It’s important to keep GM’s claims about market share and production volume in their proper context. Over the very long term, the graph above reveals the dynamic that should come first in GM’s calculations: a long-term decline in consumer trust and market share. This decline shows no signs of stopping, meaning GM’s 2009 market share of just under 20 percent is hardly a given going forward into 2010.
The other important dynamic is market size, since GM has made it clear that it sees an opportunity to sell 2.8m cars next year. As we can see above, the overall market is in precipitous decline (2009 is . GM’s assumption that the US car market will stabilize at 11.5m units is actually fairly conservative according to many analysts, some of whom see sales going into the 13m range. Still, though it seems that the worst macroeconomic conditions may be behind us, there are no promises that an economic recovery will lift the auto market the way it has in the past. As Detroit booster emeritus Keith Crain [sub] notes in a tone of petulant desperation:
There used to be a theory that car sales and population were related. Someone said you could look at the U.S. population and figure that a fixed percentage would be buying new vehicles in any year. That imperfect formula worked pretty well for a couple of decades, until our latest financial crisis… So let’s not worry about the economy. Let’s just hope for an automotive recovery soon.
In short, we can work with a few market scenarios to find a possible production goal: 10m (no growth) 11m (small growth) 12m (optimistic growth, even by GM’s standards). We can also look at a few market share projections, and just as it’s nearly impossible to predict a decrease in annual market size (as it’s at a historical bottom), it’s practically impossible to predict an increase in GM’s market share (considering it’s in a steady, 30-year decline). Therefore, let’s call 19 percent the high-end estimate, 18 percent a mid-range scenario and 17 percent as a downside scenario.
Market Share 12m 11m 10m
19 Percent 2.28m 2.09m 1.9m
18 Percent 2.16m 1.98m 1.8m
17 Percent 2.04m 1.87m 1.7m
The “best case scenario” of 19 percent market share in a 12m market is represented in the top left corner, and it would result in GM selling 2.28m cars. GM uses 2.3m (20 percent of an 11.5m market) to refute analyst concerns at its Fastlane blog. The difference between that number and the 2.8m production plan is explained thusly:
Carry-over share for Canada, Mexico and exports from the U.S. is worth about half a million more. With carry-over share based on the lower end estimates for the industry next year, the numbers would indicate a GMNA production run of about 2.7 or 2.8 million for CY 2010 – a more than reasonable estimate, remembering we’re at record-low inventory as well.
In short, GM calculates a half-million car cushion for itself for demand in Mexico and Canada. And figuring out how accurate that assumption isn’t easy. Based on the latest sales data we have (which are admittedly limited… ping us at the contact form if you have better numbers) GM Canada sells about 276,000 vehicles per year while Mexico [sub] is looking like a 120,000 unit market for GM. In short, there looks to be a good 100k worth of padding in the padding. Keep in mind as well, that GM’s sales and market share in both of those markets is trending downward as well.
Then there’s the unavoidable issue of GM’s dying brands, which could account for as much as 3 percent market share loss regardless of the economic conditions. Not to mention the (as yet) incalculable effects of GM’s culled dealers. Though the dealer bloat had to go, it remains to be seen how the slim-down will impact market share over the longer term. And then there’s the issue of segment-based market share loss, and one look at Hyundai’s hot sellers and market share growth show that GM fighting entropy in its mass-market offerings. Buick LaCrosse, Caddy CTS and Chevy Camaros might make good poster children, but they’re butter for a bread that’s dried-up and moldy. With GM’s marketing and PR locked onto brand-consideration campaigns featuring (relatively) niche vehicles, one wonders if the volume game will be lost by the time GM brings replacements for Aveo, Cobalt, Impala, and yes, Malibu (look at the numbers) to the market.The Equinox seems to be the only exception to this picture, and can’t shoulder the battle alone.
Optimism is usually a state of vulnerability, but there’s taking a chance and there’s diving off the deep end. GM insists that its bankruptcy designed it to break even at a worst-case scenario of 1.85m sales per year, so adding an extra million units of production is the kind of decision that should not be taken lightly. Especially because if GM ever does make a real commitment to that goal, its going to have to burn cash to reach it.
If GM didn’t have a long history of accidentally inflating production and going wild with incentives, we might look past the 100k unit padding in the Canada/Mexico numbers, the blind optimism about market share, and even the semi-retraction of 2.8m units as a goal. Ok, maybe not. In any case, if GM wasn’t aware of its own susceptibility to unrealistic optimism, it’s now fully aware of the public’s awareness thereof.
General Motors will probably end 2009 with 14-16% share of a 9.350M market.
General Motors will probably end 2010 with 12-14% share of a 10.625M market.
I always thought the magic number for GM is 15% marketshare. That is where they will level off.
Wife and I went shopping for a new “car payment” over the weekend. Sadly we had no reason to stop by any of the GM dealers. Had Pontiac been kept around we would have checked out and most likely purchased a G8 GT. We both like the G8 but the pickings are slim and I’m not too keen on getting another orphan (we have an 06 GTO). Buick doesn’t make a damn thing that would interest me even after drinking a 6 pack. I’m OK with the Malibu but my wife doesn’t like them. I’d love to have a Corvette or Camaro but not practical for the family car.
I must point out that GM gets paid and posts profits as the vehicles leave the factory door.
They make money by producing VIN’s.
The problems I see is even though sales in China are increasing, they must be reported in dollars.
Trying to force as many vehicles onto dealers balance sheets this fall to show Washington that they are viable will end when dealers start refusing product.
The only thing that will separate GM’s entities around the world is which way the water in the toilet bowl spins.
Edward: your top chart is a little misleading as it shows the bars in 10-year steps except for the last one, which is a 19 year step. that artificially makes the decline look steeper than it is.
I know, making the last step 9 instead of 10 years due to the lack of 2010 data makes it look a little less worse than it is…
I completely agree with your assessment, and there is nothing to sugar-coat when it comes to GM. But this chart thing looks like you are making it look worse than it is and that will give the GM-fans a point to attack your assessment, which is a good assessment.
It’s like those sales charts where they sell 1001 units in year one, 1002 units in year 2 and 1004 units in year 3. If you correctly start the y-axis at 0, there isn’t much improvement. But for the NYSE board meeting the chart y-axis starts at 1000 and the increases in sales look ballistic :-)
Attitudes.
Henry Ford wanted his workers to be able to afford a Ford, so I have read.
Our modern masters, those engaged in class war against the masses, want to maximize the wealth of the few so a multitude of us commoners waved bye bye as decent jobs went overseas and we embrace the service sector jobs and the costs of a basic living increase and and and this and that and expect a smaller percentage of the populace to be able to afford a new car.
My general prognostication at the macro level have been fairly accurate the last 25 years.
Time will show if I am correct in my current assumptions.
Growing working-poor class.
In an economy dependent upon consumer spending with so many folks with declining real income invest in the basics… people need food and clothing and shelter.
Look at worker productivity charts. The worker hasn’t been sharing in the increased productivity.
The growth in government has led to growing bureaucracies so there’s the major source of the “middle class” but how long can the parasites be supported, mainly by the upper-upper and elite classes dependent upon those bureaucracies to keep the commoners at arm’s length and to possibly quell revolts in the future as an increasing percentage of Americans are shoved into the mire of a 2nd-world life-style?
Market towards the upper-upper class and above for expensive goodies but as the masses receive a smaller piece of the economic pie the lords and masters will have to pay more for their bureaucratic barriers against the commoners.
Learn Spanish. The future oligarchy needs continued invasion.
Hope that no World War Two-type conflict does not break out since the conventional armaments can not be manufactured here or in not enough numbers to fight an “old style” war.
It will be surrender or nukes.
Even if the USA won a nuke war too many in the world would likely despise us and long-term plans would begin to destroy us.
As for GMC… the elite class will prop up their fellow elites but there comes a point where it is cheaper to ensure the elites involved with GMC and other firms that would suffer with GMC’s fall have squirreled away enough money then pull the props away.
Once I began viewing many aspects of the USA through the lens of class warfare, around 25 years ago, I observed my predictions coming true.
I can not prove it to you but my kinfolk were and still are impressed how I predicted this latest economic downturn.
Also, years ago, before the media covered it, I predicted future problems with illegal alien invasion and the effects upon the working-poor.
The long-term slide of the masses down to a 2nd-world life-style will take longer due to the large numbers of people involved.
Just wait for a couple large-scale new skims to evolve that allows the few to garner an even larger percentage of the national wealth and there will be the next “crisis.”
Maybe that “cap and trade” fiasco that will will cost the commoners mucho money as even more wealth is transferred from the many at the bottom to the few at the top.
Mark my words, folks.
If your present life-style is of the ill-defined “middle class’ or above do not expect your offspring to be at the same level. Perhaps the first generation will, the fruit of your actual loins but if trends continue as they have your grandkids or perhaps their kids are doomed to a low level life-style.
GMC is doomed, eventually.
I can envision but two ways to alter the inevitable future.
One… the elites and corporate America embrace a sense of honor and duty to country, culture and society.
Or, a military coup to make drastic alterations to our political and economic systems.
The odds of either occurring?
Zilch, zip, nada, no way, Jose.
Meaningful change via voting?
Nigh-on impossible for many reasons.
Watch the future as it unrolls and hope for yourself and your future DNA bearers that I am wrong.
I may be.
But…. for various reasons… I believe I am closer to future facts than the shills and touts of the elite class who have so effectively brainwashed the human herd.
Unfortunately another partial bailout comes in 2012, in BO’s last year. The next republican admin, lets it fail finally in 2015 amid a budget crisis and sells what left of GM’s parts bin for a huge loss.
Ed Niedermeyer: “Then there’s the unavoidable issue of GM’s dying brands, which could account for as much as 3 percent market share loss regardless of the economic conditions.”
Has some of that already happened? In August, the dead brands were 16.1% of GM’s sales. In September, they were 9.6% of GMs’ sales. Their importance has already fallen off and GM’s share for September was about 20%, wasn’t it? Maybe the erosion won’t be so bad.
And maybe the overall market will increase somewhat. In addition to any economic rebound (maybe optimism should be a crime), C4C should still exert some pull. Vehicles were scrapped that were part of the road fleet (they were registered and insured… a waste of money for a lawn ornament). This fleet size reduction should increase demand slightly going forward, although it should have increased used prices and that hasn’t happened, so maybe this won’t work the way I expect. Perhaps these effects will only show up if there’s some economic recovery (maybe a recovery with jobs is a requirement).
In addition to the size reduction, the low number of sales in the last two years has aged the fleet a little bit more… there should be somewhat increased demand for cars from that.
On the other hand, perhaps hard times teach new lessons… maybe some people have discovered they don’t need N cars as a matter of routine, that they can get along OK on N-1 vehicles and save a wad of cash. Maybe they gave up the boat, gave up the old tow vehicle as a clunker, sold another vehicle for additional down payment and have shrunk from 3 vehicles, ages 3, 5 and 9 to 2 vehicles ages 0 and 3. Widespread behavior of that nature wouldn’t bode well for future sales, as people who did this would be out of the market for years.
There are a lot of boats on the market. I wonder how boat prices are, this year to last?
Hope that no World War Two-type conflict does not break out since the conventional armaments can not be manufactured here or in not enough numbers to fight an “old style” war.
Giggle. The US manufactures more than it ever has. It just takes far fewer workers to do so, which certainly has led to some problems. But your argument is like saying that that the US can’t possibly grow enough food to feed ourselves, since so many farming jobs have been “eliminated” from one hundred years ago, when half the working population were farmers. Most of our manufacturing is concentrated on high-end parts, but if you want to argue that retooling to produce conventional arms is difficult, it’s pretty dumb to bring up World War II. For example, US tanks were practically non-existent before WWII, and production ramped up like crazy.
In September, they were 9.6% of GMs’ sales. Their importance has already fallen off and GM’s share for September was about 20%, wasn’t it? Maybe the erosion won’t be so bad.
Perhaps. But even that 9.6% of GMs’ sales means that they do account for a 2% share of the overall market. GM still needs to make sure that they keep those customers in a company brand.
In addition to the size reduction, the low number of sales in the last two years has aged the fleet a little bit more… there should be somewhat increased demand for cars from that.
On the flip side, cars do last longer than they used to, so that trend somewhat decreases the demand for cars.
Once I began viewing many aspects of the USA through the lens of class warfare, around 25 years ago, I observed my predictions coming true.
…
Also, years ago, before the media covered it, I predicted future problems with illegal alien invasion and the effects upon the working-poor.
So, “viewing many aspects… through the lens of class warfare” means that you, still rich on a global scale, hate foreigners who are much poorer than you? Got it.
And yeah, 2000 should be added to that graph. It would tell the same story as it is, without engaging in typical “how to lie with statistics” flim-flam.
I think it’s tough to spank GM for a 3-5% mismatch on their 2010 projection vs TTAC’s projection. Few manufacturers can hit a number with that precision.
That shortfall – if it materializes – can be tuned out with production slowdowns as the year unfolds. My guess is that the surviving brands may already have taken most of their beating, and will stabilize soon.
While I’d like to pile on, I can’t with these numbers. I think GM’s real numbers problem is a lack of profitability – regardless of volume – and still believe they will bite the dust in 2013 or 2014.
I think market share for GM wil be greatly affected an intangable item of anger that GM had to get bailed out by the taxpayers of the US. Many people I have talked to lately have said that they won’t even consider a GM or Chrysler vehicle because of the government bailouts. I know that I wouldn’t buy anything from those companies.
There is a real political side to this as well. With mid term elections coming up in 2010 Obama needs GM and Chrysler to be profitable and paying back loans or the Democrats are in deep DODO. GM has said they will make an IPO in 2010 well before the mid term elections. If that doesn’t go well I can’t even begin to predict what will happen both to the company and to the elected idiots.
I think a lot of this production planning is to make the government happy. Predict numbers that make Washington happy and worry about sales later. We all know that Uncle Sugar has plenty of money to give away.
johnthacker wrote:
So, “viewing many aspects… through the lens of class warfare” means that you, still rich on a global scale, hate foreigners who are much poorer than you? Got it.
+1 Nicely put.
Ed: great chart, and it would be even starker if you started it at GM’s share peak in the late 70s, I believe, where it was as high as 55%, and fell like a rock from there, and do it annually. Do you have the data or the graph itself? if yes, please post.
The market is too unpredictable right now, I think Car person’s forecasts for 09 and 10 are a bit on the low sude for both total sales and GM’s share, but longer term I see no promise in GM.
Maybe I am wrong above and it was in the late 60s, not 70s, that GM peaked. 1969? I have seen the data someplace but forgot where.
“There used to be a theory that car sales and population were related. Someone said you could look at the U.S. population and figure that a fixed percentage would be buying new vehicles in any year. That imperfect formula worked pretty well for a couple of decades, until our latest financial crisis…”
You can easily calculate a minimum for car sales by computing the “replacement demand”. In a market of 250,000,000 cars on the road today, and an average age of 15-30 until scrapped (15 in snowbelt, 30 in CA)? Assuming 25 years generously, that already gives us 10 million cars bought every year, rain or shine. (If you assume 12.5, you get 20 million!)
On top of the above replacement demand, you got the new demand, from new drivers (1% pop growth every year) and from people that just want a new car. (estimate?)
In many ways, the market share means nothing, but it gets worse for GM all the same. Here’s how.
Suppose GM could have a market share of 50 percent in a 100 million units per year and net $1 per car. GM would earn $50 million per year. (“I’m Mr. Roark and this is Tattoo.”)
Suppose Chrysler could have a market share of 5 percent and make $200 per car. Chrysler would earn $100 million per year. (“Jeannie, just grant me this one wish…”)
When they were The Big 3 in the 1990s and early 2000s, they kept their doors open with high margins on trucks, SUVs and minivans.
Once the competition heated up for minivans, GM and Ford bailed and put their resources back into trucks and SUVs.
So now things have changed, and the high margin sales of trucks and SUVs are rapidly diminishing. And this is forcing The Almost Big 2.24981 to compete in the sector of the market where, they’ve been telling us for 20 years, they can’t make money.
So the challenge, plain and simple, is that they have to make money building and selling cars. And at GM, it’s the same people in charge who have been telling us they can’t make money building and selling cars.
So, in an odd way, they actually need to LOSE market share. That way, they’ll lose money at a slower rate and will be able to hang around till the next election. But if they GAIN market share and continue lose money on every car they make, then they’re toast.
They can make money selling cars, just not nearly as much as they can selling trucks. And their cost structure was such that they needed those high margin trucks to survive. Having to sell cars, means they needed to lower the cost structures, which with the help of the government they’ve tried to do, however while they may have lowered their cost structures they still have a product problem and a consumer interest problem. They’re tarnished now because of the bailout, and they need to accept that and start making decisions based upon that, instead of taking a “you just don’t understand” marketing approach.
They’ll never say it, but they’re closer to where Hyundai was in the eyes of the cusomter when they were entering the US, than they are to where GM itself was 15 years ago. They need to shrink, shrink, shrink, and prove themselves with a few offerings, intially sold on value (read: inexpensive compared to competitors) and then grow from there. Cadillac is not as tarnished, and will keep some margins, but even Caddy I think has lost most of the consumer ground they’ve gained since moving to the Art and Science designs. I’ve considered CTS’s, but if I were shopping now, a GM shop wouldn’t even be on my list. They haven’t shown that they’re accountable yet, and haven’t proven that they will be there down the road, when you need them.
I can not prove it to you but my kinfolk were and still are impressed how I predicted this latest economic downturn.
You and your kinfolk seem to be masters of the obvious. Everyone knew the combination of skyrocketing housing prices, easy credit, and 140.00 a barrel oil would cause a meltdown.
Try not to break your arm patting yourself on the back.
As for GM’s situation, I’m surprised they have the market share they still do. I suspect fleet and other non-consumer sales are propping them up right now and will continue to do so. If they really had to satisfy customers only they would approach their customers differently.
As for GM’s situation, I’m surprised they have the market share they still do.
You shouldn’t be. Live here in East Bubbaville for a decade plus and you’ll see why the Big 2.8 survive.
That being said, when I moved here 13+ years ago, I owned the only SUV (93 Explorer Sport) and foreeeeen car (85 Prelude) in the county. Now, everybody drives Hyundais, Hondas and Toyotas. Why? First, dealers moved into the general area making it easier for folks who distrust leaving their comfort area (think of it as a reverse Brigadoon effect) be able to see a car brand that’s not from the Big 2.8. Second, some people really did get fed up with the craptastic product lines of the last 15 years from the Big 2.8 when compared side by side with your standard Toyhondai. Third, moronically easy credit.
So yes, I’ve watched anectdotally GM’s market share decline but also see why it remains where it does.
Autosavant: Maybe I am wrong above and it was in the late 60s, not 70s, that GM peaked. 1969? I have seen the data someplace but forgot where.
GM peaked in 1962, when it claimed over 50 percent of the total market (both foreign and domestic nameplates).
In the late 1970s, GM had almost 60 percent of the domestic market, but a smaller share of the total market.
geeber, I recall seeing in ’79 or ’80 or so a Business Week cover story about GM and its excellent prospects. The cover picture had the caption, IIRC, “GM: Driving For Sixty” [percent market share].
That BW article ranks right up there with its early 80’s piece, “The Death of Equities” as signals for contrarians.
obbop :
October 12th, 2009 at 11:15 pm
Hope that no World War Two-type conflict does not break out since the conventional armaments can not be manufactured here or in not enough numbers to fight an “old style” war.
[citation needed]
It ain’t 1942 any more. The chances of a GM car plant being turned into a tank or fighter jet plant due to World War III is nil-a new plant would be built, specifically to build whatever was needed. The loss of GM and Chrysler would be of no particular value in terms of loss of potential domestic military manufacturing capacity.
“geeber :
October 13th, 2009 at 10:28 am
Autosavant: Maybe I am wrong above and it was in the late 60s, not 70s, that GM peaked. 1969? I have seen the data someplace but forgot where.
GM peaked in 1962, when it claimed over 50 percent of the total market (both foreign and domestic nameplates).
In the late 1970s, GM had almost 60 percent of the domestic market, but a smaller share of the total market.”
I was thinking of GM US Sales.
One of the things I needed to do is get one of my Saturns serviced. The dealership looked empty, and the lot was obviously thin. They are having, their worse month – ever. Of course!
So I wanted to know where I was to take my future service needs. They don’t know. To Chevrolet? Well, it seems the Chevy dealer is about to close due to dealer culls. To Buick? Well, it seems that the Buick brand was switched from the longtime dealer in town, to the old Pontiac dealer. To Cadillac? Well, yes possibly, but their service isn’t accustomed to servicing Saturns. Bottom line – in this city of 150,000 – I am left hanging.
For the past decade, we have been driving Saturns and having a very nice time with the Saturn dealers. But, now that they are closed, we are expected to take our business to someone else, not yet announced by GM. If it was bad enough to lose one of the plusses Saturn offered, their cars, we are losing another strong plus – their dealer and dealership experience.
Now, top it all off that we don’t even know who within this city will remain as a dealer for a GM brand – and you have complete chaos.
So, product isn’t all that is suffering here. The very connection between long time GM buyers is being cut. How can GM expect to remain in business without having their customers like me, return? If it wasn’t bad enough to not offer vehicles Americans are willing to buy, GM is unable to even choose a stable dealership network in this small city in Central US – their loyal base of buyers.
So all this talk about percentages is based on a number of stable factors – which are not existing. I cannot buy a GM vehicle even if I wanted to, because I don’t know from whom to buy it! We choose dealers, as well as cars, people! If the last GM dealer in town offers awesome products, I still don’t know who they even are, and will pass them by.
2009 will look pretty good two years from now. As current GM customers like me switch to Ford, GM will continue to lose business until it folds. As the last of the GM cars are cycled out of daily use, GM drivers will not be shopping at GM again.
They are toast!
Autosavant: I was thinking of GM US Sales.
I should have made myself clearer. I was referring to the U.S. market. GM’s 1962 peak reflected over 50 percent of sales of all vehicles in the U.S. – both foreign and domestic.
In the late 1970s, GM claimed over 60 percent of all sales among the Big Four – GM, Ford, Chrysler and AMC – in the U.S.
Its share of the total U.S. market, however, was smaller, because the imports were a much bigger factor by that time.
Hope that no World War Two-type conflict does not break out
You may as well hope that we don’t have a Civil War type conflict, too. We don’t have many factories making muskets, either. There’s a good reason for that.
You’re out of date – we don’t fight wars like that anymore. Today, a few missiles and bombers can accomplish more than 100 B-17s with fighter escorts could achieve 65 years ago. The technology of WWII was relatively primitive and required massive amounts of manpower to deploy, with high destruction and death rates to match. Today’s gear is much more costly, takes longer to build, requires more specialized skills to use, and is far less likely to get blown up.
If you tried to fight a war today without having most of your equipment built and ready before the fact, the war would be over before you’d even started. We don’t have years to prepare, and the oceans aren’t much of a buffer zone anymore.
One reason that the US is prepared is because it is no longer possible to gear up once the war has started. Defense contractors specializing in serving the military have already built most of what will be used in the next conflict, whatever that is.
Once I began viewing many aspects of the USA through the lens of class warfare, around 25 years ago…
Once you decided to see what you wanted to see, you started to see it. It’s no wonder that you’ve gotten some of this so badly wrong.
GM has said they will make an IPO in 2010 well before the mid term elections. If that doesn’t go well I can’t even begin to predict what will happen both to the company and to the elected idiots.
And, different idiots will be elected. Unfortunately, I have little hope left in me; it’s been sucked out by the last 20 years of government boondoggles and lies.
I am not going to even try to predict economic conditions or GM’s market share next year.
However, Fritz has publicly stated several times since July (and it is publicly available in Viability Plan 4 as part of the BK records) that my employer’s breakeven point is 18% market share in a 10 million count vehicle market.
Another publicly available figure is GM sales in the US for September, 156,673. And it was indicated on this site that this was a pitiful sales month for GM in 2009.
What if GM sold a minimum of 156,673 cars, trucks and crossovers every month in 2010 regardless of total market or total market share? They would sell 1,880,076 vehicles.
IMO, the news will be compelling when GM’s sales drop below 150,000 units in a month.
On the flip side, cars do last longer than they used to, so that trend somewhat decreases the demand for cars.
This has been said for years, and was certainly true at one time. But can we take this for granted any more? I think for the last 10 years or so, there has been little focus on increasing overall reliability and durability of automobiles. Seems to me the focus has shifted to cheaper manufacturing, and the elimination of over-engineering where possible.
If any car can last 150k miles, and I do personally beleive so, then what incentive is there for a manufacturer to make a car any more durable? The customer can’t tell the difference between 150k and 250k mile engineering when they buy the car, and for the most part they probably don’t care. Furthermore those that do care buy on reputation (i.e. Toyota) since there is no other easy way to tell.
I suspect that the main reasons people purchase new cars has little to do with the current automobile being completely used up.