January 29, 2012 in Business

Despite successful year, GM may face difficult road in 2012

 

General Motors (NYSE: GM) had a solid 2011, with domestic sales up 14 percent, well above the industry’s 10 percent and reflecting a gain in market share. That’s great for a company that some say should have died three years ago, but GM may find 2012 to be tougher, even if the economy continues to improve.

December sales showed Buick sales down 12 percent over last year and Cadillac off by 3 percent. But that’s largely due to the phase-out of the Lucerne and the DTS, respectively. Chevy numbers were better, with Cruze sales strong and Camaro sales up 20 percent. Even the Volt posted record sales.

Competition is likely to heat up considerably in 2012, though. Both Toyota and Honda faced production issues in 2011, creating an opportunity that GM seized. But after months of sales declines in the wake of production disruptions caused by last March’s tsunami in Japan, Toyota’s sales have stopped shrinking and are likely to start growing.

Competition will be spiked further by Volkswagen, which has signaled that it will look to the U.S. for growth as its European home market has stalled. Other rivals are revving their motors, too.

Meanwhile, General Motors is furiously working on major new products, but they’re not scheduled to start rolling out until 2013. (Motley Fool newsletters have recommended General Motors – and Ford.)

Ask the Fool

Q: What are “defined contribution” and “defined benefit” plans? – E.C., Pensacola, Fla.

A: They’re the two main kinds of retirement plans. Traditional pensions are defined benefit plans, where employees know exactly what they’ll receive in retirement. It’s the employer’s responsibility to have the needed money available for retirees.

Defined contribution plans, such as 401(k)s and 403(b)s, have replaced many traditional pension plans. With them, the amount of money contributed into the plan is defined: You know how much you and your company are depositing into your account. The sum available at retirement is uncertain and will depend on how the contributions are invested and how they perform. You typically have more control over these accounts, as you can usually specify what kinds of investments your dollars are plunked into (growth mutual funds, company stock, bonds, etc.).

With both Social Security and investment results uncertain, it’s vital to plan effectively for retirement. You’ll find practical guidance at www.fool.com/ retirement/index.aspx and in our “Rule Your Retirement” newsletter, which you can try for free at www.fool.com/shop/newsletters.

My dumbest investment

I bought shares of Netflix just before it announced a price hike and that it was splitting its streaming video and DVD rental businesses. Since then, the company has made one misstep after another! It lost some 800,000 customers recently, and may lose more. It also sold $200 million of shares to a mutual fund at too cheap a price, and bought back many shares at high prices by borrowing money. I’m down 50 percent in my investment. So do I ride it for the next five years and hope it recovers, or do I sell? I know you Fools have recommended Netflix. – B.W., overseas

The Fool responds: Netflix has committed numerous blunders. Yet it remains a formidable power, with 24 million subscribers vs. just 5 million for Amazon Prime. We have indeed recommended it, and have seen our gains shrink in recent months. The company still has much potential, though, and it’s priced more attractively lately than it has been in recent years. Don’t decide now to hold it for five years. Sell if you’ve lost faith, or hold, watching it closely to see how it does.


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