Following Ford’s statement that its business is solid and it could make profit even if the recession came back, General Motors took the same stance to calm the analysts and investors.
After auto sales hit record numbers last year in the United States, there is some concern around the industry’s analysts and investors that good days are over and automakers will be challenged with some rough times from now on in terms of profitability. Therefore, companies have felt the need to step in front and say there is nothing to worry about. Ford’s Chief Financial Officer Bob Shanks recently told analysts at a meeting in New York that the second largest US automaker can stay profitable with a 30 percent drop in industrywide sales, or it could now break even financially if annual US auto sales fell by 37 percent.
General Motors has also wanted to reassure everybody that it will make money even if dark clouds are to reemerge over the industry. Alan Batey, president of GM North America, said the company has increased its margins and now makes more money than ever, as the average price of GM’s cars have lately considerably raised, while the lower-profit daily rental fleets fell. He also pointed out the high scores GM’s brand achieved in some loyalty surveys, as “the higher they are, the bigger advantage you have in a cyclical business,” Batey said. “One-point improvement on this index is equal to $700 million in revenue.”
GM has also raised concerns within analysts over its latest investments, after it spent 500 million dollars for the ride-sharing service Lyft and bought the San Francisco-based Cruise Automation, an autonomous driving startup company, for a reportedly 1 billion dollars.