We're getting reports from the front line that GM's 72-hour sale is a success– of sorts. One dealer reports that business was so brisk that both the Dealer World system (used to verify codes. locates, ordering, and more) and GMAC's computer comms crashed. "The F&I guys had to use the fax, then phone and stay on hold for an hour." Popular models are… gone. "Try and find a Cobelt or HHR at the ZERO for 72. Can't be done." Another dealer reported that he'd sold 15 additional units during the sale, a number he called "substantial." Which is, of course, a relative term. IF this plays out across the country, GM's Black Hole Tuesday numbers will be bad, but they won't be as bad as analysts' predictions. The downside: the prices– hence profits– are scary low. Loaded 1/2 ton pickups are walking out the door for $200 per month. And GMAC is ignoring the "when you're in a hole stop digging" maxim; offering low credit score buyers up to 150 percent loans (to get them out of their backwardsness). Worst of all, July and August. Despite the hit to the bottom line, and the long-term damage to GM's pricing, metal is being moved. Short-term thinking GM may extend the sale. The question is, can it afford to?
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Can it afford not to? In a sense, moving metal now, even at a loss, may make the most sense. If gas prices continue skyward, vehicles that are unattractive now, are going to be downright ugly as gas goes higher. Taking a loss now vs taking a larger loss down the road makes sense to me. Problem for GM and dealers, is that a sales increase is primarily made up of future sales. Meaning even more dismal numbers down the road. Getting rid of inventory in uncertain times seems like a smart move though.
offering low credit score buyers up to 150 percent loans
My God, if that’s 150% at 0%, or anything low for 72 months, why aren’t I running out and buying a base Silverado at invoice getting it for $17000 or so, then after taxes, them cutting me a check for $8,9k? That’s no different than eating up negative equity. Granted, that just about covers the first year or two of depreciation…
In running the numbers in my head real quick a few different ways, it’s still not worth it to me even though I’d be keeping the truck 10 years or more. I know they have that long powertrain 10/100k warranty conducive to me not driving a lot, but I wouldn’t bet that warranty to still exist 5 years from now.
I’m going to call around…
Robert,
Do your sources tell you it’s “anyone with a pulse” again? Hopefully they’re slightly more selective this time around.
If it moves the metal, this will certainly help the earnings numbers, which is one reason why they are doing it. A lousy second quarter will wreak havoc on the stock price.
GM sells the car to the dealer, who then sells the car to the customer. The wholesale purchase generates revenue on the income statement, and GM gets to report a delivery when the dealer sells it.
This kind of trickery gets used because it sits on the balance sheet, where it tends to get overlooked. Revenue is recognized before the cash is actually paid.
It goes back to one of the great secrets of financial analysis — the balance sheet is often your first clue to problems, before they show up on the income statement. When companies start stacking up debt, charging off receivables (what’s owed to them) and burning through their cash, then you know that there are problems, even if the earnings numbers sound pretty good.
http://jalopnik.com/cars/news/breaking-ford-announces-june-sales-numbers-truck-sales-down-car-sales-up-184974.php
Such a horrid tease. I was excited there for a minute. Now I’m depressed.
Pick and choose…hold inventory and sell at slightly higher margin (delay revenue) and maybe break even OR give cars away to prop up revenue and sales numbers just to seem like your vehicles are selling – but take a huge loss. GM’s picked their poison and it’s running the company.
Its not a anyone with a pulse sale this time and
they are capping C tier customers at 110% out the
door, but if your credit is strong they are still
willing to bury you deep especially in trucks and
SUVs
Load up GMAC with bad paper, thereby selling a lot of cars, resurrecting GM’s fortunes and then let GMAC go belly-up instead of the mother ship?
Who’s their auditor? Anyone-with-a-pulse financing should include a bigger allowance for bad debt. Of course, all I know is theoretical accounting from (long ago) college. I don’t know what form the lying takes in the real world.
So was one of your sources Jim Dollinger, aka “Buickman” on GM Inside News? :)
http://www.gminsidenews.com/forums/f12/gm-extends-72-hour-sale-through-july-7th-66245/#post1442543
working? we’re almost out of product at my main store. it’s impossible to properly forecast the business when GM pushed and pulls the market. plus, the factory is losing it’s shirt with these giveaways. what sense is there in this lunacy? yesterday GMAC crashed, aps had to be faxed, over an hour on hold at a crack to speak to someone at lease loyalty. dealer world went down as well. the system couldn’t handle the volume. sheer stupidity and I say that having made some pretty healthy commissions, still no way to run a business.
I’m close to buying a new CTS, but I am not in any huge hurry and can wait for the next great deal.
Profit?!?!
It’s all about cash flow at this point. Keeping all the feeders floating while they wait for the UAW contracts to solidify.
Let’s keep our eyes on the bigger picture. Keeping the economics of this huge company floating. Can you see 3M, or ADM stuttering because their adhesive, sealant and fuel business with GM gone? The ripple effect has yet to be discussed here. Or anywhere for that matter.
Too busy bashing the brand(s) and snuggling #2.
Even though it may be a good deal, I honestly can’t think of a GM product that I’d want to own.
gawdodirt: That’s just part of a free market economy, those companies will have to alter their business plan so that they aren’t as reliant on just one major client. It’s not our fault GM can’t do business well. It’s more than the lack of good products, it’s the leadership’s care for their own financial well-being…not of their employees, suppliers, or political constituents. I believe it has been discussed previously, if not then many of us do consider such an effect.
Sorry, but that does not make me feel like I should support GM. I supported Ford’s bottomline but not the UAW when I bought a Mazda. Seem’s fair to me, as that is another organization that is helping to bring GM (And the other 2) down a bit.
Supporting GM is in my opinion false patriotism.
Supporting mediocrity because its American is a surer way of making sure America fails than looking at products objectively. You aren’t really supporting America by promoting companies that have failed for decades to do what was necessary to be competitive; you’ve only encouraged them to avoid taking the painful steps necessary to get competitive again. And now look at the pass we’re in! They would have been much better off if the support of supposed patriots hadn’t let them limp along, bleeding resources the whole way, and rather had to face their problems before they burned through so much cash they don’t have the resources to fix the problems anymore.
Hoping for the big 3 to go into C11 is not hoping for the death of the America auto industry. It’s hoping that it can be reborn without the vast number of impediments and incompetents that have dragged them down. An American auto industry that wasn’t hamstrung by the mindset and contracts and obligations of the past would be a fierce competitor.
Hoping for the big 3 to go into C11 is not hoping for the death of the America auto industry.
Agreed, but what will happen during that?
It’s hoping that it can be reborn without the vast number of impediments and incompetents that have dragged them down.
Possibly, provided they survive and take the right decisions
An American auto industry that wasn’t hamstrung by the mindset and contracts and obligations of the past would be a fierce competitor.
Or not.
The units delivered by GM dealers to customers in June were sold by GM to the dealers in June and previous months and were paid to GM when sold to the dealers.
Moving iron by whatever means makes sense at this stage of the game and time of the years.
The value of GM shares is in the toilet and anything that can stop them from getting flushed is a good thing.
Who else was “bottom fishing” to get additional deals? Just GM or everybody?
I don’t see any problem with buying the “right” domestic products. There are a few. Show them the way.
On the other hand if they have to rise from the ashes of their legacy I think they might be smarter and stronger in the long run. Too many years of easy money makes any company or country complacent and easy to pass by with a few bright minds. Right now our country needs us to get alot smarter and quit screwing around to meet the challenges of the global economy – and I don’t mean by purchasing SUVs or more Chinese crap.
I was going to write a clever missive about how we should not help the inferior survive when it’s DNA is so badly inadequate for survival…
However, something else occurred to me on my way to my epiphany…
(insert tongue in cheek)
Maybe this is not GM’s fault, after all. I say we blame it on the automotive SPECULATORS. Those people waiting for the next great giveaway, the next great rebate, even more cash on the hood!
Yes, they are speculating on future price declines, and that’s why GM can’t make any money!
Evil speculators and dirty wabbits!
(/remove tongue from cheek)
I thought the 72 hour sale was quite interesting, however I just can’t justify another car at this point. My wife & I, between us, have a sports car, a sports bike, a 9 year old econobox that has nothing wrong with it (neon), and I am looking at an econo-bike (250cc ninja or dual sport).
Not really sure exactly what I’d do with a 5th vehicle….and I’m an apartment dweller! Where would I _PUT_ a 5th vehicle?
I know some other people in a similar situation….My brother in his household (him, wife, sister-in-law, mother-in-law) I think have 3 or 4 cars (pilot, sedan of some sort, smart) +a 125cc scooter (vino)
Probably a good strategy to “move the metal.”
Back in the 50’s when the Massey-Harris-Ferguson (now Massey Ferguson) tractor and ag machinery company was still in it’s early years they had a tremendous backlog of tractors and were burning cash to the point of being only months from closing the doors for good. New management came in, at the behest of the investors, and cleared it out (something like 5,000 units) at a cost lower than the cost to mfg. it and closed the production lines down, but it gave the company a several million dollar cushion (sorry, don’t have the article here for the exact amount) to the point they could re-start the production lines later in the year and bring out new tractors and machinery in the now familiar red and grey color scheme with the new name. You can still buy the red and gray beasts today as a result of that heroic decision.
Another interesting item, they had 100% defects for tractors coming off the line. The plan was move it out and fix it later. The article showed a picture of a sea of brand new units, every one had some defect to the point it couldn’t be sold, some were even considered unfixable. A new quality program was implemented and defects were down to 0% in a matter of months. Shows what good mgmt. can do if it will.