GM Sales Estimate For March

[Perian]

U.S. sales seen down in March for embattled GM
Source:Reuters / March 18, 2005


DETROIT -- General Motors, which warned this week it expects sharply lower profit this year, will see little relief from its March U.S. vehicle sales, which are expected to fall by as much as 10 percent, analysts said Friday.

Despite new sales incentives, GM will again lose U.S. market share to foreign automakers, leaving it with an excess of unsold vehicles even after it has already made painful cuts to vehicle production this year, analysts said.

GM CEO Rick Wagoner, speaking to analysts and reporters earlier this week, said of March sales: "It looks like March is going to be better than the first two months."

GM's U.S. sales fell more than 6 percent in January and February for a U.S. market share of about 25 percent, far below its share of 27.3 percent in March last year.

"We think GM will be down about 10 percent this month," said Jesse Toprak, a senior analyst with Edmunds.com, which tracks industry sales and incentives.

Conversely, Asian carmakers Toyota Motor Corp., Nissan Motor Co. Ltd. and Hyundai Motor Co. Ltd. will see double-digit sales gains, Toprak said.

Wagoner said GM's sales incentive strategy of 0 percent financing and high cash rebates, launched after the Sept. 11 attacks, has been paying fewer dividends in recent months. He and GM CFO John Devine outlined GM's new sales strategy of pricing vehicles closer to the transaction price, to cut back on incentives.

EXCESS INVENTORIES

"Their current strategy has failed. To me, it's an abrupt about-face," one Wall Street analyst said of GM's new strategy.

Another big decline in sales would come despite GM's new "March Madness" sales incentives, which include additional cash rebates of up to $1,500 on the sale of GM vehicles that have gone unsold for 125 days or more. GM has also cut prices on its mid-sizes SUVs, but Toprak said GM failed to effectively advertise the new prices.

Deutsche Bank said in a report this week that GM dealers are reporting an 11 percent drop in March sales so far, and the automaker could lose a full 2 percentage points of market share.

"Our channel checks indicate that GM's retail sales are down double digits again," Lehman Brothers wrote in a report this week. "We are expecting them to end the month down 3 to 4 percent."

That would leave GM with excess car and truck inventories of 200,000 to 300,000 vehicles in North America, Lehman Brothers said. Inventories of GM's full-sized pickups and SUVs, key to GM's earnings, will grow to a more than a 100-day supply, Lehman said. GM's share of the full-size SUV segment dropped to about 38 percent in February from 65 percent in September 2002, Toprak said.

For the first six months of this year, GM has forecast a cut in its North American vehicle production by 304,000 cars and trucks, down 11 percent from year-earlier levels. Any cut in production deals a direct blow to earnings, because the automaker counts profit from vehicles when they are shipped to dealers, rather than when they are sold from showroom floors.

[AJR]

More bad news it looks like. The analysts could be wrong, but I don't see this going in a positive direction. Once you are pegged, you are pegged unless you come out and knock their socks off. The upcoming GM trucks and SUVs better be extremely impressive and not warmed over vehicles like the GM minivans. Why do I get a feeling that all we'll get is warmed over vehicles from GM in the near future?

[AMcA]

Warmed over city . . . they didn't even have concept cars to speak of at this year's Chicago show. You used to be able to count on GM having at least one concept per division. No more.

[mgescuro]

I wonder how much of the decline is because GM has terminated some of the high volume cars that sold because of fleet sales (ie - Grand Am) and how much of this is a slow down in new vehicle purchases.

We know Lacrosse has been outselling the combined Century/Regal sales. But G6 is nowhere near Grand Am sales due to lack to 4-cyl option and off-the-wall pricing.

[Globalist]

It's a little bit sadistic, but I hope March sales will be very bad. Combined with red ink 1st quarter release in April, they will give GM more leverage in its discussions with UAW leaders on April 14th.

If UAW still can't comprehend the seriousness of the situation, then GM must act unilaterally.

I see some great opportunities in this difficult period. Remember that Carlos Ghosn admitted that he succeeded in Nissan turnaround because of the urgency of the situation.

[mgescuro]

Originally Posted by Globalist

It's a little bit sadistic, but I hope March sales will be very bad. Combined with red ink 1st quarter release in April, they will give GM more leverage in its discussions with UAW leaders on April 14th.

If UAW still can't comprehend the seriousness of the situation, then GM must act unilaterally.

I see some great opportunities in this difficult period. Remember that Carlos Ghosn admitted that he succeeded in Nissan turnaround because of the urgency of the situation.

Yeah, that's a bit sadistic, but it definitely has a ring of truth around it.
What do you suggest GM do when they "act unilaterally?" Break the contract?? I wonder what kind of legality is behind that. UAW can strike all they want. GM's got a lot of inventory to wait it out.

[Globalist]

Originally Posted by mgescuro

Yeah, that's a bit sadistic, but it definitely has a ring of truth around it.
What do you suggest GM do when they "act unilaterally?" Break the contract?? I wonder what kind of legality is behind that. UAW can strike all they want. GM's got a lot of inventory to wait it out.

In the middle age, 4 powerful tribes were living in peace in a holy city. In the past they fought each other in long wars. The reason of their fights was about the control of the holy city since thousands of pilgrims visited the city.

After years of peace, one day, while renovating the holy place, they disagreed on who will move a holy rock from one location to another (just a few feet). It was a great honor and privilege to do it, and each tribe wanted this honor. So, the situation became so tense that war was inevitable again.

In a meeting, the 4 tribe leaders decided to accept the advice of a wise old man. To solve the conflict, he suggested to accept the judgment of the first man who enters the holy city. So they all went there and waited for the first man to enter. And it was a young man known for his integrity. So everyone was happy.

The young man asked for a blanket, and asked the 4 tribe leaders to pull the rock at the same time and put it together in the center of the blanket, and then he asked each of them to hold a corner of the blanket and together move the holy rock to the desired location.

Everyone was happy and the war was avoided.

Morality of the story:
GM can ask many concessions from UAW (even canceling the contracts) but it should show that the sacrifice is shared by everyone--UAW, GM employees, leaders, suppliers, etc.

When there is fairness, and justice people will listen and give more than you can imagine.

[GMfan2381]

Originally Posted by Globalist

In the middle age, 4 powerful tribes were living in peace in a holy city. In the past they fought each other in long wars. The reason of their fights was about the control of the holy city since thousands of pilgrims visited the city.

After years of peace, one day, while renovating the holy place, they disagreed on who will move a holy rock from one location to another (just a few feet). It was a great honor and privilege to do it, and each tribe wanted this honor. So, the situation became so tense that war was inevitable again.

In a meeting, the 4 tribe leaders decided to accept the advice of a wise old man. To solve the conflict, he suggested to accept the judgment of the first man who enters the holy city. So they all went there and waited for the first man to enter. And it was a young man known for his integrity. So everyone was happy.

The young man asked for a blanket, and asked the 4 tribe leaders to pull the rock at the same time and put it together in the center of the blanket, and then he asked each of them to hold a corner of the blanket and together move the holy rock to the desired location.

Everyone was happy and the war was avoided.

Morality of the story:
GM can ask many concessions from UAW (even canceling the contracts) but it should show that the sacrifice is shared by everyone--UAW, GM employees, leaders, suppliers, etc.

When there is fairness, and justice people will listen and give more than you can imagine.

Well said, there really needs to be some give and take here. Hopefully the UAW will see what a position the company is in, and hopefully GM sees what the UAW is doing and follows suit.

[FusionSVT]

Wagoner needs to get serious with the unions now. If he isnt going to step in and deal with the unions head on then he needs to be replaced. I know why he doesnt want to do anything too drastic. Ive heard it before and it wont be the last "he doesnt want to be known as the CEO who downsized GM". If Wagoner is HALF the man that bill ford is he wont take any stock options nor pay until GM makes a profit. A leader is supposed to set the tone for the rest of the company, how can he set the tone when other are not? The Board shouldnt take pay either along with the top execs. You might only be saving a few million, but the goodwill from these actions will be an even greater reward. Im fairly sure Wagoner can afford to not take pay in his current financial situation.

[Havasavana]

Giving huge rebates don't do the job so I conclude price isn't the answer. The problem is the product. The UAW could work for nothing and the product would be cheaper but that's apparently not enough. Too many years wasted instead of developing new drivetrain components and failing to make adequate efforts at top quality. GM is now the underdog, but the execs have been too satisfied with being the largest. So even though they might now be recognizing reality (or might not) it isn't clear they know what to do or have the time. I expect their bonds to be downgraded to junk soon. That, together with the losses, will scare off some potential buyers. Their sales could fall rapidly and their losses mount. This could become very serious before the year is out. The execs seem at a loss for what to do and the board as to what changes to make. Drifting towards the rapids.

[spudglo08]

These upcoming trucks better have good looks.They have the standard power.that prolly isnt enough.Rumer at my dads plant is that the 900's will have 355HP 5.3L's standard.And their will be Duramax variants in all of them.

[stormwatcher]

Originally Posted by Globalist

If UAW still can't comprehend the seriousness of the situation, then GM must act unilaterally.

GM can't act unilaterally. And the UAW is unlikely to budge before 2007. Even if GM enters junk bond hell, this is unlikely to change. GM will have to be right at the precipice, ie Chapter 11, before any real change will occur.