GM cuts pick-up and SUV production

Posted Apr 29th 2008 3:40AM by Douglas McIntyre
Filed under: Forecasts, Industry, Ford Motor (F), General Motors (GM)

What is going on in Detroit? Ford (NYSE:F) came out with good earnings last week. The stock spiked up. Then a Wall Street analyst said the car company was overvalued and the shares sold off. A day later, Kirk Kerkorian made a tender offer for 20 million shares at a price above the market. Up went Ford's share again.

It may say more about the car industry that GM (NYSE:GM) sharply cut production of SUVs and pick-ups. The Big Three make large profit margins on these vehicles but, with gas price high and discretionary income low, no one is buying them. According to The Wall Street Journal, "The move will reduce by 88,000 the number of pickup trucks GM had planned to produce this year, and lower by 50,000 the number of SUVs it had planned to build."

As part of the cutback 3,500 people will be laid off.

The Ford action may have been fun to watch but the move by GM indicates that the car industry has many quarters to go before things get better, especially in the US market. GM and Ford could lose money well into 2009. If the market does not improve that is an optimistic guess.

The layoffs say that Ford and GM may now be overpriced. Ford is up near its 52-week high, trading at $8.21. At $21.94, GM is not doing well.

Anyone who thinks that there is a lot of money to be made is these stock is badly mistaken.

Douglas A. McIntyre is an editor at 247wallst.com and writes the Ten Stocks Under $10 Letter.

Tags: F, GM, inthenews

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Reader Comments (Page 1 of 1)

5-29-2008 @ 12:28AM

Picasso said...

ALL car companies will feel the car crunch, the worse is yet to come as nobody now wants to own a new SUV or even buy one used at a low price simply because having one means filling up more at gas pump and an average SUV takes about $120 to fill up. That's $300 weekly or $500 or more monthly- that's a seconf car not attached with an SUV or truck. No thanks, am going to sell my car next year and buy me a homemade EV car from someone who converts gas guzzlers to electric ones and seels them at a reasonable price around $5,000 to $10,000 but the car will pay for itself that first year of NEVER again going to the pump. Car dealers do not have a clue whats coming... We The People are fed up with high priced cars with low and poor gas mileage cars that only thing their good for is pulluting the planet. People are going to start ordering Do-It-Yourself kits to convert their current car to a green car all electric and it's already hapenning now. Car dealers either start being honest and fair or all go bankrupt and fast within next two years.