A lot hangs on GM, Ford and Chrysler turning a profit this year
By Jennifer Hadley 01/21/2010
When Time magazine declared the last decade the “Decade from Hell,” my knee-jerk reaction was: I couldn’t have said it better myself. Just before kissing the 00s good-bye, I got one last parting gift from the Decade from Hell. I crashed my car yet again. This time I hit a parked car. Hard. So I bid the 00s goodbye with a cheerful wave of my middle finger.
But that decade is gone and I refuse to entertain the possibility that the next decade could possibly be any crummier. I’m committing here and now to spread hope this decade, and that hope extends to the American Auto Industry. I really do want to see these guys turn things around. But I’d be irresponsible to predict that it’s going to be all rainbows and butterflies for GM, Ford and Chrysler. That is, while I’m hopeful that our auto industry realizes the robust prosperity it once boasted, I’m doing so with cautious optimism. And I think that maybe Ed Whitacre, the new CEO of General Motors, should follow my lead.
Whitacre boldly declared last week that GM will turn a profit in 2010 and that the company will increase its market share. I have to say that I admire his enthusiasm and can-do mentality, but come on, Whitacre! GM has lost money every year since 2005. Your market share, which surpassed more than 40 percent in the 1980s, has dwindled to just more than 20 percent.
Moreover, while Ford reported a 34 percent sales increase in December, when compared to 2008, GM reported a 6 percent decline. I understand that a lot of this had to do with the discontinuation of a bunch of GM brands. And yes, I know that when it comes to the core GM brands of Chevy, GMC, Buick and Cadillac the company did post a modest 2 percent sales gain in December.
All the same, what on earth is making him think that GM is going to suddenly start selling enough cars to not only repay the $6.7 billion loan we gave them and earn a profit? Something about this just doesn’t add up. And despite my desire to see this former iconic automaker succeed in the New Year, I can’t shake the feeling that Whitacre is trying to pull the wool over our eyes.
As I wrote in November, GM needs to get itself back to public status, to begin selling stock again. Much like I see their ability to pay back their loan as an attempt to lure back investors, I can’t help but see these declarations from Whitacre as yet another attempt to try to convince us that the company’s future is bright. In fact, he even admitted that he doesn’t think that it is necessary for GM to be profitable again before an initial public offering, but that it would be helpful.
I do agree with him on the latter point. I’d say if they aren’t turning a profit, they’re going to find themselves hard-pressed to attract investors.
But maybe there’s nothing sinister to be found in Whitacre’s optimism. Maybe he watched or read “The Secret” and he’s running GM on the law of attraction model. If he says that the company will be profitable, and he really focuses on that, puts dollar signs on his vision board and puts out to the universe that GM will sell more cars this year than ever, it will happen. But who knows?
The one thing I do know is that Whitacre better hope that his predictions come true. We’ve seen that GM has no problem ousting CEO’s who fail to turn the company around. So, I bid Whitacre good luck, but something tells me that his reckless optimism might just set the stage for another Decade from Hell for GM.
Contact Jennifer Hadley at email@example.com.