DETROIT -- General Motors redesigned several of its top-selling cars in 2016, including the Chevrolet Malibu and Cruze.
And unfortunately for GM, some people actually bought them. Even worse, GM’s engineers and designers had the nerve to do their jobs so well that the Malibu had its best year since 1980.
In earnings speak, GM refers to this trend as an "unfavorable" product mix.
GM noted this bad news in its fourth-quarter earnings report on Tuesday. It explained that one reason its North American profit margins fell in the fourth quarter was “increased volumes of recently launched passenger cars such as the Chevrolet Cruze, Malibu and Spark.”
That’s right -- selling more cars hurt profits because GM makes so little money on them.
Yet, at the same time, so few people are buying the Cruze that GM had to lay off 1,200 Ohio workers who make it last month. It’s also scheduling down time at the plant because the layoffs aren’t enough to stop Cruzes from piling up at dealerships across the country.
GM, a few readers might remember, got itself into some moderately serious financial trouble a while back, in part because it stopped caring about making good cars and focused on churning out as many SUVs and pickups and even a few awkward-looking SUV-pickup combinations as possible. When gasoline prices soared and people abandoned their Hummers angled across six parking spots at Starbucks in favor of a Little Tikes Cozy Coupe, GM ran out of money.
Then we all kicked in a few bucks, and GM finally learned its lesson. It spent billions of dollars making cars that don’t feel like punishment to drive, and now we’re back to the point where hardly anybody wants one.
This turn of events has been a boon for GM, which earned a record $12 billion in North America in 2016 -- almost all of it from big SUVs and pickups, analysts estimate. GM projects 2017 to be another strong year, its third in a row with North American margins of at least 10 percent.
It just has to hope that customers don’t mess things up by buying more of its cars.
