GM claims victory even as its market share slips Retail gains deliver more profitable mix Mike Colias/Automotive News
October 12, 2015
In another era, market share was king, and General Motors had the lion's share. Today, GM's market share is nowhere near what it once was, and perhaps trying to recapture former glory is a distraction despite cultural pressures.
That's how GM is approaching it, at least.
General Motors' U.S. market share is on pace to decline again this year, just as it has nearly every year of the last 10.
But GM CEO Mary Barra urges a closer look at the numbers, which she says offer proof that -- after years of talking about it -- GM is repressing that deeply ingrained instinct to chase market-share growth at the expense of the bottom line.
But this year's downtick is largely explained by a 50,000-unit reduction in the number of vehicles headed to rental lots, a 14 percent drop. GM's 7.2 percent retail sales growth topped all major automakers, including Toyota (up 2.9 percent) and Ford (up 5.1 percent).
Even on the fleet side, GM is targeting higher-margin business: Sales to businesses rose 15 percent through September, while sales to government customers rose 3 percent.
The strategy makes sense. I am curious to see at what point the market share will bottom out.
And when will the fleet special old Impala be cancelled? Having that vehicle in the line-up kinda muddles the message of less reliance on fleet sales.
Does it? I think keeping an old model as fleet only is a great idea. This old Impala has to be a profit maker with all it's manufacturing equipment fully depreciated, this way GM can offer the fleets a great price and still make a nice profit. Also, with the old Impala fleet only then GM doesn't have to worry about auto mags trashing GM... And internally to GM it isolates the fleet vehicles, making it harder internally to prop up vehicles that are supposed to be retail.
Between a focus on profits and GM's focus (albeit government enforced) on quality/safety (all the recalls) we are witnessing a massive internal change at GM. Hopefully it doesn't get derailed by the likes of Marchionne or activist investors; GM is in a fragile state with to much disruption/distractions giving the possibility for the old GM to re-emerge.
I like Barra, I'm really looking forward to seeing vehicles produced under her leadership (especially from Cadillac). But as much as many dislike the past two CEO's, they are largely responsible for GM hitting domestic 10% pretax profit today....
My philosophy is to try and get the best price and maximize output. If you have capacity for 300k Cruze and you're on pace to sell 260k then you should try and move the other 40k potential units as rentals. As you can see by my example below, you'll make 15 million dollars more if you can move maximize capacity, even though your profit percentage drops below 10%.
My philosophy is to try and get the best price and maximize output. If you have capacity for 300k Cruze and you're on pace to sell 260k then you should try and move the other 40k potential units as rentals. As you can see by my example below, you'll make 15 million dollars more if you can move maximize capacity, even though your profit percentage drops below 10%.
The other side of that equation is on the second hand market you tank resale value for those who purchased the vehicle in retail as there are more Cruzes around then there is demand for.
Some people confuse rising market share with rising sales and falling market share with falling sales...... .That is the real confusion with some GM has seen its retail market share increase and it has decreased its fleet market share for a net result of a slightly smaller market share.
There are certain individuals, on this very site, that live by market share numbers, yet completely ignore the profitability, until that discussion is the focus. I grew up in a time when GM had both. I also grew up in a time when they were not fighting in the trenches with 25 other makers. People can not expect GM and Ford to retain the market share they once enjoyed because during those times it was just GM, Ford, and Chrysler. Even Toyota was a bit player here.
The other plus with the fleet Impala is that when its resold people get a very good car. Probably at a low price and may help when that person is ready to purchase a new vehicle to look at GM instead of someone else. Its a decent car for someone who wants a larger car at a low price and reliable.
That is what I did. I bought a 2014 Impala Limited LS with 13k miles and 10 months old for $14,798. I like it a lot. I used to have a 07' GP base and drove it 105k with zero problems; so I figured I buy the same car with an upgraded interior, 300 HP Cadillac V6, and nice warranty expecting to drive it for 8 years, hopefully without any problems. I am now at 6.5 months and just about 20k happy miles.
Automotive market is growing, and GM is selling fewer cars to the rental companies, is this something magical or just a reflection of reality?
I'm not really sure it is good or bad..............
This is the key statement in the story:
"But this year's downtick is largely explained by a 50,000-unit reduction in the number of vehicles headed to rental lots"
Now consider; YTD, YOY GM has built about 15,000 fewer W-Body Impala's, and about 35,000 fewer Captiva's both of these cars are dedicated fleet/rental business.
Remember these are cars that were dedicated fleet, mostly rental business, they were incremental volumes to their total sales, and assuming they make money on each one they sell; is it really good that these sales are gone? It certainly helps with all the buzz words, 'Margin" "Retail Mix" and "ATP" but one would assume they were adding to the bottom line more last year than this year.
You are confusing two different market categories--rentals and fleets. Government and corporate sales are also fleet sales. The cars that they drive will never be rented except as taxicabs. They will be driven by company and agency employees until they become too expensive to maintain. The rental market subset of the fleet market is quite from government and corporate motorpools. These cars are really "pre-used." They are rented-out by the rental agency for a year or so after which they are sold on the used car market.
I'm assuming the problem with rental fleet sales is the crappy way they option them out? All completely bare bones? Why don't they just option them out a little better to get over this stupid stigma? To me, a rental is like a marketing opportunity for car makers. At my company, we travel a lot and therefore rent a lot of cars. It's an opportunity to drive random makes and models. GM should look as that as an opportunity to win customers instead of reaping profits by offering the cheapest cars possible.
I think GM does a lot better job of mixing at least mid-level trims, and I agree rental experience does influence the thoughts and opinions of consumers.
Bit of a false choice really ie a larger than 17.6 % marketshare plus stronger qualitative results plus stronger financial numbers are not inherently mutually exclusive although you certainly can position a firm ( or really 'anything' operating for a profit ) into a situation where they are.
Or.... they are not.
So really, keeping all the rest about the same, why not GM @ 18 /19 % - that's the real question - and for damn sure you can find the real answers - in the RenCen.
So really, keeping all the rest about the same, why not GM @ 18 /19 % - that's the real question - and for damn sure you can find the real answers - in the RenCen.
I think the loss of dumping to fleet, particularly in cars, is a perfect reason for a drop of 1-2%. That being said, and back to my argument about the AVAILABILITY of market to to get market share..
So I gather ???? the dog ate my homework rule revisions are to be selectively applied ie not in use - above a certain floor ?
Oh well, at least it serves a purpose whether full intended or not.
Eventually ( hopefully - like real soon ), the Ford shorts will end and even reverse and then the Ford and the Ford / GM ratios will hit some of the needed share numbers and ratios - and then voila - you watch, GM will start to gain again.
Does not explain things nor cover nor excuse.......... in any way certain basically ' all but inexpiable' decisions made ( without the dog ) with PTs, Cadillac....... and some other we do not need to list -
I've asked before, but I forget the answer... how do these fleet sales work? Do automakers solicit them (banging on doors), or do the requests for vehicles come in to the automakers? Has GM set a limit to the number of vehicles they'll sell per month to various fleets (rental, government, etc), and simply stop when they meet those targets?
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Related Threads
?
?
?
?
?
GM Inside News Forum
3.5M posts
83.7K members
Since 2003
A forum community dedicated to GM owners and enthusiasts. Come join the discussion about General Motors news, concepts, releases, classifieds, troubleshooting, maintenance, and more!