For GM, It's North America - Or Bust
November 17, 2009
The good news after General Motors Co.'s report on its financial health was released Monday: the "new" General isn't dying.
But the patient's long-term prognosis, admitted CEO Fritz Henderson, isn't exactly a clean bill of health just yet.
"When you come away from it, we lost money (in the period from July 10 to Sept. 30)" said Henderson, calling the situation "not satisfactory."
And while GM's operating cash flow figure for the period was a healthy-enough $3.3 billion, one recurring malady has popped up on GM's first-ever post-bankruptcy report: North American operations didn't get the job done.
As has been the case so often in recent years for the "old" GM, North America lost money, only to be propped up by revenue from international operations. For the period - that due to GM's emergence from bankruptcy on July 10 did not quite encompass an entire quarter - GM's North American operations lost $651 million.
This despite the Cash for Clunkers phenomenon that for one month, at least, turbocharged sales and revenue for almost all full-line automakers; generally rising transaction prices and slightly falling incentive spending and a drastic cutback on the dealer inventories that have been such a debilitating, profit-crushing habit in the past.
North America To Rise Again?
GM's international operations once again carried North America, eking out a $238-million profit to partially balance the home-market losses.
But success in North America - and quick success, at that - is a cornerstone to GM's turnaround efforts. The company has vastly downsized its operations and in the process commensurately reduced its structural costs, but if after these efforts GM cannot sufficiently resuscitate sales, market share and profitability in the U.S. market, little else will matter.
For example, GM's post-bankruptcy projections have targeted a market share of 19 percent - in a market of at least 10 million light-vehicle sales annually - as a breakeven point. Henderson said Monday the company is banking on a U.S. market of about 11.5 million sales next year, a rate that is comfortably in excess of the 10-million units GM sees as a minimum maintenance level.
But attaining - or better yet, exceeding - 19-percent market-share goal might be another matter.
With several key new models just coming on stream, GM in October mustered a total market share of 21.1 percent -- matching its highest market share for the year. And GM's share has improved every month since it emerged from bankruptcy. But 1.8 percent of the October figure was contributed by Saturn, Pontiac, Hummer and Saab, all divisions GM either has discontinued or has agreements to sell by the end of the year.
If GM's October market-share figure is condensed to just the four brands GM will retain (Chevrolet, Cadillac, Buick and GMC), GM's total market share was 19.3 percent.
| Jan 09 | Feb 09 | Mar 09 | Apr 09 | May 09 | Jun 09 | Jul 09 | Aug 09 | Sep 09 | Oct 09 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Old GM Total Share | 2.7% | 3.2% | 3.2% | 2.5% | 2.5% | 3.9% | 3.0% | 3.2% | 2.0% | 1.8% |
| HUMMER | 0.2% | 0.2% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Pontiac | 1.4% | 2.1% | 2.1% | 1.3% | 1.4% | 2.8% | 2.2% | 2.4% | 1.5% | 1.3% |
| Saab | 0.2% | 0.1% | 0.2% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% | 0.1% | 0.1% |
| Saturn | 0.9% | 0.9% | 0.9% | 0.9% | 0.9% | 0.9% | 0.6% | 0.7% | 0.4% | 0.4% |
Source: Edmunds.com
| Jan 09 | Feb 09 | Mar 09 | Apr 09 | May 09 | Jun 09 | Jul 09 | Aug 09 | Sep 09 | Oct 09 | |
|---|---|---|---|---|---|---|---|---|---|---|
| New GM Total Share | 16.9% | 15.1% | 15.0% | 18.6% | 18.2% | 16.5% | 16.0% | 16.4% | 18.9% | 19.3% |
| Buick | 1.1% | 0.9% | 0.9% | 1.1% | 1.0% | 1.0% | 0.7% | 0.7% | 1.3% | 1.1% |
| Cadillac | 1.3% | 1.0% | 1.0% | 1.0% | 0.9% | 1.0% | 0.6% | 0.6% | 1.5% | 1.4% |
| Chevrolet | 11.7% | 10.9% | 11.0% | 14.1% | 13.8% | 12.3% | 12.5% | 13.3% | 13.7% | 13.9% |
| GMC | 2.9% | 2.3% | 2.2% | 2.5% | 2.5% | 2.2% | 2.1% | 1.8% | 2.4% | 3.0% |
Source: Edmunds.com
Buyers Loyal To Brands, Or Loyal To GM?
With GM's market share currently hovering around the subsistence level, the company might correctly be concerned about the potential for backsliding as four brands are eliminated and it proceeds with plans to part with a quarter of its 6,200-plus U.S. dealers by 2012.
Although GM undoubtedly was "over-dealered" and has made credible arguments to justify the scope of its dealer-network rationalization, many analysts wonder whether the 2 to 3 percent of market share contributed by the brands GM is shedding will remain with GM.
Data from Edmunds.com show many buyers of the discontinued brands may indeed elect to stay with GM - with most of the buyers likely to move to Chevrolet.
Cross-shopping data indicate that except for Saab, buyers for each of GM's discontinued brands predominately cross-shopped Chevrolet vehicles as their first-choice alternative.
OCTOBER CROSS-SHOPPING
Source: Edmunds.com
For the Hummer and Pontiac brands, Ford was the next most cross-shopped brand after Chevy; for Saturn, the second-most cross-shopped brand was Toyota. Saab cross-shoppers, not surprisingly, seem interested only in import-brand options.
So it appears the burden of retaining potentially disenfranchised customers falls squarely on Chevy's fenders.
"Chevrolet needs to be the General Motors Co.," Dewar recently told AutoObserver in an interview. With buyers from three of GM's discontinued brands looking to Chevy to fill the gap while GM itself hopes to retain every scrap of crucial market share, it seems Dewar couldn't be righter. -- Bill Visnic, Senior Contributing Editor
Photo by GM
GM CEO Fritz Henderson
Posted by Bill Visnic at 4:33 PM under Analysis , Featured , GM | Comments (6) | digg this | Seed Newsvine
doing a static analysis of what brands owners of the phased out brands might buy from the GM stable is kind of pointless because GM is constantly adding new vehicles. GM is betting that many G6 owners may buy the Cruze but the Cruze isn't out yet. It all depends on when a particular buyer is in the market again and what GM vehicles are out at that time. You can't really predict where these people will end up but if GM offers incentives to keep them in the fold and the new vehicles are compelling one would think there is a good chance at keeping those owners within the fold. The Cruze, Regal and CTS coupe are likely to help GM's chances at retaining customers.
Posted by: 1487 | November 17, 2009 at 7:22 AM
It's not too surprising that Chevrolet is the lead Pontiac replacement; Buick has nothing comparable to Pontiac. What is surprising to me is how Pontiac outsold Buick, which in large part, are sold side by side at the same stores.
Ford, I think, will be the biggest benefactor of the demise of Pontiac. Fords still carry the impression of being a half-tone nicer than a Chevrolet, closer to Pontiac but not Buick-ish.
Wait & see with Saturn. Those buyers are more open to considering an offshore brand; advantage Toyota.
Ford could pick up some Hummer conquests by expanding he Raptor package to Explorer, and/or Expedition/Navigator.
SAAB lost virtually all of its original customer base to Subaru years ago. They will fan out over the other brands so thin and evenly that it will be impossible to tell who benefits.
Posted by: fulcrumb | November 17, 2009 at 8:05 AM
I'm torn. On the one hand, I want GM to succeed in order to pay back my tax dollars. On the other hand, I want GM to fail because (a) they don't offer vehicles that interest me and (b) it will teach Big Government a lesson not to meddle in the free market.
Posted by: greenpony | November 17, 2009 at 7:50 PM
GM should have restructed itself around 2002-2003 with lining up inventories properly in line with its sales instead of bloating inventories and way generous incentives. Gm should have also should have cut jobs in 2003rather than waiting for the bankruptcy in 2009. They should have also done this product overhaul in 2002-2003 rather than waiting for 2008-2009 also.
Why did Gm always chase market share earlier in this decade is beyond me.
I think "Jeep" will benefit from Hummers demise. Toyota is crosshopped with Pontiac alot? I didn't expect that.
Honda, Toyota, Nissan, Mazda, Chevy, and Subie will benefit from Satuns demise.
11.5 millions units Fritz Henderson expects to for total car sales for next year. I would say more like 11-11.1 million units because of unemployment.
Posted by: carguy58 | November 18, 2009 at 7:18 AM
Looking at cross shopping data for just October is pointless. Not only that, you didn't mention anything about rebates that manufacturers may have had in October may have influenced purchasing decisions. Also the 60-day return guarantee program was instituted in either September or October and that played a role in it.
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