What's Wrong With This Picture: Follow The Incentives Edition

Edward Niedermeyer
by Edward Niedermeyer
what s wrong with this picture follow the incentives edition

Sadly, my internet came crashing around my ears just as GM’s Q1 results conference call was getting interesting. Typical Monday. I’ll rock myself to sleep tonight with a recording of the call and report back tomorrow, but at this point the big news is plainly visible on this single slide. Yes, GM finally got control of its incentives and wrestled them below the industry average… for a month. That month (March) also just happened to be the worst month this year for GM market-share wise. The next month (April), the incentives went back over the industry average, and market share increased once again. The lesson seems obvious: GM won’t gain market share on promises of high-quality cars and taxpayer payback alone.

Though GM’s executives seem to understand that “buying market share” isn’t worth the long-term downsides, they also don’t appear to have much choice. This, in a nutshell, is why GM is returning to captive lending: it has to buy the market share somehow, and risky loans are better than huge incentives. Problem is, this also proves why the bailout of GM was a foolhardy proposition. In order to sustainably grow their business, automakers need one commodity above all others: the trust and respect of consumers. Without that, you can screw bondholders, force worker concessions, cut dealerships, absolve debt and dump cash on the problem ’till the cows come home, but you’ll still end up with a chart like this.

When analysts say that GM’s new marketing wunderkind Joel Ewanick faces “the toughest job in marketing history,” this is exactly the problem they’re referring to. How he will be able to reverse GM’s spiff dependence, and get people to buy GM products because they want them more than anyone else’s vehicles isn’t the least bit clear at this point. And if he doesn’t make that change, GM will have no choice but to keep the incentives high and pile on the in-house financing giveaways. High stakes indeed, for a problem that Ewanick’s predecessor seemed to think could be solved with the tagline “Excellence For Everyone.”

[GM’s Q1 Slideshow is available in PDF format here, Supplemental information in PDF format here, and Q1 SEC 10-Q filing in PDF format here

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  • Power6 Power6 on May 18, 2010

    This seems like good news. It is plain to see that market share is sort of flat, while incentives have trended downward. Call 'em as you see 'em Edward, but don't forget to keep an open mind. Things do change.

  • Buickman Buickman on May 18, 2010

    Wagoner refused to allow this to be distributed at the shareholders' meeting. time has come perhaps? another look at least... we may not agree 100% (that's probably a good thing) but this could be the plan upon which we build. odds are Reuss and company are following these threads. this is our chance to get together, the B&B @ TTAC. yeah there are other sites, but this is the best, at least my fav for sure. we give it to 'em straight...'cause we care. http://generalwatch.com/editorials/editorial.cfm?EdID=2 your thoughts?

  • Tassos There is nothing 'weird' about Finland's fine system. A few other nations have it too. Switzerland maybe, I am not sure.But you do not specify WHAT was that clown's income that required him to pay $120k for a speeding ticket?I am sure that for somebody like ELon Musk, $100k will barely operate his megayacht ONE LOUSY Day.
  • Bkojote On paper, GMC is supposed to be the understated, more sophisticated member of the GM truck family.In actuality, GMC is total garbage in the truck world - by the time they're on their second owner they're decked out with amazon wheel spacers, pizza dish wheels, punisher stickers, and really angry opinions about any president who's won the popular vote in the past two decades. And man, these things are ugly as sin too.That's because GM trucks as a whole are kinda the also-rans in the truck category. Yeah, they do sales, but they aren't anyone's first choice. Not as extreme as the Ram, not as category defining as the Raptor, not as well engineered as a Toyota, so you end up with owners who compensate big time to distract others from the endless repair bills. The only owners I know who are worse are the rollin' coal lifted Super Duty drivers. Like you bought a GMC because the guy who sold you your wife's acadia is less scary than having to grovel for a Raptor and you take the Ford guys making fun of you personally.
  • Tassos The rich get richer and the poor get poorer. I have mentioned this before, and it applies here again.Go to the U of Michigan College of Engineering parking lot. How can you say what car the $300,000 a year (ACADEMIC year of 9 months, mind you, summer pay is extra, and consulting a whole lot on top of that) and what does the $50,000 a year secretary drive?Hint: Teresa was out chair's secretary, started a year ago. She had to resign in just a few months because her 75 mile EACH WAY from her home in Lapeer MI to ANn Arbor MI just KILLED HER when gas prices rose.What car did Teresa drive? Take a wild guess. An F150? A Ram pickup? A Silverado? One of these. In a fee months she had to resign and find a lesser job in the whole lot lesser U of M Flint (but why would she care? she's just a secretary), which halved her commuting distance to a still significant 75 mile round trip every damned day.So the poor keep buying pickups and get poorer, and the rich keep NOT buying them and get richer.
  • Cprescott It is ugly enough. But why? You refuse to build enough of your products for your consumers.
  • Cprescott Only if your income also gives you more votes.