Showing posts with label GM. Show all posts
Showing posts with label GM. Show all posts

Friday, April 12, 2013

Who Will Knock Exxon Mobil off?

A quick look at FY2010’s top Profit-Making US firms (B&E US Power 100, 2011), and on how these Powerhouses will Perform in 2011 and a Decade later. Will there be a New #1 or will Big Oil Dominate forever?

The signs are everywhere. From General Motors (GM) to Ford, from Citigroup to AIG – the list of those who have defied the quotient of “sustainability” in the modern capitalistic era is to say the least, very long. Once they were the original model of success in profit-making – an archetype to emulate for all profit-loving corporations for years together. But in time, their brains which over decades were hardwired to be optimistic, were forced to live through the pain-filled sensation of losses; the glorious assembly lines and conference rooms turned a Golgotha. You ask – how could GM – a company that until 2008 had been America’s most profitable in 30 of the past 50 years – suddenly go bust? GM was what made Detroit – it made America audacious, a characteristic that was thereon inculcated into other big corporations in other First World nations as well, making them all recklessly bold characters in defiance of convention. But, it happened. Stripped naked by the US government, GM even got delisted. Ford fell too. Only, it needed no foodpack from the government to survive. AIG, a one time pride of insurance-loving America became a $170 billion headache for taxpayers when 2008 ended. Its books got laden with a loss of $99.3 billion in FY2008 alone. The following year, it lost another $10.3 billion. Then there was Citigroup – the hero of America’s private banking revolution. After recording $127.56 billion in bottomlines since the turn of the century till FY2007, the company delivered two consecutive years of losses until FY2009 ($29.28 billion). None of these companies found a place in the list of America’s 100 most profitable companies list for FY2009.

Ashamed & dethroned. But the pendulum has swung back, saving these companies a lifetime at the museum. Going by this year’s B&E US Power 100 list (FY2010), these very fallen angels are back. GM features on #27 (profit of $6.17 billion), Ford on #25 ($6.56 billion), AIG on #22 ($7.79 billion) & Citi on #17 ($10.60 billion). And unlike last time, this time around, they are back to defy the theorem of “sustainable loss-making”. That they have crawled back is good news, but the reverse can occur as fast. History does repeat. This oscillating bob is therefore ‘the’ concern for all profit-making powerhouses today.

How impressive is 80% as an indicator to a trend? Quite. If compared to a similar list prepared fifty years back, 80% of the names that appeared on this year’s America’s 100 most profitable list are new. This implies, on an average, every decade, 16 companies on the list are replaced by new ones. Digestable? Not if you understand how the dynamics of the current globalised scenario is bringing new names to the fore, faster than ever before. As per the 2011 B&E US Power 100 list, compared to a decade back, 56 new companies have knocked-off as many names from the ranking – much higher (and dangerously so for existing names) than the average replacement rate. This brings a new question to the front – how sustainable are the current profit-making schemes of the top names on the 2011 B&E US Power 100 list? Will the top names in the list retain their places when we repeat this exercise next year? And a decade later, can we imagine a new dominant #1 or will oil companies continue to flash? Many questions, one answer – read on.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
Posted by at
Labels: , , , , , , , , , ,

Monday, July 9, 2012

Second time lucky but determined not to lose first spot again

When GM went broke four years ago not many gave it a chance to spring up a fight and come back from financial rehab. Those Cassandras are now eating their words as the former lumbering auto giant strikes back with a vengeance.

A lot has changed for General Motors (GM) since it went adrift in rough seas that threatened to dash its corporate ship against dangerous waves just four years ago. In the summer of 2008, about a year before GM became a ward of the state, its chief executive Rick Wagoner was desperate to catch at straws in a futile bid to avert his company from going belly up. The financial results for the 2008 spring quarter left no one in doubt about GM’s bleak prospects: a $15.5 billion loss, its third worst in a century. GM’s revenue in North America had fallen $10 billion — a breathtaking 33% — from the year-earlier quarter. And for the first time, after donning the mantle of being the No. 1 car maker in the world from Ford in 1931, GM lost that coveted position to Toyota. In the midst of a significant downturn in the American and global economy, Toyota raced ahead of GM in global car sales, selling about 620,000 more vehicles in 2008 than GM’s 8.35 million.

But the worst was yet to come. Finding itself at the end of financial tether, Wagoner flew into Washington D.C., cap in hand, to ask for $10-12 billion of easy loans from the Federal government to bail out his cash-strapped company. But his demeanour - flying in a private luxurious jet at the company’s expense - rubbed many in Washington the wrong way. Sensing that GM was fast on its way to go kaput, the Obama administration had the good sense to push through some painful but imperative decisions. In quick time Wagoner was booted out and the doddering company was offered a lifeline in the form of government bailout funds after being put under bankruptcy court protection. GM - which hadn’t made a profit since 2004 - declared in its filing that it had $172 billion in debt and $82 billion in assets. Its market capitalisation, having plumbed the depths of investor confidence, stood at $2.21 billion in March 2009 when Wagoner departed. The value of GM stocks had cratered to $3.62 as against the trading levels of above $70 when Wagoner had joined as CEO in June of 2000.

Wagoner’s exit did not exactly move GM away from over the hump. Through the initial months of restructuring, the company became a revolving door for a succession of CEOs who drifted in and out without leaving any mark or making an impression. It was only after Daniel Akerson - GM’s fourth CEO in just under 18 months - arrived in September 2010 that the company once again rediscovered it automotive mojo and competitive gene. Since then the automaker, which had lost about $100 billion in the years before its 2009 bankruptcy, has been consistently profitable. In the latest quarter (Sept-Dec. 2011) for which results are available, GM made about $1.7 billion in profit, besides having already repaid $24.1 billion of the $49.5 billion in federal government aid it had received. But the biggest icing on the cake was that GM’s worldwide sales rose 7.6% to 9 million vehicles in 2011, helping the auto major to once again grab pole position as the world’s No. 1 car seller (a position it had ceded to Toyota in 2008). That’s surely a remarkable achievement for a carmaker that looked completely down in the dumps until two years ago.

The uptick in sales came about on the back of the strong showing by its flagship Chevrolet brand, which sold a record 4.8 million vehicles last year (even more than total sales of brands like Nissan and Honda). European carmaker Volkswagen was the second-largest seller of vehicles worldwide whose sales rose 14.3% to 8.2 million vehicles followed by the likes of Toyota, which expects its 2011 sales to come in at around 7.9 million vehicles, down about 6% from 2010. Analysts attribute GM’s recent swell performance to its strong US and China operations. Being the two biggest markets for carmakers today, GM has done well to wedge the China market open in its favour by collaborating with its local partner (SAIC Motor Corp), a strategy that has paid off handsomely. In 2011, GM sold more than 2.5 million vehicles in China, registering an 8.3% increase from the previous year. In its North American home market, GM clocked sales of over 2.5 million vehicles at a 13% growth trajectory last year.

According to Jeremy Anwyl, Vice Chairman of Edmunds, an automobile industry information website, GM was lucky to have come out of its bankruptcy and consequential restructuring at a time when global market conditions were once again turning favourable for the automobile industry. “The bankruptcy allowed GM to cut costs and fundamentally restructure its operations from a cost and incentives perspective. GM came into a growing market with a lean inventory and, at the same time, it introduced impressive new products such as the Chevy Cruze.” What also helped GM pip Toyota to the post was the fact that the Japanese car maker could not exploit the tailwind of growth and the resurgence in the global car market as it was badly kneecapped by supply-chain and production glitches at its plants, arising due to the double whammy of the tsunami and earthquake that struck Japan early last year.

But despite making the most of the opportunities in the past year, the real test of GM’s ability will be to consolidate and expand its market share without diluting its profitability. With Japanese car makers like Toyota and Honda emerging from the shadow of last year’s contretemps and players like Volkswagen and Ford stepping up on the throttle, can GM continue its alpha dog run in the industry? Already, Toyota has come out with its sales forecast of 8.48 million units for the current year, Volkswagen is pulling out all the stops to top the industry league tables by 2018 and Ford is on track taking its One Ford strategy to the next phase that might give it a fair shot at becoming market leader. In other words, GM is up against the most competitive automobile market in its history and its ability to continue delivering stellar results is bound to come under increasing strain. “Ford, VW and Hyundai are some of the toughest players there are and they lead by dint of their product line-ups. GM has to push harder to get ahead of the curve to compete head to head with these companies in all market segments globally,” says Laurie Harbour, President, Harbour Results, an industry analyst.



Posted by at No comments:
Labels: , , , , , , , , , , , ,
Subscribe to: Posts (Atom)