General Motors (NYSE: GM) has just announced that it will extend warranties on may of it used cars. According to Reuters, "GM said it would begin offering a 12-month, 12,000-mile "bumper-to-bumper" warranty on all used cars and trucks certified as eligible for the repair coverage by participating GM dealers." The firm has already said it will return to the extensive use of incentives to clear out new car inventory.
GM should have a better solution than to lose more money on each new car it sells and add costs to market its used products. It turns out that is not the case. Vehicle sales in the U.S. are just too awful and Toyota (NYSE: TM) and Honda (NYSE: HMC) take more market share each month.The talk of GM doing into Chapter 11 rings a bit more true as the time passes.
GM is now out of options. It still makes money overseas, but that is overwhelmed but its North American deficit. GM says it will stick to supporting all of its brands except the Hummer. That may end up not being true. GM did say it was moving away from incentives. It did not work out terribly well.
GM has a couple of brands that still sell only a modest number of cars. Saab is one. Saturn in another. Saab could be sold. Saturn could be closed. Saturn might not even be missed.
If GM has to continue using incentives, it will get to the point where it cannot support the marketing and product development costs of all of its brands. That point is probably coming in the next quarter.
Douglas A. McIntyre is an editor at 247wallst.com.
U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.
Hewlett-Packard (NYSE: HPQ) shares are rising over 3% in premarket trading after the computer maker reported a 14% rise in fiscal third-quarter earnings and issues current-quarter earnings guidance that exceeded analyst estimates. Tech shares could get a boost from H-P.
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) remain in focus due to concerns that a government bailout of the two firms is inevitable and would mean wiping out investors. Freddie Mac on Tuesday was forced to pay its steepest borrowing premium in 10 years, which is raising fresh concerns about its ability to withstand the housing and credit crisis without government help.
eBay Inc. (NASDAQ: EBAY) is cutting fixed-price seller listing fees. eBay will now charge 35 cents to list any number of the same types of fixed-price items. This is a dramatic change from charging fees based on item price.
One of the few hopes the U.S. car companies have had is that they have been perceived as closing the quality gap with Japanese models. Recent JP Power data shows Detroit running in a dead heat with imports in the consumer satisfaction race.
That bubble has been at least partially burst due to new information from the University of Michigan's American Customer Satisfaction Index. According to the AP, "U.S. car buyers are growing less satisfied with their purchases from domestic automakers while their Asian and European competitors continue to improve."
In the new survey, BMW and Lexus tied for the top spot followed by Honda (NYSE: HMC) and Toyota (NYSE: TM). Several brands from GM (NYSE: GM) and Ford (NYSE: F) dropped down the rankings.
At the risk of stating the obvious, Detroit is in such deep trouble that a perceived drop in the quality of its cars can only make its recovery more difficult. There are several ways around that, but none of them are very palatable.
GM yesterday introduced buyer incentives across most of its brands. That means its margins on those vehicles will be lower. It may pick up some market share, but any victory there will be costly. The U.S. car companies are cutting their marketing budgets, so they cannot "advertise" their way out of the problem.
Effectively giving cars away can certainly help hurdle the quality barrier, but losing a lot more money could sink a large U.S. auto company.
Douglas A. McIntyre is an editor at 247wallst.com.
Daimler AG (NYSE: DAI) closed at $59.55 Monday. DAI overall option implied volatility of 35 is near its 26-week average of 33 according to Track Data, suggesting non-directional price movement.
Ford (NYSE: F) closed at $4.89 Monday. F overall option implied volatility of 78 is above its 26-week average of 69 according to Track Data, suggesting larger price movement.
General Motors (NYSE: GM) closed at $10.36 Monday. GM September call option implied volatility is at 87, puts are at 103; above its 26-week average of 72, suggesting larger price fluctuations.
Honda (NYSE: HMC) closed at $33.42 Monday. HMC over all option implied volatility of 33 is near its 26-week average, suggesting non-directional risk.
Toyota Motor (NYSE: TM) closed at $90.75 Monday. TM overall option implied volatility of 29 is near its 26-week average, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
There's an upside and a downside regarding major auto companies and the quest to develop vehicles with increased fuel-efficiency.
The upside: Auto makers are positioning themselves to carve out niches in fuel-efficient technology and design, The Wall Street Journalreported Monday (subscription required).
The downside: Auto makers appear to be exhibiting a 'herd mentality' on the current propulsion technology -- hybrid engine cars with both a modest electric power source and a mainstay internal combustion engine. An electric hybrid focus
Following up on its successful electric-gasoline Prius hybrid, Toyota (NYSE: TM) announced it will make hybrid engine systems available on all models by 2020, The Journal reported. Meanwhile, Honda said it would import new hybrid technology to the U.S. to compete with Toyota and Ford (NYSE: F) plans to double its hybrid lineup next year, and Chevrolet's (NYSE: GM) Volt hybrid that will go on sale in 2010.
Economist David H. Wang said investors and consumers should not be overly optimistic or pessimistic regarding the sector's concentration on electric-fuel hybrids.
Toyota Motor Corp. (NYSE: TM) says that a hybrid version of every one of its vehicles will be available by 2020.
According to The Wall Street Journal, "The announcement came as all of the auto makers at an industry conference this week in northern Michigan maneuvered to carve out their own niches in fuel-efficient design."
But, 12 years from now, hybrids may be useless.
Nuclear energy may drive 100% of the U.S. needs for electric power.
The massive oil reserves found off Brazil and in the Arctic may have driven up oil supplies so that gas is back to $1.25.
Wind power may have undercut the need for oil-heat in many American homes.
Solar power will probably have replaced other fuels for furnishing most homes and small businesses with energy.
The hybrid car may not be such a great idea.
Douglas A. McIntyre is an editor at 247wallst.com.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about The General below in the comments.
"The General" does not deserve its nickname any longer. Founded in 1908, General Motors (NYSE: GM) was the largest car company in the world for almost seven decades. It lost that distinction to Toyota (NYSE: TM) during the last year.
GM has 50% of the U.S. car market at one point. That is now down to 20%.
"The General" still maintains a number of the most successful brands in the world: Cadillac, Buick, Chevy, and Pontiac. Years of neglect have pushed the company into a position where it does not make competitive cars in its home market. It greatest current sales successes are in the Chinese market and Latin America.
In 1955, "The General" was the No.1 company in the Fortune 500. It held that position until 2000.
Alongside General Electric (NYSE: GE), GM is probably the most important American corporation of the last 100 years. That won't be true going forward.
Douglas A. McIntyre is an editor at 247wallst.com.
Toyota (NYSE:TM) built a great deal of its US business, especially in the 1970s and 1980s, on assembling cars inexpensively in Japan and shipping them to the US. Then the world's largest vehicle maker built plants in the US to satisfy rising demand for its products and to offset resentment that it was only an importer with no interest in employing American workers.
Toyota may now regret its decision to build big manufacturing facilities on US soil. Many of the new facilities were set up to make SUVs and pick-ups for a market that moved to these vehicles in the 1990s and the current decade. High gas prices have killed that business over the last year or so.
Toyota may have come up with a good but ironic solution. It may ship SUVs and pick-ups from its US plant to countries where there is still some demand for the vehicles. The car company, once a leading importer to the American market, is now moving into the export business.
According toThe Wall Street Journal, "The auto maker, which produces the Tundra pickup and Sequoia SUV, is looking at other markets around the world, although no decision has been made," It shows how management moves that looked good in one decade can sour in the next.
The automaker reported July sales of 197,424 vehicles, down 18.7% from last year. Monthly Lexus sales dropped 24.6% to 22,182. Passenger vehicle sales fell 5.4% despite a strong showing from its hybrids and other fuel-efficient models such as the Corolla. Not surprisingly, light truck sales slumped 34.3%.
As the Wall Street Journal noted, "The weak results are a rare setback for Toyota, whose rapid expansion in sales and profit growth this decade once appeared to be immune to hardships facing other auto makers." The Big Three automakers, though, would give their left arms for results that were as "bad" as Toyota's.
Meanwhile, Wal-Mart and other discount stores are continuing to reap the benefits of the stimulus checks. The company's flagship stores reported same-store sales, excluding fuel, rose 3%, while Sam's Club grew 3.5%. Wal-Mart, which had forecast sales growth of between 2% and 4% in July when it raised its fiscal second-quarter outlook, sees growth tapering off in August to 1% to 2%.
"With the end of the stimulus checks, we know consumers are spending more cautiously,and we continue to see a pronounced paycheck cycle at the end of the month," said Eduardo Castro-Wright, Wal-Mart US President, in a statement.
The question for policymakers is whether having a second stimulus bill will give companies such as Toyota and Wal-Mart a boost to their bottom line. I have to wonder whether a new government handout is needed given that the first one did not do as much good as many had expected.
Then, what happens next? A third stimulus bill? A fourth one?
Top Colleges for Getting Rich These colleges produce top earners. Graduates of Dartmouth College finished on top of the list with a median compensation of $134,000, edging out alumni of Princeton University who finished second with a median comp of $131,000. For public colleges the University of California, Berkley tops the list at $112,000 followed by University of Virginia and University of California, Los Angeles. Top Colleges For Getting Rich - Forbes.com Also: Top Public Colleges for Getting Rich
U.S. stock futures drifted lower Thursday morning on the heel of another big loss reported by AIG. With reports today that mortgages made in 2007 are going bad at a rapid pace, the blow to the financial system may be even deeper than Wall Street had estimated, and data on June pending home sales could give more information about the recent state of the housing market. Also in focus today will be July same-store sales announced by retailers, which could show a 2.2% gain due to stimulus checks and back-to-school shopping, as well as rate decisions by ECB and BOE. The latter already kept rates the same. Finally, rising oil prices could affect trading as well.
AIG (NYSE: AIG) posted its third straight quarterly loss Wednesday after the close. Analyst believe that this quarter's $5.56 billion recorded loss due to investments related to mortgages could continue in the next few quarters. AIG's results didn't just cause investors to dump the stock, but also caused overall jitters about financials. AIG shares are down over 9% in premarket trading. In Europe, Allianz, Axa, Aegon, three of the biggest insurers, also post lower earnings on asset writedowns. Toyota Motor Corp. (NYSE: TM) reported a 28% profit fall in the quarter, 39% drop in operating profit. The company said the strong yen and rising costs of materials for the decline in addition to soft conditions in the U.S. all contributed to these results. While it said it plans to offset the declines by launching new vehicle models and stepping up production of popular models, it's unclear how successful that would be in light of softening economic conditions worldwide.
Staying with the auto industry, The Wall Street Journalreported that Chrysler and Nissan Motors (NASDAQ: NSANY) are in talks tabout jointly producing midsize cars, where Nissan would produce midsize sedans that Chrysler would sell in the U.S. under its own name.
The resale value of Toyota (NYSE: TM) cars is usually pretty good. They are admired for their quality and durability. So when the big Japanese company says it will have to write down the value of many of its leased vehicles, it is an indication that the auto industry's troubles in the U.S. are getting worse.
According toThe Wall Street Journal, "the company will set aside major reserves for its first quarter to cover losses from vehicle leases in the U.S." Toyota's first quarter ended June 30.
The news is a signal that a severe problem within the car industry is widening. Leased vehicles are often coming back to car companies with so little value that they cannot be resold for enough money to reclaim a reasonable part of their original prices. The difference has to be written off. The trouble is especially acute with SUVs and pick-ups because their fuel-efficiency makes them unattractive.
The problem has a domino effect. The leased cars coming back are sold as used. Their prices have been undermined by the current U.S. economy and gas prices, and the vehicles are marketed at deep discounts. That often makes them attractive alternatives to new cars. And, since the auto companies are already having trouble selling new cars, their problems are compounded.
Toyota's news may be bad for Toyota, but it is worse for the the industry as a whole.
Douglas A. McIntyre is an editor at 247wallst.com.
General Motors (NYSE: GM) posted a $15.5 billion loss in its second quarter. This was much worse than analysts had expected. With its stock opening 8% lower, GM stock has lost 84% of its market value since CEO Rick Wagoner began that job on June 1, 2000. His failure to prepare GM for high gasoline prices, as Toyota Motors (NYSE: TM) has done, makes me wonder whether GM's board is asleep at the switch.
GM's North American results were really bad. The New York Times reports it lost $4.4 billion and its revenues plunged 33% from $29.7 billion to $19.8 billion. But Wagoner has promoted cost reduction plans. In June, Wagoner announced that GM would close four assembly plants making pickups and SUVs by 2010 and cut vehicle production by 500,000. Then, on July 15, he detailed a 20% cut in "salaried personnel costs, the elimination of health-care coverage for white-collar retirees past the age of 65, and cuts in advertising and marketing budgets and capital expenditures," according to the Times.
Some Administration officials have been touting the wonders of a cheap dollar as if that will save our industries from a collapsing domestic economy. They should think again. Meanwhile, it is a testament to Wagoner's board relationships that there have not been calls for a new CEO. There is absolutely no way that GM can cut its way to prosperity. He has led GM into a situation where his choices are to cut costs or to file for bankruptcy. During the booming SUV and truck years, Wagoner could have invested the profits in energy efficient vehicles.
His failure to do so has jeopardized GM and should end his role as its CEO.
Your Money: McCain vs. Obama See where the presidential candidates stand on the major economic issues like gas prices, taxes, mortgage crisis, jobs, health crisis and more. Your Money: McCain vs. Obama - CNNMoney.com
If Only Martha Stewart Was a Little More Patient If they only had been more patient investors of ImClone Systems, Martha Stewart and others might have done just fine, and avoided jail time. In a strange twist, ImClone -- the biotechnology company whose stock was dumped just before bad news was announced about an experimental cancer drug -- has received a multibillion-dollar takeover bid pegged to the success of that very same drug. Once Dumped, ImClone Soars - NYTimes.com
U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.
Daimler AG
This post is one in a series on prominent company nicknames. 
Here are some highlights from this past week's 
U.S. stock futures drifted lower Thursday morning on the heel of another big loss reported by AIG. With reports today that 
Investor confidence in global growth continues to decline
Can Jerry Seinfeld improve Microsoft's brand equity?
Fannie/Freddie Flameout: Winners and Losers
