As General Motors Corp (GM) tackles one problem, it seems another one is always lurking around the corner.
At the North American International Auto Show on Tuesday, GM took the unprecedented step of lowering sticker prices on three-quarters of its US vehicles in an attempt to stem its market share losses. Dealers hailed the announcement, but the news hardly registered at a conference for auto analysts down the street, where a top aide to billionaire Kirk Kerkorian was outlining additional steps he believes GM needs to take to return to profitability.
Jerome York told the Society of Automotive Analysts that GM should consider cutting its annual US$2 per share dividend in half, which he estimated would save US$566 million a year. He also suggested cutting everyone's pay.
York said Kerkorian's private equity firm, Tracinda Corp, is interested in reacquiring the 12 million GM shares it sold in December for tax purposes and is willing to acquire an additional 12 million if it can get regulatory approval.
"We are optimistic that a path exists for GM to return to prosperity," York said.
GM slashes prices on most vehicles
GM was focused on its push to lower prices, which it said is a critical step toward weaning customers from costly incentives.
Mark LaNeve, vice president of sales and marketing for the world's biggest automaker, said the program will lower the manufacturer's suggested retail price by as much as US$2,500 on some vehicles, but the average decrease will be US$1,300. The new prices came into effect yesterday.
"We want it to be clear that with or without incentives you're getting a great price," LaNeve said.
GM will lower prices on all this year and next year Chevrolet, Buick and GMC vehicles and most Pontiac vehicles starting yesterday, LaNeve said. Saab, Saturn and Hummer will be excluded because GM feels they're already priced appropriately.
In all, the deal covers 57 of GM's 76 models. When the new pricing is combined with another price cut GM took on this year's models last fall, a total of 66 vehicles -- or 90 percent of GM's US volume -- have been repriced.
LaNeve said GM believes it will make money despite the markdowns because it has new products coming to market and it will be spending less per vehicle on incentives, which have sometimes topped US$4,000 per vehicle.
York said he hadn't calculated the cost of GM's announcement. The automaker's US sales dropped 5 percent last year, which contributed to a loss of US$4 billion in the first nine months of the year.
There is some danger GM could lower prices and vehicles still won't sell. But Chairman and CEO Rick Wagoner said he doesn't expect that to happen.
"We're going to have to be a little patient. We're going to be talking about the great value that is out there every day, and we think that by focusing more on the products we're going to get more people in the showrooms," Wagoner said.