DETROIT - It's a stark contrast, all right. General Motors, which made its last annual profit in 2004, lost $6 billion in the first quarter of this year -- $5.9 billion if you discount one of those pesky "special items" - and not as bad as analysts expected, according to Bloomberg. And BMW, once known as the most profitable full-line automaker -- there are no profitable full-line automakers now -- lost 55 million euro, equal to $73.7 million U.S. The biggest difference is that GM burned through $10.2 billion in Q1 '09, versus $3.1 billion in Q1 '08, according to its Security and Exchange Commission (SEC) filing.
CEO and President Fritz Henderson said that bankruptcy rumors have already hurt GM's sales. They're worse than other major automakers, even though nobody is buying cars or trucks. Still, GM has been slower than, say, Ford Motor Company in shifting emphasis from once highly profitable large SUVs and trucks to cars and crossovers. GM's gross revenue from cars and trucks last quarter was just $22.4 billion, down from $42.4 billion in Q1 '08. GM's net loss on automotive operations was $3.9 billion in the last quarter.
"Our level of debt has increased dramatically," GM Chief Financial Officer Ray Young said Thursday morning, and that has resulted in higher interest payments.
Even as it cuts and tries to sell off brands, cuts models, production and employees, it's in a race against itself to downsize almost to a Chrysler-size company before it has to file Chapter 11 reorganization June 1. GM said it needed another $2.6 billion in federal loans to get through May. It's quickly cutting fixed costs, and the elimination of the United Auto Workers' job bank makes it possible for the automaker to actually save money when it closes a factory. But these are extreme cuts. GM's Q1 '09 production was off a whopping 47 percent compared with Q1 '08.
Young coined a new term; he said that cutting cost-structure and inventory stock is "de-risking" the company. This was in response to a question about selling Opel/Vauxhall - whomever invests in GM Europe "has great incentive to make sure we have collaboration" on platforms like the Opel Insignia/'10 Buick LaCrosse Epsilon II platform.
BMW's 55-million-euro loss before taxes compares with a first quarter '08 profit of 827 million euro. Still, BMW had positive cashflow of 220 million euro, or $295 million in the quarter, and has the equivalent of $13.44 billion cash on hand. BMW has the kind of cash that GM lacks for developing future product. Perhaps I should have said that the General is shrinking to a BMW-sized automaker. That won't work, if you compare profit margins on a Chevy Cruze to the margins on a BMW 3 Series.
Downsizing GM's European and South American markets won't help, even as it continues to grow in China. Young said Thursday that GM's global market share fell to 11.2 percent in the first quarter, down 1.2 points, while in the burgeoning Chinese market, its share is up 1.2 points, to 13.7 percent.
Since my last blog post questioning the intelligence of selling off Opel/Vauxhall, possibly to Fiat, there have been reports that GM wants to hold on to 40 percent of the Anglo-Saxon automaker, not 20 percent as Fiat Auto's Sergio Marchionne has apparently suggested.
Meanwhile, Marchionne is quoted in a Bloomberg interview as saying he expects to become CEO of the New Chrysler, and that he's interested in buying Saab from GM. "We could combine Saab with another brand. In the U.S., there's a Saab dealership network. It would be a pity to give that up," Marchionne said.
Uh, well, Saab already is "combined" with other brands; its bread-and-butter 9-3 is on the Epsilon I platform (shared with the Pontiac G6, for one). Its next 9-5 will be on Epsilon II and the 9-4x will share its Epsilon-Theta hybrid platform with the '10 Cadillac SRX. Young said Thursday that development of the two new Saabs continues under GM. Problem is, you can't significantly grow the Saab brand without alienating its loyal customers, who like quirky exclusivity. And Saab and Volvo's Swedish factories are among the costliest in the world.
Some have suggested that what Marchionne is doing is driving up the sale price of Opel/Vauxhall and Saab. GM insists that it has 10 potential buyers for Saab, it has at least three for Hummer and may be able to sell the Saturn distribution channel, as well.
The best thing that could happen would be that in a constricted automotive market, Sergio Marchionne might be presiding over establishment of a GM-Fiat-Chrysler alliance. Ironic, in that GM rejected the opportunity to buy Chrysler last year (and a good thing it did).
The worst that could happen is that Fiat, which has found relatively modest success only in the past three to five years, tries to preside over Chrysler and GM Europe the way Daimler presided over Chrysler for nine long years.
On the other hand, if Marchionne turns out to be some sort of visionary, he could push GM into radical thinking way beyond the desperation of its sudden move to cut models, brands, production and global depth.