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And to make matters worse, GM made this announcement on Friday, March 13, 2009:
How can GM turnaround in 2010 and beyond?
But the key difference is Gross Margins - Toyota maintained double-digit gross margins in all of 2008. This is huge considering that GM's gross margins shrunk to low single digits, while Toyota had closer to 14%. This means Toyota runs it operations with considerably less expense than does GM. Call it Toyota's operational and innovation excellence, or GM's management hibernation, Toyota delivered vehicles that mattered to consumers. And consumers bought a lot of hybrids in all of 2007 and 2008.
Finally, GM's return on equity investment (stock performance) vis-a-vis Dow Jones (of which GM is a component) and Toyota Motors is terrible.
GM in 2011 - Mother of all turnarounds!
GM emerged out of bankruptcy courts in 2009, reestablished as a new company in July 2009, and began turning around its business in 2010. GM went IPO again in November 2010, and it was the world's largest IPO. On February 24, 2011, General Motors reported its first full-year profit since 2004. Equally amazing is this fact: The automaker suffered $103.7 billion in losses from 2005 through 2009 (not sure if any other company can match these staggering losses). GM avoids paying taxes on the $4.7 billion it earned in 2010, and on future profits for years to come, because of a favorable government ruling in 2010 on previous losses. The Wall Street Journal estimated the tax break, including credits for costs related to pensions and other expenses, can be worth as much as $45 billion over the next 20 years.
Household nameplates such as Pontiac, Saturn, Hummer, and service brands like Goodwrench were discontinued. Others, like Saab, were sold. Daewoo brand in South Korea has been replaced with Chevrolet.
Chevrolet Volt is an electric vehicle with back-up generators, powered by gasoline. The production Chevrolet Volt was available in late 2010 as a 2011 model with limited availability. GM delivered the first Volt during December 2010. Volt may perhaps become the best-selling GM car. Even if Volt does not become a best seller, Volt will provide GM an innovative edge in the auto industry that will have a huge halo effect. Of course, GM needs to make sure that Volt is a profitable brand from day one. Volt gives GM a new launchpad for plug-in vehicles. Volt looks great on the street, and I am looking forward to my first test drive.
GM Turnaround is for real... And Kudos to GM management for making this happen!
Originally published March 2009
Updated April 2011
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