In June ’05, GM CEO Rick Wagoner unveiled his turnaround plan for the beleaguered automaker: accelerate new products, eliminate discounts, renegotiate union contracts, import parts from China and downsize to match diminished demand. The last of these five points captured the critics’ imagination. “You can’t cut your way to profits,” they warned. Wagoner reacted with characteristic bravado: “We aren't going out of business in the next six months.” One wonders how those words would sound today, two days after the world learned that GM’s June sales slid 21.3 percent.
By now GM has a lot of practice explaining operating losses, shrinking sales and lost market share. Still, Black Tuesday challenged veteran mouthpiece Paul Ballew’s exculpatory skills. Once again, Ballew was determined to convince GM’s camp followers that the automaker’s sagging fortunes actually represent good governance and bad luck. To that end, Ballew rounded up the usual suspects.
GM’s Spinmeister began by pointing out that the showroom massacre was “partly attributable to a planned reduction of an additional 13,487 daily rental sale vehicles.” Although Ballew did his best to headline the fact, empirical analysis suggests additional emphasis on the word “partly.” In June, GM’s sales fell by 86,825 units (320,688 vehicles vs. 407,513). GM’s reduced fleet sales only account for 15.5 percent of the total tumble.
Ballew then trotted-out the old “soft industry” excuse. Only it turns out the U.S. automobile industry has an airtight alibi. According to Autodata, American automobile sales fell just three percent in June; from last year’s 1.5m to this year’s 1.46m. The numbers clearly indicate that the industry was tucked-up in bed at the time of GM’s bloodbath.
And anyway, how do you explain the fact that GM’s transplanted competition went nuts? Nissan posted a massive 22.7 percent sales increase. Toyota’s turnover rose by 10.2 percent. Honda’s sales ascended by 11.5 percent. Hyundai’s sales climbed 11 percent.
Surprisingly, Ballew says GM wasn’t surprised by their [continuing] shimmy down the sales charts. “We had very strong retail sales in June and July a year ago, so we knew we'd have a tough time on the retail side.”
Yes, well, that's what happens when you offer zero percent financing to anyone with a pulse for six days, and then don't. In any case, there's no getting around the fact that GM sold 50k units less in June than it did the previous month.
Ballew identified two legitimate conspirators: rising gas prices and slowing housing starts. The twin terrors tore into GM’s truck sales, scything 22.9 percent from the previous June's total. Sales of the relatively new GMC Sierra and Chevrolet Silverado pickup trucks fell 26.5 and 23.5 percent respectively.
Surprisingly, Ballew says GM was surprised by Toyota’s aggressive offers on their Texas Tundra: zero-percent financing for 60 months and $5k in dealer incentives. The fact that GM failed to realize that their deep-pocketed nemesis would slap cash on the dash to attain their 200k per annum Tundra target shows GM’s woeful lack of situational awareness.
It gets worse. Ballew hinted that his employer will react in kind, increasing incentives on its pickups to protect its turf. As predicted, Toyota’s entry into the market is gradually and inexorably taking its toll on the profitability of GM’s last remaining cash cow.
Meanwhile, GM's new product cadence has peaked, and its eight brands are in dire straits. Caddy (-28.4 percent), Chevrolet (-23.5 percent), Hummer (-10 percent), Pontiac (-18.1 percent), GMC (-16.1 percent), Buick (-30.4 percent) and Saturn (-8.8 percent) all sucked the joy out of June. Only Saab stayed above water, adding 1066 sales, topping out at 4361 vehicles.
In silver lining search mode, Paul Ballew and Marketing Maven Mark LeNeve pointed to the early success of the SUV-sales-stealing Lambda triplets (Acadia, Outlook and Enclave) — although admitting you can’t build a new model fast enough to meet demand is a curious sort of boast for a company that's boasted about reduced production.
So, where does all this leave Rick Wagoner’s turnaround plan? Accelerate new products. Flop. Eliminate discounts. Nope. Renegotiate union contracts. Health care “giveback” swallowed by soaring costs. Import cheaper parts from China. Check. Trim excess capacity. Who cares? If you didn’t believe it then, believe it now: you can’t cut your way to prosperity.
To wit: GM’s U.S. market share fell 3.3 percent in June, down from last year's 25.4 percent to this year’s 22.1 percent. (Down 8.1 percent since '90.) Toyota’s U.S. market share now stands at 16.9 percent. When you consider the disparity in the two automakers' dealership count– 7715 vs. 1740– it's easy to see which company is headed for Chapter 11, and why.
In fact, since Rick Wagoner launched his turnaround plan, GM’s market share has shrunk by 5.2 percent. No matter what else GM's CEO may or may not have achieved in that time, the figure is an irrefutable condemnation of his administration. GM's Board of Bystanders granted Rick Wagoner a bankruptcy-proof pension. It's time they activate it.
In what way can you not cut bloated management in a bid for increased profitability? That’s why you strip all the innards from a rally car to go faster…. Basic Lean principles about removing waste say you can cut your way to success. Just gotta be careful that you cut the right stuff.
As the article states, I'm 100% down with slicing bureaucratic fat, starting at the top.
It costs $75 or more to fill with fuel GM `s bread and butter vehicles. When they can better those numbers their sales will increase. It is really that simple.
frontline wrote on July 5th, 2007 at 8:10 am:
It costs $75 or more to fill with fuel GM `s bread and butter vehicles. When they can better those numbers their sales will increase. It is really that simple.
Are you talking about GM putting in smaller gas tanks or the price of gas decreasing to pre-Katrina levels? The former is a possibility, the latter will never come back again.
This is the first Deathwatch I’ve read that I know is absolutely true in every regard.
Round 2 is going to be a crises of confidence in purchasing GM’s vehicles. Concerns about GM’s ability to honour warranty claims will drive even more customers away. Classic catch-22.
The Deathwatch name needs to be retired and replaced by the GM Deathspiral series.
R.I.P. GM.
I take it you guys have by now seen the GM “Transformers” movie tie-in commercials, the latest desperate bid to move moribund GM metal.
Running through July 9, General Motors is advertising a “Transform Your Ride” sale on select models. The sale is tied in with “The Transformers,” which opened July 3. Buyers can get 0% financing for 36 months — if they qualify — or $1,000 cash back. These deals are IN ADDITION to current offers/rebates/cash on the hood/financing.
Eligible Vehicles (all slow sellers/fleet specials, I might add)
Chevrolet: 2006 and 2007 Cobalt, Monte Carlo, Impala, HHR, TrailBlazer, Tahoe, Suburban, Avalanche and 2007 900-series Silverado
Buick: 2006 and 2007 Lacrosse, Lucerne and Rainier
Pontiac: 2006 and 2007 G5, G6, Grand Prix and Torrent
GMC: Envoy, Yukon, Yukon Denali, Yukon XL, Yukon XL Denali and 2007 900-series Sierra
The only way I’d purchase any GM vehicle (save for a Corvette, possibly) would be IF it turned into a robot and fought evil. Then my new Solstice could transform and tear apart the guy in the new Miata at the light next to me making fun of how cheap and impractical my car’s interior is. (If I had such a Solstice, that is.)
The Tundra incentives should not have come as a surprise. It’s long been clear that Toyota has the financial ability to buy share wherever it wants it.
And the Lexus launch back in 1989 demonstrated that Toyota knew it often makes sense to lose money on each vehicle for the first year or two to get vehicles on the road in customer hands. GM always wants to price at a profitable level from Day One, and this has killed most recent Cadillac models.
They did goof up this time by pricing the Tundra too high at launch, but the incentives are fixing this.
Michael:
They did goof up this time by pricing the Tundra too high at launch, but the incentives are fixing this.
I think getting the model mix wrong was Toyota’s real goof. Now that they’ve got the Tundra crew cab with the big V8 ramped-up, I reckon they’ll ease off on the incentives.
I second the comment about the death “spiral.” It is a much more fitting name as we see the panic-induced cycles grow tighter and tighter.
RF, this editorial hits the spot, illustrating just how the wrong decisions lead down the sad, self-destructive road led by poor management.
I think the last paragraph is going to spawn the greatest bit of commenting – how exactly do bureaucrats justify salary regardless of performance? It’s like paying someone $50 to paint your garage if they wanted to and not being surprised that they didn’t do it and just pocketed the fifty in a flurry of laziness.
But back to the theme of the editorial, as GM turns the volume of its bankruptcy to eleven, I’d be interested to see just how much more hacking and slicing it will do before realizing that a head cannot feed itself without hands and arms.
Chop, chop, though, I think we’ve been waiting for the final flatline a bit too long already.
They have truly lost the momentum required to have a turnaround. People are comfortable in foreign owned but domestic produced vehicles. Resale is an indicator of that. And yesterday i hear Chyrsler is going to recall thousands of cars for some problem.
Your standing in a dealership contemplating dropping 30 large on a car. What would you do?
Cut the fat at the top RF?Never, these guys don’t live in the same world as you and I.They actually believe what thier PR guys sprout off.
If I had a bankruptcy proof pension I wouldn’t give a rats ass either.
I’m patching the leaks in my lifeboat right now,every week the ship stays afloat means another pay day.
They can start ripping the floor boards up and burning them I don’t give a shit.
Its just too bad the captain won’t go down with his ship
One point further to GM’s June sales. Of what’s counted as retail sales don’t forget that this includes all employee purchases/leases and vehicles the company buys for employees who have company cars. That probably makes up a double-digit percentage each month of that retail number.
As the article states, I’m 100% down with slicing bureaucratic fat, starting at the top.
Amen to that.
With his turnaround plan swirling around the bowl, Wagoner should bring forward a confidence inspiring warranty at least the equal of Hyundai’s.
Poor Cadillac reliability recently put us into a Japanese-made car. Why would we assume a risk GM is avoiding? An honest 10-year warranty might have bridged the gap.
Cadillac advertises world class quality. GM should put its money where its mouth is.
I am still in shock over these numbers. So too are the analysts apparently, GMs stock fell again today.
To me, Caddy is the biggest surprise. Is there a place where one can see a model by model breakdown.
I third the motion that the series be renamed the ‘Death Spiral’. After these figures, ‘Death Watch’ is much too tepid.
I guess from a scavenger’s point of view, there is good news. GM is really going to have to start cutting their prices. At a rate that makes previous discounts seem modest by comparison. I’d hate to be a dealer trying to negotiate with a customer over the rest of the summer. Talk about a buyer’s market.
Of course, as mentioned upstream, don’t hope for too much out of that warranty.
You can’t cut your way to prosperity? That is exactly whet Carlos Ghosn did to make Nissan profitible again in less than a year….
Mcloud1: You can’t cut your way to prosperity? That is exactly whet Carlos Ghosn did to make Nissan profitible again in less than a year…. The trick to business: take in more than you spend. Theoretically, you can reduce the amount you spend until it's less than the amount you take in. The problem here is that the amount GM's taking in is also declining. In other words, that "spiral" the other commentators are talking about is GM chasing its own tail. More philosophically, everything either grows or dies. GM's shrinking market share tells the tale (tail?). NickR: GM is really going to have to start cutting their prices. Yup. GM currently has 1,054,000 units in inventory, roughly 2/3's of which are trucks (744,000). We also hear reports of "channel stuffing" and pissed-off dealers. By comparison, in June '05 (before production cutbacks), GM had 1.2m units in inventory.
Yep, “these guys don’t live in the same world.” In contrast, at Wal-Mart executives fly coach and share hotel rooms on business trips. Hey Rick, did you know Southwest flies from Detroit?
Corporate excess was everywhere. My wife went to school with a lady who got a job with Oldsmobile and worked in its marketing department until she got early retirement. One of the perks there was participating in Olds’ big delegation to the Indy 500: a lavish junket that lasted several days. At a time when Olds was advertising it “isn’t your father’s Oldsmobile” (yeah, it’s not as good) they were spending a fortune to party at an event whose fans had long since quit thinking of Olds as GM’s BMW.
Monthly reported sales figures are “comprehensively managed” by the respective manufacturers.
One would suspect that GM has a few agendas that are not being communicated at this time. It seems
too obvious to lower sales figures, when its relatively easy to “crank them up” by using several levers that are at the disposal of any manufacturer.
Toyota used some of those “levers” to increase their presence in the pick up sector.
AGR:
Toyota used some of those “levers” to increase their presence in the pick up sector.
Can you be more specific?
# Mcloud1:
July 5th, 2007 at 10:14 am
You can’t cut your way to prosperity? That is exactly whet Carlos Ghosn did to make Nissan profitible again in less than a year….
But Ghosn didn’t blindly take a chainsaw to the operation, and several new models revived the brand: Xterra, redesigned Frontier, amped-up Altima. Then bring out the 350Z and the Titan/Armada. Even if the T/A models aren’t big sellers, the rest of the lineup brought Nissan back from the brink.
import parts from China
If the quintesential American company doesn’t believe in America and American products then this country is done. Prepare for our new third world status. The quality of Chinese products is atrociously dangerous. I am amazed that people buy any Chinese crap as the simplest of products doesn’t last the week.
Oh, wow. The number of ToMoCo dealerships versus GM dealerships really does say a lot, doesn’t it? How do their respective number of models compare?
The quality of Chinese products is atrociously dangerous. I am amazed that people buy any Chinese crap as the simplest of products doesn’t last the week.
This isn’t always true. Open up a lot of extremely high quality equipment and you will find top notch components made in China. Even Boeing is contracting with the Chinese on air frame components.
Quality is purely a matter of management and manufacturing techniques. It makes no difference where a product is made as long as care is taken on the engineering and production side.
The Chinese have a bad rap because of the flood of cheap goods pouring into the country. This obscures the remarkable amount of high quality, high tech Chinese equipment that is also imported.
Just a thought I’ll throw out there. The upcoming UAW negotiations truly are the make or break for GM. How much do you think GM is “managing down” sales in the QTR entering the negotiations to give them maximum leverage. I think this is a remote possibility as GM needs every sale it can get…but would not totally put out of the realm.
RF
Its no secret that manufacturers use a variety of “levers” from – subsidised interest rates – adjusting residuals on leases – cash back – option packages – to name a few, its a game of what numbers they want to achieve, and how how imaginative they want to get.
If some models slowed down one month, manufacturers will give them a “shot of nitrous” the following month. If the budgets are low for the month, or the quarter they will wait one out and step up it the following month.
In the case of this discussion the folks at GM were either totally asleep at the wheel, the sales dropped in the US and Canada, or there are other factors/agendas that come into consideration.
Toyota Tundra does not sell well enough, or the wrong models are in inventory…Toyota will exercise the “cash back Lever” or the “subsidised finance rate lever” or the “lets adjust the residual lever” to arrive at a price point. Did the market really buy more pick ups, did GM and Ford pickups suddenly become POS, or did one manufacturer get aggressive to “steal” pick up business?
Chrysler for a multitude of reasons needs to “move a lot of iron” since careers are at stake, and the agenda might very well be, lets move all the iron we can to succesfully close this deal, and try to save our careers. Last month didn’t Chrysler buy RDR’s(Retail Delivery Reports) by letting dealer get some sort of internal credit by keeping a vehicle on the road for 1 or 2 days.
If GM has dramatically curbed its fleet sales, who is picking up on the fleet business?
The simplest explanation is also the most logical – a collapsing housing market, concern over volatile gas prices and unrelenting competition are “managing down” GM’s sales.
GM’s management has contributed to the effort by bringing out vehicles that turn out to be merely okay when compared to the competition, or failing to properly promote and price several key new vehicles.
This can be explained by managerial incompetence, not conspiracy theories.
NickR: “to me, Caddy is the biggest surprise”
Caddy sales have been down some 30% all year: https://www.thetruthaboutcars.com/?p=3391
the last line of that was: “if this year’s (2007) sales trends continue, Cadillac will be right where they were in 2001” (in the toilet, before Caddy was “reinvented”).
Death Spiral? I think that a spiral is much too elegant a maneuver to describe what we are witnessing. How about Death Flop, Death Rattle, or Death Throes?
At the risk of getting flamed or being told to “wake up”. Rick’s job was actually easier than people gave it credit for. Let’s break this down a little more
What were GM’s REALY problems?
Sliding market share, poor quality & reliablity, a millitant union and poor brand perception.
Now cast your mind back 5 years prior to all this happening and imagine you’re in South Korea. What was Chung Mong Koo saying about Hyundai?
“We’ve got sliding market share, poor quality & reliablity, a millitant union and poor brand perception! These need to be fixed!”
So what did he do? Well, really he only addressed one problem which was the quality and reliability. He told all managers to make Quality and reliability the number one focus, nothing else matters! And what happened? Market share rose, Hyundai’s brand is now regarded with the same distinction as Toyota or Honda and the Unions are (relatively) happy because more work is coming their way due to increased sales.
So, there was a perfect case study on how to turn around a car company. Another case he could take was Carlos “one trick pony” Chosn. As much as I think he is overrated (which I’m sure I’ve made clear many times before!) one style of his managament is to hold managers responsible for their departments (it’s an crazy idea, but it works!). If managers don’t reach a target, kiss goodby to your bonus. This was demonstrated earlier this year, when Nissan failed to reach a sales target.
But what has Rabid Rick done? Market share is still sliding, the quality and reliability is still mediocre, brand perception is still in the toilet and the union is still ruling them with an iron fist. With regards to brand perception, I have heard GM managers bleating that “Our quality and relibility is as good as any of the transplants but people don’t believe it!”. It comes to something when, GM now start blaming customers for their own problems. Don’t tell me to believe it, MAKE me believe it! GM seem to have this mind set that their company is OWED customers!
I don’t know, maybe the managers are living in a world of their own and refuse to accept ideas from any other companies. But if diminishing market share, crumbling brand perception and a hyper fast cash burn won’t spur them into doing something tangible, what will……..?
While Bill Wade makes a good point, just try to buy something American made in your local hardware store. It’s virtually all Chinese and most of it IS crap.
I remember, over the years, when you went to a store around 1965 it was all (virtually) American. Then, in the late 70’s the Chinese stuff started showing up and you could choose to buy good but expensive(American) or something really cheap, both cost and quality (Chinese or, perhaps more accurately, made in Taiwan). And because people were either cheap or poor, they’d often make do with the cheap product. And now, it’s all Chinese it’s mostly crap and it’s all pretty expensive. And even that wouldn’t be so bad if the poor worker in China MAKING the product was reaping the benefit instead of the likes of Mr. Wagoner and their golden parachutes and whoever they have to pay off in the Chinese government.
The GM Death Watch/Spiral is a microcosm for The American Long Goodbye.
Eligible Vehicles (all slow sellers/fleet specials, I might add)
Chevrolet: 2006 and 2007 Cobalt, Monte Carlo, Impala, HHR, TrailBlazer, Tahoe, Suburban, Avalanche and 2007 900-series Silverado
Buick: 2006 and 2007 Lacrosse, Lucerne and Rainier
Pontiac: 2006 and 2007 G5, G6, Grand Prix and Torrent
GMC: Envoy, Yukon, Yukon Denali, Yukon XL, Yukon XL Denali and 2007 900-series Sierra
Wow, never have I seen such a list of automotive detritus; Tired brands, bland models, old-school slab sided SUV’s. Not a single vehicle I would consider if I was looking at any of their respective market segments.
It’s been widely reported to have cost a billion bucks to kill off Oldsmobile, yet GM can easily post that much of a loss each quarter and the stock price holds steady. I believe the real reason GM won’t cut back on their brand/model/dealer portfolio is they need to be seen and perceived as the world’s largest auto manufacturer to keep the stock price up. They could make a profit just selling Aveos and Corvettes but the company, and hence executive compensation, would be worthless.
NickR: Is there a place where one can see a model by model breakdown.
Every month the trade rag Automotive News gives monthly sales figures broken down by model. Also on their website. But I think you have to be a subscriber to get at that.
Any case, we can’t let GM fail! Whoever makes those crappy AM/FM radios with no CD player would lose their only customer if not for Chevrolet!
I don’t think a sales or incentive push will help either.
Look back at the “Kegger” they threw in ’05. Pulled forward sales, cost big bucks. No solution down that road.
RF-definately agree on the Tundra assesment. Incentives do not double your sales. Toyota is still ramping up an move into essentially new territory, getting enough inventory on the dealer lots so buyers can choose the truck they want takes time.
4 years of ferocious model launchs and the public yawns and looks east. Yikes.
“Auntie Em, auntie Em…”
Congrats on a fine editorial, I am glad someone is calling GM on the continued usage of “we are selling fewer vehicles to rental fleets” excuse. Fact is, the public have left GM (and F and C also) in droves and won’t be coming back. In the immortal words of Willie N and Dandy Don “Turn out the lights, the party’s over, they say that all good things must end”.
There’s a huge difference in unit sales per dealer between Toyota and GM. Are some GM dealers now as desperate as the gang at the RenCen?
I knew a guy who for decades made a living owning the local Pontiac dealership. It was a smallish downtown car store in a building that dated back to the 20’s, like it might have once been an Oakland outlet. Anyway, he finally sold out. He told me he got fed up with GM’s constant badgering him to build a mega-store out by the Interstate. He refused to borrow millions to have a sprawling, highly-leveraged dealership dependent on massive advertising and huge inventory and volume for viability.
I wonder if the big store (now including Buick and GMC) that got built is making any money now. Maybe so: used cars, parts and service can be quite profitable. The new cars just add a bit of luster.
NickR:
Numbers here. Ouch, my eyes.
Impala sales look good until you realize just over half of them are fleet.
Starlightmica, thanks.
And ouch is right. Looking model by model is even more sobering. And look, the one’s with the worst mileage are taking the biggest beating! Who could have predicted that?
Definitely some shocking numbers for GM in June. Nobody was expecting a drop this huge. When you start to make comparisons, the surprises continue.
In June, the Camry actually outsold the Silverado.
Not only that, but the Tundra outsold the GMC Sierra. Bet ya Ballew can’t spin his way out of this fact.
“GM’s reduced fleet sales only account for 15.5 percent of the total tumble.”
Wow! I assumed the GM sales crash was due to huge fleet-sale reduction. Aside from the Lambda triplets, the Impala is the only vehicle GM is really selling. How freaking sad is that? GM’s high-margin ware is crashing like Sammy Hagar on Cabo Wabo.
GM is doomed…Doomed I tells ya.
Look back at the “Kegger” they threw in ‘05.
That cracks me up. But they will go that route.
My former employer offered incentives in December ever year, and booked some January sales in December for good measure, to make forecast. Obviously, this meant starting in a bigger hole every year. It never stopped them, and it won’t stop GM.
I think 50merc might be on to something…its not just the number of dealers that GM has, its the number of Magadealers. Toyota has way fewer dealers and fewer models, so the magedealers make sense for them. Once, American car companies had fewer, smaller, and more personable dealers. The owner himself lived in town, and would take care of the upset customers and glad-hand a new buyers. It was a form of personal attention that even a Lexus megadealer can’t fully replicate. The Buick dealer didn’t need a full line of cars because he didn’t need megavolume to survive. It was a more boutique car buying experience.
For example – my dad was a confirmed Chrysler guy who started on Imperials in the 60s, and was still buying New Yorkers when they were K-car based junk. Every two years he bought a new one, and if they didn’t have what he wanted on the lot, they could always seem to locate one in a few days. Then His Chrysler dealer sold out to a megachain, which made it a multi-line megamall. He hated the new sales pressure, and didn’t want to have to walk miles or ride golf cart just to look at a car – now he drives an Audi. He moved to Audi to get the kind of personalized customer attention the smaller Chrysler dealer had provided 25 years before.
As for actual cutting fat and belt tightening, I would wager that if/when GM was down to just 10 employees, all 10 would be executive/management/CEO/CFO types. Such a disconnect…..they STILL don’t get it.
Back in ’05 I should’ve bought a “skid steer” end loader to plow our lot instead of the Chevy!
I’ve said it before. GM actually wrote it’s own epitaph in (what was it? September 2005?). This was when they did the “employee pricing for everyone” – and just prior to this, it was noted that they had lost over $4000 per new vehicle sold worldwide.
Right then, I knew the party was over.
“We’re losing money! Crank out the production!”
Wasn’t it Madman Muntz who said 50 years ago on early California TV ads for his new car lots, “we lose money on every one but make it up on volume”?
He was just blowing salesman’s smoke and using some humor. GM’s imbicilic “leaders” (?!) are serious. Seriously flawed!
I also find it “very very interesting” that “kizmet” or whatever you want to call it is coming back to bite GM, Ford and Chrysler in the arse.
Rewind 45 years ago and you had GM, Ford and Chrysler dealers bad-mouthing Studebaker. “Why, they’ll be out of business soon, and you won’t have any resale value or warrantee!”
Now who is suffering from the “Studebaker Syndrome”? Answer: GM, Ford and Chrysler.
But this time, there’s no need for the competition to bad-mouth them – ironically, Toyota, Honda and others are from a culture which actually frowns upon that.
If you don’t believe me, check out how many Japanese auto manufacturers there still are. Not just brands – manufacturers.
Toyota
Daihatsu (big in nations where cars/trucks/SUVs don’t have to weight in at 5000 pounds and have massive engines)
Isuzu (near dead – thanks to GM)
Suzuki
Mitsubishi (was near dead – thanks to DCX)
Subaru (saved from the maw of GM at the last minute)
Honda
Nissan
I count 8 and may have forgotten one or two! We’ve had a “big 3” for how long?!
Glenn 126:
Daihatsu is now a subsidiary of Toyota, don’t know if it’s the 33% as per Mazda + Ford, or a greater percentage such as the Nissan-Renault alliance. Toyota owns a minority stake in Subaru that GM sold off, don’t recall if they own part of anyone else.
Isuzu is dead as a carmaker but much stronger in trucks. Mitusbishi Motors still has the rest of the Mitsubishi group to fall upon if they go down (again).
The era of homegrown U.S. automakers is ending. In 20 years, the Japanese and S. Koreans will be supplanted by the Chinese and, perhaps, the Indians. After that, who knows? Cheap manufacturing maybe will come from Russia and the former Eastern blocs.
Manufacturing dominance will follow wherever there is cheap labor and lax governmental regulation
(e.g., Mexico, China, Thailand).
We (in the U.S.) are due for a major market correction. Public debt, inflated real estate, and personal debt (the average personal savings rate is -1%. Even worse, to finance our public debt, China has been buying it. If they start diversifying away from the weakening dollar to the strengthening Euro or oil-backed currencies of the Middle East, we are screwed.
Soon cars and trucks will be only luxury items for most.
If I didn’t live in Michigan, this might almost be funny. But I do, so it isn’t.
It’s been 20+ years since Deming told the big 3 what to do to save themselves. You buy them books, and send ’em to school – and they eat the books.
Just in case there is a B3 auto exec out there who genuinely wants to figure out what is going on let me help you out –
1. You’ve got to go with the Deming program, and stick with it. You can’t abandon it in 3 years. Toyota does it, Honda does it, and if you don’t you’ll regret it, soon, and for what little remains of your corporate life.
2. (This is related to one) you are getting beat on quality, not price.
3. You won’t get #2 w/o repeating it – you aren’t getting beat on price, you are getting beat on quality.
You guys have lost half the American market in 30 years. It won’t take another 30 to loose the rest. Wake Up! Smell the coffee!
I sincerely hope Toyota can claim the #1 spot after the years sales totals are in. Not because I wish ill on GM, but because maybe they will refocus on staying in business.
On the bright side Big 3 (or 2) you still have half the market (but not for long if June fortells the future) You don’t have 30 years to loose it. You’ve got more like 10. (If that long) You don’t have to go out of business – unless you want to.
Factotum: You are absolutely correct on your view on the US and global market. China will be holding many of the cards as we sink further into the black hole of personal and national debt.
Looks like the US automakers got caught unprepared again, you would think after the 1973 and 1979 oil crises’s they would learn, but no!!! The majority of Chrysler products are oversized and out of touch with the world.
Can someone please tell me what is going to happen to all the inventory the 2.5 is building up now come late August/early September when new model years start? $8K rebates? $10K rebates? How far can the envelope be pushed?
Hello!
Working in a Mazda/Subaru dealership as part of a 13-dealer network, I used to ask customers why they chose a Mazda or Subaru over a domestic product. After acting like I just shot their dog, the usual reply was..”ARE YOU KIDDING??!!”
Fast forward a couple of decades. Not only have customers abandoned the traditional domestic carlines, SO HAVE THE DEALERS!!
How many new GM,Ford, or Chrysler shops do you see being built or old ones being rennovated?
Can someone please tell me what is going to happen to all the inventory the 2.5 is building up now come late August/early September when new model years start?
The assembly plants may well be closed due to strikes (hope not), as the UAW’s contract expires in September. If that happens the only cars they will be able to sell are the ones sitting on lots.
The only way I’d purchase any GM vehicle (save for a Corvette, possibly) would be IF it turned into a robot and fought evil.
Actually, the GM vehicles I have owned were transformers–after a few years they turned into pieces of crap.
John
These are YTD May figures from Automotive News.
………………..2007………2006
Silverado………..265,941……258,378
Sierra……………84,104…….80,957
F Series…………290,282……334,725
Ram……………..154,143……150,799
Tundra……………61,113…….48,636
Charles Manson himself could not have performed a better job of destroying a once-proud company better and more effectively than Rick Wagoner. It’s taken 30 years, but BY GOD he had FINALLY succeeded!!!
Our forefathers worked HARD to leave our country more prosperous such that their children and grandchildren could live a life based upon civility, prosperity, and optimism. NOW, that bold philosophy has been turned into a philosophy based upon plunder, legalized theft, avarice and greed.
Behold the WRATH of Rick Wagoner!!!
As BTO once sang so eloquently, “You ain’t seen nothin’ yet”!!! ;)
hltguy:
I think that you’re overrating the Chinese threat. They have a huge demographic problem hurtling at them. Thanks to the One Child Policy, the nation is rapidly aging. They already have the same percentage of oldsters as we do here in the US. In about twenty years, their overall population will begin to decrease (unlike India and the US). It’s one reason the Chinese have such a huge savings rate. All those grandparents and great grandparents with only one grandchild and great grandchild have to save to pay for their own old ages since neither their descendants nor the govt. nor their companies will be providing that support. Only a fool would risk one’s retirement money on the Middle East and Europe hasn’t had sustained great growth in a long time. That leaves the US as the best place for investment.
Throughout the 80’s, there was much moaning over the threat of the Japanese disinvesting from the US economy. But it never happened. Why? Because only the US combines an advanced economy with comparatively low govt. interference and taxes and strongly growing population. The Japanese money stayed invested here. We’ll see the same with much of the Chinese money. Much of it is already being slipped out of China indirectly to avoid govt. interference and to get away from the insolvent Chinese banking system.
The last time I was at the Lexus dealership, the sales guy told me they were the only dealership between Denver and the Canadian border. So then I checked Buick dealerships for the same territory (Northern Colorado, Wyoming and Montana): at least 27 dealerships. I see Lexi all the time with Wyoming and Montana license plates. The owners just go further to buy them. Is it surprising, then, that Toyota is making money and GM isn’t?
factotum “In 20 years, the Japanese and S. Koreans will be supplanted by the Chinese and, perhaps, the Indians.”
I hear that arhument all the time but GM, Ford and Chrysler did not lose thrit dominance because of cheaper Japanese cars, they lost it because they produced subpar cars for years. I don’t think Toyota or Honda will make that mistake.
TheHammer: I LOVE this! Poor newcomer and Big GM adversary Toyota is just tying to put their little itty bitty foot in the pickup truck segment by spending $5,000 a copy- Big bad GM on the other hand, should be admonished for trying to incentivize their product. Sheesh
A company that shows increased sales and profits every quarter can afford to put incentives on ONE model to increase sales more and get a stronger foothold in a market segment.
A company that is selling off everything but the gold-plated toilets in the executive washroom just to keep afloat and shows a 24% drop in sales over the previous year is just digging themselves deeper into a hole by adding on more and more incentives on more and more models in a futile attempt to keep sales from dropping more and more.
Frank : They still got the gold plated toilet seats?I,m sure there on the block soon if they can,t get a morgage on em.
I’m wondering instead of dumping a big name as Buick why can’t we sell it?
Anything to buy some more time.
Big bad GM on the other hand, should be admonished for trying to incentivize their product.
Because GM actually makes money off their pickups, it is a Very Bad Thing for GM to put matching incentives on the GMT900s. If GMNA made big bucks on every single car built in the US, it would be a different story.
Jerry Flint from Forbes figured that if Toyota gave away every single Tundra, they would still have a profit of $15 billion this year.
Poor newcomer and Big GM adversary Toyota is just tying to put their little itty bitty foot in the pickup truck segment by spending $5,000 a copy- Big bad GM on the other hand, should be admonished for trying to incentivize their product.
GM can’t afford a sustained price war with Toyota. As others have noted, Toyota has a profitable lineup that can help to feed the Tundra’s lackluster sales to date. On the other hand, GM’s lineup is chock-a-block filled with losers, the full-size truck market is shrinking, and sales of the Avalanche and Sierra are flat.
The real underlying story here is that the Silverado is selling in large numbers, but only with large incentives and at the expense of the F-150, which is getting its clocks cleaned, with tremendous declines in its sales.
Similarly, Nissan is also losing market share and its beachhead in the US market, as sales of the Three Headed Dog and Toyota are fairly flat in a market that is contracting. One has to wonder whether Nissan’s days in the full size truck market may be numbered, and the future of Dodge is obviously uncertain.
Which leaves us with Toyota. Because Toyota has gobs of cash and many successful products to generate profits, it can afford to feed the truck business and to wait things out, while GM bleeds out.
If I were at GM, I’d be very nervous that the most successful product in my entire lineup, the Silverado, requires constant incentives and is doing more damage to the wounded Ford than it is to the healthy, scrappy Toyota. Toyota can go on like this for years, while GM cannot.
LenS: Your point is well taken about China, however one must remember and certainly consider that China now holds over $1 TRILLION dollars in debt based on US securities (in other words, they are financing a large part of the US accumulating debt.) It is true China has an aging population, so does the U.S.. But the U.S.also has massive legacy costs, namedly Medicare, Medicaid and Social Security. All of those programs will go bankrupt, the first being Medicare in probably no more than 15 years. The U.S. has gone from the largest creditor nation in history to the largest debtor nation, in approximately one generation. China indeed has problems, but the U.S. is looking down the barrel of a financial meltdown of biblical proportions, the social programs and war costs are and will do us in. Now back to autos, Ford and GM are toast.
TheHammer, you are certainly incorrect. GM trying to match Toyota on pickup incentives would be like trying to climb an icy mountain uphill with almost no supplies.
GM cannot afford to put more incentives onto it’s trucks, because it will result in bigger losses for the company. But GM also cannot afford to see Sierra and Silverado sales dropping so much. Now that the Tundra has outsold the Sierra in June, GM management must be going bonkers as to what to do to counter the ever-increasing market threat from the Tundra.
From The Wall Street Journal…sales figures for June 2007 with model breakdowns.
http://online.wsj.com/mdc/public/page/2_3022-autosales.html?mod=djemAutos
GM cannot afford to put more incentives onto it’s trucks, because it will result in bigger losses for the company.
In marketing speak a supplier can act as a spoiler in the marketplace. A company with relatively low sales volume in the pickup segment, Toyota, can afford to launch an aggressive discount program in part because even if it breaks even on those vehicles the overall business is still very healthy indeed. GM and Ford, on the other hand, have horribly sick businesses which have been propped up by good profit margins AND high volumes for their pickup trucks. If Toyota’s actions reduce the market value of every GM and Ford pickup truck by a few thousand dollars then GM and Ford suffer a world of hurt. Toyota, on the other hand, can afford to sell a relatively small portion of it’s total production at break even. Toyota can “spoil” the market for the once fat dumb and happy legacy players and then simply wait while the legacy companies bleed out. The only thing which moderates Toyota’s action in this regard is concern for political backlash. Toyota management has a long memory and they certainly remember the years of “voluntary” import volume restrictions.
I well remember the 1980s when these import restrictions were in place. The “Big 3” argued that they needed relief from competitive pressures for a period of time in order to get their act in order. Guess what, they never got their act together! You can read more about those times at:
http://www.heritage.org/Research/EnergyandEnvironment/EM74.cfm
Speaking of which, it was those unit volume restrictions which encouraged the Japanese suppliers to raise selling prices and move the products up market. If you are only allowed to sell X vehicles, then you are going to get the highest possible price for each one. It is no surprise that Lexus, Acura and Infiniti were born towards the end of this arrangement.
It’s easy to blame management for all the ills, but I think the isolation from the real automotive world extends down the ranks at the big three.
I just returned from a visit to Michigan. (BTW: a strange country; the big three’s products are everywhere. In fact, they seem to be more numerous than furrin cars and trucks!)
Anyway, many vehicles had this sticker on them:
“Out of a job yet? Keep buying foreign!”
In the rest of the country, the sticker pointed at Detroit would probably read:
“Out of job yet? Keep making crap products I don’t want!”
I live in the deep south and work at a blue collar machine shop. Yet a walk through the parking lot shows three times as many new model Tundras as GMT-900 based vehicles combined.
GM is dead, they just haven’t figured it out yet.