When GM went broke four years ago, not many gave it a chance to come back from rehab. Those Cassandras are now eating their words as the lumbering giant strikes back with a vengeance.
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. 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. “GM has to push harder to get ahead of the curve to compete head to head with other companies in all market segments globally,” says Laurie Harbour, President, Harbour Results, an industry analyst.
But after clawing its way to the top the hard way, GM is not likely to give ground either. The company made $8 billion in profits last year (a record high!). In fact, it is planning to raise its profit margins from 6% last year to 10% this year (on par with its best-in-class rivals such as Hyundai and BMW). It is expected that this move will help GM to post $10 billion in profits in the current year. However, one irritant is its share price, which even after such a bullish forecast, is still hovering around the $25 mark. For the investors to recover all their money, GM’s share price should reach $53 (which is still a distant dream for the company). Another nettlesome issue is GM’s European business, which continues to haemorrhage copius red ink. The carmaker took a hit of $580 million in losses in the first nine months of 2011, and fourth-quarter results, whose announcement was being awaited when this story went into print, were expected to come in even worse.
Despite the odds, GM will continue to be the market leader this year as well. Toyota’s 8.48 million units sales forecast for this year will just be good enough to make it second best. But although GM sales are growing globally, the company will need to focus beyond sales numbers to improving its overall financial health. To avoid any kind of financial let-down in future, GM needs to beef up its profitability and pump more growth in the markets it operates in. To its credit it has been making serious efforts to amplify its product range with fresh line-ups and models. Last year it turned out new small cars and mainstream SUVs. Now GM is focusing on strengthening its roster of higher-profit, luxury models for its Buick and Cadillac divisions.
With sales on a rebound and with new products to offer, GM can look forward to keeping its competitive metabolism cranked up.
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. 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. “GM has to push harder to get ahead of the curve to compete head to head with other companies in all market segments globally,” says Laurie Harbour, President, Harbour Results, an industry analyst.
But after clawing its way to the top the hard way, GM is not likely to give ground either. The company made $8 billion in profits last year (a record high!). In fact, it is planning to raise its profit margins from 6% last year to 10% this year (on par with its best-in-class rivals such as Hyundai and BMW). It is expected that this move will help GM to post $10 billion in profits in the current year. However, one irritant is its share price, which even after such a bullish forecast, is still hovering around the $25 mark. For the investors to recover all their money, GM’s share price should reach $53 (which is still a distant dream for the company). Another nettlesome issue is GM’s European business, which continues to haemorrhage copius red ink. The carmaker took a hit of $580 million in losses in the first nine months of 2011, and fourth-quarter results, whose announcement was being awaited when this story went into print, were expected to come in even worse.
Despite the odds, GM will continue to be the market leader this year as well. Toyota’s 8.48 million units sales forecast for this year will just be good enough to make it second best. But although GM sales are growing globally, the company will need to focus beyond sales numbers to improving its overall financial health. To avoid any kind of financial let-down in future, GM needs to beef up its profitability and pump more growth in the markets it operates in. To its credit it has been making serious efforts to amplify its product range with fresh line-ups and models. Last year it turned out new small cars and mainstream SUVs. Now GM is focusing on strengthening its roster of higher-profit, luxury models for its Buick and Cadillac divisions.
With sales on a rebound and with new products to offer, GM can look forward to keeping its competitive metabolism cranked up.
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