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General Motors and rival Ford have been the leaders of the pack for many years,but is the glory run over? GM entered the 1970s as the leader in car sales and the 70s may have very well been the beginning of the demise of GM.
I was discharged from the US Army in 1971 and I can remember gasoline being .25 cents per gallon at that time. The average car could be filled up for a few bucks and as I was still holding on to the 60s,$10 bucks would fill your car up and you would still have a few bucks to party on. I was 20 years old and women were plentiful,booze was cheap and to top it all off,.25 cent a gallon gas. At the time I thought all this would never end and apparently the folks at GM must have been partying with me as they didnt read the writing on the wall either. But,guess who saw the future and began changing to more fuel efficient autos back then? Japan!
GM made some of the finest vehicles ever made in the 60s and as they moved into the 70s quality went the way of .25 cent gas. GMs entry into the compact and fuel efficient vehicle market left a little to be desired. The Vega with the aluminum block lasted a few thousand miles(I owned one) before they started blowing head gaskets due to over heating. Ford had the Pinto which I think was a little more dependable. Chrysler even entered the compact market with the Colt and Omni. The Colt was the best of the bunch,but they were only produced a few years. Later generations of compact cars from the Big Three never improved much and eventually the Japanese would capture most of the US compact car market. By the 90s GM had recaptured some of their lost market share and stock price was back up to $80. Then in 2004 GM made what may prove to be a fatal mistake by deciding to go almost exclusively with the pickup and SUVs and shortly thereafter oil started to skyrocket. As gas prices went up light trucks and SUV sales plummeted as did the value of these vehicles.
A couple more points on more current problems for GM and we'll try to decide if there may be hope for GM and it's stock. One reason US auto makers sales have been so bad is all the sedans with anything near decent fuel mileage have been sold and now all they have left are the gas guzzlers. Import auto makers sales haven't dropped near as much as US auto makers because they had a much better inventory of fuel efficient autos. Also,last week when Chrysler announced they would drop their leasing program which made up 21% of their annual sales. I then found out that when the SUVS and pickups came off lease they couldn't give them away. A three year lease and then they we're almost worthless. They are having a problem like back in the 80s when the public found out a US made vehicle would only last the first 2 or 3 years of a 5 or 6 year payment plan. Then the public started letting the vehicles be repossessed as they we're shot well before the payment plan was completed. One other bit of info. to let you see how much out of tune the US auto makers are. In the first quarter of 2008 GM sold 843 hybrid vehicles and for the same time period Ford sold 5225. For the 2007 model year Toyota sold 430,000 hybrid vehicles. Toyota has a slight edge as you can see.
Now let's look at GM as an investment and see if now is the time to make a move. As I have stated before GM and Ford are staying a float with international sales. Guess who is the top company for auto sales in China. GM. I saw a list of closed GM plants in the US and they have a shell compared to what they had previously. As foreigners become more affluent they cherish US made autos. GM has made a couple of changes that will help. One thing was they got the UAW to take over the insurance health plan for the auto workers. GM has closed or will close about 10 plants and are converting a couple of plants to make fuel efficient sedans again. GM also has the Volt which will be marketed in 2010.
So,GM has a few things going the right way and there may be hope. GM started a restructuring plan in 2005 and even showed a profit of $400 million for the first quarter 2006. If you discount the 50 or 60 billion in write downs for plant closings,etc. they could be profitable now. So,if you have any speculation cash available,it may just pan out in the future. But,please with foreign sales as this is their main catalyst right now. As they bring some new sedans on line and dispose of their SUV glut and in 2010 the Volt begins production,there may be light at the end of the tunnel!
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