Thursday, February 10, 2005

 

GM Slides...

... and as a result of their march towards junk-bond status, Business Week says that GMAC has been cut loose:

But today, despite billions invested in new cars, GM is once again losing ground. And suddenly its slide seems to be picking up speed. That point was driven home on Jan. 13, when Chairman and Chief Executive G. Richard Wagoner Jr. announced that he was moving to wall off his most reliable profit machine -- the mortgage-lending portion of General Motors Acceptance Co. -- bowing to the real possibility that his flailing auto business will be downgraded to junk status. Carving out the mortgage lending unit, which contributed a cool $1.1 billion to GM's bottom line last year, as a separate entity should preserve its credit rating. But finance profits are already shrinking, and could fall further in years ahead. And GM's scramble shows just how dramatically its options are shrinking. With fewer dollars to squeeze out of finance, the pressure is on to begin delivering significant profits from new cars and trucks.

GMAC represents a majority of GM's corporate profits in recent times. No, that's not quite accurate - GMAC is virturely the only source of profit for GM. How about the most recent quarter?

Including special items GM posted net income of $630 million.
...
Once again it was GM's credit unit, GMAC, that was the key profit producer,
earning $611 million.


Strip out GMAC and you have less than $20 million on profit on sales of over $51 billion, folks. To be fair, that's not typical, but GMAC still provided 80% of GM's profit in '04.

The rest of the article covers the stuff we've heard everywhere - health-care costs, the reduced effectiveness of incentives, an aging truck line-up. But this deal with GMAC? Holy crap.

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