By Andrew Nusca
Posting in Energy
In an attempt to distance itself from its bankruptcy and shake for good its "Government Motors" nickname, GM has filed for an IPO.
In an attempt to distance itself from its bankruptcy last year and shake for good its "Government Motors" nickname, beleaguered automaker General Motors on Wednesday filed plans for an initial public offering with the U.S. Securities and Exchange Commission.
Since then, the company has slashed its brand offerings -- it's now down to just Chevrolet, Buick, GMC and Cadillac, dropping Pontiac, Hummer, Saturn and Saab -- and turned over top management, replacing them with less seasoned executives.
So what's in store for GM besides its big bet on green with the Chevy Volt? I dived into the company's S-1 form to find out.
First, a few statistical highlights:
- GM has a global network of more than 21,700 independent dealers.
- In 2009, the company (old and new) sold 7.5 million vehicles, or approx. 11.6 percent of worldwide vehicle sales.
- Seventy-two percent of its sales were outside the U.S., with 38.7 percent coming from emerging markets, including BRIC nations: Brazil, Russia, India and China.
Here's a look at select risks for the new GM:
GM needs volume to succeed. The company's business model is built on volume. Succinctly, profitability won't be attainable unless it stays that way.
The automotive industry, particularly in the U.S., is very competitive, and our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead as is reflected by our loss of market share over the past three years.
GM needs supply chain efficiency to compete. The second-largest automaker, GM needs to ensure that its size doesn't get in the way of good business. A number of big auto suppliers have experienced financial difficulty or insolvency post-economic downturn, and GM needs to navigate this minefield.
Suppliers have attempted to increase their prices, pass through increased costs, alter payment terms, or seek other relief...some have been forced to reduce their output, shut down their operations, or file for bankruptcy protection. Such actions would likely increase our costs, create challenges to meeting our quality objectives, and in some cases make it difficult for us to continue production of certain vehicles.
But not too much volume. GM says overall manufacturing capacity in the auto industry exceeds demand, and with "relatively high fixed labor costs" and "significant limitations" on automakers' ability to address them (read: unions), automakers may try to move more units with aggressive sales or feature bloat. Moreover:
In addition, manufacturers in lower cost countries such as China and India have emerged as competitors in key emerging markets and announced their intention of exporting their products to established markets as a bargain alternative to entry-level automobiles. These actions have had, and are expected to continue to have, a significant negative impact on our vehicle pricing, market share, and operating results, and present a significant risk to our ability to enhance our revenue per vehicle.
Future technology may not be adequately funded or even work. GM says it will invest "significant capital resources" to develop new tech, "heavily" in alternative fuel and advanced propulsion technologies between 2010 and 2012 to support the growth of hybrid and electric vehicles. But the market may not yet be ready for expensive green technology.
In some cases, the technologies that we plan to employ, such as hydrogen fuel cells and advanced battery technology, are not yet commercially practical and depend on significant future technological advances by us and by suppliers. For example, we have announced that we intend to produce by November 2010 the Chevrolet Volt, an electric car, which requires battery technology that has not yet proven to be commercially viable. There can be no assurance that these advances will occur in a timely or feasible way, that the funds that we have budgeted for these purposes will be adequate, or that we will be able to establish our right to these technologies. However, our competitors and others are pursuing similar technologies and other competing technologies, in some cases with more money available, and there can be no assurance that they will not acquire similar or superior technologies sooner than we do or on an exclusive basis or at a significant price advantage.
What happens in Washington matters. Fuel efficiency and greenhouse gas regulations are making a big impact on the auto business.
We are affected significantly by governmental regulations that can increase costs related to the production of our vehicles and affect our product portfolio. We anticipate that the number and extent of these regulations, and the related costs and changes to our product lineup, will increase significantly in the future. In the U.S. and Europe, for example, governmental regulation is primarily driven by concerns about the environment (including greenhouse gas emissions), vehicle safety, fuel economy, and energy security. These government regulatory requirements could significantly affect our plans for global product development and may result in substantial costs, including civil penalties. They may also result in limits on the types of vehicles we sell and where we sell them, which can affect revenue.
The big takeaway: Between mounting government regulation and obligations from its previous self, the new GM may not be as in control of its future as it appears.
The question: will it bite the bullet and move the cleantech needle?
Aug 19, 2010
IT is really hard to buy when people are angry with the UAW deal and even harder to buy when your loosing your job or already have one..There were a lot of people who got burned by GM going bankrupt and I wouldn't be supprised if that hurts them going forward.. http://wwwgreattruckcenter.com
GM has already shot themselves in the foot by pricing the Volt at $41,000 MSRP. Nissan is pricing their entry, the Leaf, at $32,000. The Volt gets 40 miles per charge. The Leaf gets 100 miles per charge. The Leaf will start to appear on the streets well before the Volt. And what's the point of an all electric car if all you are doing is switching green house gas sources from gasoline to coal fired power plants? We need to change our power generation over to clean/green systems before touting the all electric as "the ultimate answer". When we can start closing coal fired plants is when a vehicle like this makes sense. Which car would I buy? The Leaf, of course, mostly because of the price. If GM can't compete then let them sink. They have had their chance for greatness and they blew it.
"So what?s in store for GM besides its big bet on green with the Chevy Volt?" If the Chevy Volt was so great, the government would not need to pay people to take it... (rebates, and the offer of using taxpayer dollars to prop it up by giving away home charging stations) That alone... the home charging stations should be enough for every other country in the world to file WTO charges against the US for making the "playing field" uneven in promoting a government owned subsidiary (Government Motors) in it's sales efforts. Additionally, with the demorats up-coming Cap and Trade... it is going to cost insane sums of money to charge the Volt. And do we really have the electrical infrastructure for it? There are already blackouts and brownouts in major cities due to not being able to provide enough electricity. And you really left off the Biggest Major requirement. In a demand driven Business (like we still have in the USA, and most of the countries in the world have), you have to provide what the consumer Wants to buy. If we were say North Korea, or the old Communist Russia, or old Communist East Block (the direction our current Administration and CONgress are pushing us) we would have a centrally planned economy, and the consumer can only buy what is available... Not what they want. One last thing, they have to get the unions under control. Look at the contracts. And finally, about the IPO, you would (in my opinion) have to be completely insane to buy GM stock or bonds. Look at how the Obama Administration totally screwed the old bond holders, and stock holders. They got pennies back if anything due to Obama wanting to reward the Unions. The Unions did not give up a penny of benefits.