Is GM on the Right Track?

December/04/2010 16:50PM
Write Comment
Please follow and like us:

GM had a good month. In November, GM sold 168,670 cars and light trucks, up 12% over last year. Ford saw its sales jump almost 20% to 146,956, adjusted for the sale of Volvo, it was a 24% increase.

What was selling in November? Trucks and SUV’s. Car sales are up 6% while truck sales are up 17%. So, the public is buying more trucks and SUV’s.

GM has a long history of being on the wrong side of the demand curve for vehicles. After the first Arab embargo, GM was slow to make small cars, very slow. When the SUV”s took off, GM was wrong again. With the government’s help, can GM do this again? GM and Chrysler announced they would each hire 1,000 engineers to work on fuel-efficient vehicles. GM has a big stake in the success of the Volt.

An you drill deeper into the GM sales story for November you find their sales for the month had a 28% share in fleet sales. Fleet sales have been carrying GM’s day for the year. A unit sold to a corporation is discounted significantly vs. a sale to a consumer. Average unit margins have to lower for GM than the rest of the industry. Consumers haven’t bought the GM package, except for trucks. This is not a good position for the long-term.

Will the new, reorganized GM avoid the errors of the past? Hopefully it will. But, moving to small cars when consumers are buying SUV’s is not a good sign. Selling 28% of your share into the wholesale market is not a good sign.

It’s far too early to pass judgment on GM”s future, but one can only hope the company is paying more attention to the consumer and the competition and not to Washington. Building cars Washington wants is a sure recipe for failure.

Please follow and like us:

Other Articles You Might Enjoy:

Leave a Reply