GM stock plunges as products slip behind

1. GM stock plunges as products slip behind BY JAMIE BUTTERS FREE PRESS BUSINESS WRITER http://www.freep.com/money/autonews/gm17e_20050317.htm

2. Lose money! • General Motors Corp.'s latest efforts to fix its crucial North American car and truck business have been pummeled again by competitors with hotter brands. • That's why the automaker announced Wednesday that it expects to lose money in the first quarter -- and the reason its stock fell to its lowest level in more than eight years.

3. Aging Models • GM sells more high-profit pickups and SUVs in the United States than any other automaker. But its models are aging; they face more competition, and more Americans are shifting to cars, wagons and crossover vehicles, now that they face higher gas prices and have more good vehicles to choose from. • GM is making a lot of those ever-improving cars, but its new offerings just aren't selling at the volumes or the prices that GM had hoped for and built its business plan around.

4. Market Share Falls • With GM's U.S. market share falling to 25.1% through the first two months of the year, the world's largest automaker has cut its financial outlook, and investors see its future in the bleakest terms in almost a decade. • Its stock price -- which represents how profitable investors think it will be in the future -- fell today by a shocking $4.71, or 13.6%, to $29.01.

5. The Economics MC D Price • Monopolist sets MR equal to MC. • It then compares price to Average Cost (AC). • If P > AC  Profit! AC P* Profit MR Q* Quantity

6. If Demand Falls! MC D Price • Monopolist still sets MR equal to MC. • It then compares price to Average Cost (AC). • If P < AC  Loss! AC P* Profit Loss P** Dnew MRnew Q** Q* Quantity