Posted on 12/04/2008 5:06:22 AM PST by Cronos
General Motors manufactures eight brands of automobiles. When executives of America's biggest automakers return to Capitol Hill carrying business plans explaining how they would spend the federal bailout they've asked for, the automaker may propose trimming itself to just four
Bloomberg reports that the company "is studying whether to shed its Saturn, Saab and Pontiac brands in addition to Hummer, people familiar with the matter said. Selling or dropping brands would save money and reduce overlap as the biggest U.S. automaker struggles to avoid running out of operating cash by year's end, said the people, who didn't want to be identified because no decision has been made."
The move would leave GM selling just Buick, Cadillac, Chevrolet and GMC vehicles.
Left out of the discussion so far is exactly what process GM would use to eliminate the overlapping brands. Autoblog comments, "The word ‘shedding' is used to describe what GM would do with Saturn, Pontiac, and Saab. But we don't know where and how they would shed them." Selling the brands to other automakers isn't likely. "With the state of lending and credit markets, it would probably be easier to buy a pterodactyl than get a loan to buy one of GM's brands. HUMMER's already been on the block so long it's about to get arrested for loitering." Instead, GM is probably looking at simply shutting them down
Analysts have believed for years that GM needs to shed some brands in order to survive, but the automaker can't simply shut down a brand without a massive infusion of cash. Bloomberg points out, "GM agreed to eliminate the 103-year-old Oldsmobile brand in 2000 because of declining sales."
But eliminating Oldsmobile is believed to have cost the company over $2 billion -- money used to buy out dealer contracts and settle lawsuits filed by Oldsmobile dealers whose businesses were ended by the move. As markets open today, GM's total net worth is just slightly over $3 billion, and the company is believed to have less than a one-month supply of cash on hand.
Policymakers considering the bailout must also note that shutting down brands would mean, as Autoblog points out, "some serious upheaval and tens of thousands of job losses," which is what the bailout plan is supposedly designed to prevent.
Eliminating overlapping brands, however, looks like a great idea to investors. MarketWatch reports that GM shares " rallied during Friday's holiday-shortened trading session ahead of [this] weeks crucial meetings in Washington that could lay the groundwork for a federal bailout of the ailing auto industry." The value of GM shares surged almost ten percent after they "caught buyers' interest on reports that the company is considering shedding its Saturn, Saab and Pontiac brands as part of its effort to cut costs and secure the government loans." The company was already widely reported to be looking for a way to get rid of its stake in Hummer.
Colorado's Grand Junction Free-Press says that dealers who sell the cars "haven't received direction or assurance from the companies that make the cars on their lots."
While the bailout debate goes on, automakers are trying to sell cars as fast as possible with deep discounts. Research the best car deals with U.S. News' Car Reviews.
fuel prices will go back up to $70 a barrel by 2010.
Thats astounding. GM is only worth three billion. Let them go down the new world order drainhole. America has entered a new age where manufacturing is done by robots or slave labor. The free traders have all the problems solved.
The reps and dems both agreed on this and you know they must be right when they both agree. Unless its true that we have a evil party and a stupid party. Once in a blue moon they agree and do something stupid and evil. Thats called bi-partnership.
I can see keeping Caddilac around as an upscale brand, like Lexus, Acura or Infiniti. I really don’t see the point of keeping the Buick brand around. How many distinct models does Buick even have, these days?
I’d be sorry to see Saab disappear, although GM has pretty much watered that brand down by slapping the Saab name on several lightly reworked GMs (and a Subaru, too, I believe).
GM Key Statistics:
Data provided by Capital IQ, except where noted.
VALUATION MEASURES
Market Cap (intraday): 2.86B
Enterprise Value (4-Dec-08): 32.25B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-09) : N/A
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 0.02
Price/Book (mrq): N/A
Enterprise Value/Revenue (ttm): 0.19
Enterprise Value/EBITDA (ttm): -22.839
FINANCIAL HIGHLIGHTS
Fiscal Year
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Sep-08
Profitability
Profit Margin (ttm): -13.24%
Operating Margin (ttm): -6.05%
Management Effectiveness
Return on Assets (ttm): -4.83%
Return on Equity (ttm): N/A
Income Statement
Revenue (ttm): 166.10B
Revenue Per Share (ttm): 292.691
Qtrly Revenue Growth (yoy): -13.20%
Gross Profit (ttm): 12.12B
EBITDA (ttm): -1.41B
Net Income Avl to Common (ttm): -22.79B
Diluted EPS (ttm): -38.742
Qtrly Earnings Growth (yoy): N/A
Balance Sheet
Total Cash (mrq): 15.90B
Total Cash Per Share (mrq): 26.043
Total Debt (mrq): 45.16B
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 0.729
Book Value Per Share (mrq): -98.185997
Cash Flow Statement
Operating Cash Flow (ttm): -5.79B
Levered Free Cash Flow (ttm): -10.76B
This is what GM should have been doing all along... trim its rediculous number of pointless brands, and file for Chap 11, not going to DC begging for handouts.
They can’t. It is selling well in China and they make a profit there is the Buick line.
You are right. I have a saturn outlook and I love it. I don’t know anyone who drives a buick.
Whatever they do, they should cut way down on the models of cars they produce. Take a lesson from Honda: Fit, Civic, Accord, Pilot, Ridgeliner, Odyssey - maybe I missed one or two. Then build QUALITY into the cars. I have owned Hondas for 20 years - nary a problem. Family members with GMs? Many expensive problems. GM is just stretched too far, so quality suffers.
Yeah ... lose the Hummer and Saab brands. And quit duplicating cars across brands. The same vehicle does NOT need to be sold as Chevy, Pontiac and Saturn ... or Chevy, GM, Cadillac ... or Chevy, Buick, Pontiac ... etc.
Plymouth went away a few years ago, before GM dumped Oldsmobile. Chrysler sells Chrysler, Dodge, and Jeep.
Just call it the GMC Lucerne.
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