GM (GM) Runs Out Of Ground

Cars and Drivers

Published: June 12, 2008 5:17 am

Investors figure the only way that GM (GM) makes it out of its current troubles is that its overseas operations make money to offset trouble in the US. In the domestic market, GM is faced with losing share to Honda (HMC) and Toyota (TM). Worse, the size of the total market for vehicles is falling.

The program got a blow when the head of GM Europe said things there are as bad as they were in the 1980s. According to Reuters, "General Motors Corp’s head of European operations said rising oil prices, high commodity costs and the strength of the euro could drive European sales down to levels not seen in decades."

The GM 10-Q shows that it has a market share of 10% in Europe. The division had operating income of $112 million last quarter. If the company’s business in the region falters, that leaves GM Latin America and GM Asia to carry the load. Latin American made $483 million in the latest period and Asia made $200 million. That does not leave much left for GM to bet on.

Much of this is GM’s own fault. Fuel costs in Europe are up like they are everywhere. The largest US car company still sells Hummers in Germany. A picture is worth a thousand words.

GM has not gotten on to the idea that people want cars that don’t use much gas.

Douglas A. McIntyre

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