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Cliff Rayman 1619 days ago
So General Motors (GM:NYSE) has decided to cut prices dramatically in order to reduce inventories. In my previous article, I advised increasing margins, but unfortunately, their action will reduce gross margins further. Of course, getting rid of excess inventory and turning it into cash is always high on the turnaround specialist's agenda. Reducing gross profit margins is generally negative unless you can increase inventory turns dramatically. From a marketing perspective, the "employee discount pricing" is a great technique. Employee pricing is considered to be the best pricing available by many, and it is easy to understand. Since they are not publishing the resultant pricing, it is hard to compare it to other promotions, but it has been pretty effective at increasing revenues and reducing inventories thus far. On the negative side, decreasing prices to increase sales leaves everyone thinking that the cars are pretty much worth the "employee price", and ...
Cliff Rayman 1635 days ago
I'm sorry - but what the hell is going on at General Motors (GM:NYSE)? They are heavily discounting prices to increase sales. When the only thing you can rely on to increase sales is a large reduction of prices, your business is truly in big trouble. There is no skill in dropping prices to reduce sales. For example, I have no expertise in the large petroleum sales industry. I do not have any contacts, don't know the players or the competition, don't understand the product line, and the truth be told, I am not the greatest salesman in the world either. But, without any talent, I could walk into that industry tomorrow, with a dramatic reduction in prices, and capture a huge portion of the sales. Of course, the company I worked for would probably go broke, but it literally takes no skill to drop prices to increase sales volume. Based on my previous article, we have already determined that GM has some of the lowest gross profit margins in the industry. Decreasing prices will ...
Cliff Rayman 1641 days ago
Let's continue to analyze General Motors (GM:NYSE) today. I did some common sized income statements for GM, Ford, Chrysler and Toyota. The first thing I took notice of is the Gross Profit Margin (standard ratio analysis would have given us this number also). For a manufacturing company, Gross Profit is calculated by taking Sales and deducting costs for all those items that produced the product that made up those sales. This includes all materials, direct manufacturing labor, material acquisitions costs, rent for production and raw materials space, all employees who provide direct support to manufacturing, overhead on all the above labor (Social Security matching, retirement and pension funds, worker's compensation insurance), and others as accountants deem appropriate. Gross Profit generally does not include marketing, advertising, general company management, interest expense, etc.. Take this Gross Profit and then divide it by Total Revenues for the period (all items on our ...
Cliff Rayman 1648 days ago
I normally focus on small company turnarounds. These are companies with sales between $5 million and $50 million. So, I am going to put myself on the line, and comment on one of the biggest public turnarounds in recent history. General Motors (NYSE:GM) is in big trouble. It has had what we in the turnaround business would consider a "trigger event". A trigger event is when something happens and the client finally decides they need a turnaround artist. In GM's case, this was a downgrading of GM's bonds to "BB" which now makes them "junk bonds". Pretty clear term if you ask me. Of course, GM is a large company with lots of contacts and analysts, so they knew that this "trigger event" was coming. This allowed them to act "somewhat" in advance and hire a new CEO, Rick Wagoner, to turn them around. Based on the "BB" bond rating, by definition, Standard and Poor's is estimating that in the next four years, GM has about ...
Cliff Rayman 1667 days ago
Customer disconnects are exactly what they sound like. It is your company doing something that gives the opportunity for your customer to disconnect from the buying process. Everytime a customer communicates with your company via any method, or for any reason, they are judging your company and deciding if they should do business with you or disconnect from the process. How much money is your company spending on advertising and marketing, just to have processes and communications that cause your customers to disconnect from the buying process? I had to update my credit card expiration date on overture.com (now Yahoo) the other day. There was no place to update the expiration date, that I could find, so I tried to enter the new credit card as a new payment source. I received an error message and was told to call a toll-free number. No offers of another online chance, just call this number. I don't know about you, but when I am working on the internet, I do not want to have to use the ...
