Let's Take Another Look At One Of GM's Missguided Moves

Implications: How GM and Ford were ever able to raise money through bond offerings over the years remains a mystery to me. Consider some recent announcements.   August 5, 2008: "Default Risk At Ford, GM, Chrysler hits 95%; Automakers Ask for Taxpayer Handout."   August 4: "Auto Sales Dismal At All Three Detroit Automakers."   April 10: "Ford Abandons Goal of Return To Profitability."

Analysis: Here's another example from General Motors. Let's call it: "GM reduces Carbon Footprint by: .0000001mm.

Call it the one gallon solution, and try not to laugh.

GM plans to release new versions of its full-size pickup trucks and SUVs later this fall. Both editions get an extra MPG in both highway and city driving.

The new models are designated XFE (for "extra fuel economy.) That should make Toyota and Honda sit up and take notice.

On the new XFE models GM extended the front lower air dam, lowered the suspension and revised the chassis to cut aerodynamic drag. GM also cut vehicle weight by using more aluminum parts. The engine is a 5.3 liter V-8 with aluminum cylinder block and heads that can run on ethanol fuel, surely one of the great boondoggles of our time.

All this comes to a net savings of 1 MPG-a great selling point for the math challenged.

Even with a an additional 1 MPG from the XFE models (the new models get 15 MPG in the city and 21 on the highway,) it looks like it's still long way back to GM profitability.

GM's clearly behind. What's the level needed to catch buyers attention? Maybe 20 MPG in the city and 25 on the highway? Maybe 25 and 30? We'll see.

GM reported a net loss of $15.5 billion for the second quarter. Sales of GM trucks and SUVs dropped 23% in the first seven months of this year.

Next up, the question of what with the feds do, if anything, to help Ford and GM in the coming months.
 
On August 13 I did a GLG News article entitled "Could The Detroit Three Become The Detroit Two?" There's my opinion.