GM has stopped producing new Hummers, Saturns, Pontiacs, and Saabs for sometime now, but they have continued to sell them to deplete their inventories. GM sold Saab to Spyker so its sales do not count in GM's total sales.
According to AutoObserver GM only has about 2000 Hummers, Saturns and Pontiacs left and all will be sold in the next two or three months.
It is sad that GM had to discontinue three brands that are very iconic and held a strong place in the automotive landscape. Hummer and Saturn were relatively new brands, but Pontiac had been around for decades. GM dealerships will not be the same without these brands, but this was necessary if we wanted to every see a GM dealership again.
General Motors hired Joel Ewanick as the new vice president of U.S. Marketing. He was the man responsible for Hyundai's marketing and their dramatic increase in sales.
Like Hyundai, GM is transforming to build higher quality vehicles, but the American public is still unsure about their improvements. GM is hoping Ewanick can obtain the same results for them. He faced a similar challenge with Hyundai and should succeed at GM with their large marketing budget.
Ewanick is a great addition to GM and should bring them much success if they allow him the freedom and trust needed to market their vehicles. The marketing tactics he used at Hyundai were very risky and nontraditional, which are too things GM is not known for. Hopefully he will bring this same style, something new and fresh, to GM.
The petroleum-powered automobile—the automobile we know today—will someday have the same fate as horses. The most iconic automobiles are either named after horses or use them as their symbol, be it the Ford Mustang or Ferrari. Even the unit used to measure the power of an automobile is called horsepower. The relationships between petroleum-powered automobiles and horses are abundant, so it is only fitting that these automobiles will have a similar fate.
It was not until the twentieth century that our dependency on horses for transportation was replaced by automobiles and trains. Several factors led to this change, but none greater than Henry Ford’s implementation of the assembly line for the production of the Ford Model T, which created the affordable automobile.
Our dependency on petroleum-powered automobiles will not decrease because a completely different form of transportation will replace it. The cause will be the lack of petroleum. Experts cannot agree on when petroleum reserves will be depleted, but it will happen eventually, which means the end of the automobile as we know it. But how will it share the same fate as horses?Over a century ago the majority owned horses, but today only wealthier individuals own horses because they are expensive to own.As petroleum reserves are depleted the cost to own a petroleum-powered automobile will increase dramatically causing only the wealthy the ability to afford and operate one.
The extinction of petroleum-powered automobiles—the cars we have grown up to know and love—is inevitable, but this does not mean we cannot try to delay its extinction as long as possible.
The federal government has recognized our dependency on oil for transportation and the necessity to improve greenhouse gas emissions for the past few decades, but President Obama has been the most aggressive in reforming the Corporate Average Fuel Economy standards. The CAFE standards regulate both fuel economy and greenhouse gas emissions of automobiles sold in America. The new standards were released on April 1st and require fleet-wide fuel economy to improve to 35.5 miles per gallon by 2016. The current standards only require an average of 27.5 miles per gallon.This would mean the average miles per gallon must increase to 37.8 for cars and 28.8 for trucks.
The new CAFE standards will likely anger automotive enthusiasts. They might think it will kill the petroleum-powered automobiles that we love.However, the new standards are a blessing in disguise. The only way we—the auto enthusiasts—can save the high-horsepower, gas guzzling automobiles that we love to drive is by accepting these new standards and hope auto companies can exceed them. Petroleum will run out and the longer that this can be postponed the more time we will have with the cars we love to drive.
President Obama has implemented some lofty goals. Increasing fleet-wide fuel economy by eight miles per gallon in only six years will not be easy. Automakers can improve fuel economy with increased production of electric or hybrid vehicles. The new CAFE standards also provide incentives for automakers to produce electric or hybrid vehicles.Incentives will be given to automakers for the first 200,000 plug-in hybrids and electric vehicles they produce by 2016. These vehicles either do not use petroleum or use very little, which will improve fleet-wide averages. The new standards are to be the equivalent of taking 58 million cars off the road, which equals a savings of 1.8 billion barrels of oil.
Although the goal of the CAFE standards was not too prolong the life of petroleum-powered autos, it will be a result of the new standards. This is the key positive outcome from the implementation of the CAFE standards for auto enthusiasts.
Even with the drastic increase in production of plug-in hybrids and electric vehicles, the goal of 35.5 miles per gallon seems impossible when looking at the most popular vehicles sold today. According to Bruce Hall’s blog the overwhelming majority of the most fuel-efficient vehicles in each class do not even meet the 2016 standard of 35.5 miles per gallon. After reading Hall’s blog it’s clear that automakers have a long way to go in order to reach this standard. Automakers will be pushed to work harder than ever to improve fuel economy and meet the government standards.
Most automakers have already produced plug-in hybrids and electric cars, but the most important next-generation automobile is the hydrogen-powered car. Automakers, including the luxurious BMW and the economical Honda, have already produced hydrogen vehicles. Hydrogen is the most abundant resource in the universe so we will never worry about running out. Hydrogen-powered cars are far superior to hybrids and electrics because they never need to be plugged in nor require petroleum in any way. The biggest drawback to hydrogen technology is the overwhelmingly large and necessary overhaul of gas stations to implement enough hydrogen fuel stations to make the technology practical.
The tough CAFE standards implemented by President Obama may be the best thing that has happened to the auto industry. Normally the federal government treads lightly around the subject of improving fuel efficiency and reducing greenhouse emissions because it forces automakers to increase spending. The increased costs incurred by automakers from the CAFE standards will surely be passed onto the consumers, but the increased fuel economy will hopefully offset the increase.
Auto enthusiasts must acknowledge the new CAFE standards as a necessary evil. For as much as the standards will cause an abandonment of the current petroleum-powered automobiles that enthusiasts love, it is preferable to their extinction. The number of high-horsepower, petroleum-powered cars produced will continue to decline, but this is the only way petroleum has a chance of remaining affordable and enthusiasts can continue their passion.
Today horses are used for recreation and in the near future petroleum-powered automobiles will share the same fate. It is only with the acceptance of alternative-powered vehicles that we will lengthen our time with the automobiles we—the enthusiasts—love to drive and keep them in the hands of everyone, not just the wealthy.
General Motors announced on April 21st that they have paid back in full, with interest, $8.4 billion in loans from the U.S. Treasury and Export Development Canada. GM even produced a television commercial featuring Chairman and CEO Ed Whitacre, in which he talks about GM repaying the government loans ahead of schedule. The commercial, however, is receiving a lot of criticism.
In a time where many Americans do not trust government spending, financial institutions and large corporations, GM should tread cautiously when making public announcements involving all three. The little confidence GM has gained with Americans over the past few months can easily be lost by any action proved to be deceptive. So was Whitacre telling the truth in the television ad? Yes. GM did pay back all of the money loaned to them and did so about five years early, but it is how the money was paid back that is causing controversy.
Any American informed about GM’s situation would be curious to know how a major corporation that filed for bankruptcy less than a year ago can already repay billon dollar loans. There are plenty of bloggers, like Dave Manuel that are curious as well.GM was able to pay back the loans—provided by taxpayers—with money that was also provided by taxpayers. No wonder so many people are displeased with Whitacre’s nationally televised commercial.
After GM filed for bankruptcy, it received $49.5 billion in cash from the U.S. government in exchange for company stock. GM also received another $8.1 billion in loans from the U.S. and Canadian governments. The U.S. government gave the automaker enough cash to survive the recession, but with auto sales increasing and the economy recovering GM realized it had more cash than it needed. So repaying the debt portion was not that difficult to do—GM just used the equity portion of their bailout to pay the debt portion.
Normally Americans do not really care how companies repay debts. However, when repayment involves their own money and the company’s CEO thinks it appropriate to boast about it in a national television commercial, Americans might be a little critical. Americans are already weary of Wall Street and continuous government spending. GM should avoid creating more distrust among the American public. The problem is that GM was deceiving the American public about how this loan payment was made. Also it is unethical of GM to mislead American taxpayers, especially when they own 61% of the company.
GM never should have produced that commercial. From the commercial the average American would conclude that GM used their profits to repay the loan—not bailout money received from the federal government.
GM mishandled this event. The repayment could have demonstrated that GM is secure enough to give back some money, which is a good sign for the company and its majority shareholder—the taxpayer. If GM wasn’t back on track they would have kept the money until business turned around. The public relations department should learn from this mistake and simply tell the truth. Giving the money back is a sign of financial recovery that could have been beneficial to the company’s public image.
The future of GM is looking bright as the company’s leadership is taking necessary actions for a successful turnaround—minus the television ad. A week after the commercial aired GM’s industry all-star, Vice Chairman Bob Lutz, released his farewell letter on the company’s blog. Lutz is an industry veteran and was brought back on after the bankruptcy to help save the company. In the letter Lutz states that GM is “poised to win.” He attempts to convey to the public his confidence in the company.
GM is focusing on improving their vehicles and strengthening its product lines, according to Lutz. Its quality is now on par with Toyota and Honda according to J.D. Power’s Initial Quality Survey. And their percentage of recalls is lower than most in the industry.
He continues by stating that the key metrics used to evaluate an auto company are moving in the right direction. Inventories are down, incentive spending is down, and average transaction prices are up.
Third, Lutz believes the people and leadership at GM are the “best and the brightest.”
Lutz might be correct with his reasons for why GM is “poised for success” and he has decades of industry experience to support his points, but it is hard to see GM returning to the top of the American auto industry any time soon.
It was extremely important for GM to return to its core divisions—Chevrolet, Cadillac, GMC, and Buick. Discontinuing or selling the Pontiac, Saturn, Hummer, and Saab divisions allows GM to focus more time and money on its key divisions. This will better position GM for success despite the fact that downsizing reduces the company’s market share.
It is easy for GM to see their inventories decrease when it terminates production of four car divisions. They may have decreased incentive spending and increased transaction prices, but GM still lags behind Ford, Toyota, Honda, Hyundai, Nissan, and Chrysler in percentage increase in sales from a year ago. Although the percentage increase of GM’s four remaining brands was 19.7%, its total sales increase was only 6.4% due to the discontinuation of Pontiac, Saturn, Hummer, and Saab. The other automakers all saw increases of at least 20%, with Nissan and Hyundai seeing increases above 30%. It may take some time for GM to become comfortable with their new position in the industry. Growth must come organically. GM should focus on building a great product and avoiding past mistakes.
Hopefully Lutz is correct that GM has the leadership and people needed to succeed. Individuals will likely question the company’s leadership upon learning the truth behind the CEO’s statements in the commercial, but lets hope that was the last misstep the leadership makes for awhile. If GM is on its way to success then there is no need to deceive the American public. Let your products speak for themselves and the sales will come. Lutz would agree with that.
