General Motors Has Been Losing Money For Years
STEVEN INSKEEP, Host:
It's MORNING EDITION from NPR News. Good morning, I'm Steve Inskeep.
RENEE MONTAGNE, Host:
We're going to check up now on a claim that prosperity could be around the corner. The claim comes from General Motors. It matters to your pocketbook because your government is keeping GM afloat.
INSKEEP: After General Motors filed for bankruptcy this week, top executive Ray Young told MORNING EDITION that the company would not be losing money too much longer.
RAY YOUNG: Our estimates would bring down the cost structure and we execute a product plan, there's no reason why we can't become profitable over the next two to three years.
INSKEEP: Two to three years, he said. And the people who heard the GM executive include NPR's Frank Langfitt, who covers the auto industry and joins us both in the studio. Frank, good morning.
FRANK LANGFITT: Good morning, guys.
INSKEEP: What do auto analysts say about GM's prediction there?
LANGFITT: Well, they say it's possible, Steve, but a number of them say it sounds pretty rosy, which is not unusual. Over the years, the auto companies, Detroit auto companies, have often had more optimistic predictions. GM is, as Ray Young says, they are slashing a lot of debt, more than half in bankruptcy. And that's going to help a lot. And people generally think GM can become profitable...
LANGFITT: ...someday. It's going to take longer. A lot of them think it's going to be a longer and harder road than Ray told you yesterday. And analysts estimate it might be more like four or five years.
MONTAGNE: And why that distance, that amount of time?
LANGFITT: You know, Renee, there are a lot of risk factors here and a lot of unknowns. And most of them have to break GM's way for the company to turnaround pretty quickly. For instance, you know, when does the car market really turn around? We saw May sales numbers yesterday. It suggests things are stabilizing. But we don't know when things are really going to start growing again. The other question: What's the future price of gasoline? That's definitely going to affect General Motor's sales. And biggest and, frankly, probably most important issue is for GM, it's got to stop losing sales to other companies.
INSKEEP: Well now, Frank, you're talking about losing sales. GM is eliminating some of its brands. The Hummer brand if I'm not mistaken could be going to a company in China. Saab could go away. Saturn could go away - which raises a question: If GM stops selling those brands of cars, are those customers going to go and pick up other GM cars?
LANGFITT: Analysts say most won't, actually. You know, take Saturn. GM sold more than 200,000 Saturns last year. But most Saturn buyers are not typical GM customers. They're more white collared. They're more focused on things like fuel efficiency. Some, frankly, don't even know that Saturn's a GM brand.
(SOUNDBITE OF LAUGHTER)
LANGFITT: No, they don't. I mean, they don't. Which, you know, with sight of a - let's face it. It was a bit of a marketing strategy. So these are not people who are likely to go for Chevys. And analysts think they're more likely to go for Toyotas and Hondas.
MONTAGNE: I want to ask about another thing the GM executives said. He said GM won't try to be the biggest anymore, but will try to be, quote, "the best carmaker." Can they create that image for themselves at this point in time?
LANGFITT: Well, you know, that's a really big question. And frankly, on image, they have a long way to go. It's a big, big problem. Bankruptcy's not going to help. And even when GM builds a successful car, many customers just won't look at it. Let's take the Malibu. It's 2008 North American Car of the Year. Consumer Reports rates it pretty close to the Toyota Camry. But GM actually has to sell the Malibu for less than the Camry because people just won't pay that much for a GM car. Camry still outsells the Malibu by more than two to one. So it's going to take more time for this company to change minds and win new customers.
INSKEEP: Is there a product coming GM's way that could change that?
LANGFITT: Well, there are some products in the pipeline. One thing you could look at is the Chevy Cruz. And unlike some earlier small cars, it doesn't frankly look like a tin can. It's nicely styled. It's going to be coming out pretty soon. And it gets pretty good mileage. Something to look for also next year, end of next year, is the Volt. They've been really promoting this car a lot.
INSKEEP: This is the electric car.
LANGFITT: Yes. And I think that while they're going to lose a lot of money up front on that because the batteries cost a ton, this is something that if it works, it could actually help change the company's image from like gas-guzzlers to something that's high-tech and a lot more green.
INSKEEP: We're listening to NPR's Frank Langfitt, who covers the auto industry. And Frank, if you would, stay with us for a moment because we're going to talk about another part of this story that I know you've covered a lot.
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