Imagine GM CEO Rick Wagoner in his RenCen bunker in the middle of August. Reports from the front indicate his North American division faces a third straight month of lowered sales. As the architect of a turnaround plan with no publicly defined goals (including a return to profitability), Wagoner’s given himself plenty of wiggle room. But a bad August– in the face of production cutbacks and a rapidly declining market– would finally trigger Wall Street’s alarm clock. So what does he do? He cheats.
In August, GM’s year-on-year sales rose by 6.1 percent. In the same period, Toyota’s sales declined by 2.8 percent. On the face of it, it’s a stunning result. The media and Wall Street’s reaction was both swift and positive. “Investors given hope after GM bucks downtrend” MSNBC proclaimed. On Tuesday, GM shares rose by $1.18 (3.8 percent). Clearly, Wagoner's wily ways worked: he dodged the bullet.
Despite the obvious anomaly, industry experts weren’t all that interested in examining the figures for a suitable explanation. IRN Inc. auto analyst Erich Merkle spoke for many when he told Bloomberg “It was a quirky month.” Quirky or not, all GM's upward movement came from light truck sales, which rose by 16.5 percent. (Passenger cars sales tanked by a Toyota-beating 7.8 percent.) So the press credited the jump to a sudden increase in consumer demand for GM's pickups and called it good. Very good.
And yet, the clues to the real state of affairs were there for all to see, right in GM’s press release. “When combining retail sales with our growing commercial business, our sales were up when compared with last August,” Marketing Maven Mark LaNeve crowed. "With the double-digit decline in daily rental sales so far this year, and an overall market that remains challenging and competitive, we continue to stabilize our retail share and pricing in the market.”
Growing commercial business? Is this the same GM that said it loud and said it proud: we hereby swear-off fleet sales to protect retail residuals and get GM out of the “pile ‘em high and sell ‘em cheap” mentality? The numbers tell the tale. In August, GM’s total fleet sales rose by 21 percent. And as for LaNeve’s professed “double digit decline in daily rental sales,” note the “so far this year” qualifier. GM’s sales to rental companies increased by 24 percent during August.
In other words, Wagoner’s mob reneged on their promise to their retail customers. They sacrificed their retail customer's vehicular equity to goose the company's August numbers. They cheated. Sometime in mid-August, someone placed a call to fleet buyers and said OK, we’re done starving you of cheap cars. How many would you like ‘cause we got LOTS.
It’s hard to be specific. In a radical and deeply suspicious break with previous policy, GM didn’t separate out fleet and retail sales numbers for August. But the fact that sales of all the usual rental car suspects (Pontiac G6, Chevrolet Impala, Chevrolet Malibu, etc.) matched or exceeded last year’s totals in a declining market is pretty damn damning. If you think about it, that 7.8 percent drop in GM's car sales would have been catastrophic without bulk sales.
As for the trucks, again, we have no idea how many went to fleets. But you can bet it was a bunch. Whenever there’s a statistical anomaly–such as the reversal of GM’s sales losses and Toyota’s sales gains– common sense says something’s changed. On the retail truck side, there’s only one factor that could explain a Silverado or Sierra surge: increased incentives. From July 31 onwards, GM offered from $2k to $4k incentives or zero percent financing on their pickups– even as Toyota quietly dropped national incentives on their Tundra.
Sacrificing profits for sales might increase sales, but it does nothing for profits. So even if GM's 30 percent increase in pickup truck sales isn’t fleet related, the surge isn’t all that it’s cracked-up to be. Truth be told, The General’s recent pickup truck production cutbacks sent a clear signal to alert observers that the automaker's August sales increase must be a temporary bump on a rocky road to oblivion. Short term, GM’s headed straight for lower pickup truck sales AND reduced profit.
Since the numbers received so much attention, let’s finish with the numbers.
Frank Williams says GM’s August increase is based on percentage change per sales day. If you just compare the total numbers from Aug ‘07 to Aug ’06, there's only a 4.9 percent sales increase. Since both months had the same number of selling days (27), there’s only one reason to change the formula: to inflate the percentages. But no matter how they slice it, GM’s still down 7.5 percent overall year to date. While a few models may be showing some increases, the overall trend is decidedly downwards.
Mr. Wagoner can hide from the truth, but there’s nowhere left to run.
Sales not doing well? Lets see, my 04 colorado lease is up and I scanned the lots. What did I find? Cant get a 4 door 4wd 4 cylinder anymore even though the engine is bigger and more powerful thanks to a bore job. It was a good work truck with decent highway mpg. I dont want the trouble prone 5 cylinder. Oh, I forgot the changes since 04 – trim rings around the speedo and tach and chrome door handles inside. and they lost the slightly useful if small console. I guess the colorado/canyon are on a 7 year redesign cycle. sigh.
cbrjim –
Actually, GM is known for going much longer than 7 year redesign cycles, particularly with truck platforms…
By the way, does your hood flutter in the wind at highway speeds like the ones in our fleet?
Now correct me if I’m wrong, but GM made most of their gains in the truck section. Now, wasn’t it only a month ago that the truck division would be “Defended to the death, even with discounts”?
Also, I was reading the BBC website and saw this little gem:
The vice president of GM North America, Mark LaNeve, said his firm was enjoying a growing reputation.
“The myth of import superiority is being destroyed,” he said.
“In countless independent consumer surveys, blogs and expert reviews, it is becoming increasingly evident that we build the highest quality vehicles and deliver them with world-class service.”
Nice to see that GM aren’t the arrogant boys on the block like they used to be(!)
I could go on about how GM are going in circles, but I’ll give GM a little credit for reversing their sales fall. But what GM mention less is how much profit they made on each sale. Remember, every Aura they sell they make a $2000 loss…..
Not only does the thin hood flutter, the seat back adjuster on the drivers seat is the third one, the carpet doesnt meet the trim ahead of the console, the drivers window groans and bucks (going to go soon) the gauges dont line up with the steering wheel-drivers seat so that you cant see your speed. The tach and speedo need to be reversed. The brakes are a little better than dragging your foot out the drivers door. The headlight seals must be made of wax paper and I could go on. Maybe Mikey has an answer for the build quality or lack of. Toyota/Nissan here I come. If I cant get a 4 cylinder then I have no reason to come back. I will take quality over the 3 mpg I guess.
I love all this talk about bunkers and reports from the front. Awesome.
Another great DW RF and the nail has been hit so to speak. GM really DID “cheat” with their August numbers by breaking their promise of reducing fleet sales, breaking their promise of reducing incentives, and by not breaking down retail/fleet in their August sales report.
Significantly, Toyota had the lowest average incentives out of the major automakers. Toyota’s incentives were even lower than Honda’s for August. And as you said, MOST of the Tundra incentives were dropped in August yet Toyota STILL managed to sell almost 20K Tundras. Those of you on TTAC that are convinced incentives were selling the Tundra, there is your proof right there. Even with a major reduction in incentives, the Tundra is selling at a rate that will achieve Toyota’s sales goals.
GM most certainly cheated. They dumped vehicles on rental car agencies in particular and fleets in general (an example that’s probably mostly fleet but not rental agencies is the horrible Chevy Uplander minivan-up 28.7%-I’ll bet some company somewhere is picking those up for dirt cheap) and piled on the incentives on thier full sized pickups.
Of course, all this cheating does is hurt profits, unless GM had the choice between losing a little money by dumping them on fleets and increasing incentives, or laying off UAW workers, who would get paid 90% of thier salaries in the jobs bank anyways.
As I recall the Canyon/Colorado was originally designed for the Thailand market.
No one seems interested, even Toyota, in building really, really good light trucks like we had in the 1980s. Even the new Tacoma’s are getting big and clumsy. And the Ford Ranger–when was that designed? In 1993 or something?
I suspect the rationale is that it costs about the same to manufacture a full-size pickup as a tiny pickup, so the profits are better with bigger trucks. It’s a shame, because I suspect the public really craves a new generation of good tiny trucks. I still have fond memories of my 1984 Mazda B2000–that thing never let me down.
Too bad the General doesn’t take the market for small trucks seriously. Instead they sell yet another substandard product to fill the product line.
In some sense, I can understand Mark LaNeve and other GM brass trying to hide the bad news and pumping up the perception of good news.
But the sheer arrogance in which they do it is astounding. The only “world class service” I see from GM is the way they serve themselves with outlandish executive pay, golden parachutes, and a rich sense of entitlement.
Ever been to a GM dealership to get something repaired under warrenty? “World class service”, my *ss.
In re: Geotpf’s comment about the Uplander sales, could GM possibly be making money on these by selling some sort of cargo van version? No driver’s side sliding door, no interior behind the driver’s seat, etc. Sure, that’d be cheating, but if they’re making a profit by moving decontented vehicles to the fleets, then let ’em make some profit.
I was waiting eagerly for this editorial, and as usual, TTAC didn’t let me down.
GM’s headed straight for lower pickup truck sales AND reduced profit.
Not to mention the rising Canadian vs. American dollar, that’s really got to hurt. As of this second, a Canadian dollar is worth 95 cents, whereas for the longest time the disparity was more like 30+ cents.
Little surprise, despite this “surge” of sales, 1000 jobs just got the axe at GM’s Oshawa truck plant.
They played the game the same way every other manufacturer plays the game. They gave an indication of how they raised their numbers from the previous year.
It wouldn’t be so much fun to rain on GM’s parade if their corporate communications weren’t so damned arrogant.
It’s especially bizarre coming from a company that’s been willing to run big, sappy “we’re sorry” campaigns admitting that they had gotten lazy, but were working earnestly to improve. Remember the Cadillac ads? “Fifty years ago, Cadillac was the standard of the world. Twenty-five years ago, it wasn’t.” And so on.
If they could maintain that voice consistently, it’d be a lot easier to feel sorry for the big lug. But then the bigwigs run their mouth with every small, doctored PR victory and reveal themselves as the same heads-in-the-sand good ol’ boys that they were in the ’80s.
Usually within 24 hours of a monthly/quarterly/whateverly financial statement by GM, I’m reading the analysis both on this board, and in the Wall Street Journal.
I gotta give you credit, you manage to make the WSJ come off like a bunch of absolute pollyannas – every time.
It’s sad how GM North America can get things so wrong. The interesting thing is that in Europe, where they suffered a lot of the same problems 10 years ago( churning out boring Vauxhalls and Opels which went straight to the rental market and depreciated faster than they accelerated )they look like they have learnt their lesson.
GM Europe is on a bit of a roll right now. The Corsa and Astra are some of the best cars in their class, because they look good, are reasonably well built and are well priced.
I’m note blase enough to say that it is simple, but surely they can learn some lessons from within on how to turn the situation around, rather than just trumpet yet another false dawn…
BigChiefMuffin,
Don’t believe the hype about GM abroad, especially in Europe. Their cars are pretty boring still and the reliability is still a bit shoddy. Also, they still do DEEP discounts on their cars. You can pick up a top end Vauxhall Astra 1.8i VVT Elite 5 door automatic for £4124 off the list price (list price is £18050). That’s £4124 off GM’s profit margin! And remember, that the discount is the MINIMUM you can get. You can get bigger discounts.
GM’s press releases, regarding sales figures always follow the same format:
Mention soaring sales figures abroad.
Mention rising sales figures in the United States.
Mention that the “Turnaround is in full swing” and how quality is on par with transplants (even though it isn’t!) when sales figures are rising.
Mention extraneous forces (i.e crashing property market, rising raw material costs, so-called “perception gap”) when sales figures are falling.
Never mention how much profit you made on each car.
Never mention how much in discounts you give to maintain said rising sales figures.
Never mention GM’s management’s fault in FALLING sales.
The incentive part of the editorial is spot on. I am in the market for a new truck and was just at the GMC dealer today. On the 2007 GMC Sierra’s “Classic”, there is a $6,000.00 rebate, plus since I own a business they will throw in a $500.00 gift card to Lowes or Best Buy. Plus they will take another $1,500.00 off the sticker price. So that’s $7,500.00 right off the price of the sticker, plus the gift card. I wandered over to the Dodge dealer and was told “all 2007 trucks, except diesel have $6,000.00 rebates”, they too offered to lower the price from sticker. By the way, neither dealership, particluarly the Dodge dealership had any other customers there, at least that I could see.
As with Ford’s diminshed sales numbers (they are offering 0% for 72 months), just how many of the retail sales were made with heavy discounting and incentives? Bottom line, if I choose I can get into a well equipped new truck for around $17K. No wonder they are losing their tails financially. Oh did I mention, the extended warranties now on the vehicles also?
Omitting the sales breakdown by fleet/retail is an ominous sign, akin to the lengthy delay in releasing GM’s 2006 financial report.
If they’re using “deliveries to dealers” instead of “sales by dealer” that’d also be a fudge factor.
Can someone give us a link to a site that has the detailed sales numbers by brand and model? I’m curious to see whether Buick dealers are now down to an average of one Lucerne out the door per month.
Interesting timing on GM’s part. They chose to reduce inventory going into a very important labor negotiation.
Shows that GM has little fear of a strike. Hmmmm.
GM provides a model-by-model breakdown here.
Yes, unfortunately 7.5% less of 2,846,062 vehicles is a lot less metal.
It’d be interesting to know if this much-ballyhooed increase in “fleet” sales is a rise in sales to rental car companies, where margins are next to nil, or to true “fleet” customers, such as government, construction, etc., where the margins are slightly to moderately higher.
GM’s data is for “deliveries” and if that’s TO, rather than BY, dealers, increases in dealer inventory could help explain apparent good news. We really need detailed dealer inventory numbers to really understand what’s happening.
GM said it lowered fourth-quarter scheduled production by a hundred thousand vehicles; that’s a negative sign.
86er, for what it’s worth, federal agencies are now in the fourth quarter of their fiscal year, and may well be rushing to spend their remaining money.
Gosh its hard to realize that GM officials like to Cheat eh? And they profess to be outstanding citizens too, really amazing, thank goodness we have TTAC to set us straight.
I’ve been lurking here for about 100 DWs but finally had to chime in.
Let’s see…
Your in labor negotiations pushing the idea of a VEBA. You want to fund that VEBA largely with GM stock so you can save the cash for Rick’s parachute new model development.
What better time to goose up the sales figures to try to pump the stock price?
“I gotta give you credit, you manage to make the WSJ come off like a bunch of absolute pollyannas – every time.”
The Wall Street Journal is owned by DowJones and GM is a big Dow component. The Fed is also trying to keep the DJIA from tanking so there might be a bit of…Well…Not quite fraud.
Buick is hurting a bit, eh?
Why it’s some big surprise that GM, or any of the Big 2.8, backpedaled on it’s fleet addiction is beyond me. What would you expect? With the way things are with the UAW, it costs too much to idle the plants. Might as well keep them humming and churn out fleet fodder.
Just for the fun of it, let’s add a few statistics about California. As California goes, so goes the country. The following numbers are from the California Auto Outlook, published on the CMCDA website. These numbers represent sales by dealers, presumably including some commercial and fleet sales by those dealers, but excluding large fleet sales to rental car companies and such that are not handled by local dealers (if anybody knows more about this distinction, please add a post).
Okay, so here are California market shares for the first half of 2007:
Toyota: 28.6%
Honda: 14%
GM: 13.6%
Ford: 9.1%
Nissan: 7.9%
Chrysler: 6.3%
Hyundai: 2.3%
Or, with details:
Toyota/Scion + Lexus: 24.3% + 4.3% = 28.6%
Honda + Acura: 12.2% + 1.8% = 14%
Chevrolet + GMC + Saturn + Cadillac + Pontiac + Buick: 7.7% + 2.6% + 1.3% + 1.1% + 0.6% + 0.3% = 13.6%
Ford + Lincoln: 8.5% + 0.6% = 9.1%
Nissan + Infiniti: 6.6% + 1.3% = 7.9%
Dodge + Chrysler + Jeep: 3.1% + 1.6% + 1.6% = 6.3%
Hyundai + Kia = 1.4% + 0.9% = 2.3%
(Mercury, Saab and Hummer are too small to be mentioned with less than 0.3% market share each)
One of the saddest things about the Detroit companies: the new products they’re launching are simply not selling in California.
Ford Fusion: 3,889 versus 37,323 for Toyota Camry.
Ford Edge: sales are too low to be mentioned.
Saturn Aura, Car Of The Year: sales are too low to be mentioned. Total Saturn market share: 1.3% in 2007 vs. 1.1% in 2006. Is that the measly result of all the investments in Saturn?
Here’s the thing I don’t understand about fleet and rental sales. If they are so detrimental to resale value and overall value of new product still fresh in their product cycle why don’t they sell last generation models or have exclusive lines to use as fleets? The Mercury Grand Marquis is the perfect example. It’s still useful for the fleets and not many real world buyers want them. Perfect fit.
Don’t dilute the exclusivity and wow factor of a new model by having them appear on used lots 6 months to a year after their release at bargain pricing.
Fleets want new product at a great price. Fine, give them slightly older technology for that discounted price. If the price is right they’ll take it and Joe Public’s Malibu might still be worth more than 50% after owning it for less than a year.
” … why don’t they sell last generation models or have exclusive lines to use as fleets … ”
This has been done from time to time. The Chevy Malibu was sold into fleets as the Chevrolet Classic for a few years after it’s update was released. The Ford Taurus was likewise a fleet only vehicle for a year or two after the Five Hundred came out. GM has gone through a couple of generations of pickup truck redesigns where they keep cranking out the prior generation as a “Silverado Classic” for a year or more. Many of these end up being sold to commercial fleet users at a bargain price.
The Ford Crown Victoria is a fleet only vehicle now, with most production ending up as police cars and taxis.
At any given time any number of latest design vehicles are not selling at planned volumes, so these always make a ready supply of fleet sales vehicles. Hyundai pushed a bunch of Sonatas into the rental market after they opened their US factory and weren’t selling all of it’s production at retail.
A few companies have the discipline not to play this game. You have never seen large numbers of Acura RLs in the rental market even though that model has rarely, if ever, sold the way Honda/Acura would like it to. Contrast that with Cadillac, which brand has been shoving mass quantities into the rental fleets for years. Deville/DTS six month old ex-rentals are for sale at 40% off their “new” price almost permanently as a result. Pity the poor sucker who buys a new DTS once every three years and takes the depreciation in the shorts.
The cars aren’t going to fleet sales because they want to send them there. The retail market isn’t buying the cars so they have to get rid of them some how, fleet sales is it. And lots and lots and lots of them in this case.
If my experience at the GM dealer today was typical of the new GM that is ‘better then the imports’, then GM is toast.
I went to a local Cadillac dealer with my friend to pick up his brand new Hummer-H2, totally decked out. He just traded in his old one cause it had 50k miles on it in 2 years.
Did the dealer offer to come to his office and do the car swap? No. They made him drive across town to pick up his new Hummer in person. He was really busy today and didn’t appreciate having to take a few hours off to fight traffic to do this. But we can let that slide.
Hanging around the dealer while he went to sign some forms and get the keys was weird. It was like God’s waiting room. All octogenarians waiting in the service area. Again, I can let that slide.
Here is the kicker. We drove the new Hummer home. On the way parts started falling off. Some clips fell out of the dash on the floor. WTF? Then he starts bitching about all the squeaks. He tells me that he has to take his Hummers back to the dealer a dozen times or so to get the squeaks silenced.
That astounds me that the factory and dealer let a high-end car get delivered with enough problems to require multiple trips back to resolve.
There was a loose wire hanging across one corner of the windshield. Looked like the cellular/OnStar antenna wire. Didn’t the dealer notice that the wire had fallen out? Guess not.
Once home I did a walk around outside. Strange, one headlight had red paint on it. My friend had to scratch it off so that headlight would work properly, dismissing it something that the factory must have left on. Again, I couldn’t help but wonder why the dealer had not noticed such things before he took delivery.
One other small thing. We are in the Pacific Time Zone. The Hummer’s clocks were set to Eastern. No big deal… but once again, I could not help but wonder why the dealer did not take the time to prep this car for the local customers. Good thing we aren’t old geezers and had to take it back in to set the clock right. I figured out that the computer had time zone settings, versus the clock simply being 3 hours off. Hello dealer! Think of these things please!
I’m floored at how bad it was. An $70k car, felt like junk. THIS is the new GM? You gotta be kidding. This is the same crap they did in the 70’s and 80’s.
I wish GM dumped some new cars on Enterprise. I’m currently renting a 2-year-old Neon and it is a horrible POS. I know it’s a rental and these infernal machines get treated lousy, but with only 37k on the clock it drives like it’s 20 years old, not 2.
Only 1 more day with this car… hopefully.
GM has been claiming it has learned its lesson for 30 years, with regard to quality parity with Far East imports. Through the 70s, 80s, 90s, and now 00s it has been easy to declare quality.
Maybe it is even true now. Who wants to bet 30k to find out? If you lose you can always sell your car in a couple years for a 15k haircut.
Sure, many people get long years of enjoyment from GM, and I personally had a new Accord that was a lemon and over which I successfully sued Honda America. But when I’m betting 30k I’ll go with the overwhelming stats.
Actually, GM can do something right now to prove that it really true believes it has attained quality equivalence, or even superiority, and at the same time assure new car customers that the value will be retained: Give a full 5 year bumper-to-bumper transferable warranty.
Ronin,
I totally agree and it’s something which I’ve championed in my ill thought out rantings.
GM continually bleat on about the so called “perception gap” and that they have an unfair disadvantage. Which is rubbish. Hyundai showed everyone (and the Japanese even earlier back) how to kill a perception gap.
GM seem to conviently miss this little case study. It’s much easier to cry “Unfair” than actually put some work in. Also, it should, theoretically, cost them nothing to do a 5 year bumper to bumper warranty. If their reliability is as good as the transplants, then, they won’t lose because customers won’t be claiming, will they?
I personally believe that GM cynically thought a few flag waving adverts would turn GM around. It’s not the 1950’s anymore. The United States is a global economy and there are many Japanese, German, South Korean and British car companies who will gladly take your market share if you don’t want it.
P.S. The sales figures suck. How much profit do GM make on each sale? Even in the UK you can buy Vauxhalls with HUGE discounts.
@yankinwaoz
No offense, but you got to talk some sense into your buddy there.
Why is he buying the same vehicle that upset him before? Why is he trading in just because it hits 50K miles? Why is he buying an H2 at all?
I hate to say it, but guys like your buddy are part of the problem. He could spend his $70k in a Lexus or Infiniti dealership and get a much better vehicle AND get treated like royalty. (Infiniti FX45 is teh sexy!) Instead, he keeps giving his money away to both a company and dealership that seems to be taking it for granted.
As long a consumers are willing to shell out huge bank for high-profit products and demand little in return, GM will continue to gasp along on life-support.
I see this as GM was trying to break out some good news and show their turnaround of reducing padding their numbers by selling vehicles to fleets is working only by selling of vehicles to fleets.
What does it matter anymore? GM & Ford are well known for lots of talk then backtracking and finally doing the opposite to what they’ve promised. In effect like politicians. No one really holds them accountable. Press eats up their frequent press releases on new products, care for the environment and how they will make a difference. When they fail the press overlooks this.
But for the reliance on fleet sales talk…GM has fallen off that Wagon(er). It was only a matter of time.
@Blunozer
I’ll second your sentiment – and personally, if I had received a 50K new Hummer that had parts dropping off it as I drove it off the lot, I would turn around and drive it right into the store, probably through the front plate glass window.
I was floored to hear of GM’s surge in sales, especially when I could hear, given that I’m within earshot, the Air-raid sirens, the screams of fear and the sobs of sorrow coming from the Oshawa truck plant when the layoffs were announced on August 30…
http://newsdurhamregion.com/news/breaking_news/article/85125
I knew something was not making sense, afterall what company in their right mind would show a sales profit of a particular item, and then layoff the employees who make THAT item? Well it’s the fault of the government and NOT the GM management, union workers, or the product… so the local union court jester Buzz Hargrove says…
http://newsdurhamregion.com/news/durham/article/85189
To which our government responded…
http://www.newsdurhamregion.com/news/Business/article/85281
DICK WAGGonER, you can spin and spin until the earth starts to rotate backwards, and fudge numbers all you want, the truth will still be waiting Dicky… and its not pretty!
Why is he buying the same vehicle that upset him before? Why is he trading in just because it hits 50K miles? Why is he buying an H2 at all?
I dunno. Like our choices in women too, there are some things we just don’t question each other. He never thought much of my ex-wife either, but kept his trap shut. If he wants an H2, who am I to stop him? He has the money (his other “go to Starbucks” car is a V12 Mercedes SL60). So whatever floats his boat, eh.
How far do these f’ing liars (Waggoner & LaNeve) have to go before they cross the line (lying) — so that we can send them to jail? At what point does GM enter into Enron/Worldcom territory (telling us one story in the earnings/sales call, meanwhile the financial statements say something different)?
I’m getting close to rooting AGAINST these bastards. This is not the company my Father worked for. You can’t turn a ship around if everyone on board (especially the captain) is busy denying that they are headed in the wrong direction…using re-drawn maps to celebrate their progress.
As a shareholder, how can one trust this management team? As an individual and potential customer, how can one trust this product and the company that produces it to the tune of tens of thousands of hard-earned dollars?
Naivety, ignorance, loyalty and insanity are the only possible answers. And the last two of those are becoming more difficult to distinguish.
Instead of acknowledging another soft sales month, GM decided to let their existing customers take it on the chin by way of lower market/resale values in the long run. Wouldn’t it be refreshing to see a TV media outlet — be it FoxNews or The Daily Show with John Stewart — do a segment on this? Essentially telling the story that to save their own ass, GM discounted all of their product, which just reduced all of GM’s customers’ vehicle resale values by $3k to $5k. So if Joe Schmo’s net worth at the end of July was $100,000, it’s now $95,000 because Rick and Mark and Maximum Bob chose themselves over their customers. Thanks Guys. It’s all about you! Jackasses…
Thanks for the insight, RF.
Wow the domestics are down to 29 percent in California
$70K for a GM product? (the posting regarding the Hummer), wow. They should have treaed him like the guy delivering water to the California desert towns. I posted yesterday that I am in the market for a new truck. It amazes me the delerships don’t even offer the customer anything to drink, not even a bottle of water, though the customer has been looking at cars on a hot day/evening. The Chevrolet dealerships sales person had such poor grammer it was actually amusing. When I ask him about a certain truck he said “We don’t got no more of those”, and he is selling expensive products?
I am like so many other people, the only reason we are looking at domestics are the huge discounts and rebates. $8,000.00 off a $24,000.00 sticker price is a lot of money, though I recognize the resale will be crap.
By the way, the Los Angeles Times reported recently Ford only holds 4% of the mid size car market in California. Far cry from the days of the Ford Galaxies my parents, and seemingly every other parent owned.
Here in California people look at you funny if you buy a domestic branded new car. Domestic trucks are still considered a viable option, but hardly anyone buys a new domestic branded car. If you really must have one, stop by the Hertz used car sales lot and get one with 20-30k miles on it for almost half-off the “new” price. Recently though even the Hertz lot has moved to about 50% Toyotas and Hyundais. The last time I rented a car I was asked at the counter if I wanted to upgrade from a Ford Five Hundred to a Toyota Camry for $10 more per day. Weird that was, no said I.
“$8,000.00 off a $24,000.00 sticker price is a lot of money, though I recognize the resale will be crap.”
If you are buying a pickup truck, especially with four wheel drive, the resale will hold up remarkably well on a Chevy, GMC or Ford. Dodge not quite as well. The key is to buy a lightly optioned truck for a bargain price like you are looking at. The heavily optioned $40k Silverados depreciate like crazy. Eight years from now the full zoot truck is only worth about $1k more than the work truck version of the same configuration.
About a year ago I helped a friend buy a new Silverado 4 wheel drive 8 ft. bed work truck. He ended up buying it brand spanking new for about $17k. The only options he wanted that it was missing a CD-player and cruise control. A little research and careful eBay buying and we had factory OE equipment installed for him for another $250 which added the cruise control and an audio system with CD changer and tape deck. The audio unit came out of a new vehicle where the owner had installed an aftermarket navigation system and the cruise control only required swapping in the turn single level which had the switches for cruise control. It turns out that everything else for cruise control was already built into the truck, right up to the connector to plug into the switch.
Thanks Jthorner for the advice and it is good advice. I agree, the blinged out trucks (there are many on the lots) add way too much money, are unnecessary and imo look stupid. (One dealer had a sign on one calling it “Urban outfitted”) After rebates, discounts from sticker, I will be paying about $16,000.00 (plus taxes, California is such a socialist state!) That will get me a new 2007 model with automatic transmission, cruise control, power windows, extra room behind the seat, a/c, CD and the long warranty) I can’t believe anyone would pay sticker price, or close to it for any of the trucks I looked at. Therefore, the domestics may sell me a new truck, but I simply can’t see how they will not be losing money on it.
What a mess has been made of Ford, GM and Chrysler.
its not such a bad thing that the 2.8 sell to rental firms. It could be one avenue to showcase how good their products are but at the moment they show the gap is still large – the 300 I got was great to drive but the interior was crummy and it still looks ungainly. And with so many being taken by the rental car outfits, the depreciation at the back end is crazy.
For what it’s worth, I’ve been seeing a S-load of new Silverados around here lately.
Was listening and watching a local TV show on Vehicles tonight(Sept 9th) A caller called in to say that he had a year old Chev. Uplander that had been back to the dealer for many problems, five different ones, he was asking how he could get his money back, unfortunately we here in Canada dont have a “Lemon Law” mor eis the pity eh?
MOST of the Tundra incentives were dropped in August yet Toyota STILL managed to sell almost 20K Tundras.
Edmunds reports that Tundra incentives averaged $4,625 during July; the August TCI report isn’t out yet, to my knowledge, but Tundra incentives during August were still north of $3k per vehicle.
Meanwhile, sales fell by 18.2% from July to August, from approximately 23,000 units to a bit less than 19,000 units. The percentage decline in sales is eerily similar to the percentage decline in the incentives being offered. On the whole, it’s pretty clear that incentives are moving the large pickup market, and that no one is faring particularly well in it. That’s what buyer loyalty and costly fuel will do to you.
GM’s data is for “deliveries” and if that’s TO, rather than BY, dealers, increases in dealer inventory could help explain apparent good news. We really need detailed dealer inventory numbers to really understand what’s happening.
The thing is that nobody really reports dealer sales. The more common methodology for accounting for end-user purchases is new-vehicle registrations data.
To be fair, it’s reasonable for GM to report its “deliveries”, for GM’s customers are its dealers, not the final consumer. (The profits generated from sales to the buying public go into the pockets of the dealerships. GM is a wholesaler, not a retailer.)
However, you are correct to point out that GM engages in a practice that is known as “channel stuffing”, booking inventories dumped into dealerships as units sold and as revenue generated, even though the dealers can’t necessarily sell this unwanted, undesirable product to end users. Since manufacturers generally cover the holding costs via the holdback and often don’t get paid their wholesale price until after the dealer sells the car to the final customer, this delayed payment makes it easier for dealers to absorb cars that can’t be moved without eventually offering deep discounts or moving them into fleet duty.
As you observed, the sales numbers are misleading if we look at them in a vacuum. Without putting the sales numbers into context with comparable average inventories and average incentives figures, they don’t tell us very much. If a car requires a few grand in giveaway money to move it off the lot, then that’s a clear indication that it is not faring all that well, no matter what the PR department might tell you. No manufacturer offers that sort of Cinderella financing and free giveaways unless they have no choice. With few exceptions, large incentives are invariably symptomatic of struggling sales; they are not a deliberate or clever sales strategy, no matter who may use them.
+1 on buying a lightly optioned standard truck. They are the best deal and maintain their value much better than the extended / crew cab models. I recently took over a lease on a 2500HD standard cab with 8′ bed. I swapped in an older cd / usb player and have a nice stereo. I also got a leased truck with no down payment, the employee pricing advantage (as the original lessee was an employee), an incentive by the lessee to take over their lease, and the security deposit at the end. I’ve got 2 years left and it allows me to evaluate the truck and decide whether I want to buy it at the end of the lease (or more importantly off warranty).
So I suggest buying or taking over lease payments of a slightly used standard pickups if you truly need a truck. It’ll save you the most down the line.