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Category: Sales
You remember The Center for Automotive Research (CAR). They’re the Detroit-based automaker and union-funded think tank that progated the “soup lines beckon if you don’t bailout Detroit” study. The mainstream media repeated CAR’s stats– debunked on TTAC by both myself and our Best and Brightest— as gospel. Now that CAR has had its wicked way with $17.4b of your tax money, they’re back from hiatus with fresh apocalyptic visions for policy makers. Only this time, they’re right. “McAlinden, director-economics research for the Center for Automotive Research, predicts auto makers will sell 11.5 million units in 2009, down from 13.2 million last year and 16.2 million in 2007,” Ward’s Dealer Business reports. ‘The U.S. will not see 14 million new-vehicle sales again until 2012 and 16 million in 2013. The downturn will last a long time.'” OK, so… “Whether the two auto makers can meet the loan requirements set by the Bush Admin. remains to be seen. However he does not believe GM can meet the obligations as they are written now, adding, the ‘conditions will be changed so GM can keep them.'” Make no mistake: McAlinden has no faith in GM’s recovery plans.
Chrysler will stop building PT Cruisers this summer. OK, they’re not actually building anything until next month, and maybe not even then, but you know what I mean. Displaying the link between stress, huge salary, government begging and multiple personality disorder, ChryCo Co-Prez Tom LaSorda got on the blower with Bloomberg to acknowledge that the entire PT model is for sale. “Would we sell those assets? Yes. Do we have any offers to sell those assets? No. Would we be pursuing a buyer? Yes.” In China? Yes. Would they buy it? No. Despite the idea that China wants our cast-offs, they’re way beyond that point. And make no mistake, the PT has gone all the way from hero to zero. “U.S. sales of the PT Cruiser plunged 49 percent last year to 50,910 units, outpacing Chrysler’s 30 percent slide and the 18 percent tumble in the domestic auto market. Deliveries peaked at 144,717 in 2001, according to Autodata Corp. in Woodcliff Lake, New Jersey.” For those who lament the death (dearth?) of American automotive production, remember that the PT is hecho en Mexico. Still sucks for them, obviously.
GM Card Q1 2009 Top Off Incentive Offer
PROGRAM EXPLANATION
TO: All RDMMs, ARDMMs, ZMs, ASMs and GM Dealers
FROM: GM Cardmember Services – Detroit, MI
SUBJECT: 2009 Q1 GMCS Top-Off Earnings Retail Program
PROGRAM OVERVIEW:
GM Cardmember Services (GMCS) is sending select GM Card and GM Flexible Earnings Card Cardmembers a direct mail piece that includes a special Bonus Earnings “Top-Off” offer toward the purchase/ lease of an eligible, new GM vehicle between 1/6/09 and 2/2/09.
OFFER OVERVIEW:
GMCS will add Bonus Earnings to select Cardmembers’ Accounts so that they total either $2,000 or $3,000 in Topped off Earnings.
One of our Best and Brightest has received a bit of mail recently… “My GM Card has collected $777 towards a new GM of my choice. They sent me a snail mail volunteering to up it to $2000, no questions asked. And here’s the kicker: “Valid in conjunction with all other rebates and offers.” (I’d scan and email it to you, but my scanner has taken a dump.) Sweet, but I wish they go ahead and knock 75% off the price of a new truck, as opposed to this 50% bullshit. Then, I’d place it under ‘definite maybe, but forget about it because the economy sucks’ status.”
* Light vehicle sales tumbled 18% in 2008, to 13.2 million units from 16.1 million in 2007, with the selling rate deteriorating significantly in the second half of the year, finishing with a barely-breathing 10.3 million SAAR in Q4.
* Sadly, it looks like 2009 will be even worse than 2008. Our latest forecast for 2009 US light vehicle sales is a shade under 12.0 million units, which is down from our earlier forecast of 13.0 million, and down another 9% versus 13.2 million in 2008.
* North American light vehicle production in this scenario should be in the range of 10.6 million units, down about 13% vs. 12.2 million in 2008, reflecting the sequential decline in sales, as well as an oversupply of vehicles remaining on dealer lots at year end. The year-to-year drop in production should be even more pronounced for the Big 3 (about 19%).
Can you say price war? How else is Toyota going to shift 180k Priora when the market for hybrids has tanked (Prius sales down 44.7 percent in December) and Honda’s Insight has arrived to do battle? In their best year, Toyota shifted 181,221 gas – electric hybrids. The obvious answer: they’re not– barring a sudden recovery of the American automotive market and an increase in fuel prices. (Federal gas tax hike?) Could be. As far as the Insight’s concerned, ToMoCo isn’t. US Prez Jim Lentz told Ward’s Auto there’s room in the market for three hybrids. “You’re going to have Honda at the entry end. You’re going to have Prius kind of in the center, and you’re going to have (the) Lexus (HS 250h) on the luxury side,” he says. “It gives consumers clear choices, a large array of hybrid products.” So much for the Ford Fusion or any GM hybrid, then. Sad; but true?
Of course, that’s complete horseshit. You can no more reduce a “cool car” to a formula than you can pick a hit song by analyzing the notes. Certainly, if you’re looking for mainstream success, both car and song needs a “hook” or two and must work within a certain prescribed range (price, length). But it’s hard to take any survey on cool cars seriously when it’s conducted by people who push pencils for a living, based on a poll of “1,006 participants aged 17 to 28… randomly drawn from a panel of individuals who agreed to participate in online surveys.” Anyway, here goes nothing: “Deloitte’s survey discovered that the majority of Gen Y respondents felt a vehicle reflects a person’s style, status and values, and the factors named most often as among the top three reasons that a vehicle is cool were exterior styling, affordability and being environmentally friendly. Among survey respondents, 44 percent said exterior styling was the most important factor in selecting a vehicle, 40 percent said affordability and 35 percent said environmentally friendly. These statistics are important as they represent an opportunity for auto manufacturers and suppliers to be creative and turn their new business models into customized programs tailored to reach this diverse market.” See what I mean?
The news is flying thick and fast out of Detroit this week, as the annual conclave at the don’t call it The Detroit Auto show puts hundreds of journalists in close proximity to corporate newsmakers and spinmeisters. Automotive News [AN, sub] is doing the do. First up: Toyota’s admission that its “Saved by Zero” didn’t save the automaker from a humiliating December; trucks sank by 50 percent and they lost critical U.S. market share. So ToMoCo’s reaching deeper into its deep pockets.”The shift that you’ll see in January from December is more consumer cash and less APR and lease support through our dealers,” Toyota USA Prez Jim Lentz told AN. Jimbo didn’t offer any specifics, but AN rightly points out that Priora are stacked up like cordwood. “One of the largest sellers of Priuses in the country, Earl Stewart Toyota in North Palm Beach now has about 70 on the lot that it can’t get rid of. ‘Any kind of Prius anybody wants — any color, any anything — I’ve got it,’ Stewart says. ‘And if I don’t have it I can get it because there are several hundred in the port. Dealers don’t want them.'” Note: “According to Edmunds.com, Toyota had the biggest percentage boost in incentive spending in December at an average $1,995 per sale. That was up 87 percent from what the brand spent in December 2007.” The implications of all this are pretty clear…
Of course, that’s a bit blunt for corporate types. Ford design chief J Mays gives us the Ford-approved terminology for the automaker’s decision to forgo rear wheel-drive (RWD) for its passenger vehicles: “It’s out of the cycle plan,” J tells Automotive News [AN, sub]. “We’ve got other priorities at the moment. We’re going down a path right now that is all about fuel efficiency, and we’ve got a lot to do about that. So we’re not talking about rear-wheel drive.” AN provides the potted history of the layout’s extinction. “A year ago, Ford CEO Alan Mulally and product chief Derrick Kuzak confirmed that the new Ford and Lincoln rwd sedans would be coming. By midyear, Kuzak said Ford was rethinking the program but hadn’t discontinued it. Analysts had expected U.S. sales of the rwd cars to begin with the 2013 model year. The platform was to be shared with a large car developed for Australia.” And now, nothing. TTAC’s Best and Brightest will debate the wisdom of abandoning RWD. Suffice it to say, Lincoln. Oh, and the Hyundai Genesis.
Not only does Richard Colliver admit that ’07’s sales were a bubble– a bubble that has permanently popped– but the executive vice president of Honda America says the bailout billions thrown at banks, aspiring banks and automakers hasn’t had any impact on the credit availability underpinning the U.S. new car market. Colliver also told Reuters that HoMoCo’s given up forecasting ’09 sales. “We’re not even forecasting because whatever we forecast, we would be wrong. If you look at the last 120 days, if that trend continues then we’re looking at a significant reduction (from 2008).” So Honda’s battening down the hatches, cutting inventory to 65 to 70 days of supply in the next three months (from the current 100 days). At the same time, Honda’s planning on boosting its leasing penetration from 23 percent to 27 percent of total U.S. sales. As for the impact of Motown’s meltdown on Honda…
• December sales might have been even weaker if not for a hefty slug of fleet deliveries at GM. GM’s overall sales were down 31%, which topped our forecast decline of 34% to 36%. But within that total, GM’s retail sales were down a sharp 41%, while fleet deliveries were about flat year-to-year. If GM’s fleet sales were down roughly in line with the industry average (mid-30% range) the SAAR [Seasonally Adjusted Annual Rate] would have been closer to 10.0 million, or perhaps 9.9 million, we estimate.
• The outlook for sales in 1Q09 is no brighter than the 2008 exit rate. Both Ford and GM suggested that sales could run in the 10 to 11 million range in the first part of 2009, with somewhat of a (stimulus-driven) recovery in the back half of the year (has a familiar ring, doesn’t it?).
• GM slashed its production plans throughout the rest of the world, with Europe now set to fall 44%, Latin America 34%,and Asia pacific 27%, versus 1Q08.
• At the end of December, we find Big 3 dealer stocks to be about 31% above normal, which is about where they ended November. The truck mix headed higher again in December, and combined with weak industry sales to leave cars about 75% overstocked. Light trucks were about 12% overstocked.
• We estimate Chrysler to be the most overstocked of the Big 3, with dealer stocks about 45% above normal. Trucks are about 80% overstocked, while cars are about 37% overstocked.
• Ford ended the month overstocked by about 22%, with passenger cars a sharp 83% above normal, and trucks about 2% below normal.
• GM was about 29% overstocked at the end of December, with cars 70% overstocked, and light trucks about 9% overstocked.
• A look at days’ supply of foreign brand vehicles also shows a severe overstocked situation. For example, Honda dealers had 96 days of car supply in December, up from 50 days in the year-ago month; Toyota had 94 days of car supply, up from 42 days a year ago; BMW had 57 days of car supply, up from 22 days in December 2007.
In invite the Best and Brightest to send me examples of big discounts on new cars for publication, from any brand. Send jpegs to robert.farago@thetruthaboutcars.com. BTW: I saw a TV ad today advertising Chevy Malibus for $18k. The fine print (which I barely caught): one owner cars. Desperate times.
A friend of mine just bought a brand new Dodge Ram (V8, power windows/locks, crew cab, 6-speed stick) truck for $16,000 from a local dealer. I thought the 50% savings was only on single cab, V6 strippers. Turns out, this truck was a leftover 2007 model. (not 2008) We pulled about 2 ft of string wrapped inside the pivot point in the side view mirror. This rig obviously had many, many balloons tied to its mirror as it waited for a new owner. The new owner wisely insisted the fluids get changed before he took delivery of the truck. Which brings me to this picture: I’ve been driving by another Chrysler dealership since March and the scene has not changed. (I took this picture on Tuesday) There must be over 30 Crossfires, always sitting on the front row. I believe they stopped making Crossfires over a year ago. Maybe this isn’t newsworthy, but there’s no better sign of the times than these two outsider recent snapshots into Chrysler’s miserable sales.
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