The June auto industry’s sales results are in. The numbers have sent shock waves throughout Detroit— a town that’s become increasingly familiar with seismic events. Although sales tend to slip slightly as the model year winds down, these figures are stimulating some serious hand-wringing amongst The Big 2.8. When you factor in/out fleet sales, the future looks bleak.
Passenger Cars
Ford Fusion and Toyota Camry sales slid slightly from last month, but their mid-year report card’s looking good. For the first half of 2007, both Camry and Fusion sales are up 10 percent over the same period last year. Comparing June ’06 to June ‘07, Camry sales rose by 12.5 percent, while sales of Ford’s “hecho en Mexico” midsizer declined some nine percent.
The Chevrolet Impala and Chrysler 300 both showed significant increases over last June. The Impala is up by almost 17 percent, while the 300 ascended by 29 percent. There’s a big mid-year divergence; during the last six months, Impala sales rose by almost 25 percent while 300 sales sank by 14 percent.
Keep in mind that both models are fleet queens. In 2007, 46 percent of the 300’s and 44 percent of the Impala’s total sales sailed with the fleets. This does not bode well for either model’s long term prospects.
Pickup Trucks
As predicted, a weak housing market, high gas prices and the new Toyota Tundra’s debut have sparked an incentives war. The trend looks set to drive sales— and steal profit— all summer long.
The newcomer’s sales increased 4K from May, and jumped 146 percent compared to last June. ToMoCo’s rebates and special financing (average incentive: $5083) are working a treat.
Incentives didn’t help Chevy’s Silverado (average incentives: $3064) . Sales of GM’s turnaround dream dropped 23.5 percent from last June. Year-to-date sales are down almost two percent.
Thanks to huge incentives (averaging $6831), the Dodge Ram is holding its own. Sales were down less than four percent from last June. So far this year sales are up a little over one percent.
Sales of Ford’s F-Series (average incentive: $4272) were down less than one percent from last June. Over the past six months, sales sank over 11 percent compared to the previous year.
Truck-Based SUVs
SUV sales are still taking it on the chin. The Dodge Durango showed a 900-unit increase over May, but slid over 28 percent from last June, and almost 26 percent year to date.
The Ford Explorer lost only about 100 sales from May, but sank 23 percent from last June, and 22 percent year to date.
Chevrolet Tahoe sales slid 14 percent from last June and 16 percent over the last six months. Toyota’s 4Runner is down almost 28 percent against last June and almost 20 percent year to date.
CUVs
Once again, sales of older designs fell well below last year’s levels. The Chevrolet Equinox dropped 1.5K units from May, losing a whopping 53 percent from last June. So far, the Equinox is down 26 percent year to date versus last year.
Chrysler Pacifica's June sales climbed 500 units from May, but sank 41 percent versus June ’06, and lost 24 percent in the six month comparison. (Some 52 percent of this year’s Pacifica total has gone to fleets .)
Ford Escape sales are 33 percent above last June’s, and three percent ahead of the first six months of last year. The Toyota RAV-4 showed an 11 percent growth, with a 16 percent increase over the first half of 2006.
The new-for-‘07 CUVs showed slight dips in June. Most notably, sales of the box-fresh GMC Acadia were almost 2K lower in May. The Ford Edge and Jeep Compass held fast, dropping by fewer than 300 units.
Total Sales and Fleet Sales
Overall, all four manufacturers detailed here (Ford, GM, Chrysler and Toyota ) lost sales from May. Comparing total sales in June ’06 to total sales in June ’07, all but one crapped out. GM was down 21 percent, Ford dropped 8 percent and Chrysler lost 1.4 percent. Toyota’s sales grew by 10 percent. (Year-to-date cumulative: GM, Ford, Chrysler, Toyota.)
Over the six month period, GM is down seven percent, Ford is down 11 percent, and Chrysler is down 1.4 percent. Toyota is up 8.7 percent.
Chrysler’s relative success may be Phyrric. During the last six months, fleet sales accounted for almost 45 percent of Chrysler's total passenger car sales. The artist formerly known as DCX also designated tens of thousands of leftover '06 models as loaners– for one day– and then moved them into their used car inventory.
This is serious. GM’s June market share slumped to 22.17 percent. That’s the lowest level since the company passed that mark on their way UP to their '60's high water mark (48.3 percent share). If sales don’t pick up, The Big 2.8 will enter September (and the history books) with a combined U.S. market share of less than 50 percent.
Cue the “fast falling airplane sound” and you pretty well have the picture of the soon to be “big 2.8134343343268432” (and probably soon after to be “nothing zero”?)
The only question is, how fast is the ground coming up?
Maybe – September 2007? If so, cue the huge explosion sound and massive billowing flames.
How much inventory will the US makers have on hand when the new model year vehicles hit the streets? How do they get rid of the anticipated huge inventory, other than even larger incentives?
hltguy:
How much inventory will the US makers have on hand when the new model year vehicles hit the streets? How do they get rid of the anticipated huge inventory, other than even larger incentives?
Our resident statistician is at lunch right now, but I know that GM has 1,054,000 units in inventory (744,000 trucks).
As for the second question, I think you answered it already.
hat would cost more…if GM gave away those 1,054,000 cars/trucks on a 1st come 1st serve basis or to have them just sit in storage…i remember reading an article on here that said it would have been cheaper for jaguar to give all there customers a ford focus instead of selling them a jag…maybe GM should look into that. kinda like hitting the reset button.
Drastic time call for drastic measures
These are devastating numbers for detroit. Toyota also has more flexibility on their plant configurations, not to mention strong overseas sales. Toyota will probably own portions of GM that it feels it can use.
Don’t be surprised if the UAW gets a month off this fall to convince the rank & file that help is needed on the health care front. That’s what the inventory buildup is for (IMHO).
Can we hear a little more from other imports, e.g. Nissan and Honda? They had pretty good Junes too. So did VW. I’m seeing Rabbits everywhere in LA.
Interesting figures especially with the incentive amounts, and percent fleet sales.
Regarding the inventories, its possible that a strike will be tolerated if the negotiations reach a stalemate.
Chrysler’s numbers are affected by a 60% (!) drop in minivan sales compared to a year ago, that’s 23,000 less units. Presumably they are selling down the old models in preparation for the new 2008 vans. Put those back and their numbers look much better.
RF: perchance that excess inventory is in preparation for the strike that will be needed to convince the UAW they got all they could get? Cars are piling up like cordwood all over the big “D”…
I have to wonder if the cars piling up like cordwood all over detroit (kudos to Captain Tungsten for a great quote here) are going to back-fire on Detroit Inc?
Watch this space in about October!!!
But if I were a car dealer for the big 2.8-odd,(God forbid!) I would be looking at grabbing open franchises for whatever Japanese brand I could lay my hands on, even Suzuki, Mitsubishi, etc.
It’s called “survival” and let’s be honest, the car dealers have been more profitable than the 2.8 until just lately.
Isn’t true competition a bitch when you are 2nd class? (I’m looking at you, Detroit Inc).
Captain Tungsten:
Chrysler’s numbers are affected by a 60% (!) drop in minivan sales compared to a year ago, that’s 23,000 less units. Presumably they are selling down the old models in preparation for the new 2008 vans. Put those back and their numbers look much better
Just for reference, 35% of Town and Country and 54.8% of Caravan sales for the past 6 months have been to fleets.
I have watched this slow meltdown on the US auto guys and I just don’t get it. Seemingly the best educated, most creative people are mainly interested in getting the most for themselves as the ships are rented out cabin by cabin.
In the market of cars, I don’t actually care where my car comes from, but I can’t get over the inability of so many people to simply not be able to do what is fairly obvious to many outsiders in all the major problem areas.
How did DCX go from being a member of the Big 3 (when it was Chrysler), to a member of the Big 2.5 (when DCX bought them and their market share declined to it’s low teens level today) and now the Big 2.8 (this term came out right around when Cerebus bought them…is the .3 increase?). I’m sure Ford and GM’s whole number did not change.
Sorry, I don’t have time to look up Honda’s national sales results. Our store is up 25% over last year, year to date June. I’m concerned we will run out of Civics and Odysseys!
The Detroit 2.5 have become insular, myopic, and byzantine over the last few decades. Entire books have been written on the subject, and it is now studied in both business and engineering schools. The culture itself (somewhat like that at NASA), has become corrupted and degraded, to the point that they believe their own spin, and those tasked with making important decisions cannot agree on the color of the sky (or even that it is the sky). Hopeless.
jaje, most consider the 20% that DC still ownes of Chrysler the reason it is not a whole number. Hence, the big (or Detroit or little or domestic or …) 2.8.
fallout11: Hence, Ford’s attempt to bring in new thinking by hiring Alan Mullaly, who has not worked in the automotive industry. His tenure will be as much about culture change at Ford as about new products.
Let's assume for a second that GM and Ford's products are on par or better than anything Mr Toyota, Mr Honda and Mr Hyundai can muster. Why is their market share tumbling? Answer is, they can't keep up. A lot of people moan on here how they do fire sales all the time and burn cash that way. But they have to do that in order to stay competitive, because the transplants can sell their cars at (almost) list price. Thus, it eats into their profitability on products. So the answer is simple, they have to become more streamlined. Severe the UAW, strike brands off which cannibalise each other, platform share and send work to Mexico and Eastern Europe. But they can't severe the UAW as they have an iron grip over them. And they can't strike off brands because that would involve using money that they can ill afford. So, the only option is to out-source the work to Mexico and Eastern Europe. Which COULD (note the key word here, before anyone accuses me of prejudice) affect the reliablity of their products (remember, we ASSUMED that their products are on par). Pushing through new cars to market doesn't seem to be working, I mean, wasn't the Aveo meant to be the Yaris/Fit killer? So, they haven't managed to get a grip on the small car segment. Their only cash cow left, the pick up truck segment, is being eroded because now Toyota is purposely (I believe) selling their Tundras at a reduced margin (i.e cash on hoods) to snatch market share from GM and Ford. This is a play which Toyota knows it can do but GM and Ford can't fight back. So we can strike the pick up market off, too. What's left? the mid sized sedan segment. What do GM and Ford have to fight this Camry and Accord? The Buick Lacrosse and the Ford Taurus. Not bad cars, in themselves but hardly stellar products. In fact, I can't name one market segment where GM and Ford are winning strongly. So where can GM and Ford go with all these disadvantages?
The artist formerly known as DCX also designated tens of thousands of leftover ’06 models as loaners– for one day– and then moved them into their used car inventory.
Ouch, now that’s desperation. However, I smell a good deal coming. I feel sorry for a big 2.8 sales guy in this climate. With few exceptions, the extent of the negotiating I’d get into is ‘Here is my (very low) offer. Take it or leave it.’
bluecon:
Where do you get the fleet numbers from?
http://www.fleet-central.com
jolo: Thanks for the response – makes perfect sense.
Toyota/Honda/Nissan/Mazda sell cars and trucks. The Big 2.8 sell deals on cars and trucks. If you look at most of their advertisements and commericals you’ll notice that theme where the former discuss the car and its abilities and how it fits in your lifestyle, whereas the latter talk about rebates, discounts, and american made pride.
GM has a lot of up & down spikes. I’m convinced that after they have a bad month, they push hard on fleets and incentives to spike it back up the next month – this can only work for so long and I’m betting on a steady decline very soon.
greenb1ood-“GM has a lot of up & down spikes.”
I think RF’s earlier column nailed this one.
They have been, apparently, stuffing vehicles down the dealers throats and they finally called “Enough!”.
Remember, these numbers are for “deliveries”.
GM’s actual sales were probably worse than deliveries indicated through May, and perhaps not quite as bad as the June numbers.
Not that any of it looks good.
Ford’s stabilizing retail sales are a positive sign.
Bunter
It is a great time to be a consumer! I just got a new 2007 Ford Fusion by trading a few bags of crushed aluminum cans and a weed-whacker.
The recent report that Ford lost $5K per sale is totally believable, based on my recent experience as a consumer. Good for me! Bad for them.
Matthew Danda:
“It is a great time to be a consumer! I just got a new 2007 Ford Fusion by trading a few bags of crushed aluminum cans and a weed-whacker. Dirt cheap transportation, it is. Not a terrible driving car, either”
Can you be more specific on your Fusion deal? BTW..contrary to your backhanded “Not a terrible driving car either” compliment..the Fusion actually is a very good car…arguably better than any other mid-sizer on the market—yes this inlcudes the Camry and Accord (although the ’08 Accord is going to make everyone play catch-up). Congratulations on your very smart purchase !
Mathew Danda: “I just got a new 2007 Ford Fusion by trading a few bags of crushed aluminum cans and a weed-whacker.”
Hey, that’s a great recycling idea — bring in your aluminum cans and we’ll turn them into Fords!
Thanks Mr.Farago for a response to my question. Over 1 million units not sold and new models are coming out in less than two months, and those inventory numbers are just GM? That is just staggering. A poster said on this subject earlier that you see a lot of Rabbits in southern California, I also live in California, central California and with the exception of work trucks company utilized it is amazing how many new foreign branded cars one sees. Lots and lots of Hondas,Hyundais, Toyotas etc. This is red neck country and it appears the US makers have lost a good share of it. Over a million units still to peddle, wow.
Hot off Automotive News…
GM doubles some light truck incentives
Ford extends incentives to Aug. 31
Richard Truett
DETROIT — General Motors is boosting the rebates on some of its new 2007 model pickups to $2,000 from $1,000.
GM tonight will give dealers details on a new round of incentives that start Tuesday, July 10, in most states.
GM said it is boosting the rebates on the light-duty versions of the Chevrolet Silverado and GMC Sierra pickups.
The move comes after sales of both vehicles plummeted in June after Toyota offered huge rebates on its new Tundra pickup.
Edmunds.com estimates that Toyota is paying more than $5,000 in incentives to sell the new Tundra. Sales of that truck increased 146 percent in June.
GM said late today that consumers who buy regular-cab versions of the Chevy or GMC trucks can get $1,500 back or chose low-rate loans. Buyers who go for the extended-cab versions of those models can get $2,000 back — up from the previous incentive of $1,000.The rebates and loan rates vary by region. The pickup incentives expire July 31.
GM also said that on Tuesday it will announce new rebates for many of its SUVs, including six months of free lease payments for some vehicles leased through GMAC.
Earlier today, Ford Motor Co. said it extended its end-of-the-model-year U.S. incentives that offer buyers 0 percent loans on every 2007 Ford, Lincoln and Mercury model. Pickup and SUV buyers will get the free loan and a check for $2,007.
The program was scheduled to expire today, July 9, but Ford will keep it going until Aug. 31.
Ford’s overall sales were down 8.2 percent in June compared with June 2006. But its dealer customer sales were up slightly — the first increase since October.
Bunter1:
The term “deliveries” in this sense means “deliveries to the end consumer”. It doesn’t mean “deliveries to the dealer”. It means the actual number of sales to consumers. The easiest way to prove this is to look at GM’s sales charts-there will always be a few sales of models that have been out of production for a year or two, because some rural dealer in Kansas finally sold thier last 2005 Chevy Astro or Buick LeSabre.
The accurate number to look at is retail sales, excluding fleet sales.
In retail market share Detroit is already far below 50%. And Toyota is already the leader in almost every segment, except large pickups and SUVs. For instance, in mid-size pickups Toyota now has close to 40% (!) retail market share in America.
What is Detroit to do? There are no places to hide anymore. You have to take truely radical steps, all of you in Detroit, UAW included.
The term “deliveries” in this sense means “deliveries to the end consumer”. It doesn’t mean “deliveries to the dealer”. It means the actual number of sales to consumers.
Bunter is correct on this. GM reports “deliveries,” which are sales of inventory to its dealerships. This differs from some of the other automakers, such as Ford, that report new registrations.
Incidentally, this was highlighted at the end of 2005, when both Ford and Chevy were each claiming to be the number one marque. Ford goes by registrations, whereas Chevy goes by deliveries, so it was possible for each to be the leader by their own measure. (Of course, this gives both of them excessive credit for fleet sales, but I digress.) Here’s an excerpt of an article from the time that explained the rivalry/ contest:
____________________
Chevy claims it sold over 17,083 more than Ford. But ford is saying it out-sold Chevy by 5,000. Who’s right? Actually, it’s both of them.
Ford’s numbers are from automotive consultancy R.L. Polk, which track vehicle registrations. Once those numbers showed Ford on top, the automaker called on Chevy to stop claiming it is number one.
But that’s unlikely to happen. Chevy gets its numbers from automotive data firm Ward’s Auto, which tracks sales to dealerships, and they clearly show Chevy was on top last year.
http://www.msnbc.msn.com/id/11329006/
____________________
GM refuses to change its reporting methodology, claiming that it would be inaccurate to report sales based upon registrations because some new car buyers don’t register their car purchases. Perhaps I’m overly cynical, but I’d guess that they prefer to report deliveries because it makes it easier for them to engage in “channel stuffing”, i.e. pushing excess inventories down to the dealer level, while booking unwanted product as a sale. Between fleet sales and “deliveries,” you can end up with quite a few smoke and mirrors in the reporting.
The really bad news for the big ? is that toyota has the war chest to really go deep on Tundra rebates. With the uptick in collora camry prius, plus past billions earned they can pretty much slap whatever they want on the hood to meet their 200k goals for this year, And since their volume goals are different, their rebates may cost them less that Ford, GM etc. 5k * 200,000 vehicles for toyota vs 5k * 1,000,000 F150’s is a big difference.
The fleet sales are really scary for the domestics. These % are still this high after blaming lost sales over the last year on cutting fleet sales??? Every month they drop, but try to write it off on cutting fleet sales. They still are basing way too much volume there.
I agree with tulsa_97sr5.
Toyota is sitting on such a huge pile of cash that they could give away every 10th Tundra for free, and it would hardly make a dent. Plus can you imagine how many people would be clamoring for a chance to win a free truck with odds that high?
It doesn’t bother me that GM will be offering larger rebates – regardless of what others may think on this website, GM offers a lot of very fine vehicles, and my wife and I are considering several of them for purchase.
My wife currently drives a Toyota – I have to be honest and say I never understood the big deal about a Toyota.
Also, fleet sales are not all bad – rental fleets can hurt, but if Ford lost money on sales to police forces, the Crown Vic would have been history years ago.
Ford sales in June 2006: 269,404
Ford sales in June 2007: 247,599
The difference: 21,805 units
2006 Sales of the (old) Taurus and Freestar: 28,032.
2007 sales of these models: 0
Ford’s entire reduction is more than expained by the elimination of these two fleet models.
I guess I’m just not seeing how it is bad news to eliminate vehicles (including associated production capacity and development costs) that don’t make them money, and dilute the appeal of the brand.
Can someone explain to me why it is bad news, or why there is such a desire of to make it look much worse than it really is?
exdetroit:
“Can someone explain to me why it is bad news, or why there is such a desire of to make it look much worse than it really is?”
It’s bad news because with those numbers, Ford’s automotive operations lost $1.2b in the second quarter last year. Unless you can attribute that loss to 28,032 unprofitable sales (that would be $42,808 each), then this is bad news for the second quarter of this year.
It seems doubtful that Detroit will be able to go into 2008 with all plants fully operational; and so, more shutdowns and layoffs are likely. One has to wonder why this hasn’t been a part of either so-called “major party’s” debate?
Chrysler should do all right with the 2009 Dodge Challenger. But will they make it to 2009, without filing bankruptcy? Maybe we can get a sense of what Chrysler’s new owners might be up to if we consider something William Weld (former governor of Massachusetts) said, in a recent NY Times article (on Mitt Romney), “The private equity business is a pretty good place to make a lot of money. The market rewards people who show they can see value in a company quickly, adjust a few toggle switches and sell it again, five or five years later. It’s capitalism’s way of picking fleas off the dog.”
Might not the Chrysler Sebring be a flea?
Just a quick note on fleet sales. When retail incentives exceed standard national fleet incentives, as many do right now, a large number of fleet deiveries are reported as retail to take advantage of the better offer. As a result, fleet deliveries are always under-reported by all of the Big 2.8, mostly for smaller fleet sizes (less than 100 units in operation).
Maybe it’s just living in Detroit (‘burbs) but the deathwatch series always hits home when I drive around and find another lot full of cars and trucks waiting for somebody to love them. And I’m not talking dealer lots. The Big UAW check signers have them secreted all over the area in places you wouldn’t think to look. Except Chryslers, but I guess I know where they store their crap these days. I’ll be driving one in Orlando in a couple weeks.
umterp85:
Can you be more specific on your Fusion deal?
2007 Fusion SE with appearance package (17″ wheels), 5-speed, 4 cylinder, for $17.2K or $18.5K with tax. My employer, a large IT company, has an X-Plan pricing deal with Ford. So I didn’t have to negotiate at all (a sore point for me, if you remember one of my recent articles on TTAC).
A Fusion is “not a terrible driver” when you compare it with an Acura TL, which was my first choice. However, an Acura TL is literally DOUBLE the price of a Fusion, which makes it a financially irresponsible choice given the current incentives at Ford.
So I’m living with the lower quality of my choice (Fusion versus TL) by counting how much money every month I’m saving in payments. And then laying out all the dollar bills on my bed and rolling around in them. As much as I adore that TL, I also enjoy the rolling in money bit. So the Fusion is not a terrible driver, not at all.
exdetroit:
Can someone explain to me why it is bad news, or why there is such a desire of to make it look much worse than it really is?
1. By making things look bad now, it makes it easier to show improvement later. Why do you think the news was so bad the first few months of Mullaly’s reign at Ford? To make it easier to show improvement in the subsequent years.
2. Posturing for UAW negotiations (look how bad things are! We can’t negotiate anymore!)
“jaje, most consider the 20% that DC still ownes of Chrysler the reason it is not a whole number. Hence, the big (or Detroit or little or domestic or …) 2.8.”
Does Ford count as 1.33 due to their ownership stake in Mazda? Does that make it the big 3.11?
Anyone else getting the idea that fleet sales may ramp back up?
Does Hertz really care if a car is last year’s model?
Pch101:
I still say “deliveries” means “deliveries to the end consumer”.
Here’s my proof:
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=3&docid=37543
That’s GM’s press release of thier June sales.
The first line of the text is: “GM dealers in the United States delivered 326,300 vehicles in June”. Not “GM delivered 326,300 vehicles to it’s dealers”. Seems clear to me.
Also, there were the following sales listed in June:
5 Chevy SSRs
406 Pontiac GTOs
26 Saab 9-2xs
5 Hummer H1s
140 Pontiac Montana SV6s
These are all vehicles that were discontinued for model year 2006 or earlier, which means that GM is no longer shipping them to dealers.
Yes, rental companies prefer new cars, because:
–A significant portion of revenue comes from selling cars that have been used as rental. So they watch depreciation (from their purchase price) closely, and they want to stock their used car lots with fairly new cars to facilitate the resale process. Very important.
–Their cars must be under factory warranty, to minimize any and all maintenance and repair costs.
Matthew Danda:
“1. By making things look bad now, it makes it easier to show improvement later. Why do you think the news was so bad the first few months of Mullaly’s reign at Ford? To make it easier to show improvement in the subsequent years.
2. Posturing for UAW negotiations (look how bad things are! We can’t negotiate anymore!)”
I don’t disagree that Ford has been making things look worse for exactly the reasons you state. I guess expect sites like TTAC to see through the BS and call it like it really is, not how it is popularly perceived.
Having said that, I believe that the Detroit management teams tend to suck, and they should be held accountable for their past misdeeds. I just think the column is misinterpretation of the sales data.
picard234:
“Ford’s automotive operations lost $1.2b in the second quarter last year. Unless you can attribute that loss to 28,032 unprofitable sales (that would be $42,808 each), then this is bad news for the second quarter of this year.”
Ford was excessively bloated last year because of the loss of market share. They have been shedding the excess poundage since Q4 last year. The overhead cost base just isn’t the same to use for comparison.
The good news is that quality is improving and the cars are more appealing to real customers. The June numbers indicate that retail market share is improving.
I’m just saying give credit where it is due. There isn’t a need to look for dark shadows on every silver cloud.
exdetroit; The good news is that [Ford’s] quality is improving and the cars are more appealing to real customers. The June numbers indicate that retail market share is improving.
In what way? According to Automotive News, “Ford Motor’s domestics had 15.9 percent [retail market share] in June, a loss of 0.8 points.”
And for the year to date, Ford’s market share was down 1.7 points. How is that “improving?”
Mr. Williams is correct: the cloud is quite dark, and the silver lining is difficult to see.
The devil is in the details, namely the incentives. Edmunds reports that average incentives for the domestics are significantly higher than for their rivals:
Automaker — June 2007
Chrysler Group — $3,962
Ford — $3,187
General Motors — $2,830
Honda — $1,397
Nissan — $2,218
Toyota — $1,308
Incentives are costly, but more importantly, they are symptomatic of much greater problems. The fact that they are so high tells you that the products are unpopular, and that inventories are excessive. The lack of demand tells you that the domestics are out of step with the market, while the inventories suck capital out of these companies and harm their potential recovery plans.
They don’t talk about it much on the evening news, but these firms are clearly drowning. Companies with popular products don’t need incentives and don’t carry high inventories. When you ask yourself **why** the incentives are so persistently high, the growing crisis becomes more evident.
“How is that “improving?””
Well… hmmm… What would Tony Snow say? Obviously a loss of .8% market share is an improvement over a loss of 1.7%! :)
I stand corrected.
Matthew Danda:
July 10th, 2007 at 9:25 am
2007 Fusion SE with appearance package (17″ wheels), 5-speed, 4 cylinder, for $17.2K or $18.5K with tax. My employer, a large IT company, has an X-Plan pricing deal with Ford. So I didn’t have to negotiate at all
Paying X-Plan pricing is like paying MSRP on Ford. My local dealer was willing to go $500 below x-plan for a Focus, I offered $1000 below, and left. He left me a voice message the next day. With Mazda3 and Versa going for 0% and 0.7% below invoice, I did not bother to call him back.
Geotpf: That is known as GM semantics.
Pch101 is correct, and both Robert Farago and Frank Williams have confirmed as much, complete with evidence to back it up. Further substantiation can be found in previous TTAC editorials. GM counts deliveries to dealers as deliveries to customers, as the dealerships ARE their customers (and pay GM for the vehicles, sold or unsold, no matter how long they sit on the lot).
But, out of curiousity, how does that explain the listing of sales for vehicles that have been out of production for months (or even a year, in some cases)?
Has GM been holding them in the factory for that long, before shipping them to a dealer?
Has GM been holding them in the factory for that long, before shipping them to a dealer?
Yes, it does. Let’s remember — GM is a wholesaler, not a retailer. Aside from direct fleet sales, its customers are its dealerships, not the buying public.
Just because they produce doesn’t mean that they can sell it. If their customers (the dealers) don’t want them, they don’t necessarily ship them out, until the point comes that demand either catches up or else the factory has to pay out yet another incentive to the dealers to get them to take the stragglers.
The routine is a hangover off the Ford-inspired mass production business model followed by the domestics: run the factories in the name of “capacity utilization” and “efficiency”, thereby creating excess inventories. The resulting pileup of vehicles can result in many months worth of unwanted inventories that go unsold at the manufacturer level (which are disastrous for these companies, but that’s another story.)
This is the kind of numeric gamesmanship that leads to “channel stuffing.” Since dealers finance their inventory purchases, the manufacturer can create an inducement through incentives for dealers to take unwanted inventory without the dealer coming much out of pocket. But that of course doesn’t mean that the dealer will have an easy time selling it.
This is one reason why GM has average incentives that are typically a couple thousand dollars higher than Toyota. GM has to resort to a lot more off-camera bribery to sell its products. A lot of these incentives are being paid to the dealer, and not just to the customer. Unless you follow the business closely, you as the average consumer would never see this.
Mr. Williams –
Another excellent article – I thoroughly enjoy your packaging of the numbers.
Pch101, thank you for the explanation.
I do know that our local Chevy dealer had a brand-new SSR on the lot for months after the vehicle was discontinued. Wonder how much GM paid the dealer to take it…but I would think that the cost of keeping that vehicle on the lot for all of those months would have still hurt the dealer in the long run.
Another question – since Ford goes by actual registrations of vehicles, are its sales figures actually more accurate than those of GM? Or at least a better indicator of the model’s popularity with customers (as long as we know the percentage of fleet sales)?
since Ford goes by actual registrations of vehicles, are its sales figures actually more accurate than those of GM? Or at least a better indicator of the model’s popularity with customers (as long as we know the percentage of fleet sales)?
It’s debatable, but I’d be inclined to favor registrations, because it’s more difficult to manipulate the result.
GM would argue that cars can be purchased by end users without ever being registered, so registrations would be too conservative a measure. But I have my doubts that very many cars get sold, whether at retail or fleet, without some sort of registration, so it sounds like a subterfuge to me.
I think that the main point here is that you can’t look at “sales” numbers in a vacuum, they only tell a small piece of the story. To get a more accurate sense of the market, you need to at least consider some of the other data, such as fleet sales volumes and percentages, retail market share, average incentives and average days of inventory.
If the goal here is to see how the manufacturer turns a car into revenue and to determine which cars are helping to produce that revenue, then you need all of these pieces, and then review them to see how they fit together. One piece of data by itself won’t tell you everything that you need to know, but looking at several data points together shows the chinks in the armor rather quickly.
When a vehicle has high fleet sales, low retail sales volumes in comparison to its rivals, high inventories and bucketloads of incentives, then you know that it is in is trouble, even if the absolute “sales” number reported in the popular media seems to put it into Top 10 lists. Unfortunately, few media outlets outside of this one ever cut to the quick, connect the dots, and show you how the overall sales number often reported to the popular press is often highly misleading and fairly useless, at least as it relates to the Big 2.8.
Pch101 is fast becoming my favorite commentator on TTAC. Very well said.