GM Sees Light At the End of the Tunnel

With its purportedly aggressive plans for the Volt and the Coskata biofuels deal, these days we find ourselves in the somewhat awkward position of rooting for GM. The company has yet to return to profitability, but sees new signs of hope on the horizon amidst its attempts to scale up the production of biofuels and make electric cars available for mainstream consumption.
GM sounded a particularly cheery note on Thursday, saying that increased cost reductions would soon lead to substantially improved financial results, although probably not in 2008. CEO Richard Wagoner told analysts that this year could be tough because of “weak U.S. auto industry sales, high fuel prices, high commodity and steel prices, and mounting regulatory requirements.”
But there are other, internal reasons for the company’s troubles, too. First, they were exposed to the housing market disaster through GMAC Financial. And second — and this is the real biggie — they got caught red-handed trying to sell huge, gas-guzzling cars and trucks to an American public facing down $3-a-gallon gasoline. The company feigns surprise in this Wall Street Journal article, but who didn’t see more expensive gasoline and the attendant consumer response coming?

The real bright spot for the company is its deal with the United Auto Workers, which could save them $5 billion, if enough workers accept retiring early to be replaced by hourly workers who will make about half as much money as the old guard.
Of course that has little to do with riding the green wave, spending on biofuels or promises of the Volt. But we’ll still give them some props, as GM isn’t betting on “toys”, a.k.a. Vinod Khosla’s term for parallel hybrids like the Prius. The company is taking its time figuring out a more complex series hybrid, with the Volt set to come out in 2010.
Better late than never, we figure. But the bottom line is that the company remains firmly in the red and its return to profitability, at least in the short term, won’t depend on being green.