Tag Archive | "General Motors Co."

Marketer Responds to GM’s Facebook Decision

DETROIT – Facebook’s influence on car buyers was called into question after the Wall Street Journal reported on General Motors’ decision to stop advertising on the social-networking site. But one digital marketing firm is coming to the defense of Facebook.

Rick Gibbs, president and chief technology officer for Dealer.com, would not comment on GM’s decision, but said he believes Facebook has one of the strongest networks for reaching automotive customers via a comprehensive advertising, content and engagement strategy. That approach, he added, has had a positive impact on his clients’ brands and bottom lines.

“Most advertisers are focused on the wrong key performance indicators when measuring Facebook advertising effectiveness,” he said. “The opportunity of social networking advertising lies beneath the surface at a micro-level of brand engagement, audience reach and customer interactions. When done correctly, the results are increased engagement and customer loyalty before, during and after the purchase.”

Quoting a GM official, the Wall Street Journal reported that the carmaker plans to stop advertising after deciding that ads on the site have little impact on consumers’ car purchases. The Detroit automaker spends about $40 million on its Facebook presence, the report said, $10 million of which is directed to Facebook ads.

Whether Facebook is effective at moving cars has been a hot topic of late. Proponents of Facebook say the social-networking site isn’t geared toward selling cars, and should be viewed as an opportunity to build brand awareness. Dealers have also wrestled with the question of whether to outsource content creation and management of their Facebook pages.

Last week, F&I and Showroom reported on a recent shopper behavior study that showed many dealerships are successfully utilizing Facebook to generate new visitors to their Websites. But the study also showed that traditional methods are still required to turn visits into leads.

“The data shows that Facebook is a good approach to getting new visitors to dealership sites,” Dylan Snyder, senior manager of business intelligence at Dataium. “The lead-to-visitor ratio, which is less than half of our network average, is disappointingly low, however. This highlights that dealerships cannot rely on Facebook alone; traditional methods are still needed to turn these new visitors into leads.”

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GM Revival Slows Down

General Motors Co. posted a lackluster first quarter, showing some improved profitability but weakness overseas and continued losses to rival Ford Motor Co. in North America, its strongest market.

GM earned $1 billion in the first three months, down 69 percent from the $3.2 billion profit a year ago that benefited from one-time gains. Revenue climbed 4.3 percent to $37.76 billion, according to The Wall Street Journal.

The profitability was certainly an improvement from the losses that plagued GM before its 2009 bankruptcy. But in many ways, GM is still feeling the effects of the financial crisis. Amid that turmoil, GM halted development of its next generation of big trucks and SUVs and put off efforts to streamline its global manufacturing operations.

“We’re still addressing the consequences of decisions made in and around that time,” finance chief Dan Ammann said in an interview.

Shares in GM, which is still more than a quarter owned by the U.S. Treasury, fell 2.4 percent.

GM on average made $1,962 on every vehicle it produced in North America during the first quarter. Ford made $3,150 a vehicle, 60 percent more than GM in the quarter.

Meantime, Ford is far ahead of GM in its global effort to reduce auto “platforms” used across the globe. Major auto makers are moving to build vehicles from the same basic parts and assembled in plants that use the same tooling—wringing savings from engineering budgets.

Big global auto platforms, those used to build a million or more vehicles a year, comprise about 54 percent of GM’s current volume, according to IHS Global Insight. At Ford, global platforms account for close to 70 percent of the company’s volume.

Against that backdrop, each of GM’s international units posted weaker profit than a year ago, with its European operation suffering a $256 million loss, compared with a $5 million profit a year ago, on a 15 percent decline in vehicles sold. GM also took a $590 million charge to goodwill for Europe.

GM’s core North American unit, though solidly profitable and improved from a year ago, fell short of forecasts and trailed Ford, which is benefiting from its new line of high-margin pickup trucks and more efficient global manufacturing operations.

Mr. Ammann said GM’s North American results won’t likely improve in the second and third quarters this year as the company transitions to a new line of light trucks, thus building fewer of the high-margin vehicles throughout most of the year.

GM’s North American operating profit rose 31 percent to $1.7 billion, with margins improving to 7 percent, from 5.6 percent a year ago. That is better than the 5 percent figure that U.S. auto makers once considered acceptable, but far from GM’s goal of 10 percent globally.

Ford’s operating profit rose 16 percent to $2.1 billion, giving it a profit margin of 11.5 percent for the region. However, Ford said it is unlikely to maintain that margin level for the rest of 2012.

Ford’s new line of F-series pickup trucks are driving up profits for the auto maker. In comparison, GM’s Chevrolet Silverado and GMC Sierra pickups are dated and redesigned models aren’t out until 2013.

GM aims to improve its margin this year with the launch of some important new vehicles, including luxury Cadillacs and its next-generation Chevrolet Malibu midsize sedan.

It has vowed to resist the urge to pile on discounts or unload vehicles into rental fleets to bolster volume at the expense of margins.

While U.S. sales rose 2.7 percent in the first quarter, its market share dropped nearly 2 percentage points to 17.2 percent as rivals notched bigger gains. Ford’s sales rose 8.5 percent in the quarter and Chrysler’s were up 35.9 percent.

Outside of North America, GM’s results fell from a year ago, hurt by economic turmoil in Europe and increasing competition in South America. Its unit including China reported operating profit of $529 million, down 9.7 percent.

Mr. Ammann said it was “too soon to tell” when losses in Europe will bottom out. The company is preparing a restructuring plan for the region and has its sights set on closing one or two factories amid overcapacity throughout the region, people familiar with the matter have said.

Investors, labor unions and regional governments are eagerly awaiting GM’s plan, which Mr. Ammann said could be rolled out gradually in the months ahead.

“Everybody is waiting for a big bang,” he said. “I am not sure there is going to be a big bang.”

Excluding charges of 33 cents a share for goodwill impairment on its international operations, GM’s earnings fell to 93 cents a share. Analysts had forecast earnings of 85 cents a share. A year ago, the company’s earnings were lifted by $1.5 billion in gains on sale of its holdings in former units Delphi Automotive LLP and Ally Financial. “We making solid progress, but it’s a long-term path that we are on to get to the [margin] levels we want to be at,” Mr. Ammann said.

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A Weight Hobbling G.M.

DETROIT — General Motors posted its ninth consecutive profitable quarter on Thursday. But almost three years after its taxpayer bailout and bankruptcy, the nation’s biggest automaker still can’t shed the stigma of being “Government Motors.”

Because the Treasury Department still owns a 26 percent stake in the company, G.M. remains saddled with pay restrictions that limit its ability to recruit new talent, a ban on corporate jets, and lingering image problems in the eyes of some consumers, reported The New York Times.

Company executives usually deflect questions about the effect of government ownership on their business, or their frustration with it. But in a rare interview on the topic, G.M.’s chief executive, Daniel F. Akerson, said he longs for the day that G.M. can finally say goodbye to its biggest shareholder.

“I try not to let it bother me,” Mr. Akerson said. “But the fact is it does bother me.”

The farewell celebration won’t be happening anytime soon. Based on G.M.’s current stock price of $22.37, taxpayers would lose an estimated $15 billion if the government’s shares were sold today. Unless the stock rose quite significantly, the chances are slim that the Obama administration would sell its 500 million shares before the November election and invite criticism from Republicans about the wisdom of the auto industry bailout.

Mr. Akerson said he has regular conversations with Treasury officials, but has never gotten guidance on when they intend to divest. “I don’t know what the government’s plan is,” he said. “I think it would be helpful if they would publicly state it.”

After pumping in nearly $50 billion to save G.M., American taxpayers owned about 60 percent of the company when it emerged from Chapter 11 in the summer of 2009. The government sold the bulk of its holdings at $33 a share in the company’s public stock offering a year later.

But the administration is not eager to sell the rest at a loss. “As with all of our investments, we try to balance the goals of maximizing taxpayer recoveries and exiting as soon as practicable,” said Timothy G. Massad, the assistant Treasury secretary overseeing the Troubled Asset Relief Program. “We don’t have a specific timetable, but we’ll continue to watch the market closely.”

Like partners in a three-legged foot race, both the company and the government are hobbled by their connection. Unless G.M. improves its performance and gets the stock price up, the government can’t sell without losing billions. At the same time, uncertainty about the government’s stake worries some investors and hurts consumer perceptions of G.M. cars.

In a survey last quarter of 30,000 Americans shopping for new vehicles, 32 percent of those who rejected a G.M. model said they would not consider buying from the carmaker because of the bailout.

While that is down from 59 percent in 2009, “G.M. still has quite a hangover,” said Art Spinella, president of the firm that conducted the survey, CNW Marketing Research of Bandon, Ore. “That’s a significant number of people who will buy something else because of the bailout.”

Chrysler, the other Detroit automaker to receive government aid, fared better in the most recent survey. The company paid off its federal loans last year, and just 22 percent of shoppers said they had avoided a Chrysler product because of the bailout.

Mr. Akerson said the negative feelings about G.M. were an unfortunate byproduct of the past struggles that led the company to seek government assistance.

“All we can do is put numbers on the board and hope people start to believe in our story,” he said.

Government ownership is also affecting G.M. internally. Mr. Akerson said the company has lost a half-dozen candidates for management jobs because of salary restrictions on companies getting TARP financing. G.M.’s search for a new head of human resources lasted months because several promising contenders balked at the uncertain time frame for the government’s exit.

The government’s ban on corporate aircraft is mostly a matter of inconvenience for Mr. Akerson and his senior staff members. He was stuck in a Paris airport for five hours last year after missing a connecting flight to China, and often spends an entire day traveling to remote factories for visits that last two or three hours.

“It is part of the deal,” Mr. Akerson said. “There’s no use complaining about it.”

He was more troubled by how G.M. had become, in his words, “a political football.” He still seethes about being called to testify before Congress in January about the safety of the Chevrolet Volt, which experienced battery fires after government crash tests. “I think the whole thing was politically driven,” he said.

Mr. Akerson also said he believed that politics were affecting the government’s decision to hang on to its G.M. stock. President Obama has been pointing to the turnaround at G.M. as a bright spot in the nation’s economy. But if Washington were to sell G.M. shares at a loss, the comeback story would be eclipsed by the cost to taxpayers for its rescue, he said.

“That’s why I don’t think they are going to sell in an election year,” Mr. Akerson said. “Right now, this is a positive for the current administration. If they sell it this year and don’t get all the money back, it’s not a positive.”

The presumed Republican presidential nominee, former Massachusetts Gov. Mitt Romney, said in a Feb. 14 opinion article in The Detroit News that the Obama administration needed to “act now to divest itself of its ownership position in G.M.” But in the same article, he said the shares should be “sold in a responsible fashion,” without elaborating.

G.M. is not the only automaker with a lagging stock price. Shares in Ford, which weathered the recession without a bailout, have dropped almost as much as G.M.’s in the last year because of increased competition in the domestic auto market and economic troubles in Europe.

Still, if G.M. improved its sales and earnings, its share price might rise and hasten the government’s exit.

The company said Thursday that it earned $1 billion in the first quarter, a 69 percent decline from the year-ago period, when it benefited from one-time gains from asset sales.

Its earnings in North America improved 30 percent during the quarter, but continued struggles in Europe dragged down overall results. While the company is introducing 20 new models worldwide this year, industry analysts say G.M. has yet to match Ford’s pace in globalizing vehicle platforms to save money on product development, parts and manufacturing costs.

“It’s important for people to realize that they are not done transforming themselves,” said David Whiston, an analyst with the Morningstar investment firm. “It is going to take more time to right the ship.”

The skepticism is not lost on Mr. Akerson, a former executive with the Carlyle Group private equity firm who took over as G.M.’s chief in mid-2010.

“We have a good company,” he said. “It’s our job to make it great again. We know we have a lot of work to do.”

Losing the distinction of Government Motors could help it get there faster. “But we’re in a situation we can’t control,” Mr. Akerson said. “So we have to wait.”

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Peugeot, GM Cement Alliance

PARIS – Auto maker PSA Peugeot Citroën SA will issue as many as 120.8 million new shares at a 42 percent discount from Monday’s average share price, under terms of the company’s capital increase of €1 billion ($1.32 billion).

The share sale includes an about €240 million investment by General Motors Co. for a 7 percent stake to cement their joint development and procurement alliance. Peugeot also said its financing arm, Banque PSA Finance, applied for €700 million in low-interest loans from the European Central Bank’s refinancing operation at the end of February, reported The Wall Street Journal.

“The capital increase is entirely designed to finance Peugeot’s strategic project with GM and will allow it to pursue its global expansion strategy and its plan to move its model range upmarket,” Chief Financial Officer Jean-Baptiste de Chatillon said on Tuesday.

Peugeot’s offer—giving shareholders the right to purchase 16 new shares for every 31 existing shares—will be open between March 8 and March 21, the company said. The family-controlled company said it won’t pay a 2011 dividend to bolster its finances.

Peugeot’s shares were down 3.5 percent at €13.71 in Paris on Tuesday, with some analysts warning of the significant dilution shareholders face from the capital increase and lack of a dividend. Peugeot and GM have also acknowledged slim initial financial benefits from the alliance even if annual cost savings could reach $2 billion a year in five years.

“Bottom line: such a dilution for the prospect of a long-dated payoff fuels our recommendation to sell the rights,” analysts at Barclays Capital said.

Mr. De Chatillon said the share price decline wasn’t surprising. “It’s true the share price has gone down a bit, but that’s normal in capital increases because of the dilution effect,” he said. “The news of the dividend [suspension] wasn’t expected by the market,” he added.

Peugeot and GM said they are seeking to address the problem of surplus capacity in Europe.

“We will deal with the overcapacity issue by 2014 notably in France and Spain where the overcapacity is most acute,” said Denis Martin, the head of Peugeot’s industrial operations. “We’ve already had a certain number of meetings with labor representatives in Europe and have put the overcapacity issue on the table,” Mr. Martin said.

GM Vice Chairman Stephen Girsky said on Tuesday that the U.S. auto maker also is in the middle of talks with unions about a fresh round of cost cuts.

“We’re trying to change the calculus here,” Mr. Girsky said. “This company has lost a lot of money [in Europe], and we know that running the same play the way we’ve been running it won’t work.”

The two auto makers expect each will generate significant cost savings at their struggling European car operations through their five-year alliance. The alliance will include sharing of vehicle architectures, components and the creation of a global procurement joint venture. Combined purchases will be about $125 billion a year, the companies said. They plan to build some vehicles together as soon as 2016.

Paris-based Peugeot is to become GM’s main partner in Europe and the two may consider broadening the partnership to other regions. They will continue to operate as separate companies and compete with each other in many markets. Longer term, the arrangement could lay the groundwork for a deeper partnership between the two.

But the deal isn’t an antidote to the companies’ financial troubles in Europe, which has GM undertaking a major restructuring in addition to Peugeot’s capital increase. Both companies have ruled out any deep changes to their operations in the short term while analysts have cautioned that the alliance doesn’t address the problem of chronic overcapacity, estimated at 20 percent or more, in Europe’s car industry.

Auto sales in Western Europe are down 14 percent since 2007. But in that time, among major auto makers, only GM and Fiat have closed a factory, one apiece. Matching production to sales would require eliminating 1.5 million vehicles worth of annual production capacity—the equivalent of five assembly plants, estimates Morgan Stanley.

The investment in Peugeot and cost-saving alliance is GM’s most significant manufacturing alliance since its 2009 bankruptcy. The auto maker has tried European partnerships in the past with mixed results. GM paid $2 billion to Fiat in 2005 to dissolve a failed alliance.

Following the rights issue, General Motors will hold 7 percent in Peugeot Citroën and the Peugeot family will remain the main shareholder, with 25.3 percent of capital and 37.9 percent of the voting rights.

Société Générale SA, BNP Paribas SA and Morgan Stanley are arranging the rights issue.

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GM Squeezes After Bailout

General Motors Co. reported Thursday the largest annual profit in its 103-year history—but the auto maker is acting like a company on the rocks.

It earned $7.59 billion in 2011, a 62 percent increase from a year ago. The bulk of that profit came from GM’s large North American unit, where sales rose and customers are paying more for its cars and trucks, reported The Wall Street Journal.

Yet even as investors celebrated the gain by pushing GM’s stock up, company executives talked of the urgent need to slash expenses everywhere and to restructure its long-struggling business in Europe. GM shares gained 9 percent in 4 p.m. New York Stock Exchange trading on Thursday, adding $2.24, to $27.17, a six-month high.

The company, as it rolled out the news, disclosed a series of cost-cutting actions and offered a dire view of Europe’s economy this year. Among its moves, it will reduce 2011 bonuses for its 26,000 U.S. salaried workers and freeze their pay for 2012.

“We obviously have a long way to go to get to the objectives we want to get to,” Dan Ammann, GM’s finance chief, said at the company’s headquarters on Thursday.

GM has undergone a remarkable turnaround from 2009, when it needed a $50 billion lifeline from U.S. taxpayers to survive. Today, its car business is growing fast in China and North America, has little debt and $38.8 billion in liquidity. It also will pay scant U.S. taxes for years to come as a condition of the government rescue.

However, an 8 percent fourth quarter earnings drop underscored challenges it faces this year: Growing losses in Europe and thin profit margins in its overall business despite shedding debt and taxes in bankruptcy court.

On Thursday, Chief Executive Dan Akerson said the company expects sales volumes and revenue to grow in 2012. But when pressed, Mr. Akerson declined to predict whether that means GM will make more money this year.

“It’s tough to make predictions,” he said. “We know what our challenges are and we are addressing them.”

The auto maker lost $747 million in Europe last year. GM initially thought it would be profitable in the region last year, but rescinded its profit forecast last fall amid a regional sales slump triggered by the European debt crisis. Last year’s loss in Europe is narrower than in 2010, when GM lost nearly $2 billion in the region.

Mr. Akerson said the troubles in Europe are on the same scale of the 2008 meltdown in the U.S., which resulted in an $80 billion U.S. auto industry bailout and bankruptcies for GM and Chrysler Group LLC.

Executives are working with labor unions to hammer out a restructuring plan for Europe that will cut capacity and reduce costs in the region, officials said on Thursday. GM in recent months has sent several top executives to Europe and is overhauling the unit’s management.

The company is considering closing factories in Bochum, Germany, and Ellesmere Port, England, according to people familiar with the discussions. GM said on Thursday it would stick to labor agreements that prohibit further plant closings through 2014, signaling any closing won’t happen immediately.

Mr. Ammann, the finance chief, said GM has enough liquidity to manage further losses in its Opel/Vauxhall operations and doesn’t need to seek aid from European governments.

GM is moving to stop cracks from becoming fissures. This week, it disclosed plans to end this year payments to a traditional defined-benefit pension plan for 19,000 salaried workers who still receive them. The move is intended to help reduce its future pension risk. Workers will keep their existing pensions, but future retirement contributions will be made into a 401(k) plan.

Its pension shortfall rose to $24.5 billion at the end of 2011, from $21.4 billion a year earlier mostly because the company has reduced its projection of the future rate of return.

The company also failed to make significant progress on its goal of increasing profit margins. Fourth-quarter profit margin was 2.9 percent of sales, almost unchanged from the 2.8 percent of sales a year earlier. GM executives are working to get margins closer to 10 percent over the next few years. Its margin for the year was 5.5 percent, compared with 5.2 percent in 2010.

Analysts said the company’s lack of comment on its 2012 profit outlook wasn’t enough to change their opinion of its shares.

“A lack of guidance leaves GM shares shrouded in the thick fog of macro uncertainty,” Morgan Stanley analyst Adam Jonas said in a research note. Still, he said, “We believe investors have little room to feel any different about their 2012 estimate in either direction.”

A strengthening stock price could get the U.S. closer to selling its 26.5 percent stake in the company. GM stock would need to exceed $50 a share for the U.S. government to break even on the rescue. But the U.S. Treasury would consider selling its stake once shares top $30, near to the $33 price in GM’s 2010 initial public offering, people familiar with the situation said.

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GM Posts its Highest Profit Ever: $7.6 Billion

DETROIT – Just two years after it was rescued and reconstituted through bankruptcy and a government bailout, General Motors Co. cruised through 2011 to post the biggest profit in its history.

The 103-year-old company, leaner and smarter under new management, cut costs by taking advantage of its size around the globe. And its new products boosted sales so much that it has reclaimed the title of world’s biggest automaker from Toyota, reported Yahoo Finance.

GM may have a hard time breaking this record in 2012 because it is losing money in Europe and South America, and U.S. sales growth slowed in the last three months of 2011.

But the company’s performance in North America and Asia still helped it earn $7.6 billion for the year, beating the record of $6.7 billion set during the truck boom in 1997.

The profit won’t stop the debate about spending $49.5 billion in taxpayer dollars to save GM. But it did drive up the company’s stock price, which could help the government get more of its money back.

The bailout of GM and Chrysler Group LLC, begun by George W. Bush and finished by Barack Obama, remains a major issue in this year’s presidential campaign. It’s so politically charged that even a Super Bowl ad celebrating Chrysler’s rebirth caused arguments.

GM, which released its earnings Thursday, performed best in its home territory, posting a $7.2 billion pretax profit in North America. The numbers were so good that 47,500 blue-collar workers will get $7,000 profit-sharing checks, the maximum allowable under their new union contract. International Operations, which includes Asia, made $1.9 billion before taxes, but that was down from 2010.

GM’s cost cuts, and its outlook for this year helped to push up the stock price by almost 9 percent to $27.08. The company said it trimmed costs by $500 million in the fourth quarter alone mainly by consolidating advertising agencies and engineering operations. A prediction that costs wouldn’t rise this year wowed investors, especially since other automakers have forecast rising costs, said Itay Michaeli, an analyst for Citi Investment Research.

“That was a very pleasant surprise,” he said.

GM also was optimistic about sales and revenue. It sees its global market share holding steady at 11.9 percent, and if global auto sales rise as expected this year, GM’s slice of that would also increase.

That’s especially promising, since GM managed to make money last year with industry-wide sales in the U.S. at a historically low 12.8 million. Sales this year could rise to 14 million.

The company expects to charge more for its cars and trucks this year, but warned that the prices could be pressured as the market shifts toward smaller, less-expensive vehicles.

CEO Dan Akerson hinted at a better year for GM in 2012, saying that the company will build on the 2011 results as it brings more new products into the market.

“The outlook here is quite favorable for earnings growth,” said Citi’s Michaeli. “They’re keeping their costs really under control.”

That’s good news for the U.S. government, which still owns 26.5 percent of the company and needs more strong earnings to push up the stock price.

The government owns 500 million shares of GM, which it got in exchange for the $49.5 billion bailout. Through earlier stock sales and loan repayments, the government has recouped about $22.3 billion of that money. The remaining shares would have to double in price and sell for around $53 for the government to get back the rest.

Despite the big annual profit and optimistic outlook, GM still lost $747 million before taxes in Europe last year, and its losses are expected to continue until a restructuring plan takes hold.

Akerson said GM will have to cut its European factory capacity to match lower sales. South America lost money, too: $122 million for the year. GM’s fourth-quarter profit fell 8 percent, and its U.S. sales growth slowed in the quarter even as more Americans bought cars and trucks.

Also, GM’s U.S. stockpile of cars and trucks is growing, and that could force it to offer discounts, especially in competitive market segments like pickup trucks and midsize cars. In January, GM’s inventory was about 620,000, enough to supply its dealers for 89 days. That’s up by more than 100,000 from a year earlier, when GM had a 68-day supply, according to Ward’s AutoInfoBank.

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