As, GM (GM) figures out what brands to sell, which ones to keep and which ones to just pull the plug on, you’d think the goal would be to consolidate the units that are the most profitable, while tossing the money losers.
But it sounds like the administration, seeing the world through green-coloured glasses, sees things differently. The Journal reports that GM is being pressured to dump its GMC light trucks business.
Why? Well sales are down, that’s certainly true. And as a maker of trucks and SUVs it’s one of the worst with respect to fuel efficiency and the environment.
But as the article notes, this is one of the company’s highest-margin lines. If you think the market for cars is going to stabilise and recover, GMC would likely be one of the company’s big sources of profit.
Bear in mind that part of the reason GM bet so heavily on SUVs and trucks during the last decade is because it had to. Its high labour course forced the company to put most of its chips on the highest margin vehicles it could produce. Those were trucks.
Conversely, green cars from the likes of Toyota and Honda — the ones we want to see Detroit make more of — aren’t even profitable yet, despite waiting lists at one point to get them.
The administration has a vision of an American auto industry that makes high-tech, fuel-efficient cars, with high profit margins and a bevy of American workers producing them. It’s a nice dream. But realistically, pushing the green thing to far, by taking away its most profitable units, threatens to derail the whole thing, while guaranteeing that the company remains on the public dole forever.
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