GM and its upside down international strategy

GM posted this week a record loss of $722 million for last quarter. But digging into it further the loss was from the sagging North American operations where the company is rapdily losing market share to Toyota, Honda and other international manufacturers. For 2007, GM's revenue was flat in North America compared to the 50% gain in Latin America and 20% growth in Asia Pacific. The company continues to lose automotive U.S. market share-falling from 23.6% in 2006 to 23.1% in 2007. GM barely held on to its title as the largest automaker in the world, beating Toyota by just 3,000 vehicles. This result came at a time when the dollar was at record lows against the Euro and was relatively weak against the Yen. Yet international carmakers figured out how to cut prices of exports to the US. Most of the international auto makers also have operations in the US and they also managed to profit despite the rise in prices for imported components due the weaker dollar. GM, like most US manufacturers, exports relatively few cars. It chose a strategy after the Second World War of having local assembly or manufacture. In fact, GM cars in Europe bear little resemblance to the ones produced in the US. There is some sourcing of parts from the US but most of the content is local. Over the past two decades, GM and Ford international operations have been more efficient and profitable than the domestic counterparts. But it leaves the auto makers unable to take advantage of a weak dollar since they export little. On the other hand, when the dollar is strong, imports are more competitive. The US automakers have vigorously fought the new high fuel efficiency standards. They now must retool to produce more efficient engines. The international manufacturers, particularly the Japanese, have already made the investments in clean technology. GM has much to do with "right-sizing" its domestic operations. It also faces challenges in "greening" its fleet. However, if the company loses such money in weak dollar environment, watch out if the dollar suddenly strenghens.