Flint: Slow Months Coming for Detroit

[tgagneguam]

Flint: Slow Months Coming
Sales have been pulled ahead by employee discounts.
by Jerry Flint (2005-09-26)

Slow times are coming forDetroit - two months for sure, three months likely, maybe even four months. After that we're in 2006 and we'll see.

There are four good reasons:

1. Payback from the sales boom of the last few months tied to the employee sales bargain days. People just buy ahead. That doesn't mean it wasn't the right thing to do. General Motors and Ford needed to lower inventories and they did. But sales will fall for a while because folks that wanted to buy took advantage of the deals.

2. Higher prices. The Detroit companies are trying to push prices up. They have better product, they have lower inventories, but the customers expect great deals, not fair prices. They will hold back for months.

3. Gasoline prices are inching their way down, slowly, but the shock won't wear off. The shock will slow sales and push the buyers to the Japanese and Koreans who have the high-mileage reputations. A friend just bought a Hyundai Elantra four-door for $16,000 and brags that he's getting 35.5 mpg. He's a happy camper. The big pickups and SUVs, the heart of Detroit's business recently, will shrink for the same reason so the home team's market share will take a beating.

4. And there's the issue of confidence. The disaster of Katrina and the bad news from Iraq hurt. That University of Michigan consumer confidence index has dropped to a 13-year low.

You know all this for sure. You know it is hurting business in September. Ward's Automotive Reports predicts a 28-percent sales decline for General Motors from a year ago, a 14-percent drop for Ford, and a slight gain for Chrysler. We'll see how it comes out in two weeks. It's reasonable to figure that October will be another down month, and probably in November and possibly December, too.

More...

[goblue]

Should be some great deals for those looking at models that were not redesigned for 06 and who have access to a GM discount. The incentives will come. Probably Oct 1. GM needs to make more sales to close out 05 on a decent note.

[mjd1001]

It is going to be very hard for GM to shake the rebate thing.

My father is currently considering a new car. He has always bought GM and wants to continue to do so (despite most of the family giving imports a try).

Anyway, he says he is not going to buy a GM car now, he is going to wait until next spring for higher rebates. Even when we discussed that GM may try to "stick to their guns" and keep the rebates from escalating, his response was that he'll take his chances and bet by next spring the rebates will be much higher than now (although he admits not in the $3000 - $5000 range).

I think the only way GM can shake this is for an entire year, to not raise the rebates at all through the winter and spring. That is the only way consumers will see how serious they are about this. It may be a good idea for GM to do this also, just use a massive rebate/incentive program like the "employee pricing for all" at the VERY END of the model year, only when the 07's are already hitting the lots.

[AJR]

I will be very curious to see how the Japanese brands do during this "slow down" for Detroit. It could mean that Toyota could meet one of its (actually my) goals earlier than expected.

[knightfan26917]

Originally Posted by mjd1001

My father is currently considering a new car. He has always bought GM and wants to continue to do so (despite most of the family giving imports a try).

He isn't alone.

I, too, have been considering a new car actually ... if only because I'm not sure I like the idea of letting such good deals go by without at least a look ... or looking into the possibility.

But, other than the GTO, I'm not sure what GM car I'd want right now.... Ah, well ... have all week to decide/consider .


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[drew770]

I think GM should just accept that this year and the first 6 months of next year will be very weak for GM.
GM have focused on SUVs and trucks for so long it will be hard to grab car buyers that will be looking to a car strong Toyota, Honda and even Hyundai.
The next 2 years will either make or break GM so lets be prepared for the rollercoaster.

[AdmiralViscen]

From the sounds of it, they are willing to bleed in order to break out of the incentives game. I get this from his 'higher prices' reason for reduced sales. If he is acknowledging that prices will be higher, that must mean that incentives aren't going to be used as much.

I can't imagine why AJR has his own goals laid out for Toyota. It's one thing to enjoy their vehicles, it's another to gleefully watch as domestic industry is torn down.

[obriend]

Originally Posted by tgagneguam

The shock will slow sales and push the buyers to the Japanese and Koreans who have the high-mileage reputations. A friend just bought a Hyundai Elantra four-door for $16,000 and brags that he's getting 35.5 mpg.

More...

Who says the Koreans have a high-mileage reputation? While at a dealer this week, the tiny Aveo (Korean) got something like 26/34 city/highway, while the midsize 4cyl Malibu next to it got 24/35! A small car does not necessarily equal an efficient car Mr. Flint!

[Ming]

Originally Posted by obriend

Who says the Koreans have a high-mileage reputation? While at a dealer this week, the tiny Aveo (Korean) got something like 26/34 city/highway, while the midsize 4cyl Malibu next to it got 24/35! A small car does not necessarily equal an efficient car Mr. Flint!

Its about perception. GM touts its big SUVs, and doesn't spread the word enough about its fuel efficient options such as THESE .

I assume that this is because GM doesn't get high profit margins on the cars I listed, when compared to giant truck based, loaded to the gills with options SUVs. So it steers GM buyers to these large choices, and has lots of truck and SUV commercials (at least here in Texas) and gets the reputation for being a "Big SUV/Truck Company".

[AJR]

Originally Posted by AdmiralViscen

From the sounds of it, they are willing to bleed in order to break out of the incentives game. I get this from his 'higher prices' reason for reduced sales. If he is acknowledging that prices will be higher, that must mean that incentives aren't going to be used as much.

I can't imagine why AJR has his own goals laid out for Toyota. It's one thing to enjoy their vehicles, it's another to gleefully watch as domestic industry is torn down.

I can't put a big long explanation down, but if you could see me, you'd see a person shrugging their shoulders like I just don't care anymore.

And you are wrong about my goal for Toyota. I don't gleefully want to see the domestic auto industry go down to Toyota, but it is not in my hands to change it. What can I do? Besides, you are thinking big term, while I'm thinking quite a bit smaller. You will know it when/if Toyota meets that goal.

[usa1]

Flint says on his articles, "More from the jaundiced keys of Jerry Flint"

Jaundiced struck me as an odd choice of words.

This is from Dictionary.com

jaun·diced Audio pronunciation of "jaundiced" ( P ) Pronunciation Key (jôndst, jän-)
adj.

1. Affected with jaundice.
2. Yellow or yellowish.
3. Affected by or exhibiting envy, prejudice, or hostility.

I think he's referring to number 3 here. 1 and 2 certainly don't apply. Well, there you go. That's all you need to know about this guy.

Mark

[AdmiralViscen]

Originally Posted by AJR

I can't put a big long explanation down, but if you could see me, you'd see a person shrugging their shoulders like I just don't care anymore.

And you are wrong about my goal for Toyota. I don't gleefully want to see the domestic auto industry go down to Toyota, but it is not in my hands to change it. What can I do? Besides, you are thinking big term, while I'm thinking quite a bit smaller. You will know it when/if Toyota meets that goal.

There's nothing you can do about it, but making your own little Toyota sales goals and cheerleading for them isn't helping.

[asim]

Originally Posted by mjd1001

It is going to be very hard for GM to shake the rebate thing.

Most definitely, but what can they do?

[johnnyl321]

I think GM may need to rethink their old ways of "to sell more cars, build more cars and build more dealerships". They've had dealerships touting only the discounts more than the quality of the vehicles in the last 5 years. Now, they can come off of the huge discounts and rebates by going to a "REAL" transactional price. Not price a 39k GMC Sierra for 38500 and then offering a grand off. Price that thing around 31-32.
Same thing with the cars, if an 05 Grand Prix can be sold for 19160 with employee pricing and rebate, make the 06 sell for 20-21k.
GM can also help a lot if they come up with good leasing on their models. People still shop by payments and offering 7-9 year financing just takes people out of the market way too long. Offer good 24-36 month lease terms on ALL GM MODELS. Make people understand the upside of leasing. At my dealership we have over 12 salespeople, we all lease.

[Motownr]

Originally Posted by johnnyl321

come off of the huge discounts and rebates by going to a "REAL" transactional price.

Johnny:

An interesting comment given your job.

What percent of your buyers are upside down? If you go to value pricing, what percent of buyers will you lose?

I fear that value pricing will eliminate a sizable percentage of the buyer pool, and decimate the F&I dept. It'll be interesting to see how this plays out, as DCX has largely ignored GM's more and refrained from going the value-pricing route.

Will DCX be able to 'buy' deals that GM can't?