"In North America the alignment activities we have under way is the right way to go," he said, referring to GM's announcement two weeks ago that it would group its brands under four retail channels effective June 1 and consolidate sales under four marketing chiefs. He said GM has "direct experience" cutting brands and learned how expensive and "painful" it was when it eliminated Oldsmobile earlier this decade.
GMAC drags down earnings
The CFO's comments came during his discussion of GM's first-quarter results. The company reported a global first-quarter net loss of $3.3 billion with special items vs. a net loss from continuing operations of $42 million a year ago. The auto giant said it took a $1.45 billion special, non-cash charge in the quarter for the change in the value of its 49% stake in its former wholly owned GMAC financial arm.
GM's auto operations posted positive results in three of its four regions worldwide, with North America remaining the laggard. GM's North American auto operations posted a $611 million adjusted pre-tax loss for the first three months of 2008 compared with a $269 million adjusted pre-tax loss a year ago. The automaker reported lost production of 100,000 new vehicles in the U.S. as a result of the ongoing strike at supplier American Axle, saying the labor action affected earnings in the quarter by an estimated $800 million. A softer U.S. market was another factor the company cited as a drain on its bottom line.
"A $600 million loss in North America is not acceptable," Mr. Young said. He said GM's U.S. launch products continue to be strong, although the company is struggling as consumers move from trucks to cars. Mr. Young said average transaction prices on two recently launched new cars, the latest Chevrolet Malibu sedan and redone Cadillac CTS sedan, have risen by about $4,000 and more than $8,000, respectively.
Slipping at home, growing overseas
The company reported its North American market share slid to 21.7% in the first quarter vs. 22.5% a year ago. With North America, GM's global market share slipped by 0.5% to 12.5%; without North America, GM's share grew by 0.1% to 9.6%.
Mr. Young said GM plans to beef up its activities overseas. GM will put "our foot on the accelerator ... and jam it to the floor" to try to expand capacity in emerging markets such as Russia and India. "We see no slacking" in GM's volume and revenue growth in the second period overseas, especially in those emerging markets, said Mr. Young.