News From the Auto Industry

This ain’t the old General Motors anymore. It’s beginning to show more than just spots of brilliance. Still, it has a way to go and earned an overall B grade by boosting its quality, profit per unit and return on sales numbers. GM Chairman Jack Smith has said GM has rounded the comer and the 1997 results tend to prove him tight

Even Rick Wagoner, the company’s youthful and energetic CEO, has failed to stop the rot. In fact he’s contributed to the problems, having been a prime mover in the disastrous failed alliance with Fiat that cost GM $2bn earlier this year.

The company is haemorrhaging money. It reported a net cash outflow of $3bn (pounds 1.57bn) from its automotive business in the first quarter of 2005, despite earlier forecasting a positive cashflow of $2bn for the year. Now it won’t give any forecasts at all.

At least GM has made positive steps elsewhere. Wagoner swallowed his pride and paid Fiat $2bn to get out of a deal signed in 2000 that could have seen GM forced into buying Fiat’s ailing car division (and taking on $6bn of debt), but the company has gained from this potentially disasterous situation. The big bonus is that GM now has access to Fiat’s excellent diesel technology ” something that it, unforgivably, lacked. Quite how GM Europe’s product planners didn’t notice that every other car sold on the Continent was a diesel simply beggars belief, and gives an indication of how deep-rooted was the malaise within the company’s European division.