A number of analysts have suggested that autos play a much less significant role in the U.S. economy today than they have historically. The data from 2005 would seem to call that conclusion into question.
| 2005:Q3 | 2005:Q4 | |
|---|---|---|
| Motor vehicles | +17.6% | -15.9% |
| Cars | +18.7% | +10.6% |
| Trucks | +17.1% | -27.3% |
Motor vehicle production alone contributed -0.6% to 2005:Q4 anemic annual growth rate of 1.1%. The drop in spending followed the classic pattern for the macroeconomic disruptions caused by an energy price shock of a sudden change in the composition of spending, with BEA reporting that although car production was actually up at a 10.6% annual rate in the fourth quarter, truck production (which includes the SUV’s, and accounts for more than half of Detroit’s sales these days) was down 27.3%.
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Interpreting these figures is complicated by the fact that third quarter sales were inflated by the summer discount programs, and these sales doubtless also persuaded some consumers who would have purchased in the fall instead to buy earlier. This compounds the already difficult task of separating the cyclical contribution from the seasonal slowdown in sales that we usually see in the fall. If one looks at the seasonally unadjusted number of units sold, domestic light truck sales were 12% lower in 2005:Q4 than in 2004:Q4, and 1% lower for 2005 as a whole compared with 2004.
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But autos matter for the American economy well beyond the employment of those who actually produce the vehicles. As noted by SCSU scholars, once you include all of motor vehicles and parts, the contribution of autos to the fourth quarter GDP figures comes to -2.06%; (see BEA Table 1.5.2). In other words, if autos had just held steady (after seasonal adjustment) in the fourth quarter of 2005, the latest GDP statistics would have shown 3.2% rather than 1.1% annual growth.
Nor is it all over yet. I had said that something had to give when General Motors lost $1.2 billion on its North American operations in the second quarter and $1.6 billion in the third. Well, North American operations managed to lose General Motors another $1.5 billion in the fourth quarter. [Figures here correct an error in my original post]
Ford and GM have each announced plans to eliminate 30,000 jobs, and Detroit News reports that GM is in discussions with the UAW on “an accelerated attrition program” that could pave the way for a wave of early retirements in its hourly work force. And the full extent of the consequences from the bankruptcy of Delphi, the largest U.S. auto parts supplier, remains to be seen.
Did we dodge the bullet of the oil shock of 2005? Some have suggested that the bullet hit GM dead on and now, like a character in a bad movie, it’s thrashing about while everyone watches, waiting for it to fall.
I sell for companies who are coupled to the auto sector pretty tightly… While I don’t do a ton in that biz I see enough to realize what a huge driver of economic activity it really is… both for mfg & for services. Mfg in general & automotive in particular are very much front end leading economic drivers… if they go so does a lot of other things from materials & components all the way through to finance & insurance.
I was told by one of my profs to think of it like the arrowhead on the arrow… a lot more stuff follows behind the arrowhead but with the arrowhead it is nearly directionless & unable to penetrate & stick… a leading rather than following.
A similar thing applies to new home construction… between automotive & new construction a lot of our economic activity (again services included) starts there.
It will be interesting.
Auto’s Effect on Q4 GDP
The folks at Econbrowser take a look at the effect of the auto industry on Q4 GDP. Their math indicates that if auto sales had held even vs Q3, reported GDP would have been 3.2% or 2.06 points higher.
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Fed Watch: Now It Gets Interesting…
Tim Duy with a Fed Watch: For the Fed watcher, the 4Q05 GDP report is a real brainteaser. The central focus of the many, many blogs covering Friday’s news was the disappointing growth numbers (see William Polley’s and James Hamilton’s
Yes, autos are important, but are GM and Ford synonymous with autos?
Jim — Well, North American operations managed to lose General Motors an additional $5.6 billion in the fourth quarter. That, by the way, works out to losing $42,000 every minute of the quarter, even counting the hours in the day when most of us are sleeping.
Come on, Jim. Study the GM financial statements.
You’re painting a far darker picture than exists factually in terms of GM North America (GMNA) quarterly performance.
Yes, it’s a rough situation over at GM and more specifically, GM North America (GMNA) operations, but it’s not as bad as you have selectively and inaccurately presented for the 4th Qtr. Unfortunately, your financial number hardly tells the 4th Qtr story, failing to distinguish between annual losses, 4th Qtr performances for GM or GM North America, and End of Year special adjustments and costing.
GM North America GMNA) operations did not lose an additional $5.6 billion (adjusted or unadjusted) in the 4th Qtr.
GM North America (GMNA) didn’t lose $5.6 billion in the 4th Qtr even if one includes the applicable additional special items GM added to the annual total for special items.
Not even close.
You’re the third economist I have noted since Thursday who has presented inaccurate data on General Motors. The errors have been huge. What’s up with that?
Just study the financial statements. The facts are readily available.
You’re dead right, Movie Guy. I simply made an error. There was a $4.8 billion loss in the quarter including nonrecurring items, but I meant to refer to the adjusted loss from North American operations, which was $5.6 billion for the year rather than the quarter. Thanks (once again) for catching my blunder.
Jim,
I appreciate your effort to straighten out the GM financial information in the post.
GM North America recorded a 4th Qtr reported loss of $2.820 billion, including special items charges of $1.373 billion. The adjusted loss was $1.459 billion (subsequently rounded to $1.5 billion).
GM’s reported global loss for 4th Qtr was $4.777 billion (rounded to $4.8 billion in some generalized references), including special items of $3.594 billion (additional special items costs for the operating year). The resulting adjusted loss was $1.183 billion (elsewhere in GM statements, the figure is rounded up to $1.2 billion).
GM’s reported global loss for 2005 was…$8.554 billion, including special items of $3.594 billion. The resulting adjusted net loss for 2005 was $3.389 billion.
Let’s review this GM financial document:
General Motors 2005 Highlights – Q4 Financial Results
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/newspublisher/support_file/01-26-2006/38/NR-4q05-220060126073802.rtf
GM states:
GM North America (GMNA), 4th Qtr:
Reported Net Income (loss) – $(2.820 billion)
* includes special items – $(1.373 billion)
Adjusted Net Income (loss) – $(1.459 billion)
GM North America (GMNA), 2005 Year to Date:
Reported Net Income (loss) – $(7.647 billion)
* includes special items – $(2.065 billion)
Adjusted Net Income (loss) – $(5.582 billion)
GM rounded the 4th Qtr adjusted loss of $1.459 billion to $1.5 billion. GM rounded the 2005 YTD reported loss, including special items, of $5.582 billion to $5.6 billion. Both figures were cited in the GM document, GM Reports Preliminary 2005 Financial Results.
The GM North America 4th Qtr special items total nor the Reported Net Income (loss) were identified in the GM document, GM Reports Preliminary 2005 Financial Results.
The GM North America special items for the 4th Qtr include the North America restructuring charge – $1.29 billion (4th Qtr and YTD) as well as portions of other new special item charges not broken down by global operations components.
The North America restructing charge was rounded to $1.3 billion in the GM documents, GM Reports Preliminary 2005 Financial Results, and
General Motors 2005 Highlights – Q4 Financial Results.
Total GM Automotive (GMA), 4th Qtr:
Reported Net Income (loss) – $(3.492 billion)
* includes special items – $(2.006 billion)
Adjusted Net Income (loss) – $(1.486 billion)
Total GM Automotive (GMA), 2005 Year to Date:
Reported Net Income (loss) – $(9.736 billion)
* includes special items – $(4.427 billion)
Adjusted Net Income (loss) – $(5.309 billion)
Other, 4th Qtr:
Reported Net Income (loss) – $(1.874 billion)
* includes special items – $(1.588 billion)
Adjusted Net Income (loss) – $(0.286 billion)
Other, 2005 Year to Date:
Reported Net Income (loss) – $(1.626 billion)
* includes special items – $(0.738 billion)
Adjusted Net Income (loss) – $(0.888 billion)
This information excludes net income from GMAC operations and other financing income and losses.
Further clarification…
General Motors – Special Items reported in the 4th Qtr:
(A) North America restructuring charge – $1.29 billion (4th Qtr and YTD)
(B) UAW / Delphi benefit guarantee – $2.327 billion (4th Qtr and YTD)
(C) U.S. salaried attrition program – $0.00 for 4th Qtr; $148 million YTD
(D) Plant & facility impairments – $0.00 for 4th Qtr; $889 million YTD
(E) Adjustments to investment in Fuji Heavy Industries – (- $51 million) for 4th Qtr; $737 million YTD
(F) Restructuring charges:GME, GMAP, and Other – $97 million for 4th Qtr; $701 million YTD
(G) Cumulative effect of accounting change – $109 million for 4th Qtr and YTD
(H) Change in Polish tax law – (-$49 million) for 4th Qtr and YTD
(I) Tax items – (-$129 million) for 4th Qtr; (-$987 million) YTD
(A) In connection with the North American manufacturing capacity actions announced in November, GM recorded an after-tax charge of $1.3 billion in the fourth quarter of 2005. This charge includes $835 million associated with the hourly employees at the facilities GM is idling and $455 million for the non-cash write-down of property, plants and equipment.
(B) In October of 2005, GM estimated that its contingent exposure relating to the benefit guarantees for certain former GM U.S. hourly employees who transferred to Delphi, ranged from zero to $12 billion. GM now believes that the range is between $3.6 billion and $12 billion with amounts closer to the low-end of the revised range considered the companys best estimate assuming an agreement is reached between GM, Delphi and its unions.
As a result, GM established a reserve of $3.6 billion ($2.3 billion after tax) and this is included as a non-cash charge in the fourth quarter of 2005. The amount of this charge may change between now and when GM files its Form 10-K with the SEC, depending on the status of discussions between GM, Delphi and its unions and other factors. GM is currently unable to estimate the amount of additional charges, if any, that may arise from Delphis Chapter 11 filing. A consensual agreement to resolve the Delphi matter may cause GM to incur additional costs in exchange for benefits that would accrue to GM over time.
(C) Relates to voluntary early retirement and other separation programs in the U.S. in the first quarter of 2005.
(D) Year-to-date adjustments include after-tax impairment charges totaling $805 million ($468 million at GMNA, $176 million at GME, $99 million at GMLAAM, and $62 million at GMAP) resulting from third quarter reviews of the carrying value of long-lived assets held and used, other than goodwill and intangible assets with indefinite lives. These impairments consist of $711 million related to product-specific assets and $94 million related to office and production facilities, which were still in service at year-end 2005. Year-to-date results also include an after-tax charge of $84 million, recorded at GMNA in the first quarter 2005, for the write-down to fair market value of various plant assets in connection with the cessation of production at a Lansing assembly plant.
(E) Relates to the $788 million after-tax write-down to fair market value, as of June 30, 2005, of GMs investment in approximately 20% of the common stock of Fuji Heavy Industries (FHI). In the fourth quarter, GM completed the sale of its investment in the common stock of FHI and recorded a gain of $71 million (after tax) due to the appreciation of the fair value of such stock after June 30, 2005, the date of the FHI impairment charge. Also in the fourth quarter, GME recorded cancellation charges of $20 million (after tax) related to FHI, resulting in a net adjustment of $(51) million in the fourth quarter.
(F) The fourth quarter charge relates to after-tax restructuring charges of $69 million at GME, $21 million at GMAP, and $7 million at Other. In the fourth quarter of 2004, GM Europe announced a restructuring plan targeting a reduction in annual structural costs of an
estimated $600 million by 2006. A total reduction of 12,000 employees, including 10,000 in Germany, from 2005-2007 through separation programs, early retirements, and selected outsourcing initiatives is expected. The fourth quarter GME restructuring charge of $69 million relates to approximately 800 additional separations, as well as charges related to previous separations that are required to be amortized over future periods. The year-to-date GME charge of $673 million also includes costs related to the separation of approximately 6,700 people in the first three quarters.
(G) Relates to the adoption of Financial Accounting Standards Board Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” as of December 31, 2005.
(H) Relates to the effect of changes in Polish tax law at a GM Powertrain joint venture. Amount is included in equity income.
(I) Fourth quarter and year-to-date amounts of $746 million and $1.6 billion, respectively, relate to tax benefits, in excess of GMs previously communicated annual effective tax rate of 15%. In addition, the fourth quarter includes recognition of a valuation allowance of $617 million against deferred tax assets at GM do Brasil. Adjusted loss reflects an effective tax rate of 15%.
GM Reports Preliminary 2005 Financial Results
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewpressreldetail.do?domain=2&docid=22384
General Motors 2005 Highlights – Q4 Financial Results
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/newspublisher/support_file/01-26-2006/38/NR-4q05-220060126073802.rtf
General Motors 2005 Consolidated Statements of Income – Q4
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/newspublisher/support_file/01-26-2006/38/NR-4q05-320060126073802.rtf
If the oil get higher price at 2006….well….that will be not nice to GM and Ford…
Yipes! There’s so much talk about accounting here that for a moment I thought I accidentally visited a FASB bulletin board. Oh well, it’s all to the good.
Here’s a piece of trivia that goes almost unnoticed. Andy Card, Dubya’s chief of staff, was the president of the now-defunct American Automobile Manufacturers Association. Remember that ridiculous auto trade war with Japan that almost resulted in Super 301 being slapped against the Japanese? Yep, Andy had a big part in it. That the current administration’s policy is pretty much “you’re on your own” suggests to me that the auto lobby isn’t much of a force in politics anymore. If it appears that the government is willing to let GM go the way of the dodo, then I guess it’s long come around to thinking that you can’t fight fate.
Another overlooked portion of the GM statement was the revenue line. 51.2 billion in 2005 compared to 51.4 billion in 2004. GM reported a net profit in Q4 2004. Restructuring costs designed to save money in the long run are brutally costly in the short term.(Plant closings, establishing special funds, jobs bank) Many dealers report a considerably improved inventory days supply compared to one year ago, and GM production targets are big for the first quarter.
Many dealers report a considerably improved inventory days supply compared to one year ago, and GM production targets are big for the first quarter.
I think the industry is getting their $#@! together with regards to inventory… they were all pretty sloppy the last few years thinking that if they make’em folks will buy’em… they were right but only if they give’em away and they aren’t going to do that much anymore if they can help it.
Publicly GM says the ‘build targets’ are large for ’06 but if you talk to suppliers like I do they are being told to not build unless firm orders say ship soon (back to real JIT)… meaning there are two messages, one public & optimistic and the other more cautious & private. I doubt they will let the inventory get out of control on them like last year… if they do they deserve all the red ink.
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Nice post MG… but $3 billion, $4 billion, $5 billion… and whether one time or recurring… that is a lot of losses. So my question is are they real?
Without posting another ‘book’, how does the cashflow statement look? I’m always a little suspicious of income statements – sometimes they show gain/losses that are all paper while the cash situation is very different – sometimes good, sometimes not so good.
Anything interesting we should know in the cash flow statements?
TIA
Rick, you can sell or shill all you want, but the problem is that even those of us driving imports occasionally have to drive your cars, so there will, frankly, be no substitute for just shutting the heck up and making better ones.
Wow M1Ek you’re a feisty little one today aren’t you? Fortunately there are still many who disagree with your personal automotive quality study, as thorough as it was. Personally, I’ve made a whole lot of money selling the very vehicles you despise. Sorry.
The original point of this post, I think, was that autos still make up a big part of the US economy. I would think the way figure that out would be to look at autos as a share of the US economy. Pick ’65, ’75, …’05. Not hard to do. Talking about GM and Fords 4th quarter #’s seems pretty stupid. They have both been losing market share for decades, as their quality is inferior and their labor costs are higher than their competion, hence their bonds have been taking rating hits for years. I wonder if Michael Milken would get thrown in jail these days for selling Ford bonds 🙂
Movie, why aren’t you slain by this detail:
…GM estimated that its contingent exposure relating to the benefit guarantees for certain former GM U.S. hourly employees who transferred to Delphi, ranged from zero to $12 billion. GM now believes that the range is between $3.6 billion and $12 billion …
Am I just too insensitive (not like John. or Rick. or M1EK) to get worked up about losses of this magnitude to bother with such nuances of whether those losses were quarterly or annual?
I know. I’m the only guy who can’t keep a straight face when I see these independent (WHY put THAT in and make everyone nervous?) audits. By certified (See?) accountants.
I can rescue this post: After the Hurricanes, everybody wanted to buy an amphibious solar powered bomb-proof vehicle. GM and Ford obliged with the best they had at irresistible discounts (owing to the non-solar powered feature which Chrysler now offers via free fuel mileage). This brought sales forward and explains the dumpy 05Q4 GDP number. I expect some improvement next quarter.
Or hell.
I’m sure the accountants can provide us with the improvement, you?
That was not cm above, but your nearly in control of his browser, me.
Let me add a correction for the data I posted above.
MG — GM’s reported global loss for 2005 was…$8.554 billion, including special items of $3.594 billion. The resulting adjusted net loss for 2005 was $3.389 billion.
My statement is technically accurate, but obviously incomplete. The special items for 2005 totaled $5.165 billion.
cb, key claim is that autos can have big business cycle effect, and I think a good way to establish that is to point out, as I did, that if motor vehicles and parts had just held steady, we would have have 2005:Q4 growth of 3.2% rather than 1.1%.
I remember a newspaper story, back in the hurricane and sales incentive period, in which an SUV seller said “our customers know gasoline prices will come back down.” I thought that was interesting phrasing. Obviously the sller wanted us to “know” that, but it was in actuality a gamble.
I expected a continuation of the general “stair step” pattern, and better than $3 next summer, but even (pessimist that I am) I didn’t expect $2.50 now (as it is in Orange County, California).
Did we dodge the bullet of the oil shock of 2005?
Maybe, if all it takes is a one-time hit in profits at the domestic automakers. On the other hand, if they (and consumers) are walking out of the oil shock of 2005 with some injury … the oil shock of 2006 is going to be that much harder (esp. in combination with a housing slowdown).
“Fortunately there are still many who disagree with your personal automotive quality study, as thorough as it was. Personally, I’ve made a whole lot of money selling the very vehicles you despise. Sorry.”
Yes, as basic economics tells us, if you discount crappy cars enough, more people will buy them. This says nothing about the quality of the cars.
Let’s assume for a moment that the rental car companies didn’t buy those thousands upon thousands of cars every year at a steep discount from (GM/Ford/Chrysler). What would the automotive landscape look like?
M1EK…Nice. In the last JD Power long term ownership study Chevy, Cadillac, and Buick all ranked above industry average. Volvo, Nissan, and Audi were all below. Quality studies, whether performed by an industry observer like JD Power, or informally by you via rental cars are all highly suspect. Running a used car department for the last 15 years+ I’ve done my own informal study. I drive approx. 8 used cars a day including a wide variety of makes and mileages. 8 a day over 15 years probably provides a greater sample size than your rental car experience. I also pay a technician to repair and recondition these cars. My observation is that in the last 5-8 years the quality difference between most makes is minimal. At 100,000+ miles owner care has a far greater impact on the remaining viability of the product than does the original manufacturer. Regarding fleet sales, in 2005 GM sold 4,454,386 vehicles. Toyota sold 2,260,296. If you remove the approximately 26% of GM vehicles that were sold into fleet service GM still sold to 1 million more retail customers than Toyota. These 1 million people probably disagree with you too. You also can find some rental Camrys around from what I hear.
Crowing over a good showing in a reliability study which measures “long term” at 3 years is a symptom of your problem, rather than evidence you’ve been cured.
And I’ve never seen a rental Toyota. Ever.
What study are you quoting as your retort to long term quality? So far the only evidence I’ve seen from you is an anectdote about a rental car. Toyota fleet sales to rental are minimal compared to GM and Ford, that’s why I compared GM numbers after pulling them out. However, they do account for some of their sales figures as most Toyota dealers maintain a dealer owned fleet. Toyota also sells a lot of vehicles into rental outside of the US.
Consumer Reports is my source for long-term quality, as it is for most people who take it seriously. They’re also pretty much the only people who seem to study it that far out.
I thought this post was potentially misleading about the role of the motor vehicle sector in the fourth quarter’s surprisingly low GDP growth. Two measures of the motor vehicle contribution to GDP are mentioned: -0.6 percentage points for “motor vehicle production alone” quoted near the beginning and -2.06 percentage points for what you get “once you include all of motor vehicles and parts” quoted near the end. One could read that as saying the conceptual difference between the two numbers was whether the BEA included parts.
In fact, the difference between the two numbers is production vs final consumption expenditures. -0.6 (actually -0.58) is the contribution of motor vehicle production. The BEA gets it by counting the number and price of the vehicles that rolled off of assembly lines. It is relatively small because the number of vehicles assembled was down only a little. -2.06 is the contribution of motor vehicle consumption expenditures to GDP as measured by spending. The BEA gets it by counting the number and price of vehicles driven off dealers’ lots by consumers. It’s a big number because consumers bought a lot less vehicles. As one would expect given the difference between the two numbers, motor vehicle inventory investment increased a good deal.
Actually, the auto contribution to the slowdown in final spending growth is even larger than the -2.06 figure quoted. Investment purchases of autos also dropped a lot in the fourth quarter. NIPA table 7.2.6B shows final sales of motor vehicles (for consumtion, fixed investment, and government) falling by 75.8 billion chained 2000 $. I think that works out to a contribution of 2.73 percentage points. So, that 3.2% figure quoted for what GDP growth would have been could just as well be 3.8%. Of course, that is implicitly assuming that inventory investment would have been unchanged if we had bought the same number of vehicles.
Maybe a better way to think about is that motor vehicle spending contributed a positive 0.65 percentage points in Q3. That’s a swing of 3.38 percentage points, or about two thirds of the entire swing in final sales.
I referred to the gas crisis of 2006 above. In my mind there is some question whether current prices constitute an ongoing crisis (soaking up too much of folks’ disposable income).
Peeve:
“‘Investors should also be aware that the inflation-adjusted all-time high for oil is closer to $100 barrel,’ he said, so ‘as it stands, oil is still cheap at these levels.'” – forbes /AFX article
I assume there is no hard and fast economic rule that a price 70% of it’s all-time high is “cheap” right?
We seem to have gotten distracted on a ‘bashing Ford and GM’ thread. Its a bit like bashing the whole airline industry because 2 or 3 of its legacy players are in trouble. Toyota or Honda or Nissan are the Southwest Airlines or Jetblue of this piece: they will fly on regardless.
The germane question is whether the US is still as sensitive as it was historically to the automotive cycle. The results of GM are not particularly important in that (although layoffs by the Big 2 and their parts suppliers may be).
(the striking thing about GM/ Ford v. the transplants is how little discounting and sale via 3rd parties, eg rental fleets, the transplants do– this makes them inherently more profitable, I think in the case of Toyota an average realised car price $6k above GM)
In the 1970s, a rise in energy prices led to a downturn in the economy, with one of the primary transmission mechanisms being the automotive industry downturn.
In the 2000s, autos are a much smaller part of the US economy, but still a very cyclical one.
I would conclude autos still have a role in the downturn. Housebuilding and housing related industries (including mortgage origination, real estate agents etc.) have a much bigger role. While that keeps ticking over, the US economy looks OK.
Although the US is a huge car manufacturer, it has never been much of a car exporter (because its cars are unsuitable to other markets– too big and gas guzzling). This is in striking contrast to, say, computer software or aircraft. However if the US dollar falls, net net the US auto industry probably benefits because imports become more expensive, and production is switched to the transplants.
Unfortunately though, because of the lack of export presence, a steep fall in the US dollar is not going to stimulate the auto industry.
I was going to add that GM and Ford remind me very much of our British Leyland (the last bit of which, Rover, just went bankrupt and was sold to Nanjing Automotive of China). BL died, although it took over 30 years to do so. One telltale sign was when it lost its export markets (it used to have dominant market share in former British colonies) to the Japanese and Europeans.
Ford and GM make too many of the wrong kind of vehicles, with the wrong people making those cars and running the companies. And there are far too many retired people who are owed benefits by the existing operation.
Just like the airlines, it is very hard to fix that. You would be better to start with a clean sheet of paper.
Their European subsidiaries are, however, much stronger in general. And Ford in particular seems to be being very realistic about its likely future position in the US.
John, despite the lack of direct export products, GM has a huge international presence. GM is #1 in China with over 1 million sales in 2005. The difference between GM and Rover is that GM manufactures large numbers of vehicles in each of the different markets around the world specifically designed to adhere to the variables in that unique location. GM sold more cars abroad than at home. They manufacture in 32 different countries and sell cars in 200. Chinese operations are GMs largest contributor to profitablity aside from GMAC. The real impact of a struggling US auto industry in America is something that only time will tell if things don’t financially improve for GM and Ford. It’s worth noting a couple of things. GM is the largest private health care provider in the US. They have the largest pension obligations. Delphi alone is a customer for over 1,000 other auto suppliers. GM, Ford, and historically their suppliers pay employees at all work levels considerably better than WalMart. These people traditionally buy things like software and houses.
‘December Forward’
I agree with Jim’s points in the original post.
The U.S. automobile industry, including manufacturing, component suppliers, distribution, sales, and service, is a significant economic mover in the U.S. economy. While round trip manufacturing to/from China is also a driver, it’s not a wage builder for U.S. workers. Similarly, the building construction industry, commercial and residential, is a large contributor, but it can be knocked down rather quickly…and easily. The automobile industry continues to contribute to the U.S. economy during periods of strong and weak economic performance. People still purchase tires and parts, for example. And shift their vehicle purchases from more expensive to less expensive, from new to used, and from less to more fuel efficient. The automobile industry’s role is critically important to the U.S. economy.
So, what’s the problem? Well, December may be the problem. Or rather ‘December Forward’.
If what we observed in December 2005 automobile new vehicle sales continues in 2006, we’re in for a bit of a rough ride. Throw in the forthcoming changes of increasing foreign sourcing for automobile parts, components, and materials, and the ride may become rough, indeed.
Let’s also not overlook the vehicle exports which will be flowing from China in the future. They are coming…maybe not today, but soon enough. Plus more potential vehicle imports from Mexico, South Korea, and elsewhere.
Automobile Industry Sales in the USA (early January estimate)
* Light trucks include pickups, vans, minivans and sport utility vehicles.
December 2005-2004 Sales Comparison
Car: 626,674 vs. 654,601, decrease of 27,927 units
Truck: 856,610 vs. 887,017, decrease of 30,407 units
Total vehicle: 1,483,284 vs. 1,541,618, decrease of 58,334 units
Big Three vehicle: 818,960 vs. 896,286, decrease of 77,326 units
Asian vehicle: 545,369 vs. 533,079, increase of 12,290 units
European vehicle: 118,955 vs. 112,253, increase of 6,702 units
Year-to-Date 2005-2004 Sales Comparison
Car: 7,711,702 vs. 7,536,554, increase of 175,148 units
Truck: 9,274,449 vs. 9,370,451, decrease of 96,002 units
Total vehicle: 16,986,151 vs. 16,907,005, increase of 79,146 units
Big Three vehicle: 9,674,072 vs. 9,922,043, decrease of 247,971 units
Asian vehicle: 6,202,915 vs. 5,843,133, increase of 359,782 units
European vehicle: 1,109,164 vs. 1,141,829, decrease of 32,665 units
Source:
December 2005 car and light truck sales in the United States by the major automakers. Industry totals include 22 automakers.
http://www.townhall.com/news/ap/online/biz/general/D8DK0FL08.html
Ford and General Motors Vehicle Sales
Here’s an overview of vehicle units sold by Ford and General Motors during December and YTD 2005.
It’s apparent that the vehicle product sales problems of Ford and General Motors are not necessarily similar across the board. GM experienced large losses on its car sales while Ford posted car sales gains for 2005. General Motors posted a major loss of car sales in December 2005. Light trucks sales represent a different picture, as Ford is slipping faster than General Motors in terms of unit sales.
A more detailed analysis is available by reviewing the model sales statistics available from the Ford and GM sales reference documents
listed at the bottom of this post.
It’s interesting to compare all auto manufacturers at the individual vehicle product level. I am noting problems and successes with individual vehicle models that contradict some of the standard comments that we find on blogs and in the news media.
Ford and General Motors Vehicle Sales
* Light trucks include pickups, vans, minivans and sport utility vehicles.
Ford
2004-2005 Vehicle Sales Comparison
Cars sales increased 2.0 percent for 2005. Increase of 20,543 units.
2004 – 1,018,333 units
2005 – 1,038,876 units
Truck sales decreased 8 percent for 2005. Decrease of 184,063 units.
2004 – 2,313,343 units
2005 – 2,129,280 units
Total Vehicle sales decreased 4.9 percent for 2005. Decrease of 163,520 units.
2004 – 3,331,676 units
2005 – 3,168,156 units
Monthly Vehicle Sales Comparison – December
Car sales decreased 5.8 percent for December. Decrease of 4,793 units.
Dec 2004 – 83,200 units
Dec 2005 – 78,407 units
Truck sales decreased 10.2 percent for December. Decrease of 21,596 units.
Dec 2004 – 211,070 units
Dec 2005 – 189,474 units
Total Vehicle sales decreased 9.0 percent for December. Decrease of 26,389 units.
Dec 2004 – 294,270 units
Dec 2005 – 267,881 units
* Ford doesn’t offer a separate sales rollup for Light Truck or Light Vehicle sales. So, aside from its low cab forward and heavy trucks sales, some portion of the heavier platform (gross vehicle weight) F-Series sales not categorized as light trucks appear to be included in the F-Series sales rollup. This would include all of the F-350 series, as an example.
General Motors
2004-2005 Vehicle Sales Comparison
Cars sales decreased 7.1 percent for 2005. Decrease of 133,278 units.
2004 – 1,885,199 units
2005 – 1,751,921 units
Light Truck sales decreased 2.4 percent for 2005. Decrease of 67,796 units.
2004 – 2,770,260 units
2005 – 2,702,464 units
Total Truck sales decreased by 2.0 percent for 2005. Decrease of 56,408 units.
2004 – 2,822,217 units
2005 – 2,765,809 units
Total Light Vehicle sales decreased 4.3 percent for 2005. Decrease of 201,074 units.
2004 – 4,655,459 units
2005 – 4,454,385 units
Total Vehicle sales decreased 4.0 percent for 2005. Decrease of 189,686 units.
2004 – 4,707,416 units
2005 – 4,517,730 units
Monthly Vehicle Sales Comparison – December
Car sales decreased 19.4 percent. Decrease of 31,607 units.
Dec 2004 – 163,294 units
Dec 2005 – 131,687 units
Light Truck sales decreased 4.7 percent. Decrease of 12,497 units.
Dec 2004 – 265,430 units
Dec 2005 – 252,933 units
Total Truck sales decrease 4.9 percent. Decrease of 13,513 units.
Dec 2004 – 273,867 units
Dec 2005 – 260,354 units
Total Light Vehicle sales decreased 10.28 percent. Decrease of 44,104 units.
Dec 2004 – 428,724 units
Dec 2005 – 384,620 units
Total Vehicle sales decreased 10.32 percent. Decrease of 45,120 units.
Dec 2004 – 437,161 units
Dec 2005 – 392,041 units
Sources:
GM – December and YTD 2005 vehicle sales
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=3&docid=21738
Ford – December and YTD 2005 vehicle sales
http://media.ford.com/newsroom/release_display.cfm?release=22189
This is an updated list of automobile sales links from the manufacturers.
Auto Manufacturers – auto sales data
Audi (VW)
Audi USA – Press Releases (no updated sales info)
http://www.audiusa.com/about_pressreleases
Audi Global – Press Releases (very limited sales info)
http://www.audi.com/audi/com/en1/company/news/press_releases.html
* See Volkswagen – limited Audi sales info
BMW
BMW USA – Press Releases (USA sales summary)
http://www.bmwusa.com/bmwexperience/Buzz/News.htm
BMW Group of North America (BMW GNA) – Press Releases (global sales summary)
http://www.bmwgroupna.com/pressmain.aspx
DaimlerChrysler – Chrysler Group USA
Chrysler Group USA – Sales Data and Related Press Releases
http://www.daimlerchrysler.com/dccom/0,,0-5-7164-1-62942-1-0-0-0-0-0-8-7164-0-0-0-0-0-0-0,00.html
DaimlerChrysler – Mercedes-Benz USA
Mercedes-Benz USA – Sales data and Press Releases
http://www.daimlerchrysler.com/dccom/0,,0-5-7164-1-62942-1-0-0-0-0-0-8-7164-0-0-0-0-0-0-0,00.html
Mercedes Car Group – Sales data and Press Releases (global)
http://www.daimlerchrysler.com/dccom/0,,0-5-7164-1-62942-1-0-0-0-0-0-8-7164-0-0-0-0-0-0-0,00.html
Ford
Ford – Press Releases
http://media.ford.com/newsroom/press_releases.cfm
Ford – Jaguar
Jaguar – auto sales – see Ford data
http://media.ford.com/newsroom/press_releases.cfm
Ford – Land Rover
Land Rover – auto sales – see Ford data
http://media.ford.com/newsroom/press_releases.cfm
Ford – Volvo
Volvo USA – general info (no sales info – see Ford)
http://www.volvocars.us/
Volvo Cars Global – press releases (no sale info – see Ford)
http://www.volvocars.com/default.htm
Volvo – auto sales – Ford data source
http://media.ford.com/newsroom/press_releases.cfm
General Motors
General Motors – Press Releases
http://www.gm.com/company/news_events/press_releases/
General Motors – News Media – Press Releases
http://media.gm.com/us/gm/en/index.html
(or)
http://media.gm.com/us/gm/en/news/press/pr_recent/index.html
General Motors – Investor Information – Current Sales and Production
http://www.gm.com/company/investor_information/sales_prod/
GM Daewoo
GM Daewoo – Press Releases
http://www.dm.co.kr/dwms/english/news/news.jsp
GM – Saab
Saab USA – Press Releases (for auto sales, see GM)
http://www.saabusa.com/saabjsp/about/press.jsp
General Motors – Press Releases
http://www.gm.com/company/news_events/press_releases/
Honda
Honda – Press Releases
http://corporate.honda.com/press/list.aspx
Honda – News Media – Sales info (detailed)
http://www.hondanews.com/CatID1007?html=sales.html
Hyundai
Hyundai USA – no sales info
http://www.hyundaiusa.com/
Hyundai Global – Press Releases, 2006 (summary sales info)
http://worldwide.hyundai-motor.com/common/html/about/news_event/press_list_2006.html
Hyundai Global – Press Releases, 2005 (summary sales info)
http://worldwide.hyundai-motor.com/common/html/about/news_event/press_list_2005.html
Isuzu
Isuzu USA – no sales info
http://www.isuzu.com/index.jsp
Isuzu Global – Press Releases (no sales info)
http://www.isuzu.co.jp/world/press/2005/index.html
Isuzu Global – Fact Book 2005 (prior years sales info)
http://www.isuzu.co.jp/world/investor/fact/index.html
Kia (Hyundai)
KIA Motors Global – Press Releases
http://www.kmcir.com/KIRE/KIRE5000/KIRE5200.aspx
Mazda
Mazda – auto sales – Ford data
http://media.ford.com/newsroom/press_releases.cfm
Mazda Global – Publicity – Production and Sales Results
http://www.mazda.com/publicity/
Mitsubishi
Mitsubishi Global – Press Releases
http://media.mitsubishi-motors.com/pressrelease/e/allcategory/all/
Mitsubishi Global – North America auto sales – previous years
http://www.mitsubishi-motors.com/corporate/ir/share/pdf/e/fact2005-05.pdf
Nissan
Nissan USA – (no sales info)
http://www.nissanusa.com/
Nissan Global – Press Releases (global summary)
http://www.nissan-global.com/EN/NEWS/2006/01_03.html
Porsche
Porsche North America – Press Releases (no monthly sales info)
http://www.porsche.com/usa/aboutporsche/pressreleases/pcna/
Porsche AG Global – Press Releases (limited sales info in some releases)
http://www.porsche.com/usa/aboutporsche/pressreleases/pag/
Porsche Global – Fiscal year auto sales (limited summary)
http://www.porsche.com/usa/aboutporsche/pressreleases/pag/?pool=international-de&id=2005-12-07
Suzuki
Suzuki America (American Suzuki Motor Corporation) – Press Releases
http://www.suzukiauto.com/about_suzuki/news_and_events.php
Suzuki Global – Press Releases
http://www.globalsuzuki.com/globalnews/index.html
Suzuki – Press Releases – Auto Sales
http://www.media.suzuki.com/auto/press_releases/sales_releases.php
Toyota
Toyota USA – Press Releases (sales summary)
http://www.toyota.com/about/news/
Toyota USA – News Media Press Releases – Auto Sales (detailed)
http://pressroom.toyota.com/releases?st=kw&criteria=sales_result
Toyota Global – Press Releases
http://www.toyota.co.jp/en/news/05/manufacturing_sales/
Volkswagen
Volkswagen of America – press releases (no sales info)
http://www.vw.com/companyinfo/news_index_2005.html
Volkswagen Global – general info (limited sales info)
http://www.volkswagen.com/vwcms_publish/vwcms/master_public/international_portal/en.html
Volkswagen Global – Investor Relations – Auto Sales
http://www.volkswagen-ir.de/English_version.337.0.html
Volkswagen – News Media – Auto Sales
http://www.volkswagen-media-services.com/medias_publish/ms/content/en/dta/oeffentlichkeit/topics/t2_unternehmen/t3_vertrieb___marketing/t1_absatzzahlen.standard.gid-oeffentlichkeit.acq/ctx-pressetext,fmt-pressemitteilung,mod-all,pid-1/index.html
Volkswagen – Previous Years’ auto sales (limited summary)
http://www.volkswagen-ag.de/english/defaultIE.html
This might be easier to compare.
Ford and General Motors Vehicle Sales Summary
2004-2005 Vehicle Sales Comparison
Ford – Cars sales increased 2.0 percent for 2005. Increase of 20,543 units.
GM – Cars sales decreased 7.1 percent for 2005. Decrease of 133,278 units.
Ford – Truck sales decreased 8 percent for 2005. Decrease of 184,063 units.
GM – Total Truck sales decreased by 2.0 percent for 2005. Decrease of 56,408 units.
Ford – Total Vehicle sales decreased 4.9 percent for 2005. Decrease of 163,520 units.
GM – Total Vehicle sales decreased 4.0 percent for 2005. Decrease of 189,686 units.
Monthly Vehicle Sales Comparison – December 2005
Ford – Car sales decreased 5.8 percent for December. Decrease of 4,793 units.
GM – Car sales decreased 19.4 percent. Decrease of 31,607 units.
Ford – Truck sales decreased 10.2 percent for December. Decrease of 21,596 units.
GM – Total Truck sales decrease 4.9 percent. Decrease of 13,513 units.
Ford – Total Vehicle sales decreased 9.0 percent for December. Decrease of 26,389 units.
GM – Total Vehicle sales decreased 10.32 percent. Decrease of 45,120 units.
Rick
– agree Ford and GM are big international companies. Ford in particular is strong in Europe. Like many US multinationals, they earn a lot of profits abroad, but don’t do much exporting (for various reasons, Japanese and German multinationals are different in that regard)
– good point re the multiplier of their domestic activities in the US. Probably v. their Japanese transplant competitors, the percentage of parts US sourced is much much higher (I am thinking 50% v. 80%+ for the Big 2?)
That said, I think the problem for GM and Ford is that one stakeholder (that held by pension and healthcare obligations) is too large. Again and again in mature industries we have seen companies exit from that via Chapter 11: airlines and steel most notably.
The other problem, as I say, is they make the wrong cars with the wrong people– from the executive suite down to the shop floor (it’s simplistic to say it is only a union problem). (I think I read the average Chrysler worker is over 50). And it’s very hard to change a company top to bottom.
If you go to a ‘winner’ US company like Nucor or Southwestern airlines, they actively avoid recruiting people with previous experience in their competitors. The attitudes and work habits are all wrong.
So the domestic operations of Ford and GM are in a very tough position, where they don’t even have the largest market share in cars (they do in trucks and SUVs, but even those market segments are being squeezed). They just no longer have the loyalty of the American consumer. My own family, which bought Chryslers for 4 decades (pace a disastrous 1978 Pontiac Lemans or ‘the Lemon’ as we came to call it), now owns entirely Subaru SUVs and Honda Accords, is a case in point. (there is also a Volvo station wagon in there: it is very hard to find a station wagon these days)
Maybe they can turn it. The tip off for me was going to Syria. I had heard that Syria, like Cuba, was full of 1950s American classics, lovingly held together by devoted owners. Not so: it is full of economical Japanese pickups and cars, and a few Koreans.
It was when these secondary Commonwealth markets like Jamaica and South Africa were lost by the British carmakers, and went over to the Japanese, that you could tell the end was coming for British Leyland.
Remember Britain is still one of Europe’s largest car producers (the transplants), one of the world’s leading car designers (design studios) and probably the world’s leading racing car producer. Automotive excellence is in the British blood, but not business success at making cars.
I hope Ford and GM will be in a better position, but the trend of steadily falling market share has continued for a very long time, as Ford has just acknowledged by cutting so many plants.
Vehicle Sales – 2005 Summary
The following information reflects the 2005 U.S. market sales of cars and trucks by automobile manufacturers. Gains and losses from the 2004 sales year are indicated as + or – entries. The rank order is based on sales volume for each category.
Although GM sustained major losses in 2005 car and truck sales, GM still leads both categories of sales by wide margins. Ford car sales, excluding its foreign brands, achieved sales gains of over 48,000 cars during 2005. Ford’s principal problems appear to rest with its truck sales and lagging sales of two of its foreign brands.
Interestingly, Honda’s car sales declined slightly in 2005, while its truck sales posted significant gains. Similarly, Mercedes-Benz had problems with its car sales; only one model class achieved gains while all others suffered losses on the order of 12.4% to 50.8% in 2005. Volvo and Jaguar appear to be in trouble, as does Volkswagen.
CARS: (includes crossover vehicles)
GM – Cars: 1,677,507 … -131,374 cars
Toyota – Cars: 1,289,356 … +188,135 cars
Ford – Cars: 920,841 … +48,267
Honda – Cars: 837,822 … -5,467 cars
Nissan – Cars: 572,465 … +35,708 cars
D-C Chrysler Group – Cars: 526,823 … +52,704 cars
Hyundai – Cars: 325,958 … +25,864 cars
BMW – Cars: 238,653 … +12,371 cars
Volkswagen – Car: 206,145 … -22,051 cars
Mazda – Cars: 198,072 …+10,394 cars
D-C Mercedes-Benz – Cars: 188,128 … -6,310 cars
Kia – Cars: 146,395 … -9,513 cars
Subaru – Cars: 136,222 … +14,560 cars
Volvo – Cars: 87,611 … -12,273 cars
Mitsubishi – Cars: 86,472 … -22,465 cars
Audi – Cars: 83,066 … +5,149 cars
Suzuki – Cars: 57,772 … +10,663 cars
Saab – Cars: 36,071 … -2,088 cars
Jaguar – Cars: 30,424 … -15,451 cars
Porsche – Cars: 18,326 … +4,970 cars
Isuzu – Cars: (NA)
Land Rover – Cars: (NA)
Total Cars: 7,664,129
TRUCKS: (pickups, SUVs, minivans, vans)
GM – Light Trucks: 2,700,192 … -70,068 trucks
Ford – Trucks: 2,047,129 … -195,525 trucks
D-C Chrysler Group – Trucks: 1,778,010 … +46,105 trucks
Toyota – Trucks: 970,940 … +12,112 trucks
Honda – Trucks: 624,650 … +73,541 trucks
Nissan – Trucks: 504,205 … +54,973 trucks
Kia – Trucks: 129,456 … +15,309 trucks
Hyundai – Trucks: 129,054 … +10,533 trucks
BMW – Trucks: 68,367 … -1,462 trucks
Mazda – Trucks: 60,267 … -15,937 trucks
Subaru – Trucks: 59,780 … -5,960 trucks
Land Rover – Trucks: 46,175 … +10,669 trucks
Mitsubishi – Trucks: 37,523 … -15,149 trucks
Mercedes-Benz – Trucks: 36,293 … +9,121 trucks
Volvo – Trucks: 35,976 … -3,207 trucks
Suzuki – Trucks: 24,329 …-2,508 trucks
Volkswagen – Trucks: 18,050 … -9,865 trucks
Porsche – Trucks: 13,607 … -4,510 trucks
Isuzu – Trucks: 12,177 … -15,011 trucks
Saab – Trucks: 2,272 … +2,272 (first SUV sales)
Audi – Trucks: (NA)
Jaguar – Trucks: (NA)
Total Trucks: 9,298,452
Total Vehicles: 16,962,581
Notes:
1. GM totals do not include Saab cars and trucks sales.
2. GM truck sales only reflect light truck sales according to GM data, which makes such distinction.
3. Ford totals do not include Jaguar, Land Rover, and Volvo cars and trucks sales.
4. Ford truck sales include all trucks, light fleet and larger GVW truck sales.
5. Daimler-Chrysler Chrysler Group sales appear to include higher GVW truck as well as light truck sales.
6, Hyundai totals do not include Kia vehicle sales.
Here are the January vehicles sales news releases from Ford and General Motors.
Those who appear to take particular delight in slamming Ford and GM should take note of these sales figures. Both manufacturers are reporting sales increases over December, and in some categories, increases sales over Jan 2004 levels.
Ford Motor Company Reports Januaary U.S. Sales Increased 2 Percent.
http://media.ford.com/newsroom/release_display.cfm?release=22481
“Total car sales were 82,710, up 18 percent compared with a year ago.”
“Ford’s new mid-size sedans the Ford Fusion, Mercury Milan, and Lincoln Zephyr continued to gain momentum. Combined sales for the trio totaled 14,714, up 25 percent compared with December. In contrast, Ford estimates U.S. industry sales declined 20 percent from December to January, reflecting historical seasonal patterns. January’s sales for the new mid-size sedans translate to an annual sales rate of 220,000 well above Ford’s original estimates.”
“Ford’s F-Series truck, America’s best selling vehicle for 24 years in a row, posted January sales of 52,771 up 7 percent. Sales for most other light trucks declined.”
The Ford Five Hundred (up 32%), Mustang (up 9%) and Freestyle (up 13.7%) models are also selling well.
—-
GM Reports 296,003 Deliveries in January, Up 6 Percent
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=74&docid=22705
“General Motors dealers in the United States sold 296,003 new cars and trucks in January, up 6 percent compared to the same month a year ago. Car sales were up 15 percent and truck sales were comparable to year-ago levels (-0.5 percent).”
“GM’s January deliveries were led by a 23 percent increase in full-size sport utility sales. Chevrolet Tahoe, which had a 53 percent sales increase, paced large utility deliveries. Sales of the all-new 2007 Tahoe are off to a strong start, and production of GM’s other all-new full-size utilities, GMC Yukon and Cadillac Escalade, is ramping up.”
“Small utility deliveries rose 76 percent, led by continuing strong sales of the Chevrolet HHR and Saturn VUE. HHR had its second-best monthly sales since its launch. The new VUE, which posted record January deliveries (up 39.5 percent) drove a 22.5 percent sales improvement for Saturn. This was the eighth consecutive month of year-over-year sales gains for VUE.”
“GM continued to experience strong sales of its luxury vehicles with Cadillac, HUMMER and Saab all posting January sales increases.”
“January luxury car deliveries posted a 24 percent gain. Luxury car sales were paced by Cadillac DTS, with deliveries more than double year-ago sales for DeVille, the vehicle it replaced. DTS achieved its second-best sales month since launch, and CTS set a new January sales record (up 6 percent), driving Cadillac to a 5 percent sales improvement. Saab’s 34 percent sales gain was paced by the 9-3, which achieved solid sales results, posting a 35 percent improvement over year-ago levels.”
GM SUV sales, other than Tahoe, Suburban, and Trailblazer sales, appear to still be a major problem. Car sales, on the other hand, are looking much better. In addition to the GM quotes noted above, Buick’s LaCrosse and Lucerne sales look strong, as does most of the car line up at Chevrolet. All strong. Pontiac sold 15,340 G6 models, and 11,903 Gran Prix models, along with 1,990 Solstice models in January. Pontaic achieved a 53.8% increase over the January 2004 sales level.
My morning paper asserted that fleet sales were heavy during the last month. This takes a bit of the shine off the GM performance, particularly.
Suresh and I have talked of this often, but I don’t believe that it is widely understood. Domestic manufactured (GM, Ford, Chrysler) cars depreciate much more rapidly than the two big Japanese brands, Toyota & Honda. As a result, you should almost never buy a US Car new and you should almost never buy a Japanese car used. I was reading an article last night over at Econbrowser.com, and they completely miss the point.
Let’s take an example that’s near and dear to my heart (because these are two cars which I’d consider buying, and for which I’ve shopped): the 2003 Ford Crown Victoria and 2003 Toyota Camry 4 cylinder LE. Now, I know these cars aren’t competitors in market segment, but they’re two cars that I would buy for various reasons.
2003 Crown Victoria LX MSRP: $27,175. Current NADA Book: $13,800
2003 Toyota Camry LE MSRP: $19,800. Current NADA Book: $16,325
For NADA book values, click here.
Although the 2003 Camry cost over $7,000 less than the 2003 Crown Vic, it is currently worth $2,500 more!
So, let’s talk about the difference in depreciation. The Ford depreciated $13,375, or $371.52/month. The Toyota depreciated $3475 or $96.52/month.
If I were to buy the Ford new, it would cost me an additional $275/month in depreciation alone! This, my friends, is outrageous!
Say what you will about how Detroit have managed its business, but the bottom line is, depreciation is killing them.
Another item to remember is this: many financial pundits will tell you it’s smart to buy a used car– you’ll save lots of money. NOT TRUE! If you’re buying a “smart car” (meaning a vehicle with low depreciation), you’ll buy new!
Dave, depreciation is highly dependant on a multitude of variables. Mileage far and away is the most significant factor. On the used car lot people will line up to buy a tired old 1999 with “Only 39,000 miles”. A 2005 with 50,000 miles is hard to sell, unless it seems REALLY cheap. Some domestic models do pretty well(Fullsize trucks particularly diesels) In general you are right that if you have a Ford or Chevy next to a Honda or Toyota with the same model year and miles the import will retain a higher % of MSRP. The domestic, however, probably sold for a much lower % of MSRP originally. One and two year old models are highly equipment sensitive. Older vehicles resale values are largely a product of mileage and condition.(By the way, as an old used car guy I can tell you the Crown Vic has always sucked for resale)
“My morning paper asserted that fleet sales were heavy during the last month. This takes a bit of the shine off the GM performance, particularly.”
Agree, up to a point. Fleet sales, though, are strong every January. And such sales are not limited to GM and Ford. So, gains over Jan 2004 sales also included gains with commercial customers, which could be a good economic sign.
GM advised in follow up remarks that it is targeting a ten percent reduction in sales to rental companies during 2006.
Many auto manufacturers, including Asians, sell to commerical companies and municipal/county public entities.
Change in national fleet sales:
“The Big Three sold 55,000 more vehicles to fleets in January compared to last year, in part because of rebuilding efforts in the Gulf Coast, Pipas said. He said fleet sales will fall as the year goes on and predicted they will be flat or up slightly for all of 2006.”
— Ford’s U.S. sales analysis manager George Pipas.
Actually, I am a bit surprised that any of the auto manufacturers posted year-to-year sales gains in January after December’s performance.
Some of the Asian sales gains for January were strong. Honda rebounded slightly, too.
The 2005 sales summary posted above should clear up some of the questions regarding overall performance. While Toyota is obviously gaining significant ground in car sales, the same is not true for Honda. Perhaps Hyundai is capturing some of the normal Honda sales along with some portion of sales that would normally flow to Toyota. The Hyundai Azera upscale model should cut into sales by all manufacturers, including Toyota (Toyota and Lexus) and Nissan. The Azera’s appointments based on its price point are hard to beat.
I’m impressed that Ford sold 48,367 more Ford, Mercury, and Lincoln brand cars in 2005 than 2004. But Ford’s truck sales should be a major concern.
Daimler-Chrysler’s Chrysler Group is also on the move, with strong gains in car and truck sales. Not sure I really understand why, considering that its car fleet is primarily a niche market group and its trucks certainly don’t achieve great mpg ratings.
Chrysler Group, Honda, Nissan, Hyundai, and Kia (owned by Hyundai) appear to be the prime percentage growers in the truck/SUV segment. Toyota gained, but not much of a move compared to the other gainers.
Not sure what GM will do to turn around its car sales, considering that many new models were introduced to the lineup. GM will likely continue to do well with its large SUVs. But some of the truck sales weakness is in its small SUV and pickup lineup, many models of which are new, improved entries.
Perhaps Rick can shed some light on why GM is having difficulty in its car lineup and small trucks market. The standard poor quality arguments hold no water from a factual comparison basis. The quality of these products is pretty good, so the problem may focus more on other factors.
That should read “Ford sold 48,267 more Ford, Mercury, and Lincoln brand cars in 2005 than 2004.”
FWIW, I think this is a regional thing, but in SoCal people tend to go to GM for SUVs and elsewhere for cars. That mental association spells trouble.
I think the primary issues holding back GM car sales are styling and image. When Bob Lutz called Buick and Pontiac “damaged brands” he was absolutely right even though it made the other leaders at GM cringe. People perceive some prestige when they opt for a foreign car.(Just like your imported Spanish tile floor) The Pontiac G6 and Buick Lucerne are pretty capable competitors in their segments but lack the brag about factor. Chevy fortunately has a rock solid loyalty factor(Cobalt, Malibu, and Impala sales all up) and Cadillac(cars up 33%) has the “In your face” luxury niche. Saturn needs some new cars which are on the way, and I don’t know what the heck GM is planning to do with Saab.
“Fleet sales, though, are strong every January. And such sales are not limited to GM and Ford.”
Yes, but don’t mistake that for what it isn’t. Toyota and Honda have very very little fleet sales, because they don’t need to sell their cars at a big discount to get them off the lots.
“While Toyota is obviously gaining significant ground in car sales, the same is not true for Honda.”
Honda doesn’t have as wide a line-up as Toyota. I would guess that has a lot to do with it.
Saturn needs to be repositioned as a Toyota/Honda clone. I think the fact that it has been drawn back into the GM marketing envelope does it great damage.
Saab is a sad story. They used to be funky and unique, now they sell rebranded subarus and chevy SUVs. I’d say put the funk back, or kill the brand.
GM and Ford tend to soak up excess capacity with fleet sales, which has the unfortunate side effect of lowering the trade-in values for regular customers.
When my wife found out that GM had killed the trade value of her Malibu by dumping them on rental firms she promptly traded it in on a Toyota….we won’t be fooled again… I think is the lyric.
MG — “Fleet sales, though, are strong every January. And such sales are not limited to GM and Ford.”
M1EK — “Yes, but don’t mistake that for what it isn’t. Toyota and Honda have very very little fleet sales, because they don’t need to sell their cars at a big discount to get them off the lots.”
save the rustbelt — “GM and Ford tend to soak up excess capacity with fleet sales, which has the unfortunate side effect of lowering the trade-in values for regular customers.”
I believe that fleet sales are a mainstream component of a growing number of automobile manufacturers in the U.S. and other nations. Considering that the commercial fleet sales client qualification typically kicks in at ten units, it’s not unusual at all for corporations and companies to purchase/lease small fleets of Mercedes-Benz, Toyota, Nissan, or Volvo cars for its employees. Each manufacturer offers such programs along with Ford, GM, Chrysler Group, and other manufacturers. In the work truck segment, it appears that the majority of the manufacturers are attempting to capture a growing share of that commercial fleet market.
While GM and Ford are pulling back from certain types of fleet sales in the U.S., and that effort is showing up in their loss of market share, it’s clear that other auto manufacturers are filling the void. Not to be overlooked is the fact that some loss of market share is attributed to such pullbacks. Same story for some gains in market share.
In order to understand movements in fleet sales, I break fleet sales down into truck and car segments, followed by a separation between commercial fleet and rental fleet sales. I have not had great success in finding details of manufacturers fleet sales each month. I suspect that some of the fleet sales information is being surpressed unless pursued by the news media.
Commercial fleet sales are not necessarily undesirable, whereas rental fleet sales are not high on the list of manufacturer sales. The benefit of commercial fleet truck sales is, of course, presence, but also maintenance revenues for the servicing dealers.
Anyway, it is clear that the commercial fleet sales of Asian manufacturers should grow. And that was the case last Fall.
Note Wagoner’s remarks.
Fleet sales give automakers a boost in October, but at a price
November 4, 2005
http://www.nctimes.com/articles/2005/11/05/business/news/21_49_4811_4_05.txt
DETROIT — The October auto sales rate was at its lowest level in seven years, but the results could have been even worse if automakers hadn’t gotten a significant boost from sales to corporate and rental-car fleets.
Industry analysts say that’s a disappointment for U.S. automakers, who have been trying to reduce their fleet business because fleet cars sell at a lower price, which hurts resale values.
“Obviously, we never like to see that,” said George Magliano, director of auto research for the consulting firm Global Insight. “Putting cars and trucks into the fleet in a big way is a stopgap measure. They don’t make a lot of money on those cars.”
But some automakers said the trend isn’t all bad. DaimlerChrysler AG’s Chrysler Group said retail sales to individual consumers fell by double-digits but were propped up by a 119 percent surge in fleet sales to corporations, who lease vehicles for their executives and sales staff. Fleet sales made up nearly 40 percent of Chrysler’s October sales.
Gary Dilts, Chrysler’s senior vice president of sales, said October was Chrysler’s best corporate fleet month ever. He said companies are attracted to Chrysler’s current offerings, such as the Chrysler 300 sedan and the Dodge Charger.
Dilts said corporate business is better than selling vehicles to rental companies, because Chrysler makes more profit on its corporate business. Typically, two-thirds of a company’s fleet business is to corporations and one-third is to rental agencies, but Chrysler has been tilted more heavily toward rental car agencies until now, Dilts said.
“While fleet business sometimes gets a bad name, there is very good fleet business,” Dilts said.
General Motors Corp. had a fleet share of 32 percent in October. That’s well up from its third-quarter average of 25 percent, Merrill Lynch analyst John Casesa said in a recent note to investors. Ford Motor Co. said its fleet percentage was flat for the year at 33 percent, up from its third-quarter average of 18 percent.
Art Spinella, president of CNW Marketing Research Inc., said fleet sales tend to surge in February, June and October, so the increase in fleet sales last month wasn’t unusual.
Spinella said that while corporate fleet business is more profitable, no automaker likes to have more than around 15 percent of its sales be to fleets, which typically want vehicles at a big discount with fewer options like leather seats.
Spinella said GM, Ford and Chrysler were pulled into the fleet business in the 1990s because rental car agencies, corporations and the government could get more cars for their money from domestic automakers. For example, if a corporation could get 10 Ford Taurus sedans for the price of eight Toyota Camrys, it would take the Tauruses.
But those sales eventually hurt resale values, and GM and Ford have been trying to pull away from fleets. In an interview with The Associated Press last month, GM Chairman and CEO Rick Wagoner said GM is making a concentrated effort to get out of the rental-car business even though it has hurt sales this year. GM’s U.S. sales were down nearly 3 percent in the first 10 months of this year.
“Really, a lot of our share loss this year is a strategy to — and I think it’s the right thing to do — lessen the daily rental fleet,” Wagoner said.
At the same time, fleet managers have been looking beyond domestic automakers to fill their needs because they want vehicles with better resale values. Toyota Motor Corp., Honda Motor Co., Nissan Motor Co. and Hyundai Motor Co. all have increased their fleet sales in the last few years, Spinella said.
“A lot of Hyundais are going into fleets right now,” Spinella said. “Koreans are being dragged into it, just like GM, Ford and Chrysler were dragged into it years ago.”
As an example, here is Toyota’s fleet sales program and vehicle availability.
Toyota (USA) – Fleet Sales
http://fleet.toyota.com/html/ted.asp
Toyota (USA) – Available Fleet Vehicles
http://fleet.toyota.com/html/vehicles_home.asp
Avalon, Camry, Camry Solara, Corolla, Prius, 4Runner, Highlander, Land Cruiser, RAV4, Sequoia, Sienna, Tacoma, Tundra, and Matrix
Toyoto Fleet Sales – Commercial and Government
http://fleet.toyota.com/html/PandP_commercial.asp
Commercial Accounts qualification:
– A qualified Commercial Account is defined by Toyota Motor Sales, USA, INC (TMS) as any company that maintains ten (10) or more units in service.
– All utility and government agencies are considered qualified commercial accounts.
– No minimum purchase volume is required.
– Commercial accounts must maintain the cars in service for a minimum of 6 months or 12,000 miles, unless otherwise required by specific program guidelines.
Toyota Fleet Commercial Vehicle Availability
http://fleet.toyota.com/html/vehicle_availability.asp
Includes Scion TC, Scion XA, and Scion XB, as well as 4Runner V6, 4Runner V8, Avalon, Camry, Camry Solara, Corolla, Highlander, Highlander Hybrid, Matrix, Prius (limited availability), RAV4, Sequoia, Sienna, Tacoma, Tundra V6, and Tundra V8.
Toyota Tundra Work Truck Commercial Fleet Promotion and Comparison
https://fleet.toyota.com/html/documents/tundra_work_truck.pdf
Comparing the 4.7 liter i-Force V8 Toyota Tundra to Ford F-150, Chevrolet Silverado, Dodge Ram 1500, GMC Sierra 1500
Toyota Fleet Sales – Promoting the 2007 line up
https://fleet.toyota.com/html/default.asp
* Currently promoting the 2007 Camry for fleet sales)
Toyota Fleet Sales – Rental Car Program – Rent A Car Risk and Long Term Daily Rental
http://fleet.toyota.com/html/PandP_Rac.asp
– An account (National Commercial Leasing/Rent-A-Car Companies) or Regional Fleet Account (such as Rent-A-Car Companies and licensees, corporate accounts) must be pre-approved by TMS Fleet Department.
1. Corporate RAC Accounts:
– Corporate Rent -A -Car companies that maintain one hundred thousand (100,000) or more units in service and which orders, during the current year, a minimum of five hundred (500) Toyota’s.
– Corporate RAC accounts must maintain the cars in service for a minimum of 6 months or 12,000 miles, unless otherwise required by specific program guidelines.
2. Licensee Accounts/ Independent RAC:
– Licensed Rent-A-Car companies that maintain ten (10) or more units in service and which orders, during the current year, a minimum of five (5) Toyota’s.
– Licensee/ Independent RAC accounts must maintain the cars in service for a minimum of 6 months or 12,000 miles, unless otherwise
required by specific program guidelines
3. Long Term Daily Rental Accounts:
– Daily Rental companies that maintain one hundred thousand (100,000) or more units in service and which orders, during the current year, a minimum of five hundred (500) Toyota’s.
– Long Term Daily Rental accounts must maintain the cars in service for a minimum of 9 months.
Here are DaimlerChrysler’s various fleet sales programs.
DaimlerChrysler
DaimlerChrysler Chrysler Group Fleet Operations
https://www.fleet.chrysler.com/fleetcda/CDAController
Record Sales for DaimlerChrysler Commercial Vehicles in 2005
http://www.daimlerchrysler.com/dccom/0,,0-5-7145-1-583064-1-0-0-0-0-0-243-0-0-0-0-0-0-0-0,00.html
DaimlerChrysler Mercedes-Benz Fleet Program
http://www.mbusa.com/brand/ecp/index.jsp
http://www.mbusa.com/brand/ecp/programinfo/overview.jsp?MBSkin=ecp&menu=2_0
DaimlerChrysler Mercedes-Benz Car Fleet Newslettern (an example)
http://www.mbusa.com/media/downloads/main/ecp/newsletters/Summer2005.pdf
DaimlerChrysler Mercedes-Benz Commercial Vehicles
http://www.daimlerchrysler.com/dccom/0,,0-5-179998-1-180000-1-0-0-0-0-0-36-7163-0-0-0-0-0-0-0,00.html
Nissan has just formalized its fleet sales program, though fleet sales have been ongoing at dealership leve for some time.
Nissan Fleet Buying
http://www.nissanusa.com/buying/FleetBuying/0,,,00.html
Nissan Forms New Division Called Light Commercial Vehicle (LCV) and Fleet
January 17, 2006
http://www.fleet-central.com/af/t_inside.cfm?action=news_pick&storyID=22158
Summing up Movie Guy’s 800 lines:
Toyota sells some cars to fleets too. I don’t know how many.
Meanwhile: http://www.autoblog.com/2006/02/05/fleet-sales-power-detroits-january-performance/#comments
Anybody who thinks the fact that Toyota sells greater than 0 cars to fleet customers is remotely relevant to GM and Ford having to dump cars by the hundreds of thousands on rental car agencies is remotely relevant, please speak up.
Again, if Toyota was dumping cars on rental fleets, you’d see them when you went to rent a car. We all know the score here.
Let’s put a few myths to bed regarding foreign auto manufacturers and fleet sales, including rental vehicle sales.
Those who do not understand the importance of fleet sales and, in particular, rental sales obscure the fact that such sales represented over 2,833,700 new vehicle registrations in 2004. Commercial fleet and rental fleet markets are most assuredly worth pursuing under the right product offering and pricing. The market segments are huge.
Manufactures engaged in commercial fleet sales and rental sales aren’t dumping the vehicles, but rather capturing major markets in automotive sales on the order of 21.36% of total car sales and 13.71% of total truck sales in 2004. Volume sales plus the supporting routine vehicle maintenance programs clearly make such sales viable and profitable. Suggesting otherwise ignores the role that Wal Mart plays in the general retail industry. A supplier doesn’t want to sell its product to Wal Mart, fine. But that supplier chucked huge volume sales with smaller profit margins in the process. That approach will work for a few niche or luxury suppliers, but not most. A similar principle applies in auto sales, particularly when routine auto maintenance market share is factored into the larger forward looking sales picture.
Foreign auto manufacturers and fleet sales in 2004 based on vehicle registrations:
In 2004, car and truck sales by foreign auto manufacturers accounted for 17.9% of rental fleet sales, 12.6% of commercial fleet sales, and 2.2% of government fleet sales.
In 2004, car sales by foreign auto manufacturers accounted for 22.1% of rental car fleet sales, 25.1% of commercial car fleet sales, and 4.1% of government car fleet sales.
In 2004, pickup truck sales by foreign auto manufacturers accounted for 1.5% of rental pickup truck fleet sales, 3.6% of commercial pickup truck fleet sales, and 0.3% of government pickup truck fleet sales.
In 2004, van sales by foreign auto manufacturers accounted for 6.0% of rental van fleet sales, 6.2% of commercial van fleet sales, and 1.5% of government van fleet sales.
In 2004, SUV sales by foreign auto manufacturers accounted for 13.4% of rental SUV fleet sales, 14.8% of commercial SUV fleet sales, and 2.0% of government SUV fleet sales.
In 2004, medium-duty truck sales by foreign auto manufacturers accounted for 9.7% of rental medium-duty truck fleet sales, 10.5% of commercial medium-duty fleet sales, and 1.1% of government medium-duty truck fleet sales.
Toyota fleet sales? Toyota sold 9.5% of its total car sales as fleet sales based on 2004 vehicle registrations, 80.03% of which were rental car fleet sales. Toyota sold 2.9% of its total truck sales as fleet sales, 48.73% of which were rental truck fleet sales.
Source: R. L. Polk