About That Break-Even Point . . .
At this morning’s press conference, GM CEO Fritz Henderson couched his decision to “choose” viability over jobs in terms of lowering GM’s break-even point. Like job cuts, UAW concessions and nearly every other recent viability-oriented reform goal, GM’s break-even point predictions have been consistently more optimistic than leading reality-based indicators. With every new viability scheme, GM’s assumptions about the demand for US-market new cars in 2009 have been revised downward. According to the NY Times, even though this is viability plan V3, GM may still have some reality embracing to do.
Back in December, GM predicted a “worst case scenario” of 10.5m sales and a “baseline scenario” of 12m per annum. With the 10.5m worst-case scenario now entrenched as GM’s main market assumption, “people with knowledge of the company’s planning say that figure is expected to drop again, especially since GM announced deep production cuts last week.” Ya think? “Until we have a formal viability plan [ED: yes, a new one] filed with the government, it’s not something we want to discuss in any detail,” say GM spokesfolks. Here’s a thought: play it safe for once. If bailout billions can buy anything it should be the ability for GM to exceed its own expectations just this once.
Mark my words, the culling of dealers and nameplates is going to cause a bigger unit sales hit than GM is expecting.
CarPerson, that would be me, has been predicting 9.25M to 9.35M since October of last year. Apparently Fiz is not checking into TTAC as often as he should.
More dealers seem to be migrating to AutoMalls located along freeways. Drive down I-5 and Toyota is in several places with a population far less than 100,000.
They are killing many of the wrong dealers. You want the stores in smaller towns that sell 10 units/month. Right now locally they are competing with a similar Ford Store and perhaps a Dodge/Chrysler/Jeep store. Between the bailout anger and not wanting to drive 1hr+ for parts or warranty work most of that business is going to the Ford Dealer across main street. It is the huge overpopulation relative to market share in the metros that is killing GM. For Example If I want to purchase a midsize SUV in Sacramento I have 50+ dealers selling very similar product within a 45min travel distance. A quick comparison for dealers within 50mi of "95628" shows 12 Toyota Stores vs. 15 for Chevrolet, 10 P/B/GMC and 1 Saturn. Twice as many stores to sell less cars.