General Motors shares are dropping again today as January sales figures disappointed Wall Street. Sales for the month fell 11.9% from a year ago with weakness across the board. The news follows last week’s announcement that GM has now dropped to number three in global sales, being surpassed by both Toyota and Volkswagen.
The bad news at GM comes amidst continued political hype for the company. GM CEO, Mary Barra was a guest of honor at President Obama’s State of the Union address last week. Ms. Barra may want to start focusing on the continuing problems at GM instead of politics. Her Obama-appointed predecessors had maintained a strategy that was more concerned with appearances and political correctness than on profitability and sales growth, which has led to the company losing market share both domestically and globally.
GM’s news release for January’s poor sales performance had the same old flavor. GM products are winning awards and the company is spending lots of money on advertising seem to be the two positives from the release. It amazes me that the GM leadership still hasn’t learned that awards from cronies in the auto field do not result in increased sales if they do not build products that offer the best value. An example of that would be the Chevy Volt, which was consistently winning awards but did not have mainstream appeal. The much-hyped vehicle may have been President Obama’s favorite car, but American consumers did not share his infatuation with the Volt, which has become the electric version of the Ford Edsel.
The main difference between the Edsel and the Volt is that Ford knew when it was time to call it quits with their loser. GM refuses to admit that the Volt is a failure, despite the most recent evidence surfacing from January’s sales report. The Volt sold only 918 units in January. And that comes after GM reduced the price last year by $5,000. Taxpayers pitch in to try and save the floundering Volt as well, with a $7,500 federal tax credit (in addition to state subsidies) going to each affluent buyer of the car.
To further exemplify how the political goal of forcing electric cars on the public has led to inept management at GM, the company is doubling down on the Volt technology, now thinking that charging twice as much for a Cadillac version (the ELR) of the car will help the green cause. Shareholders should hope that Ms. Barra can overcome the objections of the remaining Obama-appointed board members at GM and start making more logical decisions.
The focus on money-losing electric cars may also have hurt GM where it counts most. The most profitable segment of sales, trucks, also suffered during January. Most disturbingly for GM shareholders, the “award winning” Chevy Silverado saw sales plummet 18.4% from last year. GM’s entry in the best selling midsize category, the struggling Chevy Malibu, did even worse, losing 25.3% from last year.
GM share price has dropped to about $35 and change at the time of this article. That is a decrease of approximately 20% since GM management (and Obama cronies) hyped the company’s potential, boasting of a “fortress” balance sheet as they announced a dividend in an attempt to reassure investors that the company is doing just great.
The curious timing of GM’s dividend announcement only further lowers the credibility of GM management. Worst of all, it appears that the dividend hype was designed to fool small investors, as the smart money knew better than to jump in on the hype. The stock performance of GM is the best indicator of how bright the company’s prospects are.
Mary Barra has a tough job ahead of her. For the sake of GM shareholders, she should acknowledge the obvious; which is that the company needs to stop the crappy politics along with the crappy car offerings. GM will not succeed if they are counting on worthless awards, political correctness and a huge ad spending campaign to drive sales.
Mark Modica is an NLPC Associate Fellow.