The federal government has put the Cash for Clunkers (a.k.a. C.A.R.S. program) on hold. Supposedly, they’ve run out of money. The MSM is all abuzz with talk of extending the program, allocating more funds and the bummer of a congressional recess (no action ’til after Labor Day). But there’s talk that the number of clunkers hitting car dealers’ lots or the logjam on getting paid isn’t the real reason for putting Cash for Clunkers on hold. Do the math. The program is good for about 200k to 250k rigs, depending on the average rebate qualification. No way there were that many clunkers traded in over the six days since the program went live (official D.O.T. stats after the jump). The real story is that C.A.R.S. over-stimulated the market for new cars (even without a clunker trade); dealers are running out of new vehicles to sell. Or, more to the point, cars that consumers want to buy.
Well that was quick. The Freep is reporting that CARS will be suspended after only 4 days due to over-subscription. NADA is warning the Wall Street Journal that demand is quickly exceeding the $1 billion available. An unofficial NADA survey shows 25k qualifying deals that the NHTSA still has yet to process. And dealers sound pissed. “Their capacity to accept the applications is not adequate,” one dealer tells the Freep. “Dealers are spending all day trying to submit the applications . . . I have not spoken to one dealer that has received approval, and or has been funded, for even a single transaction.”
The Wall Street Journal reports that GM will go back to its leasing habit in August, after nearly a year of cold turkey. According to the WSJ‘s anonymous sources, GM “is looking at various models across its four-brand lineup as candidates for leasing. Those include the Cadillac CTS, which competes in a luxury market that is heavily dependent on the availability of lease deals.” CTS sales which had hovered around the 5k units/month level since the last redesign are now fighting to hold on to 3k units/month. And that’s the latest, hottest Caddy out there. GM and GMAC probably see no alternative to burning even more bailout cash trying to move the CTS oversupply. But the source of the burnt cash is the only thing that has changed since they walked away from leasing. The WSJ notes that the “firming up of resale values” is contributing to GM’s decision to go back to leasing. Maybe they can’t smell the desperation. If you want a whiff of why this is a bad idea, check out eBay’s recently completed CTS auctions, where 2006 and 2007 CTS 3.6 models are consistently failing to attract $15K bids.
No big deal. Just $650m net income over the last three months. That’s almost double what analysts expected, and comes despite an 11 percent drop in global sales (not including affiliates). Hyundai’s worldwide market share hit five percent for the first time though, with US share up over 1 percent in the last year. 56 percent sales growth in China didn’t hurt either. Forget the Genesis, Hyundai’s financial news is going to be what stirs up the competitors’ boardrooms.
Back in roaring 20s (or thereabouts), TTAC highlighted American automakers’ tendency to use fleet sales to keep expensive factories running. The practice eroded vehicle quality (why bother making better fleet fodder?), eroded margins (a little profit on a lot is better than nothing!) and corroded brand equity (badge it up and send it out!). As The Big Three became The Big 2.8, as GM headed for bankruptcy, we gave the automakers grief for claiming they were abandoning fleet sales to address these issues when, in fact, the fleets were abandoning them. Point of clarification: the “look at us we’re so responsible” BS was a bad thing, even though fleet reductions are a good thing—provided the automakers switch to retail-competitive products, meaningful brands and, thus, larger margins. Which hasn’t happened. And the domestics’ fleet sales continue to disappear. In other words, whichever way you look at the fact that Detroit’s share of fleet sales has slipped from 80 percent to 48.4 percent, they lose.
Ford got a whole lotta love around here yesterday for agreeing to hook up TTAC’s staff with better press fleet access. Though the move shows that Ford is more willing to face the truth than its Detroit competition, the announcement generated perhaps a bit more optimism about the firm’s fortunes than the data warrants. One commenter got so carried away by the good vibes that he opined “the Ford brand pretty much has a good car in every segment there is, with the exception of the minivan.” Not quite. Let’s turn to our XLS spreadsheets of Ford monthly sales since 2003, shall we? [Thanks to bumpy ii for the spreadsheet]
A TTAC Commentator emailed this about the what did she mean debate re: GM’s proposed inventory levels for the new Buick LaCrosse.:
Just an FYI, but the execs at Chrysler always looked at the dealer stock and total stock separately. Although the cause of this was as you pointed out – due to the sales bank where cars were being parked in overflow lot. The situation got so bad in 2008 that Chrysler had to track “unaccounted for and parked somewhere random” stock separately… but that’s a separate story. Hopefully New GM will never go the route of building thousands of unallocated cars (but I’m sure they’ll find a way). The two metrics were required because the various operating groups could be measured against the gap between dealer/total stock or the efficiency of the dealer stock. It just depended on what was being measured.
Yesterday, Bloomberg reported that Buick jeffe Susan Docherty promised to “restrict” supplies of the new LaCrosse to a 75 to 90-day inventory. As we pointed out in our blog, that’s 15 to 30 days above the industry ideal. We also highlighted the lunacy of Docherty’s comparison to the slow-selling Acura TL. As PFC Pyle used to say, surprise, suprise, surprise! Docherty’s spinning and backpedalling furiously. What’s worse: Autoblog has appointed itself apologist-in-chief. Make the jump to span the “plausibility gap.”
Bank Of America-Merrill Lynch have released their annual “Car Wars” report, and it predicts slumping sales for GM and Chrysler. GM’s market share of 22 percent last year is seen shrinking to a mere 15 percent, which is significantly lower than the 18 percent number that GM admits to. The real butt-clencher? Merrill Lynch based its calculations on a 14m unit SAAR, which is much higher than the 10m SAAR that we’ve been seeing through the first half of the year. Which means GM’s losses could be even worse if we don’t see a return to those sales numbers soon. Even at a 14m SAAR though, the three percent discrepancy between GM’s numbers and Merrill’s would amount to GM selling half a million fewer autos than expected. The report places blame on weakness in GM’s new-product pipeline for the projected drops. GM’s Tom Wilkinson fires back at the Freep, arguing “we understand that analysts get paid to try to predict the future… but that doesn’t necessarily mean they are going to be right.” Gosh, can’t anyone just trust GM?
America’s traditional method for clunker-culling was to load old cars onto a truck and ship them to market in Mexico. That changed last year when Mexico banned the importation of vehicles built before 1998. Now, Mexico’s president Felipe Calderon has announced a scrappage scheme for his country, in hopes of jumping on the car sales bump bandwagon. According to El Universal [in Spanish, Hat Tip: Gato Negro], the program
“will grant 15,000 mexican pesos [about $1,000] towards the purchase of a new car. The clunker must be 10 years old at minumum. Initial budget will be 500 million pesos, expandable to 1,000 million. The cost of the new car should not exceed 160,000 pesos. Also: The car must be assembled in Mexico [or another NAFTA country] or imported by one of the seven brands that have a car factory in Mexican territory.”
Meanwhile, the Wall Street Journal quotes analysis which shows that Europe’s 6.8m oversupply for 2009 will grow to 7.2m in 2010, because “scrappage schemes are significantly distorting the dynamics of the European market.”
Before the worldwide auto industry meltdown, most analysts reckoned carmakers had burdened themselves with 40 percent production over-capacity. After the new car market shrunk by 40 percent, well, you do the math. Only there’s an anomaly: inventory levels. While we’ve got a pretty good idea of how many day’s supply of vehicles are lingering in dealer lots, what about all those ’08s and ’09s stored on vast parking lots, ships, airfields, etc.? [NB: above pic is from Mother Russia] The story got lots of play at the beginning of the cartaclysm, but slipped off the radar since then. Are we to believe that the lots were slowly emptied, as manufacturers shut down their plants? Or are there still hundreds of thousands of cars out there . . . somewhere? If so, we’re still in a price-inflated market, as those cars have to be sold sometime to someone. Anyone have any anecdotal or objective evidence one way or the other?
Commenter j_slez (who compiled GM and Toyota monthly sales since 2004 for us already) writes:
I saw the call for a log-scale GM plot, and since the change only took a minute I threw that together, even though I’m not a fan of it personally. It does help separate the lower-selling brands. Part of the point of the original is that they’re all low-selling. I replaced Pontiac with all of the “Old GM” brands – it doesn’t make much difference really.
Then I did Toyota. They’ve got a bit of a dive themselves of late.
TTAC Commentator bumpy ii is nothing if not persistent. When the member of TTAC’s Best and Brightest bumped into the most recent U.S. new car sales figures (June), he was determined to get all trendy on us. And so . . . Click here for a look back at the sales stats for every Toyota model back to January ’04. If another one of our OCD, I mean, B&B wants to share some statistical analysis, or put this into a more visual form, bring it on. As always, your editorial support is most appreciated. [farago@ttac.com] Next up: same thing, Old GM.
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