I had to check it myself. Yup. On January 15, General Motors lowered their sales forecast for 2009 from 12m units per year to 10.5. Today, seven days later, Bloomberg reports that The General reckons sales will fall below 10m. “There are a whole bunch of different forces at work,” GM sales analyst Michael DiGiovanni said in a conference call. For that he gets paid? Bloomies tries to fill in the blanks– and falls back on data. “Dwindling consumer demand will further reduce revenue for automakers in the U.S. already reeling from an 18 percent drop in sales last year to 13.2 million cars and light trucks, the fewest since 1992. Monthly annual selling rates have exceeded 10 million units since a 9.8 million pace in August 1982, according to Autodata Corp. of Woodcliff Lake, New Jersey.” And then they give up on GM, preferring to quote the eminently, endlessly loquacious AutoNation jeffe Mike Jackson. “Industry sales are at depression levels of 10 million” Jackson told Bloomberg TV. “The industry is going to need further bridge loans to get through this turmoil.” Hmmm. Did GM lower its forecast to pump-up the volume on the “too big too fail” (a.k.a. it wazzunt me) rhetoric?
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A forecast, by definition, is wrong. Just ask the guys who built that new Tundra plant in Texas.
I bet my niblets that the General is running their forecast process daily, as quickly as new (and depressing) information becomes available.
I continue to be amazed that these guys don’t understand the difference between “hope” and “plan” when preparing budgets, production schedules, etc. Our economy is in a terrible place right now. No one knows when it will improve. Therefore these companies should PLAN accordingly. After a suitably conservative PLAN has been hatched and implemented, then you HOPE that your estimates were too conservative and you can come out ahead. (Even if you are not profitable in the short term, beating estimates, budgets, etc. is short term success.) Collectively they should all just shut the hell up and start running their companies as if it were their own money at stake. This is why corporate socialism doesn’t work.
To be fair to GM (which I’m normally not!) the 10 million figure quoted in the Bloomberg report is an annualized figure for January (and not the whole year of 2009).
I have to wonder if this is a prelude to the General’s January sales report.
Bunter
Warren Buffett always says that when the tide is high all the swimmers are having fun, and then when the tide goes out you find out who isn’t wearing any swimwear.
GM is rather naked now that the tide has gone out, and they are apparently blaming the tide itself for their nudity.
Dwindling consumer demand will further reduce revenue for automakers in the U.S.
Dwindling? DWINDLING? That,sir, is not dwindling.
what will the forecast be seven days from now?
Carnot-chuckle.
Thanks.
Bunter
The sales are low since they reflect the collapsing US economy. This isn’t something only GM is experiencing.
Should people live within their means? If so, what’s wrong with people realizing that fact now and buy fewer cars? Then there is nothing with 10M/year sales.
Again, why bail out the auto industry, if there is nothing wrong with 10M/year?
If we have to do it, why bail out two companies which account for only 30% of the industry?
Since the industry has decline more than 30% in total sales, doesn’t it make sense to just let those 2 companies go and then everyone else will be back to normal?
I wonder where all these sales forecasters got their degrees.
Funny how we take forecasts so seriously. Books like David Orrell’s The Science of Prediction show how we cannot predict, with any degree of accuracy, things like how many cars will sell in 2009.
Yet people make these predictions all the time. And they get mentioned in the press and on TTAC. Mentioned as if they mean something.
Of course, forecasts do have some value. As TexN points out, you need to make plans, and plans require some kind of forecast. But forecasts like this should not be taken any more seriously, in my mind, than a horoscope.
bluecon-while this is definately true, GM has a legacy of propping up a month here or there with fleets (recent instance: Dec retail was down 41% but fleet was at ’07 levels producing a 31% aggregate).
GM’s loses on non-fleet pump months in ’08 look more like CRYslur’s than the rest of the industry.
They just are more prone to buy some market share.
I’m not saying this is an indicator of an even bigger stinker of a month than usual (pulling forward fleet sales now?), but it could be. Not that GM would try and blame their problems on outside forces. Heaven forfend!
Other factors to watch for:
Will there be a rise in “patriotic” sales for the Debt 2.45?
Will there be a “anti-bailout” backlash against the Generally Moochers, and Cryco?
Will that help Ford?
These numbers could just indicate a desperate company grasping wildly at the data also. Probably.
Just some thoughts.
Regards,
Bunter
We have an expression in managing sales forces, pipelines and forecasts in tech: “You can only expect what you inspect.” The ability to forecast with reasonable accuracy is not only vital for disciplined internal operations, it is a credibility-earner with markets in public companies. In a turbulent environment where and when no company has clear visibility into demand for the rest of this year, it’s normal to re-evaluate as new data emerges.
However. We’re only three weeks into the year and the variables ahead are diverse and large. It does no good to extrapolate daily or weekly data into the next 50 weeks. It only drives either unwarranted panic and pessimism, or false euphoria. So my advice is for GM to shut up for awhile on forecasting, uttering only quarterly prognostications at most, and get down to the business of creatively selling cars regardless of market size. Arrest slide and instead boost share.
And what’s with “…industry sales are at depression levels of 10 million…”? Depression levels? Global production capacity was known to be in a surplus state even during the boom. Over-capacity untethered to demand in good times does not define depression. If 1982, a recession year, saw monthly annualized sales at 9.8mm units, how does 10mm equate to “depression levels?” This is exactly the kind of skewed and malapropos opining that leads people to conclude that media does its best to talk us into a slump. U.S. population was estimated at 232mm in 1982, about 24% less than today. That suggests that relative to population increase, recession sales in an economy of similar drabness as 1982 (it *was* bleak!) should be about 13mm or pretty much where we landed for 2008.
What happens to car sales on an annualized extrapolation in Januarys? It’s not the peak month, is it? Closer to the trough for the year. The remaining months of 2009 — meaning nearly all of the year — are likely to improve from January’s extrapolation even if the economy remains flat. It won’t. The back half of the year will see steady, incremental improvements. In short, GM and everyone else — stop biting your nails. Talk to us in April when there’s a sequence of data worth projection. Even in a downturn, demand isn’t the primary shortage — creativity is. Companies have to make a serious effort to grow their businesses in a recession, so real-time review and appropriate change to products and practices must be pursued to compete irrespective of market size.
Phil
It’s spin. They want to paint a “halving of the market” picture in DC, to get more money.
We’re probably headed there, though. In Europe, 9 out of 10 manufacturers (across the board industrial manufacturers) are reporting cancellations of orders and much reduced activity compared to 12 months ago.
9 out of 10.
For that he gets paid?
Yes, and he is very good at his job.
These are unpredictable times. You can question GM’s forecast accuracy, but they get it as right as every other carmaker.
The forecast WILL head the other way (eventually), and then GM will doubtlessly be accused of sandbagging.
You heard it here first.
TEXN-Noone could have foreseen the collapse of the Financial institutions. People tend to forget that without lending to the customer most purchases are not made. But back to the real reason the USA economy faultered is due directly to American job loss and then foreclosures and then defaults and then the banks and then the economy. So when we trace back the initial problem its job loss and it was caused directly by the flooding of the markets by foreign goods and this in turn undermined American businesses and then the employees which were the homeowners and car buyers.
The USA is in a deep recession heading for a depression. Cause-UNFAIR trade practices FIX-TARIFFS
Just so you know scartooth traditional tarrifs work like this. Products manufactured outside of the country are taxed and those made in the country are not. Guess what the Toyotas and Honda etc made in the US would not be taxed.
You don’t want tarriffs you simply want your competition taxed. Sorry Mr GM management man you’ll never get that in a million years. We might someday go back to tarriffs on imported goods but we will never go to a system to simply tax your companies competition if they actually make the products in the good ol USA.
By the way the Americans working in a factory of a foriegn company value their jobs every bit as much as the workers at GM. (and no I am not one of them)
Predictions of the predicaments, exposure, and risk of the lending institutions have been made constantly for the last decade, although you won’t see it on MSNBC. This was not a surprise.
Likewise, Chevy’s introduction a couple years ago of its great hope, the magic sword that would save the company: The new Silverado. Fantastic predictions that this would save everything. At precisely a time when gas prices were expanding and small cars the big thing.
There is an entire history of bad market decisions and arrogance from GM. People will write B-school term papers on the subject. It was inevitable, held off by questionable practices.
And it continues: The GM Card extra pull-ahead bonus announced last week: It only goes to some cardholders. The rest get squat. Who knows how they determine who gets it and who does not. In an era of instant publicity, this is a huge disincentive for the deliberately unselected cardholder to buy. What a turn-off for them- their neighbor gets a discount, they do not, and no one can explain why.
yes, this has been foreseen for years. And you cannot blame the “US Economy” as an excuse. It is the job of executives to manage the company whatever the economic environment, good or bad. This is exactly what they are paid for. The fact that the economy is bad absolves them of nothing, it’s just an excuse they give to try to defer responsibility from themselves. Meanwhile, of course ,they still collect their millions.