Bailout Watch 344: GM Lowers Sales Forecast to 10.5m, Ups Bailout Ante

by Robert Farago

Published: January 15th, 2009

bailout watch 344 gm lowers sales forecast to 10 5m ups bailout ante

GM has revised the estimate for U.S. new car sales in submitted to Congress in December. At the time, the company predicted the U.S. market would account for 12m new vehicles in ’09 (a goodly amount from their factories), The General now reckons the number will be closer to 10.5m. As CNNMoney indicates, GM’s second sales revision in as many months suggests that they’re preparing to increase their mega-suckle on Uncle Sugar’s teat when they return to the pig sty in February and/or March. “According to the turnaround plan, GM said it might need $15 billion in federal help by the end of March if estimated industrywide sales fell to the 10.5 million level.” And here we are. But the numbers are a double-edged sword. On one hand, they substantiate GM’s Curley defense. On the other, there isn’t an accountant outside of Dearborn who thinks GM can even break even if sales remain at anything near that level. Prop-up a vital industry for a year or more at the cost of hundreds of billions of taxpayer dollars, or cut bait and fish? The battle lines are drawn.

Robert Farago

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4 of 23 comments

F1guyus on Jan 15, 2009

First rule of Snouts and Troughs. Once the Snout is in the Trough the Snoutee will move heaven and earth to keep it there.

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Pch101 on Jan 16, 2009
Can someone explain to me how it is that excess dealers drains sales or profits from a company? Having too many dealers contributes to lower revenues, because there are more retailers available to compete with themselves, which lowers transaction prices, which increases the need for incentives. They might be able to sell the cars for a bit more money if there was less in-house competition. This also hurts the captive financing side, because cars sit on lots for longer periods, which adds to the cost of providing the floor plan to keep them there. In theory, the dealer is paying for that, but in practice, it becomes necessary to increase the incentives to make up for the dealer's burden. That being said, I would put this toward the bottom of the list of their many problems. These channels would be in decent shape if the vehicles were more appealing to customers. It's only a problem now because they keep trying to preserve a level of market share that they can only maintain if they give cars away at a loss, even when times are good.

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Ronin on Jan 16, 2009

13 million, 10 million, 5 million, who cares. The question never came up when tax and spend Republican W handed them free taxpayer money. It won't matter in the future when tax and spend H hands them free money. It is never about justification, earning, viability, good management. It is just about, hand it over, we deserve it because we are victims. If anything, the very fact that the numbers are going down proves we are even sadder victims, hence deserve it even more.

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Shaker on Jan 16, 2009

I blame the "big 3" for the fact that even Honda, Toyota and Nissan were slow to introduce "cutting edge" car models simply becuase there was no innovation from Detriot in the American market - they had little incentive to "better" the Big 3 when the Big 3 was selling optioned-up BOF SUV's for huge profits. Now that Detroit has realized the error of its ways, we're suddenly becoming duluged with hopeful vehicle concepts (with GM especially at the forefront), that won't see the light of day without more bailout bucks... But the good in all of this is that the "forigen" makes are starting to offer smaller, more interesting vehicles as well, and hybrids and EV's (which were a 'niche' at best) are suddenly on the radar, as there is "incentive" from the bailout-supported carmakers (who I actually hope manage to survive). 2010 will be a magic (as well as tragic) year for the industry.

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