Automotive News Backs Off Bottoming Out BS

Robert Farago
by Robert Farago
automotive news backs off bottoming out bs

Last Thuesday, Automotive News [AN, sub] was busy towing [sic] the GM party line, suggesting that the U.S. new car market had reached its nadir (not Nader) in August. TTAC immediately called bullshit. And now AN is doing the same, to themselves, backpedalling so furiously they just might achieve reverse traction. “Has the mix been fixed?” Amy Wilson (and pals) asks, redundantly. “Are the truck behemoths really back? And has the slim-profit small-car craze peaked? Bean counters, beware. It ain’t over till it’s over. Small-car sales were constrained last month by low inventory levels, and don’t forget that gasoline — while cheaper than it was — still costs more than $3.50 a gallon. And although full-sized pickups posted their highest sales and industry share month of the year in August, manufacturers had to shell out. The average full-sized pickup incentive was $5,723 per vehicle last month, reported. That’s the highest monthly pickup incentive since Edmunds began tracking the data in January 2002.” And then it’s back to the same old spinmongery, from Ford and, of course, GM’s Marketing Maven. “At some point, gang, the market bottoms,” said Mark LaNeve. “Nobody knows when the hell it is — me especially. I’d like to think it was June and July, and we’re starting to crawl our way out of this thing.” I’m sure he’d like to think that. The question is, is it the truth? Hopefully, this article marks AN’s resumed pursuit of same.

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4 of 12 comments
  • Landcrusher Landcrusher on Sep 08, 2008

    Yank, I am not foreseeing hyper inflation yet (call me after November for an update); however, I don't think that many people will buy a new car to avoid the price increase until the fear of their present ride is greater than the fear of the price increase. Given how many folks have relatively new cars, it will take a few years for this to occur. The 2.8 could all go bankrupt in the meantime.

  • Netrun Netrun on Sep 08, 2008

    I love how the B&B from GM have all the information in front of them yet the best plan of action, the best strategy they can come up with, the best response to -25% in sales this year is: "Gee, I hope it gets better." They pay you for that kind of stupidity? If my analyst came up with that as a response he'd be hunting for a job by lunchtime.

  • Geotpf Geotpf on Sep 08, 2008
    yankinwaoz : September 8th, 2008 at 11:07 am I understand “The bottom” is when the sales volume per month starts to become more than the previous month. But if they are loosing money on every sale, then why sell more? There are economies of scale. That is, it's quite likely that if a car plant is running at 50% of capacity, the car manufacturer will lose a significant amount of money per car, but if that same plant is running at 100% of capacity, they will actually make a significant amount of money per car. If you can spread fixed costs (advertising, R&D, tooling, insurance, office overhead, rent or mortage payments, etc., etc.) over more cars sold, the break even point per car drops.

  • Wave54 Wave54 on Sep 08, 2008

    @ daro31: Now we take the 20 Million cars we need to cover the miles in a year and divide it by the 12.5 years a car can live, we find we need 1.6 Million cars a year to meet the basic need. This is where your argument falls apart. You've already used the cars assumed lifespan of 150,000 miles in calculating the need for 20 million cars to cover the 3 trillion miles we drive annually. There is no dividing 20 million cars by 12.5 years since each car's useful life has been squeezed into one year to achieve the previous calculation. I would also posit that the average miles per year is more like 15K and the average lifespan of a car to be 200K+. Dividing 3 trillion miles driven by 200,000 miles per car equals an annual need for 15 million cars -- just about the true number. Of course, there is no accurate equation to sift between need and desire with regard to car purchases.