GM has revised the estimate for U.S. new car sales in submitted to Congress in December. At the time, the company predicted the U.S. market would account for 12m new vehicles in ’09 (a goodly amount from their factories), The General now reckons the number will be closer to 10.5m. As CNNMoney indicates, GM’s second sales revision in as many months suggests that they’re preparing to increase their mega-suckle on Uncle Sugar’s teat when they return to the pig sty in February and/or March. “According to the turnaround plan, GM said it might need $15 billion in federal help by the end of March if estimated industrywide sales fell to the 10.5 million level.” And here we are. But the numbers are a double-edged sword. On one hand, they substantiate GM’s Curley defense. On the other, there isn’t an accountant outside of Dearborn who thinks GM can even break even if sales remain at anything near that level. Prop-up a vital industry for a year or more at the cost of hundreds of billions of taxpayer dollars, or cut bait and fish? The battle lines are drawn.
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Does this mean if they project ZERO sales then they should get $100 Billon?
MikeinCanada,
Regardless of projections, they’ll get 100B before they get cut off.
10-11 million units for 2009 sounds about right.
GM’s problem is that it doesn’t have a lock on any of those sales. Not long ago you would read things like “GM controls xyz% of the market”. But actually, nobody controls any market share. Look at the way Chrysler sales have fallen off the cliff. Continued news of GM’s troubles has got to continue spooking potential customers. Who, pray tell, is buying any Saabs, Hummers or Saturns whilst they are under Strategic Review?
I’d like to vote for the second option please. Please? Pretty please with sugar on top? Anybody? Buehler?
Really, how many people outside of the Best-and-Brightest KNOW that Saab, Hummer, and Saturn are under Strategic Review? A lot of people don’t read the Detroit News, and the Wall Street Journal usually buries product and/or brand information in their stories under the data on the rate of return of the toilet paper in the executive washroom. If some clown (I’m assuming this is their remaining customer base?) wants to buy a Saab, he’s going to buy a Saab, and has probably been wanting it since he was 17. /rant off
As far as I know, Ford’s market share has been more or less stable as GM or Chrysler market shares have been crashing. It’s not because of strategic reviews or bankruptcy talk … the bankruptcy talk and strategic reviews are the dependent variable that is explained by customer lack of interest in product, ergo sales drop and plans to drop unsuccessful franchises ‘sometime before 2015.’
Sorry I attacked the WSJ so forcefully – IMO it’s the only newspaper worth buying for two bucks at the newsstand. I just can’t take MSM discussion of “the Lexus” like product is some sort of black box. Deming told us to focus on product and craftsmanship, not short-run margins.
Chapter 11 is the only way they can shed all the dealers that they need to get rid of. It aint gonna be pretty, children turn your heads. When it is all over we are going to have a much different automotive landscape.
Hmmmmm…now that they don’t have to convince those “mean ol’ Republicans” the situation suddenly looks bleaker.
Could be coincidence.
Could be Uncle Sugar looks a little more ample around the piglet refueling nozzles.
I think there is little chance the PolitBuro and BO will turn off the tap, even if it would be cheaper to give every member of the UAW (not just Debt 3 workers) their salary direct from our pockets.
Sigh. Think I’ll go figure my current taxes.
Bunter
Hopefully we won’t give any more money to these thieves. If people are really concerned about jobs they would give them training in a job that would actually be needed. The problem is that congress just got themselves into the automotive business and it would take a miracle to get them out. Giving more money would not help the workers since they would be just as productive on the public dole if the big 2.8 can’t sell any cars. Prepare to empty your wallets for good old uncle sugar.
If you have some money socked away for a rainy day…money you do not need to live off of…and which is not “invested”…but is just sitting there….get out of it.
That’s right…get out of it.
http://en.wikipedia.org/wiki/American_Silver_Eagle
http://en.wikipedia.org/wiki/American_Gold_Eagle
http://en.wikipedia.org/wiki/Krugerand
Precious metals are a means of “storing” your earnings. Paper is just like the stuff sitting on the roll of your toilet. It will continue to lose value…just like it has ALWAYS done.
So why NOT exchange $900 of those pieces of paper for something tangible. Even if you have to pay a fee for a safe deposit box, you’ll STILL come out ahead.
You have to get AWAY from “their” game. Don’t play it.
I fully support helping our domestic industry in its time of greatest need, I own a 1977 camaro, 1985 S10 and a 1996 Buick park avenue along with a recently sold 1995 chevrolet caprice wagon. All of which have well over 100,000 miles on the odometer, two even have over 200,000, and are still running strong. The park avenue could even be mistake for new in terms of how well it has held up. And yet for every foreign car i’ve been in, including a 1993 toyota camry, a 2003 avalon, and a 2007 camry, i have not really been impressed, except maybe a 2003 accord coupe which i seriously thought about buying.So as for me, i have had no issues with American cars and will continue buying American cars, and will continue to gleefully add my taxes to helping them out, especially when its the financial institutes’ fault that caused this mess. I would rather give money to the big three LONG BEFORE i gave money to the financial institutes, which mind, you went with no strings attached.
unseensightz – “I own a 1977 camaro, 1985 S10 and a 1996 Buick park avenue along with a recently sold 1995 chevrolet caprice wagon.”
But the question is – did you buy all of these cars NEW?
What will be very distressing about the Auto Bailout is not ultimately the amount of money spent on the black-hole or the selectiveness of picking winners out of flawed businesses. It will be that an opportunity is being lost to re-deploy those people to other sustainable enterprises.
I’ll take a bet, that in 12 months time, or 3 years time when GM fails or shrinks to nearly nothing, there will be unemployed auto workers standing around saying “what happened?”
The UAW will have failed them. Their political leaders will have failed them. Someone told them there was “hope” for this industry.
So far, it seems to me, that politicians are not prepared to admit that the problem is STRUCTURAL within the industry. Obama the realist might have to admit it.
There is another, darker reality that could force the teat to suddenly run dry for all the piglets…
The simple fact that the borrow-and-printing machine that is all this “money’ might just run out of steam. We forget that all the TARP, stimuli, D1.8 loanage etc.is not actually Unlce Sugar’s money, its Uncle Mao loaning Uncle Sugar some money to then loan to the associated cabal of losers (Its a Democrat’s version of trickle-down economics). If Uncle Mao says “No more roan for you, deadbeat!” Uncle Sugar’s not so sugary REAL fast.
Also, just for rhetorical accuracy it really isn’t the Debt3, D2.8, etc. as we Best & Brightest call the domestics, at least not in the Bail-out context. Ford has actually not borrowed one dime from Uncle Sugar (outside of those re-tool loans, which I bet have are helping with EcoBoost and hybrid toolage) just for the sake of staying solvent. Ford as of late has been far and away the most composed and rational operator among the D3. Ford also seems to be the only one of these three companies that actually is trying to deploy a bevy of vehicles that are both better than their predecessors and with hard launch-dates. This contrasts highly with GM (VOLT! VOLT! VOLT!) and Chrysler (cue chirping crickets). So when we talk bail-outs we really mean the D2, or more like D1.8. Wait a minute…D1.56, oh…my, my Chrysler’s sales are falling fast, I meant D1.31!
“Chapter 11 is the only way they can shed all the dealers that they need to get rid of.”
Can someone explain to me how it is that excess dealers drains sales or profits from a company? I understand how too many brands and models is a big problem, but I fail to see how raw dealer count hurts a company. I understand how BAD dealers hurt a company, but people keep talking about too many dealers without regard to quality issues.
I’ve done a lot of road-trips and continue to do so. Outside of the major metropolitan areas it is rare to see a non 2.8 branded showroom. Chevy, Ford and even Dodge are almost everywhere … but Toyota, Honda, Nissan and the rest get scarce fast outside the bigger cities.
Does anyone know how many of the 2.8 branded dealers are in markets where they compete directly with another same-company dealership within ten or twenty miles? And even if there are competing Chevrolet dealerships only miles apart, how exactly does that hurt GM? In fact, it has got to help GM’s replacement parts business as all the dealers need to keep a substantial inventory on hand, most of which is bought from GM. Every time a Chevy dealer closes, hundreds of thousands if not millions of dollars worth of high margin parts inventory gets dumped back onto the market.
You never hear McDonald’s complain about having too many franchisees, eh?
“… opportunity is being lost to re-deploy those people to other sustainable enterprises”
Like what, exactly? Decent wage paying middle class jobs have been disappearing at a rapid clip for over a decade now. What do you propose these people be redeployed doing? The Service Economy we have been told about for years is largely a mirage. In fact, the financial services industry got us into a goodly portion of the present disaster. We have more than enough lawyers and Wal-Mart clerks, so what exactly do you propose these people go do? You have noticed that unemployment is sky-rocketing, right?
“Ford also seems to be the only one of these three companies that actually is trying to deploy a bevy of vehicles that are both better than their predecessors and with hard launch-dates.”
I agree with you there. Ford has had my bet for winning the last-man-standing game for quite some time. Oddly enough, family ownership may be what made the difference for them … and I’ve long been critical of the silver spoon aspect of how the Ford heirs got their wealth and power.
I think it’s Ok that General Motors wants to show a plan using 10.5M 2009 sales. They can use 11.2M, 11.77M, 14.191M, or 15.238781 if they want. Heck, they can use any of 100 different figures for 100 different plans if that gives them a buzz.
What I, as a tax payer, want to know is what the plan looks like when 9.325M is plugged in for gross 2009 industry auto and light truck sales. This is what the plan will have to perform at because that’s where sales will be.
By GM not showing a plan using 9.325M they are admitting that at anything below 10.5M the “bridge loan” money is a bridge to nowhere.
@ John Horner
Can someone explain to me how it is that excess dealers drains sales or profits from a company? I understand how too many brands and models is a big problem, but I fail to see how raw dealer count hurts a company.
I don’t see the connection myself either. What it has formed is part of the employment “Connectedness Of Everything” argument for the Bailout. You have to bailout GM/Chrysler because otherwise the dealers will fail. Eh?
If those same dealers aren’t selling anything AND they’re being dumped with excess inventory, then they’re going to fail anyway aren’t they??
Like unseensightz I too have driven nothing but GM rear wheel drive V8 cars and trucks for over 50 years. They have given me very good service, but, right now I am so pissed at GM for their greed and stupidty that I will look elsewhere for my next car. I had no fight with their product and they still are going to lose me.
I’m late to this party, but I just noticed something. What the hell is GM doing predicting total sales for the whole flippin’ industry?
Even if they can’t give cars away, other OEMs will find ways to sell them, perhaps in better numbers (or not.)
GM’s market share in N. Am. is what…20-25%?
How can they extrapolate sales for all the others off their measly share? Or is this their way of hiding the fact that they may only sell 2.5M vehicles? (“Hey, 10 million is a bigger number; yeah, let’s use that one…)
Can someone explain to me how it is that excess dealers drains sales or profits from a company? I understand how too many brands and models is a big problem, but I fail to see how raw dealer count hurts a company.
Each dealer or any other retail store needs some minimum number of customers to pay for the costs of upkeep. Spread the customers too thin and signs all is not well start to show. Faded paint, potholes in the parking lot, old inventory minus the good stuff, and a shortage of fellow shoppers. I’ll buy groceries at a store with half-empty shelves, but I’m annoyed when they don’t have everything on my shopping list. Similar annoyance when a car dealer doesn’t have the more desirable model I want, but the desperate salesman tries way to hard to sell the crap he has. Also, compare the shopping experience in a successful shopping mall to a “dead” one with insufficient customers and many unoccupied storefronts. Within limits, the busy mall is just more fun to go to.
First rule of Snouts and Troughs.
Once the Snout is in the Trough the Snoutee will move heaven and earth to keep it there.
Can someone explain to me how it is that excess dealers drains sales or profits from a company?
Having too many dealers contributes to lower revenues, because there are more retailers available to compete with themselves, which lowers transaction prices, which increases the need for incentives. They might be able to sell the cars for a bit more money if there was less in-house competition.
This also hurts the captive financing side, because cars sit on lots for longer periods, which adds to the cost of providing the floor plan to keep them there. In theory, the dealer is paying for that, but in practice, it becomes necessary to increase the incentives to make up for the dealer’s burden.
That being said, I would put this toward the bottom of the list of their many problems. These channels would be in decent shape if the vehicles were more appealing to customers. It’s only a problem now because they keep trying to preserve a level of market share that they can only maintain if they give cars away at a loss, even when times are good.
13 million, 10 million, 5 million, who cares. The question never came up when tax and spend Republican W handed them free taxpayer money.
It won’t matter in the future when tax and spend H hands them free money.
It is never about justification, earning, viability, good management. It is just about, hand it over, we deserve it because we are victims.
If anything, the very fact that the numbers are going down proves we are even sadder victims, hence deserve it even more.
I blame the “big 3” for the fact that even Honda, Toyota and Nissan were slow to introduce “cutting edge” car models simply becuase there was no innovation from Detriot in the American market – they had little incentive to “better” the Big 3 when the Big 3 was selling optioned-up BOF SUV’s for huge profits.
Now that Detroit has realized the error of its ways, we’re suddenly becoming duluged with hopeful vehicle concepts (with GM especially at the forefront), that won’t see the light of day without more bailout bucks…
But the good in all of this is that the “forigen” makes are starting to offer smaller, more interesting vehicles as well, and hybrids and EV’s (which were a ‘niche’ at best) are suddenly on the radar, as there is “incentive” from the bailout-supported carmakers (who I actually hope manage to survive).
2010 will be a magic (as well as tragic) year for the industry.