GM Sales, Prices Rise Since Bankruptcy; Profit Per Vehicle Flat
November 16, 2009

General Motors, which reported its first financial results Monday since emerging from bankruptcy July 10, has boosted market share and hiked vehicle prices since its bankruptcy, but its typical profit per vehicle remains essentially flat, according to Edmunds.com.

GM's U.S. market share of 21.1 percent matched its high point for the year in October. Sticker prices are at their highest point of the year as well. However, higher share and higher prices aren't translating into higher profits per vehicle because, while consumers are willing to pay more for new GM models, they are unwilling to do so for the carryover ones.

New Models Well Received

GM CEO Fritz Henderson said, during conference calls on the automaker's financial results issued Monday, that the company was helped since the bankruptcy by the strong retail performance of some of its newest vehicles. He mentioned specifically the all-new Chevrolet Camaro and the GMC Terrain, which are additions to their brand's lines, not replacements. He said the Chevrolet Equinox, Buick LaCrosse and Cadillac SRX are generating higher average transaction prices and higher residual values than the models they replace.

Indeed, GM's sticker prices are at the highest point of the year. GM's average MSRP is $33,576 a vehicle. Similarly, GM's average True Market Value (TMV) price of $31,968 per vehicle is up. 

Edmunds' proprietary TMV takes into account product mix changes and consumer incentives across the total portfolio, which includes the discontinued brands Pontiac and Saturn, the Saab and Hummer units, which GM has arrangements to sell, and models that are being wound down.

GM's prices are at their highest level this year because of the introduction of new models that are vastly improved over the ones they replace and so can command higher prices. This is a typical industry phenomenon.

"Automakers often gain pricing power with new model introductions," said Edmunds.com CEO Jeremy Anwyl. "The trick is to keep it going as the model ages." 

And that's a trick GM hasn't accomplished with its carryover vehicles. 

The Edmunds.com True Market Value (TMV) Price Index, an index designed to measure the price changes in retail transactions over time with December 2002 as the base by measuring actual transaction prices less total incentives to the consumer, shows little change from June to October. That suggests that GM's price hike is not translating into additional profits per vehicle sold. GM generally fares better than the industry average in the index but the gap between GM and the industry average has been shrinking in recent months.

GM Launch Performance

The Chevrolet Equinox has proven immensely popular. Henderson noted Monday morning that the Canadian joint-venture plant with Suzuki is running on three shifts producing as many Chevrolet Equinox units as it can. The plant, the future of which Henderson hinted would be revealed later, is producing the Equinox (and GMC Terrain) exclusively, with no Suzuki models assembled there.

Not only is the Equinox selling well, but GM executives told financial analysts during Monday's conference call that the average transaction price of the Chevrolet Equinox was $25,500 -- $4,100 higher than the Equinox it replaced, according to GM data, which uses prices that do not include consumer incentives, an increase in vehicle content from one model year to the next and adjustments for product mix. Nor does the higher transaction price go completely to the bottomline. 

Chevrolet's still relatively new Camaro, which continues to sell well, commands an average transaction price of $34,800. Buick's just-introduced LaCrosse sedan is selling for an average of $31,700, up $9,400 from the previous model. Cadillac is selling a vastly revamped version of the SRX crossover for an average transaction price of $40,300, up $4,300 from the old SRX.

GM did not provide information on average transaction prices for carryover models, just new ones.

 Source: GM

Consumers Consider GM Brands

A positive sign for GM is that more consumers are showing interest in its four remaining brands -- Buick, Cadillac, Chevrolet and GMC. Again, that's due mostly to new models for every brand.

GM executives and many industry observers had warned that an automaker in bankruptcy would lose buyers -- buyers it may not recover. In addition, skeptics wondered if GM could maintain its sales and market share level with only half of its brands.

However, GM's ramped-up marketing efforts, its "May the Best Car Win" advertising campaign and its 60-day money-back guarantee have captured the attention of shoppers.

"People are beginning to respond more enthusiastically to GM's marketing messages and new product introductions, said Edmunds.com Senior Analyst David Tompkins, PhD. "For example, we saw Chevrolet consideration spike this summer because of the Equinox launch, even though the automaker's bankruptcy was all over the headlines at the time."

Consideration measures an Edmunds.com site visitor's interest in a vehicle as indicated by navigation to pages of content specific to that vehicle, such as reviews, videos and photos. It is expressed as a percentage of all Edmunds.com visitors shopping new cars and is a good metric for gauging marketing effectiveness. Consideration is the first step toward purchase intent, though not everyone counted is currently in the market to buy a vehicle.

Source: Edmunds.com

GM Share Improves

GM's market share matched its highest level in October of 21.1 percent. GM's exit-bankruptcy plan calls for market share of 19 percent or higher in order for the automaker to succeed.

 -- Michelle Krebs, Senior Analyst and Editor at Large

 

Posted by Michelle Krebs at 6:56 AM under Analysis , Featured , GM | Comments (1) | digg this | Seed Newsvine

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