By on October 30, 2013

-1628080508

The Government Accountability Office issued a report on the U.S. Treasury’s investment in General Motors (and Ally Financial, the former GMAC credit arm of GM) which says that the automaker has improved since 2008 but that there still are concerns about competitiveness and market share as well as pension and labor costs. “Although GM’s financial performance has improved significantly since the company initially received federal assistance, questions remain about competitiveness, market share and costs,” the GAO said.

While GM sales were up 15% between 2010 and 2012, the North American market overall grew by more than 23% so GM lost market share. “GM’s North American market share generally has declined,” the report said. “In 2008, GM reported capturing 21.5 percent of the North American market, compared with 16.9 percent in 2012. GM reported that its North American market share was 17.2 percent through the second quarter of 2013.”

The report also said GM’s negotiations with the United Auto Workers when the current contract expires in 2015 will be key to the company’s future. “GM’s ability to remain competitive will also depend on its ability to continue to control costs, in particular its labor costs. Labor costs refer to the costs that GM incurs to pay workers to build its vehicles at factories in the United States and elsewhere. Through its restructuring, GM lowered labor costs, in part by reducing its workforce and making more efficient use of its remaining workers,” the report said. In addition to labor costs, funding pensions could have an impact, “GM’s large pension obligations could have a potential impact on GM’s costs.”

Full report (PDF) here.

Get the latest TTAC e-Newsletter!

39 Comments on “GAO Report: GM Has Improved Since 2008 But Still Faces Challenges...”


  • avatar
    sirwired

    It’s hard to make any comparisons based on marketshare. Pre-crash GM put an awful lot of cash on the hood and made a lot of crappy fleet sales. If their marketshare dropped by shifting to a more profitable vehicle mix, more power to ‘em.

    • 0 avatar

      Their market share dropped as they axed Saab, Saturn, Hummer, and Pontiac, along with some dealers. It would be a surprise if their market share didn’t drop.

      • 0 avatar
        Lorenzo

        Good points, especially the last one. GM doesn’t sell to the public, it’s customers are the dealers. Reducing the number of dealers reduces sales, but the people running the shotgun bankruptcy couldn’t grasp that.

        Apparently, neither could the people at Ford. They’ve been trying to reduce the number of Lincoln dealers, ostensibly to enrich the buying experience for retail customers, but to sell more cars with fewer dealers tends to produce just the opposite.

        • 0 avatar
          Pch101

          Dealers require credit. When cars aren’t moving, then they also require incentives.

          Just as a bank doesn’t profit by lending to everyone, a manufacturer doesn’t profit from providing inventory and extending credit to everyone.

          Too many stores will cannibalize each other, and building excess inventory ties up scarce capital. And it’s not great to be in the business of extending credit during the depths of a credit crunch, particularly when the risk of failure and cost of capital are both high.

  • avatar
    APaGttH

    Agree with above posters, a bit surprised on focus on marketshare. It is growing where it matters, and as others noted, building mediocrity with cash on the hood to shout, “we’re number one,” is not a successful model for any automaker.

    History is playing out, it is VERY hard to be number one in global volume, still build to high quality standards, and over a modicum of soul in product. To gain marketshare, you need to dilute your offerings. History shows us this over and over and over again (and Toyota sure appears to be on that very slippery slope).

    Of course if you fall into a Mazda situation (great products, soul, respect. but small base of buyers) you definitely have problems. I for one don’t care if GM hovers around 18% US marketshare as long as they make money on that 18%. Otherwise the bailout was only a band-aid.

    But I’ll close with again, if the guy building the Malibu, can’t buy the Malibu, then we are all in trouble, Our consumer based economy relies on 70% to 80% consumer spending in the mix to grow. If we keep squeezing salaries (in general, not directed at GM) at all levels but the boardroom, eventually the wheels will come off the economic bus – without a way to recover.

    • 0 avatar
      mikey

      @APaGttH…..My grasp on higher economics, is somewhat limited. Though even I can understand that taking the consumer out of play,can only turn out badly.

      Todays cars are better built,and with carefull maintenance will give years of service. The consumer is no longer forced into buying a new car. If your family income is already stretched, your going to get longer out of the old car. Or buy used.

  • avatar

    market share will drop to 15% during 2014 unless the marketing is radically altered.

    • 0 avatar
      Lorenzo

      Is that the whole ball of wax for GM? I know the marketing campaigns today are much smaller than they’ve been in the past, especially the ’50s and ’60s, but which came first, those massive marketing campaigns or the 50% market share?

  • avatar
    thegamper

    What a shocker, pension costs weigh on GMs long term success. Maybe thats because they werent allowed to slash them in bankruptcy and hand the liability to the PBGC like any other company that has gone bankrupt. Its comforting to know my taxes were used to keep UAW retirees fat. I really wish the everyone would just stop referring to the auto bailout or GM bailout and call it what it really was….”the UAW bailout”. It wont be the last time that they reach into your pocket to fund their pie in the sky benefits. The VEBA will run dry and we will be asked/forced to foot the bill.

    • 0 avatar
      mikey

      Really upsets your type eh?

    • 0 avatar

      So what you prefer. UAW pensions paid for by the PBGC (quasi government agency) or by GM. You choose. You’re not making sense.

      Exactly how would have bailed out GM and Chrysler and left the UAW out of the deal. How would that have worked?

      • 0 avatar
        mikey

        Well ruggles, I owe you an apology. When you first started commenting at TTAC, I thought you were just another misinformed troll, on steroids.

        Wow! Was I ever wrong! I stand corrected.

    • 0 avatar
      Pch101

      If the GM and Chrysler pensions had been dumped into the PBGC, then the feds would have been forced to bail it out, too, since the PBGC would have been insolvent due to the added liabilities.

      That would have also compromised the ability to put together a fast track Chapter 11, as it’s not exactly easy to keep a business running without any workers. The union’s support of the plan was necessary in order to keep the doors open.

      It also didn’t help that those same workers were creditors in the bankruptcy case. You can thank GM and Daimler-Chrysler management for that — the VEBA turned them into creditors, and not just workers.

      A deal that would have disemboweled the UAW would have failed. The pensions would have forced a bailout of the PBGC, plus the automakers would have gone into liquidation. That would have been an enormous and expensive failure. As it stands, the union accepted a haircut, so it’s not as if they came out of it unscathed.

      • 0 avatar

        @ Pch101 – Exactly. I don’t believe a C11 has ever been used to break a union. Actually, I think that would be against the law. And you are certainly correct about the potential impact on the PBGC. Bush and Cheney knew all of this too. They also know how the supplier base is critical to military procurement.

  • avatar

    RE: “Author: Buickman
    Comment:
    market share will drop to 15% during 2014 unless the marketing is radically altered.”

    They’re back on Facebook. What more to they need to do? Facebook thinks they should spend all their ad budget there. But they’ll be back on the super Bowl this year, I am told.

  • avatar
    highdesertcat

    Not to worry! If GM needs bailed out again after 2015/2016, it will be bailed out again, no matter who’s in the White House or who’s controlling the House and Senate.

    Precedence was set. Handouts, bailouts and nationalization are the new norm. In for a penny, in for a pound. Too big to fail is the new slogan, instead of E Pluribus Unum.

    The 6% of the workforce employed in the US auto industry will be bailed out and funded by the other 94%, just like in 2009. It’ll be Deja Vu all over again.

    Don’t worry. Be Happy!

    • 0 avatar
      sunridge place

      Yep…just like we taxpayers bailed out the real estate industry….right?

      Did that bailout help you HDC?

      Does the fact that a person can purchase real estate through a mortgage loan help you out personally?

      Did some govt $$ save that?

      I have plenty of $$ but I don’t have it tied up in real estate. I’m kind of mad that my tax $$ went to prop up people who own and buy real estate. Because if that whole process wasn’t saved, it would be dead.

      Not too worry…..if the real estate and mortgage business (on which real estate business is based) needs to be bailed out again, no matter who is in the White House or Senate etc….it will happen.

    • 0 avatar
      sunridge place

      Yep…just like we taxpayers bailed out the real estate industry….right?

      Did that bailout help you HDC?

      Does the fact that a person can purchase real estate through a mortgage loan help you out personally?

      Did some govt $$ save that?

      I have plenty of $$ but I don’t have it tied up in real estate. I’m kind of mad that my tax $$ went to prop up people who own and buy real estate. Because if that whole process wasn’t saved, it would be dead.

      Not to worry…..if the real estate and mortgage business (on which real estate business is based) needs to be bailed out again, no matter who is in the White House or Senate etc….it will happen.

      • 0 avatar
        highdesertcat

        sunridge place, last week was a great week for us. We sold and closed on two homes we put up for sale this month.

        Neither was financed with a mortgage by the buyer. Both were paid for with a Cashier’s check. We didn’t care where the money came from but there is no lien against either home.

        One home was sold to a retired guy from NY who moved here to be near his (military) kids and grandkids, and the other was sold to a German national (YES, foreigners can buy real estate in the US, in case you don’t know) whose son is in the German Luftwaffe, stationed at the nearby Air Force base.

        We haven’t sold or bought any new homes since buying one for our daughter in El Paso in January and one for our grandson in March, which is the one subsequently sold last week to the retired guy from NY, since my grandson took a DoD civilian job at Camp Pendleton doing essentially the same thing he did on active duty, and now lives in Fallbrook, CA, in the house that belonged to his in-laws, that was given to my grandson and his bride by her parents as a wedding gift.

        In case you don’t know, these things happen, and IMO, they happen more often now than they have ever happened before Obama. Must have something to do with the redistribution of wealth in America, eh?

        Again, your assumptions and presumptions are based on your own spaghetti logic and don’t mesh with MY real world.

        • 0 avatar
          sunridge place

          You are quite the fool if you can’t acknowledge that government bailouts in the banking/mortgage area helped stabilize real estate prices…for any sellers whether the buyer is paying cash or taking out a mortgage.

          If you killed the mortgage business, you kill the real estate business. The cash buyers would be king and would walk all over the sellers.

          Simple supply and demand. Demand would be severely constrained.

          If you only know what happens in YOUR world and retreat there when questioned… why do you drone on and on about things outside your world?

          • 0 avatar
            highdesertcat

            “Did that bailout help you HDC?”

            You asked the question, chump. The bailout didn’t help us. And it certainly didn’t do diddly for me.

            The only two homes we (the business) bought were in 2013 and they were not mortgaged. One of them was sold, and it was not mortgaged.

            The second one that sold was bought a long time ago (2004) and was a rental, rented to a young German AF officer whose father decided to buy it from us — at a great price, I might add. He didn’t mortgage it either since he owns a string of new car dealerships in Germany.

            If you don’t like the reply you got, phrase your question better.

            There is no doubt in my mind that handouts, bailouts and nationalization helped an awful lot of people in all sorts of failed enterprises, not just the US auto industry. But certainly not me, since my meager money doesn’t buy nearly as much as it used to.

            The people who got helped are not the people who have to pay for it either.

            Yet there are probably more people who did not get helped than there were people who got helped.

  • avatar
    thelaine

    Agreed HDC. Now they even get a business performance review from the federal government, which is hilarious. GM is America’s national auto company, and when they need more money, they will get it.

    • 0 avatar
      highdesertcat

      thelaine, after all is said and done, and this unfortunate incident of the ill-advised mission of revival of dead US automakers is relegated to the dust bin of US automotive history, the real loss to the US taxpayers will probably amount closer to $200Billion, all told.

      But what’s worse is that the Fed has been and is currently still buying debt at $85B a month and will do so for the foreseeable future. All these people that are pro-handouts, bailouts and nationalization are not mentioning these faux attempts at improving the US economy, because it is also an epic fail.

      The answer, everyone proclaims, is to broaden the tax base by increasing the availability of jobs in America. There are tons of jobs going unfilled in America. Americans just aren’t willing to take them or move to where the jobs are at.

      It’s too easy to decline work when the US government encourages people to be dependent on the government by giving out money for nuttin’, cell phones and foodstamps for free. Yeah, they’re advertising free cellphones on our local channels to the unemployed couch potatoes, along with Medicaid.

      Add to that the complications that the Affordable Care Act inflicts on employers along with the never-ending demand to raise the minimum wage, and there you have it. A recipe for disaster. Employ more than 25 people as a small business and work them for more than 29 hours a week, and you get the double whammy.

      With a US workforce participation rate of only 63%, it means that 37% have decided to drop out of the workforce and coast along on a free ride, while contributing………. nothing.

      That’s OK for people who earned their cookies in one way or another, like Vets, Cops and other pensioners, but not OK for people who haven’t done a damn thing except to ask what their country can do for them, instead of what they can do for our country.

      BTW, I think what the Hospitals, Wal-Mart, K-Mart, Walgreens, Lowe’s, Home Depot et al, are doing by hiring recently discharged Vets is a wonderful thing. I’ve seen a lot of young faces at these stores recently, and they still sported their military haircuts.

      It makes me proud to see America’s Vets being sought after for jobs in all career fields. But I also feel sorry for them since they will be the ones carrying the burden of the handouts, bailouts and nationalization the freeloaders enjoy.

      GM has nothing to fear. Uncle Sam will be there for the UAW in perpetuity, and forever and ever. Amen.

  • avatar

    RE: “I read that in search of a cogent rebuttal, and couldn’t find one.”

    Rebuttal to what? Sorry you didn’t understand it. If I recall correctly you don’t know how dealerships pay for their cars. They pay for them when they roll off the assembly line in advance of even receiving them. Dealers would prefer to pay their net cost up front instead of having to pay invoice, then wait for the rest money from their OEM, just another way OEMs finance their operations on the backs of their dealers. If you’re so smart, why don’t you recommend this to the participating parties and show them the error of their ways. You’re big on theory and short on experience.

    RE: “But you and I both know that isn’t ever going to happen because the new car dealership model is built on leveraged returns. Without credit to pay for the inventory and manufacturer incentives to move the dogs, the whole thing falls apart.”

    Is this some kind of debate ruse you stole from Bill O’Reilly? “You and both know?” Please. No one that understands the industry would say such crap because they actual participants know how it works. You still don’t understand the way this all works, but not to worry, everyone’s an expert on the car business. Hell, how hard could it be? :)

  • avatar

    RE: “The VEBA will run dry and we will be asked/forced to foot the bill.”

    And you know this how? The VEBA is all their is. You might want to research how it is put together before popping with baseless remarks. So far, the VEBA stock is doing well. They have the UAW where their VEBA does as bad or as well as the company stock does.

  • avatar

    RE: Pch101
    Comment:
    Dealers require credit. When cars aren’t moving, then they also require incentives.

    Just as a bank doesn’t profit by loaning to everyone, a manufacturer doesn’t profit from providing inventory and extending credit to everyone.

    Too many stores will cannibalize each other, and building excess inventory ties up scarce capital. And it’s not great to be in the business of extending credit during the depths of a credit crunch, particularly when the risk of failure and cost of capital are both high.”

    I have read and reread this trying to make heads or tails out of it. Do you think OEMs finance the inventory for dealers? If so, you are thinking that fewer dealers is easier on the OEM who has to extend capital for the financing of the inventory? Is that it? OEM captives have to compete for the floor plan business. In all my years I was floor planned with an OEM captive once, only for a few months. When the OEM captive do floorplan dealers, it is often as a last resort for the dealer. Dealers I know prefer to floorplan through a local bank or even a regional or national bank. I preferred the control of being able to bounce a draft if the OEM sent me stuff I didn’t order. Can’t do that with a captive.

    “Too many stores” cannibalize each other?” How is this a problem for the OEM. How do you define “too many stores?” A good operator doesn’t need to depend on new vehicle sales to be profitable.

  • avatar
    Pch101

    “‘Too many stores’ cannibalize each other?” How is this a problem for the OEM.”

    When retail transaction prices are low, your buddies at the dealership demand incentives. I do hope that you know that the money comes from the automakers, not from incentive fairies.

    Automakers also have to protect their brands, and blowing out cars with cash on the hood harms brand equity. But dealers couldn’t care less about that, now could they?

    Your comments illustrate that there are some downsides to having franchised dealers. This is very much like the VAR problem in technology marketing — you guys care only about your low-cost captive financing and incentives, not about the brand or the drain that you place on the producers. A high maintenance channel that believes itself to be low maintenance.

    • 0 avatar

      Wrong again. My dealer buddies don’t demand incentives. But they sure won’t order any more product until they have both physical and financial room to do so. AND they won’t order more “dogs.” What a shock that it works that way in many other business from electronics to furniture. These incentives are built in to the original OEM cost structure. Even now, price hikes are being added on new vehicles to account for the expected rate subventions that will be offered once interest rates rise. Trying to characterize this as a dealer originated plan is uninformed, at best. But feel free to sell your services to the OEMs. Maybe they don’t know the dealers are making these decisions for them? I have a news flash for you. If OEMs don’t want to have to incentivize vehicles, which destroys the resale values of like model pre-owned, they probably shouldn’t build so many of particular models in the first place. Its an OEM decision to overproduce and try to force the market, not dealers’.

      Downsides to having dealers? OEMs are free to decide. Your reasoning, to use the term loosely, is based on the false assumption that it is dealer forcing the OEMs to over produce. For an exercise, look up the SAAR projections of the various OEMs for 2014. Add them all up and see what you get. Then ask yourself, did their dealers force those predictions on them? Then try to imagine how the various supplier contracts are worked out. You don’t suppose pricing has a lot to do with volume projections, do you. This has NOTHING to do with dealers.

      I suspect if you ever actually participated in the business you’d have a much better understanding of the dynamics of it all. The fact is, it’s OEMs who both over dealer and over produce. A dealer will just sell used cars if there is nothing his factory offers that appeals to his customers. OR they will take on additional franchises to have a better spread of vehicles for their consumers to choose from. If a vehicle cools in the marketplace, dealers just stop ordering them. They don’t have to get on the phone to form a consensus. They are capable of figuring it out on their own.

      • 0 avatar
        Pch101

        “My dealer buddies don’t demand incentives”

        Dealers don’t want to just eat losses and suffer in silence; they prefer that the manufacturer take the hit by paying the dealers to move the dogs.

        It’s fine that you want to advocate for your team, but you can at least try being honest about it.

        “Your reasoning, to use the term loosely, is based on the false assumption that it is dealer forcing the OEMs to over produce.”

        While I appreciate the credit, that isn’t just my reasoning.

        “The fact is, it’s OEMs who both over dealer and over produce.”

        Make up your mind. If you acknowledge that automakers “over dealer”, then you shouldn’t be surprised if the automakers want to cut the size of their networks so that they are no longer “overdealered.”

      • 0 avatar

        “Author: Pch101
        Comment:
        “My dealer buddies don’t demand incentives”

        Dealers don’t want to just eat losses and suffer in silence; they prefer that the manufacturer take the hit by paying the dealers to move the dogs.”

        OEMs don’t care what dealers “prefer.” They care that dealers order cars. They have no one else to sell them to. If OEMs don’t want to pay incentives they should produce fewer vehicles to maintain equilibrium. But they force the market to keep assembly lines running to keep their price pacts with their suppliers. Its an OEM choice. Dealers speak loudly, without uttering a peep, by ceasing to order what isn’t moving. The next move is the OEM. You’d know all this if you’d ever actually participated in this market you think you know so much about.

        RE: “It’s fine that you want to advocate for your team, but you can at least try being honest about it.”

        Its fine I have your permission to point out the facts on the ground. I’d do it anyway.

        “”Your reasoning, to use the term loosely, is based on the false assumption that it is dealer forcing the OEMs to over produce.”

        While I appreciate the credit, that isn’t just my reasoning.”

        I know a LOT of people in the industry for a LONG time and I have NEVER heard your “reasoning” voiced. That’s probably because your theory flies in the face of common sense.

        “”The fact is, it’s OEMs who both over dealers and over produces.”

        RE: “Make up your mind. If you acknowledge that automaker “over dealers”, then you shouldn’t be surprised if the automakers want to cut the size of their networks so that they are no longer “over dealered.”

        “Over dealering” helps the OEM. It doesn’t help individual dealers. That’s one of the basic conflicts between OEMs and the dealer body. There is no conflict in what I have pointed out at all. Again, you would know that if you have been an actual market participant. Have you yet figured out how the manufactured vehicles get paid for? You seem to think the OEM captive finances them all for dealers. That is a last resort for a dealer, not a first choice.

        • 0 avatar
          Pch101

          “They care that dealers order cars.”

          You’re being disingenuous yet again.

          If dealers order cars that they can’t sell, then the automakers will have to pay them to sell them. That reduces profits or produces losses for the OEM.

          “‘Over dealering’ helps the OEM.”

          I’ve already addressed why that position is nonsense. Lower transaction prices hurt the automakers. Excessive inventories and excessive dealer competition reduce transaction prices.

          If you are willing to acknowledge that dealers compete against each other based on price, then it should be easy for you to connect the dots and understand the implications of having too many dealers.

          • 0 avatar

            To continue: A primary implication of cutting back dealers is that fewer vehicles are sold, impacting the OEMs economy of scale and the price they pay for the assemblies, modules, and parts to build cars.

            Then I could start on the financing implications, but if you don’t understand the first part you won’t get the second part.

          • 0 avatar
            Pch101

            “A primary implication of cutting back dealers is that fewer vehicles are sold”

            That isn’t the implication, primary or otherwise.

            If the manufacturer wants to increase or maintain steady volume, then the remaining dealers can sell more vehicles per dealership, increasing the profitability of the individual stores.

            In the alternative, if the manufacturer wants to cut volumes in favor of margin, then the remaining dealers can sell the reduced volumes while remaining profitable.

            Prior to the bailout, GM was building too many vehicles for the market. GM’s reduction in market share has been positive for GM, because the sales that it is making are now producing a profit for the company. An extra point of market share will do more harm than good if it produces a loss.

            Perhaps you should research the term “diseconomies of scale.” GM had those in abundance.

  • avatar

    RE: “after all is said and done, and this unfortunate incident of the ill-advised mission of revival of dead US automakers is relegated to the dust bin of US automotive history, the real loss to the US taxpayers will probably amount closer to $200Billion, all told.”

    Now this is some interesting speculation fueled by a complete lack of understanding of arithmetic. One doesn’t even require math skills to figure out how bogus this claim is.

    First of all, I’m sorry you were fooled by the fact that the new corps bought the brand names from the old corps and kept many of the same people and products. An alternative would have been liquidation of the D3 and most of their suppliers, with the resulting chaos and disruption. Pieces would have eventually been sold off to those with cash and the industry would have eventually reformed on some basis in a process Austrian School economist Joseph Schumpeter termed “Creative destruction.” Pensions would have dropped on the quasi government agency that guarantees pensions. NOTE: Pensions are not guaranteed in total. A UAL pilot who had $150K per year coming BEFORE the company dropped pensions on the PBGC now receives about $30K. But just that BK C11 move cost $6.1 billion. SO all the wannabe economists would have been happy that the villains and morons would have been punished and taken great satisfaction in that while the North American Industrial Base, including military procurement, waded through the chaos to eventually find new order. That’s called turning a recession into a depression. No one in their right mind would do such a thing were they faced with such a decisions, and that includes Ron and Rand Paul. Just the perception of such an attitude has been hung around Herbert Hoovers neck, FBOW, and no Republican will go there again, despite rhetoric to the contrary.

    Just the cost of pension guarantees would have been well over $80 billion. Throw in the cost of unemployment compensation,the dramatic reduction of tax revenue for a spell, and loss of consumption spreading its poison to other industries, the ripple effect of defaults dragging regional banks down, etc. etc. and you have ideologues creating the kind of disaster that keeps a political party out of power for a generation and a resurgence in militant socialist and communist groups.

  • avatar

    RE: Unions

    My wife is a union member. I have been a member of the Oil, Chemical, and Atomic Workers Union. I’ve had union mechanics go out on strike as a dealership manager. I’ve lived in RTW state and non RTW states. I can cite anecdotes both pro and con. I would NEVER put myself in a position where, as an owner, I’d be dictated to by a union or a group of employees. That said, I understand the problem.

    A chapter in Steve Rattner’s book is “F**K the UAW, a line from Rahm Emanuel. For those who believe all the RW blather about Obama giving the car companies to the UAW I suggest you go to any of the fact checking sites and review some documentation.

  • avatar

    RE: “Author: sunridge place
    Comment:
    You are quite the fool if you can’t acknowledge that government bailouts in the banking/mortgage area helped stabilize real estate prices…for any sellers whether the buyer is paying cash or taking out a mortgage.”

    This is certainly a fact. The credit markets froze because lenders held illiquid assets and securitization had ceased. There was no possible way to micro manage each mortgage individually and time was short. They did what they could under the circumstances. It could have been a lot worse. I know that doesn’t look very attractive on a bumper sticker, but it is quite true. As it was, and even now, mortgages are damn difficult to get and the documentation and red tape is off the charts. I think the pendulum swung to far the other way, but that’s a typical reaction to a disaster.

    If you killed the mortgage business, you kill the real estate business. The cash buyers would be king and would walk all over the sellers.

    Simple supply and demand. Demand would be severely constrained.

    If you only know what happens in YOUR world and retreat there when questioned… why do you drone on and on about things outside your world?

  • avatar

    RE: “A primary implication of cutting back dealers is that fewer vehicles are sold”

    That isn’t the implication, primary or otherwise.”

    Actually, it is. Even Steve Girsky has come around now that he actually works for an OEM in a management capacity. Toyota builds a pretty nice truck called the Tundra. It sells poorly. Toyota doesn’t have a lot of dealers. After all, the Toyota High Throughout Model is named after them. Toyota now has to admit something everyone else has known for decades. Potential buyers aren’t going to drive by a bunch of your competitors to get to one of your high throughput stores without some leakage taking place. If Toyota had more dealerships, especially in rural areas, the Tundra probably would have achieved some real traction. You have voiced an opinion no one in our industry takes seriously, sold under duress to a few OEM execs who parroted the Girsky line because that’s what they thought they had to say to keep their companies alive. As I mentioned, you might want to read Neil Barofsky’s SIGTARP report on the issue. But since you think you know how the auto industry runs better than the folks in it, you’ll probably want to lecture him on the business too. The idea that shedding dealers won’t impact sales is just laughable.

    RE: “If the manufacturer wants to increase or maintain steady volume, then the remaining dealers can sell more vehicles per dealership, increasing the profitability of the individual stores.”

    Sounds really good in theory doesn’t it. I’d suggest you keep your day job.

    RE: “In the alternative, if the manufacturer wants to cut volumes in favor of margin, then the remaining dealers can sell the reduced volumes while remaining profitable.”

    Really. Wonder why we haven’t figured that out?

    RE: “Prior to the bailout, GM was building too many vehicles for the market.”

    That can happen when the market takes a sudden turn south. Maybe you haven’t noticed, but the auto business is a little cyclical.

    RE: “GM’s reduction in market share has been positive for GM, because the sales that it is making are now producing a profit for the company. An extra point of market share will do more harm than good if it produces a loss.”

    There are some sales that cost more than they are worth. ANd you have actually admitted that it is gross profit that pays the bills and provides ROI, something dealers have figured out. Adding dealers costs GM nothing. In fact, if they never sold a new vehicle each new dealer is a profit center. GM is currently having difficulty keeping up with the inventory demands of its current dealers. It has curtailed sales to rental companies to keep dealers stocked for the retail market. It is widely known within the industry that curtailing dealers has cost them sales and market sales IF they could have supplied them.

    IF you get to where you grasp these basic auto industry tenets, I’ll take you through the finance part of “incentives.”

    Perhaps you should research the term “diseconomies of scale.” GM had those in abundance.

  • avatar

    RE: “The people who got helped are not the people who have to pay for it either.

    Yet there are probably more people who did not get helped than there were people who got helped.”

    Actually, EVERYONE was helped, some more than others, some directly, others indirectly. You were helped when the economy avoided Depression.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India