Employees of General Motors Corporation (NYSE: GM) got the bad news today that there are going to be another 2,000 layoffs coming at three of the company's car factories.
The struggling auto maker announced today that layoffs will be coming to its plants in Lordstown, Ohio; Orion Township, Mich.; and Oshawa, Ontario. The planned layoffs are scheduled to begin sometime in February.
It is no secret the company has been going through some tough times, and recently appealed to the government for some bailout assistance, and the root cause of these current layoffs is, of course, the slowing demand for the company's vehicles.
This is not the first time this year that GM has been forced to announce layoffs, and adds to the 11,000 factory jobs that were eliminated earlier in the year. The current 2,000 jobs represent 2.4% of the company's total North American blue-collar work force, which is currently employing 84,000 people. The Lordstown, Ohio news comes just one month after an announced layoff of 1,100 other jobs.
A lot is riding on the current hearings in Washington over a possible bail out for the auto industry. The big 3 are pushing for up to $34 billion to help keep their business's afloat, but there is still no decision made as to just how much, if any help, the industry is going to get from Uncle Sam.
A clear sign of just how bad things have gotten for GM came in its latest monthly sales figures, which showed that the company saw a massive 41% drop in year over year sales during November, and so far through the first 11 months of the year, sales have dropped by 22%.
The main culprits are the tightening credit lending by banks, economic slowdown, and shift in consumer habits away from the big heavy duty automobiles to smaller more fuel efficient cars that GM just does not have a strong market presence with just yet.
I was thinking about the auto industry last weekend. I am not the biggest football fan in the world, but I did find myself watching a game last weekend, and I was amazed at how many Ford Motor Company (NYSE: F) and GM commercials they were running during the game.
What really caught my attention was not the sheer number of advertisements, but the nature of the ads. It felt like every other ad was for either Ford or GM, and every single one of them was promoting their new generation of big trucks. I do believe the entire game was being sponsored by the new generation Ford F-10 pick up truck, and I really had to wonder, do these guys even get what is going on?
On the other had, the one or two Toyota Motor Company (NYSE: TM) commercials I saw were on the other end of the spectrum, and highlighting their fuel efficient, low cost smaller cars. Seeing the two different mentalities at work, I don't think it takes a genius to figure out where the overall problem is here.
But this weekend, as you find yourself on the couch in front of a football game, pay attention to the advertisements. See how many Ford and GM commercials you see, and look at what they are promoting. I think it will be an eye opener to the underlying problem the big 3 are currently dealing with.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
12-05-2008 @ 4:19PM
Ken said...
I think the point that the advertisements highlight the problems is an incredibly short-sighted and flawed point of view. Would you suggest that these companies do not advertise new generations of vehicles upon which they have spent hundreds of millions, and possibly billions, on R&D, capacity, and production? These new products are also the vehicles that they feel place them on parity with foreign imports - an entirely different problem in which they are accused of falling short. You can not cease advertising your profitable products and hope to return to profit. I wonder what kind of situation the Big 3 would be in right now had gas prices not tripled relative to this moment ($40).
http://WeAreOfMichigan.blogspot.com
12-05-2008 @ 5:06PM
ohiomom2 said...
The adds for the sporting events target a certain demographic, ie. SUV and truck drivers. Marketing research shows that is the demographic viewing the events. All automakers conduct market research and mold the commericals to that group. If you were watching another program the commercials would be different.
12-05-2008 @ 11:57PM
Jerry said...
You don't get it do you?
Form and Chevy only make money on trucks and SUVs.
Sports fans like trucks and SUVs - duh!
Next game check the parking lot for Prius and Fit and Versa versus trucks.
BUT that's also why Detroit is in trouble - Toyota and Nissan are eating into their truck business. Sayonara, Big 3.
12-06-2008 @ 1:41PM
gddewalt said...
the thing i can not understand is why gm makes exact duplicates in small trucks gmc sierra chevy silverado ? this to me allways seamed really stupid
12-06-2008 @ 6:46PM
mark said...
Where is the E-V- ONE ? ELECTRIC CAR?
THE CEO'S MAKING 20 PLUS MILLION A YR
& YOU CAN'T KEEP MAKING ANY PRODUCT IF THE PEOPLE AREN'T BUYING
RUST IN PEACE !!!!!!!!!
12-07-2008 @ 4:59AM
tw said...
Flexibility, imagination and sheer intelligence can guide a business through this depression. Detroit apparently lacks all three. The US needs the car companies, but not their bloated and blind management, nor their expensive unions and legacy costs. You can not compete unless you are competitive. The solution is located in Silicon Valley where the greatest technological minds reside and their ability to create alternative energy vehicles. Downsize Detroit immediately 40%, replace management, no bonuses, this is akin to trauma surgery or the big 3 will die.
12-07-2008 @ 6:33AM
Al said...
If the 400,000 uaw members took a $3/hr cut from $33 - $30/hr and the pensioners 600,000, took a $50 / mon cut from $3150/month to $3100/month, then walla - almost 4 BILLION in savings - immediately !! Why are we not asking for that ? Why is congress not asking them why they arent helping themselves ? people ? wake up. Heres a simple plan for those that want to save their jobs, yet theyre hands are out to you ? Suckers ! WOnt even help themselves !!! Sound familiar ? Its called Welfare ! Idiots ! THINK !
12-07-2008 @ 10:38PM
elaine said...
As A hummer H3 owner for the past few years I have repeatedly asked my dealership representatives WHAT exactly was GM going to do in regard to remodeling, redesign to make the Hummer brand a more fuel efficient "green" model type of vehicle, in response to the consumer climate. The answer I got, "Nothing." Production several months ago was going full steam ahead with absolutely no concern to the fact that gas prices were climbing steadily upward and their sales were falling. Senior management had it's head stuck in the clouds or "in their anatomy." it is disgraceful that GM has to lay off 2000 employees due the the lack of responsibility of irresponsible management who cannot even drive their own vehicle to a meeting to beg for billions of dollars for a bail out with no plan. Now it is fashionable for the CEO's of these failing auto companies to agree to work for a dollar, please, even at that they are overpaid!