GM: posts record net income of $7.6 billion in 2011

Partners with PSA for joint purchasing and co-developing platforms

2012/03/30

Summary

 In 2011, GM sold 9.03 million vehicles worldwide and has regained the title of the world's top-selling car maker for the first time in four years. The car maker also improved profitability in its business in North America and posted a new record of consolidated net income (USD7.6 billion) for the first time in 14 years since 1997.

 Although its performance is improving, GM announced two plans in order to further enhance management efficiency.

 In August 2011, the car maker announced its intention to improve the efficiency of development, investment, and production, saying that it will build a structure in which it continues to yield high profitability stably in the long run. Focusing on the long term, GM will continually invest a certain amount every year without being influenced by economic fluctuations and will build a structure in which it begins to cooperate with main suppliers at an early stage of development. It will also halve both the number of platforms and types of engines in about 10 years, thus improving management efficiency.

 In February 2012, the car maker announced that it would take a 7% stake in PSA and will form a comprehensive alliance including joint procurement of parts and joint development of platforms. It will rebuild its business in Europe, which runs a persistent deficit, and will also cooperate on a global scale, thus producing a synergy effect of USD2 billion a year.

 In its model plan, GM introduced fuel-efficient small passenger cars including Chevrolet Cruze/Sonic for the last two to three years, and will introduce models such as the Malibu new midsize passenger car and the Spark mini car in 2012 in order to further increase sales.

 Concerning the introduction of electric vehicles, GM launched the Chevrolet Volt plug-in hybrid vehicle in November 2010 and its sister model, Opel Ampera, in Europe in February 2012. The car maker will increase the number of models that use "eAssist" mild-hybrid system, planning to sell about 70,000 vehicles equipped with the system in 2013.

Related reports:  New regulations on fuel economy in U.S. and compliance plans among OEMs (2) (November 2011)
GM Europe (January 2012)


GM sold 9.03 million vehicles in 2011, becoming the world's top-selling car maker for the first time in four years

 In 2011, GM sold 9.03 million vehicles worldwide, exceeding VW (8.27 million) and Toyota (7.95 million, Toyota had been the top-selling car maker for three consecutive years), to become the world's top-selling car maker for the first time in four years.

 GM's global sales grew by 641,000 units from 2010. Among the regions, sales volume in North America increased by 299,000 units from 2.625 million to 2.924 million. The GMIO's sales in emerging markets excluding South America grew by 230,000 units (including 225,000 in China) from 3.072 million to 3.302 million.

GM's Vehicle Sales

(units in thousands)
2007 2008 2009 2010 2011
Old GM Old GM Old GM +
New GM
New GM
GMNA
(North America)
United States
Canada, Mexico and other
3,867
649
2,981
583
2,084
400
2,215
410
2,504
420
Total 4,516 3,564 2,484 2,625 2,924
GME (Europe) 2,182 2,041 1,668 1,663 1,735
GMIO
(International
operations)
Total 2,672 2,751 2,453 3,072 3,302
thereof: China 1,824 2,348 2,573
GMSA (South America) 872 1,025 1,065
Total Worldwide 9,370 8,356 7,477 8,385 9,026
Source: GM's Financial Results 2011
(Note) 1. Sales volume in China is the total of three joint ventures - SGM (Shanghai GM, GM owns 49%), SGMW (Shanghai-GM-Wuling, GM owns 44%), and FAW-GM(FAW-GM Light Commercial Vehicle, GM owns 50%). The figures include 1.15 million in 2010 and 1.19 million of vehicles under the Wuling brand.
2. GM plans to double sales in China to 5 million units by 2015.

 



GM: posts a record net profit of USD7.6 billion in 2011

 In 2011, GM's revenues increased by 10.8% to USD150.3 billion. The car maker reported a net profit of USD7.6 billion, securing overall profit for the two consecutive years. It posted a new record profit for the first time in 14 years since 1997 (net profit of USD6.7 billion).

 The consolidated EBIT-adjusted is USD8.3 billion, of which North America accounted for USD7.2 billion; GM's profit is largely dependent on North America. The GMIO(General Motors International Operations), which is in charge of emerging countries except for South America, sold 3.302 million in 2011, which exceeds sales volume in North America of 2.924 million, but registered EBIT-adjusted of only USD1.9 billion (In addition, GM posted an equity income (net of tax) of USD1.3 billion from joint ventures in China and India, which is included in the consolidated net income).

 The GME (GM Europe) posted a loss of USD750 million and the GMSA (GM South America) a loss of USD120 million.

 GM says that it will aggressively introduce new models in the future and will increase market share globally to boost revenues and will also continue to make efforts on lowering the break-even point in its business in Europe and South America. In 2012, GM plans to invest about USD8 billion mainly in the development of products and technology (USD6.2 billion in 2010 and USD4.2 billion in 2009).

GM: registers a record net profit of USD7.6 billion in 2011

(in millions of dollars)
Old GM New GM
2008 January 1
through
July. 9, 2009
July 10 through
December 31,
2009
2010 2011
Net sales and revenue 148,979 47,115 57,474 135,592 150,276
Operating income (loss) (21,230) (16,095) (4,863) 5,108 5,656
Reorganization gains, net(Note 2) 128,155
Net income (loss) (30,943) 109,118 (4,428) 4,668 7,585
Source: GM's Financial Results 2011
(Note) 1. New GM started on July 10, 2009, upon the completion of bankruptcy proceedings.
2. Reorganization gains are extraordinary profit that was registered between January 1 and July 9, 2009 as the debt was reduced in the proceedings of Chapter 11 in the court.

 

GM's net sales and EBIT-adjusted by operating segment in 2010-2011

(in millions of dollars)
2010 2011
Total Net Sales
and Revenue
GMNA (North America)
GME((Europe)
GMIO (International operations)(Note 1)
GMSA (South America)
GM Financial
83,035
24,076
20,561
15,379
281
90,233
26,757
24,761
16,877
1,410
Corporate & elimination (7,740) (9,762)
Sales & Revenue 135,592 150,276
EBIT-adjusted
(Earnings before
Interest and Taxes)
GMNA
GME
GMIO
GMSA
GM Financial
5,688
(1,953)
2,262
818
129
7,194
(747)
1,897
(122)
622
Corporate & elimination 86 (540)
EBIT-adjusted 7,030 8,304
Operating income 5,108 5,656
Net income 4,668 7,585
Source: GM's Financial Results 2011, SEC Filing (10-K) 2012.2.27
(Note) 1-1. GMIO(GM International Operations) is in charge of all regions other than Europe and Americas, including Russia and Uzbekistan. It is headquartered in Shanghai.
1-2. Since the joint venture companies in China and India, which account for 70% of GMIO's sales volume, are equity method affiliates, their revenues and operating income are not consolidated but equity income (USD1.3 billion, net of tax, in 2011) is posted and reflected in the consolidated net income.
2-1. GM's business in North America (including Mexico) regained profitability remarkably due to reasons including the concession of UAW in 2007 and 2009, reduction of debt through application of Chapter 11 bankruptcy procedures, favorable sales of new models including the Chevrolet Cruze, increase in selling price, and a sufficient amount of money spent on the advertising of each brand as the car maker has reduced the number of brands from eight to four.
2-2. In the labor contract with UAW in 2009, the two-tier wage system has been introduced at the US plants of the Detroit 3. At the Orion Township vehicle plant in Michigan, which produces the Chevrolet Sonic subcompact car, the hourly wage of the current GM employees is USD57 including benefit and US33 for new employees. In addition, employees of suppliers, whose hourly wage is USD20, set parts to be assembled for each vehicle, which also improves efficiency of operations.
2-3. Through this reduction of labor cost and streamlining of work, production of subcompact cars, which was considered impossible in the US, has been made possible. The Orion Township plant is considered to be a laboratory for reduction of production cost in North America.

 



In August 2011, GM announces its intention to improve efficiency of development and production

 In August 2011, at the 2011 Global Business Conference, which was held for investors and analysts, GM announced its intention to improve efficiency of development, investment, and production. It says that it will build a structure in which it continues to yield high profitability stably in the long term.

 So far, GM's development and investment plan is not consistent and cost of churn for capital is estimated at up to USD1 billion a year; it intends to continue to invest a certain amount without being influenced by economic fluctuations from the long-term view. The car maker also says that it will build a cooperative structure with major suppliers, in which they will start cooperation at an early stage of development.

GM makes its development and investment consistent and also improves its relationship with suppliers

Consistent
development and
investment to
improve efficiency
 GM says that it has so far wasted up to USD1 billion a year due to the confusion caused by discontinuation of projects, changes at late stages, and changes in development centers in charge. In addition, the amount of investment has not been stable because of economic fluctuations. GM will continue to invest a certain amount annually in the future under a long-term plan in order to improve efficiency of investment.
 In the current development structure, it is very difficult to develop excellent products. In addition, because of significant improvement of financial conditions through the application of Chapter 11 bankruptcy, GM is able to adopt this development structure.
Improvement of
relationship with
suppliers (Note)
 Suppliers have so far given GM a low score, almost at the bottom of major OEMs, for OEM-Supplier working relations. GM but says that it will change its current practice (Note 2) to build a new reliable relationship.
 GM will have suppliers participate in development at an early stage and aggressively accept their opinions in order to jointly develop products. The car maker pays premium for new technologies that are provided earlier (even half a year) than other car makers. It has also introduced a system in which it promises to order parts to be used in a new model from suppliers that propose excellent technology or cost reduction measures.
Source: GM's 2011 Global Business Conference (2011.8.9), Automotive News 2011.8.15
(Note) 1. GM deals directly with about 3,200 suppliers in 35 countries worldwide. They deal with 191,000 types of parts. The amount of direct procurement is worth USD77 billion.
2. GM says that there have been problems in its business practice. Suppliers often commented: "GM determines specifications without discussing with suppliers"; "GM changes specifications after the contract is concluded and before production begins"; and "GM's schedules are unclear and may change".

 

GM produces 90% of global production based on 14 Core architectures in 2018

 GM will cut the number of platforms (that GM dubs Architecture), which are the base for development, by 50% from 30 in 2010 to 14 in 2018. In 2015, the car maker plans to manufacture more than half of its global production in the flexible network of production facilities at major regions worldwide through sharing of Core architectures and through mutually complementary operations. GM says that 90% of its global production in 2018 will be based on the 14 core architectures.

 The number of platforms for engines will be cut by 50% from about 20 in 2009 to about 10 within 10 years.

GM will halve the number of Architectures by 2018

2010 2014 2018
The number of Architectures 30 24 14
thereof: Core architecture 8 13 14
Ratio of volume on Core architecture 31% 62% 90%

Source: GM's 2011 Global Business Conference (2011.8.9), Automotive News 2011.8.15
(Note) GM classifies its current architectures into Core architectures and Regional architectures. By increasing the number of Core architectures, it plans to eliminate Regional architectures.


 Although the capacity utilization (2 shifts, regular working hours) of its vehicle plants in North America is close to 100%, GM, saying that it can meet the demand even if the US industry volume recovers to the 16 million-mark, announced that it would enhance production capacity mainly in Low Cost Countries in the future.

GM improves efficiency of its production in North America while it enhances production capacity in Low Cost Countries

 GM improved the capacity utilization (2 shifts, regular working hours)of its vehicle plants in North America from 48.0% in 2009 and 89.5% in 2010 to 97.2% in 2011. Even if the light vehicle market in the US recovers to the 16 million-mark, the utilization ratio can be increased up to 133% with the third shift introduced. This allows GM to produce a sufficient number of vehicles to maintain its market share. By adding overtime work, the ratio will be further increased to as high as 150%.
 GM conducts 80% of the 2011-2015 enhancement of production capacity in "Low Cost Countries". Among such countries, the car maker plans to boost the production capacity in BRIC nations by 45% from the current capacity.
Source: GM's 2011 Global Business Conference (2011.8.9), Automotive News 2011.8.15
(Note) 1. In 2010, GM cut production capacity for vehicles in North America by 1.5 million units from 2005.
2. The total labor cost for hourly employees in the US was cut by USD11 billion from 2005.

 



At the end of February 2012, GM takes a 7% stake in PSA, forming a global alliance

 At the end of February 2012, GM reached an agreement with PSA that it would take a 7% stake in PSA and form a global alliance. The two companies will leverage combined scale and strength, aiming to produce a synergy effect of USD2 billion within five years.

 The two companies will establish a joint venture company for joint purchasing of parts. They will also jointly develop platforms, planning to produce up to about 4 million vehicles a year based on the platform that they will co-develop starting in 2016.

In February 2012, GM and PSA form Global Alliance

Objective  Through a long-term, comprehensive global alliance, to improve profitability of the two car makers and to enhance their competitiveness in Europe.
Financing  PSA raises 1 billion Euros through capital increase for strategic investment.
 GM undertakes some of the capital increase to take a 7% stake in PSA and becomes the second largest shareholder after the founding family of Peugeot. Yet, the two companies will continue to produce and sell their products independently.
Framework
of alliance
1. To focus mainly on small and midsize passenger cars, MPVs, and crossovers. At the outset, to promote sharing of platforms, parts and modules of B-segment vehicles (2.3 million units) and D-segment vehicles (1.6 million units) and to release a new model based on a platform that the car makers share by 2016.
2. To establish a global purchasing joint venture. The financial amount of the two car makers' procurement of parts and service is about USD125 billion a year. Their total sales volume, which significantly exceeds that of next closest OEM, is the basis for the synergy effect.
Synergy effect  The synergy effect may be limited for the first one to two years. Yet, with the progress of a new-vehicle program, the effect will increase and is expected to be USD2 billion annually within five years. The synergy effect will be shared equally between the two car makers.
Source: Two companies' joint press release 2012.2.29
(Note) 1. Sales volume of passenger cars in Europe (27 EU countries + 3 EFTA countries) peaked at 16 million in 2007 and continued to decline for the four consecutive years to 13.57 million in 2011. During the same period, GM's sales volume fell from 1.65 million to 1.17 million, while PSA's sales volume declined from 2.05 million to 1.68 million (data from ACEA).
2-1. As a result, the two car makers' business in Europe is slumping. GME (GM Europe) registered EBIT-adjusted loss of USD1.95 billion in 2010 and USD750 million in 2011. GM says that it takes one to two years to move into the black in its business in Europe and is reported to be considering a large-scale restructuring including plant closure.
2-2. PSA announced a plan to cut costs by 800 million Euros in 2012 including reduction of 3,500 employees in Europe (announced in October 2011).

 



Model plan: GM launches small cars in 2010-2012 and full-size trucks in 2013

 GM will introduce small cars that improve fuel efficiency between 2010 and the beginning of 2013. It sold 231,732 units of Chevrolet Cruze compact car in the US in 2011, which it had released in November 2010.

 In 2012, GM will launch a new model of its mainstream midsize sedan, Chevrolet Malibu (204,808 units were sold in the US in 2011), and Chevrolet Spark mini car. GM says that, with the launch of the Spark, it will complete a lineup of fuel efficient vehicles.

 In 2013, it will start marketing of new full-size pickups and new SUVs.

GM's Model Plan (2011-2013)

(* indicates small cars (compact, subcompact and mini car class)
2011 2012 2013
Chevrolet *Sonic (replaces Aveo) *Spark (mini car), New Malibu New Impala, Corvette, Tahoe,
Suburban, Silverado
Cadillac XTS, *ATS New CTS, Escalade,
Large Crossover
Buick *Verano *Encore
GMC New Yukon, Sierra

 

GM: aggressively introduces small cars

Release
year
Model Summary
2010 Chevrolet
Cruze
 The Chevrolet Cruze is a compact 4-door sedan that was launched in November 2010. The car maker sold 231,732 units in the US in 2011. The model is the top-selling small car in the US following Toyota Corolla (240,259 units).
2011 Chevrolet
Sonic
 The Chevrolet Sonic is a subcompact car; a sedan and a hatchback are developed. In the summer of 2011, production began at the Orion Township plant, in Michigan, USA. The car maker plans to produce about 80,000 units a year.
Buick
Verano
 The Buick Verano is a compact car that shares the Delta platform with the Chevrolet Cruze. The model is produced at the Orion Township plant in Michigan, which also manufactures the Sonic. The model was released in November 2011.
2012 Chevrolet
Spark
 The Chevrolet Spark is a sister model of Daewoo Matiz. The model is a mini car that comes with a 4-cylinder 1200cc engine. It is produced in Korea and is exported to the US. The model will be released in the middle of 2012.
Cadillac ATS  A compact 4-door sedan of the Cadillac ATS, which is based on the rear-wheel-drive Alpha platform, will be released in the summer of 2012. The car maker is expected to introduce a coupe and a convertible. The Cadillac ATS competes with BMW 3 Series.
Early 2013 Buick
Encore
 The Buick Encore is a 5-seat compact crossover vehicle. The model is developed based on the Gamma platform. It is scheduled to be launched at the beginning of 2013. The model competes with Audi A3 and Acura RDX.

Source: Automotive News 2011.7.25/2011.9.26/2012.1.30
(Note) GM was said to launch GMC Granite concept in 2013MY, which had been exhibited at the 2010 Detroit Auto Show, but is reported to have cancelled or postponed its release (January 2012).

 



Introduction of electric vehicles: GM starts marketing of Opel Ampera in Europe, increasing the adoption of eAssist system

 GM launched the Chevrolet Volt in November 2010 and sold 7,671 units in the US in 2011. The car maker is said to plan to sell 45,000 units in the US in 2012. Yet, it sold only about 1,600 units between January and February; it suspends production of the Volt for five weeks.

 GM will increase the usage of "eAssist" mild hybrid system. The car maker made it available in the Buick LaCrosse/Regal in 2011 and introduced an ECO version of the Chevrolet Malibu with eAssist in February 2012. It expects that 20 to 30% of the customers that purchase each model choose eAssist and that it will sell about 70,000 vehicles with eAssist in 2013.

 GM is expected to make available the four-mode hybrid system, which is an upgraded version of the current two-mode hybrid system, in full-size pickups and SUVs to be launched in 2013.

 GM will also launch Chevrolet Sail EV in 2012, which it jointly develops with Shanghai Automotive, and Chevrolet Spark EV in 2013.

GM's plan to introduce electric vehicles

Chevrolet Volt
(Plug-in Hybrid)
 In November 2010, GM started marketing of Chevrolet Volt Plug-in Hybrid. The car maker sold 7,671 units in the US in 2011. It was said to plan to sell 45,000 units in the US alone in 2012, but sold only 1,626 units between January and February. GM has inventory of almost 6,300 units of the Volt at the end of February and suspends production of the model for five weeks starting on March 19.
Opel Ampera  In February 2012, GM Europe delivered the first of Opel Ampera, which is a sister model of the Volt. The car maker announced that it had won orders for about 6,000 units as of February 21.
"eAssist"
(Mild Hybrid)
 GM says that eAssist costs a buyer about a quarter of what a conventional hybrid system costs but can deliver about half the added fuel savings. Concerning the Buick LaCrosse, which was launched in the fall of 2011, the price of the 4-cylinder 2400cc model with eAssist is the same as that of the V6 3600cc model, but GM expects that 20 to 30% of the customers choose the model with eAssist. The eAssist is available in the Buick Regal as an option; the price is USD2,000. In February 2012, the car maker released the New Malibu Eco(which comes with a 2400cc engine and eAssist).
Four-mode
Hybrid System
 GM is expected to use the four-mode Hybrid System, which is an upgraded version of the current two-mode Hybrid System, in full-size pickups and SUVs to be launched in 2013. The four-mode Hybrid System is said to improve fuel efficiency in various driving conditions and towing.
Chevrolet
Sail EV
 GM jointly develops with Shanghai Automotive and will start marketing of Chevrolet Sail EV in China in 2012. It is also pressing ahead with the plan to build a supply chain in China for core components including batteries and motors.
Chevrolet
Spark EV
 In 2013, GM will launch Chevrolet Spark EV. The car maker will initially sell the model in the US and then will market it globally. The model is equipped with a Li-ion battery supplied by A123 Systems and a motor that GM independently develops for the first time.

Source: GM's press releases 2012.1.5/2012.2.8/2012.2.21, Automotive News 2011.11.28/2011.12.12/2012.1.9
(Note) In August 2011, GM announced that it would jointly develop its future electric vehicle with Korea-based LG Group. The LG Group will participate in the development project at an early stage and supply batteries and related systems.

 

GM forms an alliance with Teijin, adopting CFRP in its mainstream vehicles

 In December 2011, GM reached an agreement with Teijin Limited on joint development of carbon fiber reinforced plastic (CFRP) parts. These parts can be molded within one minute and can be used in mainstream vehicles.

GM jointly develops carbon fiber reinforced plastics with Teijin, expecting to use CFRP parts in mainstream models in the future

 In December 2011, GM and Teijin reached an agreement on joint development of carbon fiber reinforced plastics (CFRP), which is made of thermoplastic materials. The current CFRP, which uses thermosetting resin, is not suitable for commercial vehicles because of the time needed for molding (it takes about five minutes at the shortest) and of productivity. In March 2011, Teijin developed the technology for molding thermoplastic CFRP within one minute, which allows the car maker to expect to use CFRP for mainstream models.
 Teijin will establish "Teijin Composites Application Center" as a center for joint development, which integrates functions for application development and marketing, in the northeastern United States and accept GM's engineers to press ahead with joint development. GM says that this project may become a game changer in the automotive industry.
 GM will adopt CFRP for components such as body frame, roof, and bonnet in vehicles that are priced at about several ten thousand dollars. The car maker is said to start operations of a production line that produces more than tens of thousands of units a year to launch a model that uses CFRP parts in 2015.

Source: GM's press releases 2011.8.25/2011.12.8, Teijin's press releases 2011.3.9/2011.12.9
(Note) CFRP stands for Carbon fiber reinforced plastic.

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