General Motors Company (NYSE:GM) has again shocked the market with it’s another set of new recalls totalling 8.45 million cars in North America, thereby raising eyebrows over the functioning of the company.
Sales Not Fallen Off
Meanwhile, Fox Business tried to get some answers from the former Chrysler Group LLC CEO, Bob Nardelli, about how he sees General Motors Company (NYSE:GM) and its CEO, Mary Barra, handling the recall issue. Nardelli said:
“First of all, I think Mary is doing a very good job as evidenced by the fact, that sales have not fallen off. Second, we heard from Kenneth Feinberg [a lawyer specialized in resolutions of disputes and hired by General Motors Company (NYSE:GM)] and I think again it speaks volumes about the integrity, the credibility and the culture that Mary is trying to create now at General Motors. And I think that is boding well for car sales.”
At the same time, Nardelli seems optimistic that the auto industry as a whole is recovering as he considers it to be a major part of the economic engine of the country.
Inventory Control
Nardelli also said that while he was at Chrysler Group LLC, they tried to look platform by platform and the net cost of incentives to be paid out to move the car to the dealer and then to the consumer. It is important to pay attention to these aspects because through them, profit margins could erode very quickly. Nardelli said that calls for the need of inventory control, which is essential so as to avoid pull back in production in times of diminishing demand, adding that while it will affect the overhead costs but it is an effective way to control the costs.
Talking about the future of the auto industry, Nardelli said that so far in terms of year to date, the standard cars are up by just 0.7%, but truckers, and other big vehicles are up by 21%, implying that the consumers are going big, and that means bigger and better margins for the auto industry.
Robotics Will Take Time
When asked about his opinion on the introduction of robotics in the auto industry, Nardelli said, I think, for example, coming over here in the cab, I would have not wanted to put my life in hands of a robot navigating the traffic here. I think it will happen, but it is going to happen in a controlled fashion.” In order for robot technology to work in auto industry, Nardelli stresses on a greater involvement by the Highway safety board along with steps like positive separation and lane control.
American Corporations Beating PE Firms
Moving away from the auto industry to private equity firms, which have a huge pile of cash and drive power coupled with responsibility to invest in attractive areas, Nardelli, who is also a senior advisor to CEO of Cerberus Capital, said that at present corporations are giving a tough competition to the private equities. He added that there are U.S. manufacturing corporations, who are generating a huge cash reserve, like in case of General Electric Company(NYSE:GE), because of the productivity coming out of their strategic acquisitions that are hard to compete. Nardelli suggests that those areas, which have an element of innovation to meet the frustration or demand of the investors should be looked for making investment.
Uncertainty Outplaying
Turning to the progress of the U.S. economy, Nardelli said that to be on a realistic note, it will be very challenging for the economy to grow by 3.5-4%. He said that even as the Fed’s chair Yellen speaks about 3,5% growth, and still considering a growth of 3%, a negative 2.9% in the first quarter puts us in zero. So, I think uncertainty is trumping all of the great productivity, efficiency, coming out of these corporations. I hope I am wrong.” With over five years through the credit crisis, the U.S. corporations are still wary of the country. For which, Nardelli explained that the inability to address corporate taxes like in the case of healthcare and lack of action in repatriating offshore funds is creating uncertainty among the corporations, and thus they are forced to take things in their own hands.
Chrysler Group LLC is one of the largest automanufacturers in the U.S., together with General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F). The company is currently fully owned by Fiat.
Disclosure: none
