Chrysler’s sales fell 36 percent last year, as bankruptcy and some of the weakest products on the market conspired to keep sales and market share trending downwards. CEO Sergio Marchionne figures Chrysler’s slide has hit bottom, and indeed his turnaround hinges on considerable improvement over last year’s dismal numbers. How much improvement? Marchionne tells the Freep that ChryCo needs to sell 1.1m vehicles in the US next year, an 18 percent improvement on 2009’s number, in order to reach his break-even projections. Worldwide, Chrysler needs to sell 1.65m vehicles, or 27 percent more than last year. Given the downward sales and market share momentum, the overall uncertainty of the US market, and the lack of new products until the end of this year, reaching those volume numbers won’t be easy. Especially because Marchionne refuses to cut any corners.
GM has a tough row to hoe in 2010, with the launches of key products like the Cruze and Volt going on sale, an IPO to worry about, and a sales slide (down 30 percent for 2009) to reverse. Still, according to GM’s new North American boss Mark Reuss, navigating the congressionally-mandated dealer arbitration is the top challenge of the coming year. At a speech last night, Reuss told reporters from Automotive News [sub] that:
I welcome this as an opportunity for GM and the dealership network to go through a change in our network with integrity,
As opposed to the arbitrary bankruptcy-era dealer cull? (Read More…)
Speaking to Bloomberg yesterday, GM Sales Boss Susan Docherty called December’s sales results “very encouraging.” Her argument: heavy fleet sales in December 2008 explain why December 09 results look worse by comparison. But spinning sales results as the product of conscious fleet percentage reductions is just one longstanding GM tradition that Docherty indulged in: talking points touting falling incentives and improved inventory weren’t far behind. None of which is necessarily indicative of a satisfactory performance. In fact, if you dissect the spin, it’s clear that what lies beneath is not nearly as attractive as the PR would have you believe.
According to Reuters, GM has sent a letter to its dealers offering $7,000 for every new Saturn or Pontiac they can move to a rental or service fleet between now and January 4. The plan would essentially make dealers the first buyer of the remaining Pontiacs and Saturns, which would then be operated as fleet vehicles or be sold as low-mileage used cars. In any case, the single objective is clear: get those dead brands off the books at all costs. With 7,900 vehicles left at Pontiac as of the 14th of December and upward of 5,000 left at Saturn as of the beginning of the month, the cost to GM could easily approach $100m. But as they say in the advertisements, their loss is your gain…. as long as you’re interested in one of the G6s or Auras that dominate the dead-brand straggler inventory. Where’s Oprah when you need her?
While Ford is slowly but surely gaining traction in North America and China, Europe is storming ahead. Over at paddocktalk.com there’s report on Ford of Europe’s latest sales, which jumped 19.8% in November. This marks Ford’s sixth consecutive volume increase, resulting in a 9.1% year to date market share. “November was another month with outstanding volume gains for Ford of Europe”, said Roelant de Waard, Ford of Europe’s Vice-President for Sales. “Having the right products at the right time is paying off, and this is why we’re continuing to strengthen our position as the clear No.2 choice for customers in the European auto industry.” A key point included how 63% of their sales went to retail customers, which was an increase of 13%. Increase in sales? Increase in retail customers? Increase in market share? It all sounds great! Until you dig a little deeper. (Read More…)
Well, we’ve been here before… about this time last year, to be exact. The Freep reports that Chrysler, which had to quit leasing for much of last year due to falling resale values and the credit crunch, is reinstating subsidized leasing for its 26,000 qualifying retirees. Under the terms of the plan, retirees could lease up to two 2010 Chrysler, Dodge or Jeep products with no down payment and free scheduled maintenance. The 36-month leases run from December 9 through June 30, 2010. According to the Freep, retirees will pay $100 per month less on average than Chrysler employees who have access to two-year leases. GMAC, which is financing the leases, is set to receive another government bailout of “less than” $5.6b on top of the $13.5b it has already received from the TARP program.
Chrysler CEO Sergio Marchionne isn’t bothered by his firm’s sliding market share, which have declined to the point where Honda will certainly surpass them to become the number four automaker in America. At least that’s what he keeps saying, and Automotive News [sub] went ahead and made it a headline. If dealers are “expecting us to call them up and give them a $6,000 check for every new vehicle, they won’t get the call,” Marchionne joked recently in the Detroit Free Press.
Along with Israel, Denmark is one of the first countries to sign on to Project Better Place’s attempt to establish a viable electric car infrastructure. And as with all early adopters, Denmark is paying a pretty price for the experiment. The country is spending $100m on infrastructure, including charging points and battery-swap stations. Moreover, Better Place’s partner, public utility Dong Energy, is trying to run the new EV infrastructure entirely on wind power, which is already the source of 20 percent of Denmark’s energy. “We’re the perfect match for a windmill-based utility,” Better Place founder and CEO Shai Agassi tells the NY Times. “If you have a bunch of batteries waiting to be charged, it’s like having a lot of buckets waiting for rain.” Despite the close government involvement in the project, Danes are still wary of making a wholesale switch to EVs, prompting the government to offer $40,000 in consumer incentives for electric vehicles, as well as free parking in downtown Copenhagen. Though there’s plenty of skepticism in Denmark about the plan, that incentive is expected to make a huge difference.
Despite already having some of the highest incentives in the game right now, Chrysler is joining GM in putting more cash on the hood to clear out year-end inventory. Automotive News [sub] reports that Chrysler will be adding $1,000 to $1,500 in incentives per vehicle, on top of October’s $3,219 per vehicle average (as calculated by Edmunds). According to the same Edmunds analysis, the average industry incentive is $2,468 per vehicle. This continued reliance on incentives contradicts a number of Sergio Marchionne’s statements at the presentation of Chrysler’s five year product and business plan, in which he argued that Chrysler could not rely on incentives to push volume. Marchionne claims to believe the incentive-based volume chasing is “insane,” but his commitment to a sustainable business plan is about to be tested. For Chrysler’s five year plan to succeed, its sales need to turn around fast, making 2009 the trough year indicated on this graph. But with no new product (and by new product, we mean refreshed product) due out until the fourth quarter of next year, such a turnaround seems impossible without huge incentives. And yet Chrysler also showed graphs projecting a direct relationship between volume and profit, meaning there is little to no wiggle room for profit-sapping incentives. Rock, hard place, I’d like you to meet Chrysler Group.
US sales of the not very Smart car have fallen off a cliff. The Financial Times reports that “Smart sold only 661 of its fortwo model in the US last month, more than two-thirds below October 2008 and the lowest for any month since the car made its debut in the US early last year.” Other analysts are blaming low fuel costs and the foolishness of US consumers who just don’t get the appeal of microcars. Not me, I blame the fact that the Smart car is an all around underwhelming vehicle which gives up too much capability in return for mediocre fuel economy. Note that the Smart brand is a failure in Europe as well. “Daimler’s decision to export Smart to the US was a critical part of its rescue plan for the brand. For all its pizzazz, the little car has been a financial millstone. Daimler came close to shutting down the brand in 2006, but opted instead for a €1bn ($1.5bn) restructuring aimed at making the business profitable by the end of 2007.” How anyone (let alone Roger Penske) thought a failed European microcar would be saved by exports to the US is beyond me. Smart’s new “Value Days” 1.9% financing promotion isn’t going to get the job done. Not even a Toyota-esque Saved By Zero campaign would do the trick.
We don’t have any numbers yet on GM’s 60 day money-back guarantee, but according to GM dealers speaking to Automotive News [sub] it’s not generating a lot of interest. “If [customers] like the car, if they test drive the car, most of the people would rather have a car to keep,” explains one dealer. Which makes a certain amount of sense, and which is why dealers insist that the number of buyers taking GM up on the offer doesn’t matter. “It’s more important to talk about the money-back guarantee. It conveys confidence in the vehicles,” says another dealer. “It’s not about the deal, but rather it’s about the world-class products.” That sounds good in principle, but the reality is that it actually is all about the deal. Again. Still.
In a follow up to E. Niedermeyer’s previous post, details have emerged about the scheme to give rebates to buyers who trade “clunkers” for new, fuel-efficient vehicles. FT.com (Financial Times) reports that the program will cost taxpayers about $4 billion and will spur, according Brian Johnson, an analyst at Barclays Capital, the sale of 3 million units in the “near term” (whatever that means). With the US’ SAAR projected at approximately 9 million, this is a very optimistic prediction.
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