Earlier this month, pundits were looking to see what insights into the state of the economy could be gleaned from the world's largest automaker's most recent quarterly report to shareholders. Those who are looking for signs of an economic recovery were cheering news from General Motors, which has been steadily losing market share over the last decade.An analysis of a sampling of GM's recent coverage revealed that the Detroit-based automaker is in high gear, having reported strong US sales over the past three months. The media embraced the good news that the company's earnings were 158% higher than a year ago. Fox's Your World with Neil Cavuto reacted by telling viewers that GM's earnings "handily beat even the most bullish estimates, enough to propel an already pumped-up stock into overdrive."
In reporting what had prompted the surge in earnings, coverage most often identified two items that were seen as deciding factors. GM has actively expanded its lineup of high-margin trucks, which, in turn, have generated very strong sales due to the company's pioneering use of 0% financing incentives. GM began this program shortly after September 11 and has continued to use it.
On CNNfn (April 16), Jonathan Fahey of Forbes said, "GM started the 0% financing because they were in a perfect position to do so. They had brand new trucks ready to roll, and they were the first to come out with a big, strong push - '0%, Keep America Rolling.' It really inspired people to buy cars."
The media was also pleased to hear that GM's strong sales had led it to raise its 2002 earnings forecast for the second time. An investor interpreted GM's move to mean, "They're expecting consumer sales to hold up."
This was welcome news, since there had been fears in the auto industry that the use of incentives would prompt a one-time spike in sales at the expense of sales later in the year. But based on GM's move, CNNfn (April 16) reported, "That really hasn't happened. The consumer keeps buying cars."
Several stories also pointed out the overall impact that these sales were having. Whereas GM has been slowing losing market share to domestic rivals and imports for many years, GM's sturdy sales of late have helped to reverse that. CEO Rick Wagoner stated, "The quality of our market share keeps improving with a richer mix of more profitable vehicles and a higher percentage of retail sales
(Los Angeles Times, April 17).
A number of reports also focused on the role that GM's cost-cutting program had in its turnaround. Jon Devine, GM's CFO, explained to CNNfn (April 16), "The game plan at GM has been relatively simple. We have to have great products, we're getting more of those on the road everyday. Focus on cost reductions; focus on using the great people we have in the company and our dealers. And making those come together as a team. We're beginning to see some of the results of that."
Indeed, it appears they are. From Wall Street to Main Street, GM is increasingly seen as a pretty solid company. And the media seems to think so too. The May issue of Money magazine published a lengthy article that stated, "GM is a more savvy and successful car maker than it's been in a long time."
Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.