GM Profits Down 41%

That’s compared to this same quarter last year, when GM enjoyed goosed sales due to supply problems for Toyota and Honda after the Japanese earthquake and tsunami. Opel, GM’s European division, is in a total shambles. But dig deeper for the telling detail:


America’s largest automaker made $1.5bn in the second quarter of 2012, compared with $2.5bn for the same period last year. Revenue fell to $37.6bn from $39.4bn in the second quarter of 2011. The results exceeded analysts’ estimates, but further underlined Europe’s drag on the US economy.

Revenues were down only about 5%, yet profits were down over 40%. Labor costs are pretty fixed. Materials costs aren’t skyrocketing. It’s not like GM has to pay a whole lot in taxes. So what’s the deal?

Easy: GM must be back to competing on cut-rate prices, instead of on quality products.

As I wrote yesterday:

GM got into trouble because they allowed themselves to get dependent on fleet sales, cash back incentives, and subprime loans.

And what is GM’s business strategy reliant upon today? Fleet sales, cash back incentives, and subprime loans.

Remember that GM’s June domestic sales were goosed by massive fleet sales — to Washington. But even DC cronies can buy only so many cars, even if they do it with made-up Monopoly dollars borrowed from China or printed up by the Fed.

It amuses me — in the blackest way — that this is the business model practiced by the same vile progs who preach “sustainability.”


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