Despite Employee Discounts, GM posts $286M loss in quarter

[Analog]

DETROIT -- Dragged down by its money-losing North American operations, General Motors Corp. lost $286 million or 51 cents a share in the second quarter, including special items, the automaker reported this morning.

Excluding the items, which include recognition of a tax benefit, GM lost $318 million or 56 cents a share, far below Wall Street expectations of a 3 cents a share profit. Total revenues were $48.5 billion compared with $49.3 billion last year. During the March-June period a year ago, GM earned $1.4 billion or $2.42 per share.

GM's second quarter performance was hurt by a $1.2 billion loss in its North American operations. The loss also negated gains in other regions, leaving GM's Global Automotive operations with a $948 million loss for the quarter.

The automaker said GM North America was impacted by lower production volumes and sales of lower priced vehicles.

"With the intense competitive conditions and pricing pressures continuing in the North American market, it's clear that we need to move faster in implementing the key cost reduction strategies that I outlined at out annual meeting," GM chairman and CEO Rick Wagoner said in a statement. http://www.detnews.com/2005/autosinsider/0507/20/01-254109.htm

 

[Banana]

Time to buy shares in GM!

 

[dullard]

I don't think this surprizes anyone. If you slash prices, your revenue and profits drop.

On a semi-related note, this morning I heard a radio commercial for a GM dealer. They listed a long disclosure of vehicles which aren't covered by the employee pricing. Pretty much sounded like most of their trucks and sporty vehicles. I was under the mistaken impression that all GM vehicles had employee discount.

 

[Vette73]

Originally posted by: dullard
I don't think this surprizes anyone. If you slash prices, your revenue and profits drop.

On a semi-related note, this morning I heard a radio commercial for a GM dealer. They listed a long disclosure of vehicles which aren't covered by the employee pricing. Pretty much sounded like most of their trucks and sporty vehicles. I was under the mistaken impression that all GM vehicles had employee discount.

All but the corvette and 2006 models

 

[NFS4]

LOL. Large scale employee discount = poking a hole in the money bag.

In the mean time, Toyota says...

 

[Ronstang]

GM better start busting that union or they will be out of business.

 

[EagleKeeper]

Employee discounts for those models that are not hot sellers

All the auto makers have been canablizing sales from themselves for years. The heavy rebates/discounts started the trend 10+ years ago and it still is hurting them. Too much capacity, high capital/labor costs and weak realistic demand .

Until they achieve a balance between supply and demand and control costs, they will be operating always near the redline.

 

[m2kewl]

ford and gm are just delaying the inevitable....

/agent smith

 

[ElFenix]

Originally posted by: dullard
I don't think this surprizes anyone. If you slash prices, your revenue and profits drop.

not necessarily. if their prices were higher than their profit maximizing point, then they would actually gain profits by moving toward their profit maximizing point.

GM's problem is that it's profit maximizing point may still be turning a loss.

 

[FoBoT]

maybe they should reduce costs instead

 

[CondorHero]

Originally posted by: FoBoT
maybe they should reduce costs instead

or make better and reliable cars like Honda and Toyota

 

[FoBoT]

Originally posted by: CondorHero

Originally posted by: FoBoT
maybe they should reduce costs instead

or make better and reliable cars like Honda and Toyota

well, i think lowering costs is more realistic, lets not think of totally impossible things for them to do

 

[dullard]

Originally posted by: ElFenix
not necessarily. if their prices were higher than their profit maximizing point, then they would actually gain profits by moving toward their profit maximizing point.

Very few companies are higher than that point, especially companies with large departments devoted to determining the optimal price. Yes, they may have all been wrong, but that is not likely to be off by much. Always err on the lower price side if you can.