Upwards of a year ago, when I first began penning a series of articles describing the dire financial straits facing Virginia mobile computer maker Xybernaut (OTC BB: XYBRQ), I got an email from one confused reader who wondered: "How can Xybernaut not be a wonderful investment?" Quarter after quarter, year after year, the company had released a stream of press releases describing its increasing sales. And if a company is constantly selling more stuff, doesn't that mean it's in good shape?
The reply I gave then is the same answer I give to investors enthusiastic over the record-breaking sales that automaker General Motors
It happened to Xybernaut, which ended up declaring bankruptcy.
And that brings us to the topic of today's column. A report just out from Harbour Consulting, a management consulting firm, shows that over the first six months of 2005, General Motors posted the worst profit numbers of any of the automaking "Big Six." On average, GM lost $1,227 for every vehicle it has sold this year -- nearly 10 times the $139 per-car loss incurred by U.S. rival Ford
Meanwhile, all three of the largest Japanese automakers earned multiple times more profits than even the only profitable "American" car company. Nissan
So in their desperate scramble to retain market share, GM and its domestic brethren have succeeded in boosting sales -- but at the cost of abandoning the profit-making motive that drives successful capitalistic ventures. The Japanese, meanwhile, are holding the line on prices, and they're earning profits as a result. Patriotic jingoism aside, it seems clear to this Fool which companies make for the smarter bets.
Revisit GM's desperate measures in:
And monitor the GM Death Watch, now in its 26th installment, at thetruthaboutcars.com.
Fool contributor Rich Smith owns no shares in any of the companies mentioned in this article.