High Finance, Reduced To Whack-A-Mole
Whenever we talk about middling sales and dwindling market shares of certain carmakers, moles pop out of the holes, check their talking points, and shout: “Volume is soooo lame. Awesome profits is where it’s at!” Point taken.
Today, Toyota reported a pre-tax profit of 415.2 billion yen ($ 5.3 billion) for the second quarter of the calendar year. GM’s pre-tax profit was $2 billion for the same period. Volkswagen’s pre-tax profit for the quarter was €5.8 billion ($ 7 billion.) Volkswagen wins this round, with GM a distant third.
Toyota reported a “better-than-expected result that underscored its rebound from the natural disasters that blighted 2011,” says Reuters.
If you don’t see moles popping out of holes, don’t worry, they are still around. They are busy digging for fresh talking points.
Herr Schmitt, Since you have experience with Volkswagen, Toyota and GM, could you do an article which, at least posits, why there such a gulf in profits between the three companies who have similar volumes? Toyota aren't exactly a bloated company, but why are Volkswagen streets ahead? More efficient plants? Cheaper materials for their cars? etc. On the other hand, you could just dismiss what I'm saying and carry on posting shibari pictures? I'm cool, either way. :O)
It would be good widen this to other major companies like Ford and Honda. A year view would also be good, especially as we all know quarterly figures can be cooked (re: recent TTAC article).
I like whack-a-mole....I just took my niece to Chuck-E-Cheese and she really enjoyed it. It would also be intersting to layout profitability by global markets. For example, how much of Toyota's profit (if any) comes from Japan where GM is non-existant and VW is a very small player. It would also be intersting to see what % of revenue the big players are putting into product development. What amount of profit comes from captive finance from the big players? These sorts of areas really tell the big picture. As far as volume vs profit: Real volume growth in only truly achieved by competing in new (non-niche) segments and in new global markets. VW in the US is a perfect example. Its not like they decided to have some sales meetings at the dealership level a couple years ago to rally the troops and increase sales 30+%. Nope, they added good product in new segments. Doing this also costs a boatload of money but VW is such a well-oiled machine globally that such costs are a blip in their profits. GM/Chrysler are playing catchup in investing in new products from their development blackout in 2007-2009. As another example, Cadillac will be showing some dramatic volume growth numbers by % volume increase in the US by Q4 and throughout next year. They will also show dramatic growth in China. This will be due to segment growth--competing in the luxury compact segment (highest volume luxury segment)for the first in a long time with the ATS. A lot of the $$ spent to develop that product has alredy been spent and the key will be to execute those sales/leases profitably to get a good return on that investment. XTS will help as well as it is a major improvement over STS/DTS. Lets take a look at a place where volume growth isn't everything and drive by analysis can be misleading. Segment growth can be important too. US Cruze sales: July 2011= 24,648 July 2012= 14,954 Looks like a devastating drop. Well, Cruze had about 70 fleet sales in July 2012...and ~ 6500 fleet sales in July 2011. So, its really a drop of 4000 sales 2011/2012. But, look deeper, Sonic had 6278 sales in July 2012 vs 0 in July 2011. Spark added 1460 sales in July 2012 vs 0 in July 2011. Drive by analysis says Chevy small car sales tanking if you look at the Cruze. But, when you step back and look at the whole small car segment...not so much. Are they leading the world? No...are they raking in profits that lead the world? No. But, I'll betcha they are far, far ahead of where they were in the past as these vehicles have higher transaction prices and lower incentives than many of their competitors and their past. Then look at Cruze growth in China. Is Cruze a better global car than Corolla....nope. Is Cruze the FIRST attempt at a global small car from GM...pretty much yes. But, dramatic growth from the Cruze will only happen when it enters new markets. Once its established you hope to maintain share and grab some small growth here and there with refreshed product etc. These are interesting debates. Its a bit disappointing to hear the editor of this webpage assume that some of us present 'talking points' as if we are politicians spinning versus stating facts. By some people's thinking, there are two winners each month/year/quarter. The volume sales leader and the profit leader. Everyone else sucks.