General Motors Death Watch 27: The Big Dipper

Robert Farago
by Robert Farago

You get a terrific view from the top of a roller coaster– but there's only one way to go. GM execs would have known the feeling at the beginning of August– if they were paying attention. They weren't. Despite all the experts' warnings, The General's top brass were too busy high-fiving each other over the 'success' of their Employee Discount for Everyone (EDFE) program, talking-up their plans to gently wean customers from discounts and incentives. Well hands in the air boys, the August sales figures are in…

Ward's AutoInfoBank reports that GM's sales are down 16.5%. [All figures cited are in comparison to August '04] Lest you think the results were a simple case of a sinking tide stranding all boats, Autodata reveals that the US automotive market as a whole rose 3.8%. While Daimler Chrysler and Ford eked-out small gains (1.2 and 1.4%), check out their Japanese competition: Toyota (+9.5%), Nissan (+10.6%) and Honda (+18.6%).

What happened? Truck and full-size SUV sales tanked. Although the media has been busy upbraiding consumers for daring to buy the General's discounted gas-hogs (ignoring their eco-moral responsibilities), the press gang failed to realize that the EDFE blowout was the last charge of the light truck brigade. Look at August's top 15 sellers and clock the change. Only two pickups and two SUV's made the list. More to the point, GM's entries on Ward's automotive hit parade were off a whopping 35.4% (Chevrolet Silverado) and 17.5% (Chevrolet Trailblazer).

August's big winners were relatively small cars like the Ford Focus, Honda Civic, Toyota Camry and Nissan Altima– still. Only more so. Sales increases for these vehicles were well into double digits. Although GM has three Chevrolet automobiles in play, two of these models lost sales and one remained static. The Pontiac Grand Prix was the only bright spot in the General picture, up a staggering 78.4%. One problem: the new G6 (developed at a cost of hundreds of millions of dollars) was supposed to be the bright star in the Pontiac firmament…

Obviously, post-Katrina gas prices will accelerate the trend away from low mileage leviathans towards more fuel-efficient vehicles– at the exact moment when GM expects its refreshed trucks and SUV's to carry the can. Of course, any company with 70 models will have a number of products appropriate to a conservation-minded climate. On average, GM's fleet is a fairly frugal bunch. But neither statement obviates the fact that GM has ignored clear and consistent signals that truck-based vehicles were a dead genre guzzling. The General's divisions are still lousy with pickups and SUV's, with no automotive cavalry waiting in the wings. Oops.

Not that you'll hear that expression from inside GM. They're too busy backpedaling from earlier assertions that rising gas prices would not damage their SUV-based plans to finally pull the company out of its tailspin. For months, GM has been insisting that its middle-class customers are insulated from high fuel prices. (No suprise there: The General delayed some mid-sized car programs to speed the launch of their full-sized SUV and pickup programs.) Now that the gas prices are disappearing into the stratosphere, GM's spinfolk are admitting that the cost of gasoline may have a "psychological impact". Spinelessly enough, they're implying that GM's current and impending woes will stem from of potential customers' misguided timidity, rather than The General's abject failure to adapt to market trends.

In any case, the debate over gas hogitude probably suits the suits. It draws attention away from the elephant in the room: sales brought forward by the EDFE. Every industry analyst worth his pocket protector has been saying that GM's summer sales bonanza was the result of customers buying sooner rather than later. Well, it's later. In fact, it's a lot later than GM thinks. The General's rivals are rapidly and inexorably siphoning-off GM's market share. Yet Rabid Rick Wagoner's mob have yet to downsize their operation or 're-negotiate' GM's onerous labor costs to match its dealers' diminishing ability to sell GM vehicles at a price that can generate a profit for the corporation.

GM's reaction to the latest crisis was predictable enough: they extended the EDFE program through September. More significantly, the program now includes many '06 models– a tacit admission that GM has abandoned its ambitious plan to leave their Wal-Mart image behind. At a press conference yesterday, The General's chief industry analyst entered England's understatement hall of fame. After calmly predicting that oil would eventually stabilize at an SUV-friendly $50 a barrel, Paul Bellew admitted that "September will be a challenge."

While GM clings to euphemisms for comfort, corporate carnivore Kirk Kerkorian made an equally predictable play: he bought more of GM's cheapened stock, raising his stake from 7.2 to 9.5 percent. Mr. K's spokesman said the octogenarian billionaire has "confidence in the company, the American auto industry and the US economy as a whole." And, no doubt, the wisdom of firing the boneheads who brought the world's largest automaker to its knees, selling off GM's assets and completely restructuring the business. Hang on folks; it's going to be a wild ride.

Robert Farago
Robert Farago

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  • Anonymous Anonymous on May 17, 2007
    truck sales Beats earnings expectations on higher truck sales Puget Sound Business Journal Seattle. Truck Sales Over 10,000 Thousand Trucks & Trailers for sale, Expose and Sell your used truck i...
  • Lou_BC As others have pointed out, some "in car" apps aren't good or you pay for upgrades. My truck did not come with navigation. It was an expensive option. There's a lame GM maps app that you need to subscribe to "in-car" data. The map does not give you navigation other than to tell you where restaurants and gas stations are located. I'd want Android auto since I already pay for the phone.
  • Theflyersfan Given so many standard nav systems aren't the best and updating could mean a dealer trip, and I stream all music, Android Auto is an absolute must. Wireless isn't necessary and some wireless chargers overheat the phone. And there are some hacks that let YouTube stream on the screen - excellent for listening to concerts.
  • Jeff I going to guess by the condition of the body and interior that there is little to no rust on the frame. Appears to be a very well maintained car.
  • MaintenanceCosts Would not buy a new daily car without it.
  • Namesakeone I hate the thought, and I hope I'm wrong. Mazda. They're a small fish in a really big pond, and they made their reputation on sports cars--a market segment that nobody seems to want to buy new anymore.
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