Posted by: David Welch on May 10, 2007
By now, many industry watchers figured that General Motors would be showing better progress. The company took out about $7 billion in costs from its North American business over the last year or so. But the home business lost $85 million in the first quarter as GM disappointed the Street.
And it is disappointing. It’s not like GM doesn’t have anything new to sell. New vehicles like the Chevrolet Silverado and GMC Sierra pickups, Saturn Aura sedan and a whole raft of crossover suvs are at dealerships awaiting a throng of eager buyers. This is a high point in GM’s product offensive.
So why the lousy bottom line? Well, part of it is just plain bad luck. GM hoped the Silverado and Sierra would be selling big and minting cash. Pickups sell with lots of pricey options and bring in big profits.
But the housing bubble hath burst. All those contractors, plumbers, electricians and painters who were building those homes during the housing boom have slowed down. They’re aren’t buying new pickups at such a fast clip and the market has gone soft. After a static month of pickup sales, GM slapped 0% financing deals on its big trucks. That’s what hurts.
If it’s any consolation, Toyota has had to spend some cash to market its new Tundra pickup, too. But that’s cold comfort for GM, which is trying desperately to get its North American business back in the black.