By on April 27, 2009

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.

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11 Comments on “About That Break-Even Point . . ....”


  • avatar
    Conslaw

    If you cut half your dealers, each remaining dealer has to sell twice as many cars to sell the same total as before. That’s why I’m sceptical of the whole strategy of cutting dealerships. The last time we were in the car market, there were models we didn’t consider simply because we didn’t like the one close dealer or because the closest dealership was too far away.

  • avatar
    Luther

    Can’t GM sell their cars at half price and make up the difference by stealing from the taxpayer? What’s stopping them?

    These clowns can destroy their better competitors easily when they have guns pointed at the taxpayer…They are stupid.

    The taxpayers at USA Honda and Toyota are funding their own demise by paying the ransom to the Federal Mafia…A lot like giving someone a rope that they will use to hang you.

  • avatar
    amadorgmowner

    I realy don’t know how GM is going to save money by having fewer dealers. GMAC killed off my local (rural) long-time GM dealer last December. I have a bitter taste in my mouth towards GM and especially GMAC since then. I am simply not going to drive one hour to the next closest GM dealer to buy another GM vehicle. I have been buying GM cars and trucks since 1982(from my now former local dealer). I feel betrayed and backstabbed by GM. GM didn’t lift a finger to help our local dealer after GMAC killed him off. They both take “loans” or “bailouts” and then crap on the loyal customers who provided the tax dollars to fund them. So in return, I will no longer buy GM vehicles and I frankly don’t care at this point what is left at GM (Chevy, GMC, etc)after “re-organization”. I am done. Nobody takes my tax dollars and uses them against me after I have been giving them business all this time. I am heading to Toyota for my next purchase. I suspect I am not the only one who feels this way towards GM and GMAC.

  • avatar
    NulloModo

    amadorgmowner:

    With the current gloat of domestic dealers there is competition not only between GM, Ford, Chrylser, Honda, Toyota, Nissan, et al, but between local dealers of the same domestic make. While improving quality in the vehicles in important to driving up average sale price, and thus profits, it is also important that two local GM shops aren’t going to be fighting over the same customers and driving prices back down.

  • avatar

    amadorgmowner,

    Most of the problem dealerships are in big cities where the same brand dealers compete with each other. Fewer dealers in the same city could sell just as many cars.

    Toyota sells ~ as many cars as GM does with about 1,500 dealers. As of a couple of years ago, Chevy alone had about 4,500 dealers.

    While some small town dealers will close, GM & Ford are cutting more from urban areas. A lot of those dealers in small towns are still profitable and help create a strategic advantage.

    You don’t want to drive to a distant GM dealer. Well, Toyota doesn’t put dealers in cities smaller than ~100,000 people. If people in small towns want to buy a Toyota or any other foreign brand, they’re going to have to take a drive to get it serviced.

  • avatar
    cardeveloper

    NulloMudo,

    You may have stumbled onto yet another unanticipated consequence, as the number of dealers decrease, the average price per car will go up, costing us more to buy new cars.

  • avatar
    NulloModo

    cardeveloper –

    As a consumer, I can see how that is a bad thing. As a car salesman, having to sell only the relative benefits of my product and not having to compete with another dealer who doesn’t have to do anything but undercut my price by a few hundred bucks after I have already sold someone on a certain vehicle is a very good thing.

  • avatar
    John Horner

    Mark my words, the culling of dealers and nameplates is going to cause a bigger unit sales hit than GM is expecting.

  • avatar
    CarPerson

    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.

  • avatar
    CarPerson

    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.

  • avatar
    RedStapler

    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.

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