpayers friend. So it would be no surprise I shun GM and Cryster (yes, my spelling on purpose). Some year soon, I will be in the market for a car after my 385,000 mi Subaru made in Indiana can no longer be made to work....I figure in about 120,000 mi. I prize and value GOOD products. For years I was a Chrysler guy, starting with the 67 Barracuda I wish I still had. The occasional GM disappointment, the odd Ford also ran, and a once in a while 240Z. Cars got a lot better and lasted a lot longer, hmmm except maybe GM. Always trailing, always second best, always biggest and ego centric. Disaster for taxpayers, 20 BILLION out of the money, the bailout should outrage you all. That it does not, simply reinforces my resolve not to buy GM products unless they are at least 25% better than the competition...not even close yet. Same with Cryster, I mean Fiat.... Take a good look at F models especially the 2013 Fusion, and then look at F balance sheet.... a lot better and no taxpayer stock on the tightrope... easy analysis.

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