June Sales: GM Hits All-Time Low Market Share
July 06, 2007

General Motors’ market share last month hit an all-time low, according to Edmunds.com’s analysis of June sales.

GM’s June market share slumped to 22.17 percent, the lowest level in recent history and dipping below the previous monthly low of 22.3 percent in October 2005, according to Edmunds.com.

In June, the industry sold 1,455,236 vehicles; GM sold 322,048 vehicles, down 24.2 percent from June last year. GM closed 2006 with 24.6 percent market share.

The stock market didn't like GM's sales results. GM shares fell $1.22, or 3.2 percent, Thursday, the first trading day after GM announced lower June sales.

“GM may have miscalculated the need for incentives in June, particularly as Toyota and Honda boosted incentive spending to their record levels,” said Alex Rosten, Edmunds.com’s manager of pricing and market analysis.

Scaling back incentives

Excluding a summer strike in 1998, the previous low-water mark of October 2005 came the month after GM instituted its Employee Pricing promotion. The campaign proved successful in terms of increasing sales but it wiped out inventory for October sale, leading to the low market share. It also was a money-losing venture for GM.

What, if anything, GM plans to do to increase market share this time is unclear. GM has been focused on profitability more than increasing sales volume and market share. GM has been on a strategy of scaling back incentive spending.

In fact, GM may have scaled back too much.

Indeed, of the Big Six automakers selling vehicles in the U.S., only Honda and Toyota had higher incentives in June compared with June a year ago, according to Edmunds’ True Cost of Incentives (TCI) analysis. Toyota and Honda also raised incentives in June from the month earlier.

In contrast, GM went in the opposite direction, cutting average incentives by nearly 10 eprcent. In June, GM spent an average of $2,830 per vehicle on incentives, still more than Honda and Toyota but the least amount of any of the Big Three. GM's TCI in May was $2,920 per vehicle and $3,135 in June last year. June 2007 was the only June in the past six years that GM’s incentive spending fell below the $3,000 mark.

True Cost of Incentives for the "Big Six" Automakers
Automaker	June 2007	May 2007	June 2006
Chrysler Group	$3,962	$3,831	$4,045
Ford	$3,187	$2,942	$3,648
General Motors	$2,830	$2,920	$3,135
Honda	$1,397	$1,300	$770
Nissan	$2,218	$1,943	$2,677
Toyota	$1,308	$1,128	$961

Source: Edmunds.com

In Edmunds’ analysis of the month of June for the past six years, GM hit an incentive spending high of $4,277 per vehicle in June 2004, which got GM a 26.2 percent market share. The highest market share for a June in the past six years was in June 2002, when GM had 30.2 percent market share with average incentive spending of $3,018 per vehicle.

GM June Market Share History
Year	Market Share	Total Volume	TCI
2002	30.2%	460,972	$3,018
2003	29.1%	428,077	$3,699
2004	26.2%	377,516	$4,277
2005	33.0%	551,497	$4,176
2006	27.3%	408,258	$3,135
2007	22.1%	322,048	$2,830

Source: Edmunds.com

Trucks socked by Toyota incentives

Forecasters predicted GM sales and market share in June would be down from a year ago, but the reality was worse than the predictions. GM’s total sales fell 24.2 percent, not the single-digit drops many expected.

GM attributes this year's decline to a cutback in low-margin sales to car-rental companies, but that’s not the whole story.

Sales of GM trucks were a significant weak spot in June. Chevrolet truck sales dropped 26.4 percent from June a year ago; GMC’s truck sales plunged by 29.2 percent. Last year, both divisions had just introduced their redesigned versions of the Silverado and Sierra, respectively.

The pickup truck market, in general, has been down, in part due to a slow housing sector. In addition, the competition is intense in the segment with Toyota introducing and promoting heavily with incentives its new Tundra, Ford vowing to hold onto truck leadership for the third decade with the aging F-150 and Chrysler trying to hold its own with the Dodge Ram.

Mid-June, Toyota announced extremely aggressive incentives on the Tundra, which hit the hoped-for annual rate of 200,000 vehicles a year, in May. Those incentives included rebates of more than $3,000 per vehicle and zero-interest financing for 60 months. Other incentives and competitions for sales people were put into place in specific markets. Those incentives, which particularly hurt GM truck sales, are due to expire July 9.

Toyota's newest round of incentives pushed its TCI on the Tundra to $4,878 per truck, while GM decreased incentives on its Chevrolet Silverado and GMC Sierra significantly.

June True Cost of Incentives on Large Trucks
Make	Model	June 06	May 07	June 07	06-07 Change
Chevrolet	Silverado 1500	$4,195	$3,557	$3,604	-14.1%
Dodge	Ram 1500	$6,079	$6,755	$6,831	12.4%
Ford	F-150	$4,966	$4,125	$4,272	-14.0%
GMC	Sierra 1500	$4,112	$3,442	$3,644	-11.4%
Nissan	Titan	$2,646	$3,486	$3,363	27.1%
Toyota	Tundra	$4,878	$2,877	$5,083	4.2%

Source: Edmunds.com

Cadillac's renaissance over?

In addition, Cadillac’s slump continued and deepened in June, prompting the question – what’s happened to Cadillac’s turnaround? Cadillac’s car sales plummeted 33.3 percent in June.

Silver lining?

If there is a silver lining to the GM story, it is the fact that automaker had solid sales performance in one of the hottest segments – crossovers. The Saturn Outlook, GMC Acadia and Buick Enclave are selling well and demand in coming months for them looks strong.

In fact, in Edmunds.com's analysis of consumer intent, which watches shopping behaviors now that translate to sales later, the Enclave showed in June the largest increase in consumer interest of any vehicle.

GM also gets a boost in a couple of other weak spots – cars and Cadillac – this fall when Chevrolet introduces the promising new midsize Malibu sedan and Cadillac launches the revamped CTS.

GM’s large SUVs could see a pick up from the Two-Mode hybrid versions of the Chevrolet Tahoe and GMC Yukon, which launch this fall. However, that’s no guarantee large SUV buyers will warm to hybrids. Edmunds analysis of hybrid sales show the hybrids that sell best with the lowest incentives are small ones in the lower price range that focus on high fuel efficiency whereas performance-oriented and luxury hybrids do not fare as well.

While GM’s Saturn stumbled in June, its outlook is promising. Saturn, which had been enjoying double-digit increases in year-over-year sales, saw sales drop by double digits – 12.2 percent in June from a year ago, though most of the drop is attributed to Saturn’s intentional sell down of its Ion small car. It is being replaced later this year with the Opel-built Astra. Still, Saturn’s TCI was down 17.8 percent while its new products were selling well.

In mid-June, Saturn launched a bold promotion whereby its dealers provided a Toyota Camry and Honda Accord in their showrooms to test drive against the Saturn Aura. The results of that promotion are not evident yet.

Are we there yet for bottoming out market share?

The big questions analysts are asking – as must GM, itself – is how low will market share go and what can GM, already in the midst of launching loads of new, competitive and promising products, do to stop the freefall?

In the Wall Street Journal’s Heard on the Street column of July 3, the paper quoted Robert Barry, an auto analyst with Goldman Sachs Group Inc., as saying: "I just don't believe GM is going to sustain over the long term anywhere near its current market share.”

Barry, who raised his rating of GM stock in May to “buy” from “hold” based on the prospect of GM getting a good contract with the UAW this fall, predicted GM’s market share could slide into the "mid- to upper-teens" given the fierce competition in the U.S. market. "And a lot of competitors have better reputations, better balance sheets, better dealer networks," he told the Wall Street Journal.

In the column, entitled “For GM, Curves Lie Ahead,” other dangerous curves, in addition to fierce competition, include:

· rising gasoline prices and the housing slump that work against GM, slowing sales of trucks and sport-utility vehicles, which generate most of its profit. Leveling off truck sales will  "adversely impact" GM's production, market share and pricing through the rest of 2007 and 2008, Joseph Amaturo, an analyst at the Buckingham Research Group, was quoted as saying in the Wall Street Journal;

· GM’s burning through cash as its core North American operations aren't making money as its outlays for new products increases;

· lack of assurance that GM, indeed, will win a favorable contract from the UAW this fall. Standard & Poor’s, which upgraded GM stock last week, said GM could get $350 million in cost savings from a new labor contract, but would still need to restructure further and jump-start revenue growth to reach Toyota-like profitability levels.

General Motors' Market Share: Highs and Lows
Year	Month	Market Share	Total Volume
2007	6	22.1%	322,048
2005	10	22.3%	254,325
2007	1	22.6%	245,114
2007	3	22.6%	346,161
2006	5	22.9%	339,050
2007	4	23.2%	308,146
2006	12	23.5%	335,138
2006	4	23.6%	340,680
2006	3	23.6%	360,652
2006	2	23.7%	298,277
2005	8	23.7%	350,528
2005	11	23.9%	277,515
2007	5	23.9%	371,763
2005	2	24.5%	305,533
2006	8	24.6%	364,141
2006	10	24.6%	298,039
2006	11	24.6%	294,123
2007	2	24.7%	308,970
2006	9	24.8%	334,751
2004	11	25.2%	300,391
2005	4	25.5%	381,946
2002	9	25.7%	313,639
2006	1	25.8%	293,839
2002	11	25.8%	309,187
2004	10	25.9%	343,605
2005	5	25.9%	387,095
2005	12	26.1%	385,459
2005	9	26.1%	345,461
2005	1	26.1%	276,386
2004	6	26.2%	377,516
2004	1	26.5%	297,980
2005	3	26.8%	421,855
2002	5	27.0%	403,267
2003	3	27.1%	390,223
2002	1	27.1%	298,050
2003	1	27.1%	293,669
2006	6	27.3%	408,258
2006	7	27.3%	407,010
2004	5	27.4%	444,609
2004	3	27.5%	413,884
2003	2	27.6%	333,605
2003	5	27.6%	433,046
2004	2	27.6%	351,710
2004	12	27.8%	424,846
2003	10	27.9%	361,827
2002	3	28.0%	420,980
2004	4	28.1%	399,298
2003	9	28.3%	366,700
2003	4	28.4%	398,344
2004	8	28.5%	405,281
2003	11	28.8%	358,662
2003	8	29.1%	471,424
2003	6	29.1%	428,077
2005	7	29.1%	524,821
2002	8	29.2%	494,305
2002	4	29.4%	420,855
2004	7	29.5%	457,697
2002	6	30.2%	460,972
2003	7	30.3%	457,091
2002	10	30.3%	392,108
2002	7	30.8%	466,835
2003	12	31.1%	437,669
2002	2	31.6%	411,232
2004	9	31.9%	454,979
2005	6	33.0%	551,497
2002	12	33.0%	473,446

Source: Edmunds.com

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