Detroit Ostrich Farm: GM (GM) Cuts Back SUV Design

Elvis has left the building but that does not seem to matter to GM. The company is cutting back on new designs for future SUVs, the same SUVs that no one will buy.

The Wall Street Journal writes that the largest car company in the US is looking at it whole product line.

GM’s stock fell below $15 yesterday.It has not been that low since the last days of the Arab Oil Embargo in 1974. Gas prices killed GM then, and, over 30 years later, it is happening again.

GM advocates would make the argument that the SUV was a perfect product for its time. Gas was cheap and trucks have very large profit margins. The counter to that argument is that GM is a large enough company so that it could have had a portfolio of products to prepare for the inevitable day when petrol was not $1.50 anymore. The company does support seven major brands.

More nimble firms like Honda (HMC) never let their global fleets be based largely on one bet, a bet that gas would always be plentiful. GM’s argument that it needed to make hay while the sun was shining worked until it didn’t.

Now, GM is faced with one of the greatest financial disasters in its history. It will need to raise more money and, in this credit environment, that will be very hard.

Douglas A. McIntyre