In another thread, Eric made a post that I found intresting:

Then I thought about alot of other pressures on the automobile market that simply doesn't have anything to do with the economy.

Here's what I mean...Food for thought:

Everyone's focus is on increased sales over the previous year.

Cars tend to last far longer today than they ever have in history, meaning people can hold onto their vehicles longer.

Most everyone agrees the US car market as a whole can't expand much (if any) more.

New cars, and car makers are showing up on the market almost monthly.

Would it stand to reason that at some point or another, the car market for any maker will decrease. Not because of bad vehicle or bad management, but simply because a growing number of choices, a stagnant size of the marketplace.

It would also stand to reason that perhaps the focus today shouldn't be on sales increases over the previous year, but clearing more earnings for the vehicles sold. Finding more efficient and streamlined ways to develop and manufacture the best vehicle possible would seem to be far more important to a company's survival than simply beating last years numbers.

Sure, the financial mags and papers will focus on the negative sales figures over the previous year and say things are bad for that company. But, lost in all of that is the fact that the company still made money that previous year even if sales volume was lower.... and the year before that..... and the year before that as well, with sales volumes far lower than what might be expected today.

 

Isn't that exactly what GM has been doing? (lower volume at higher margin with less reliance of fleet sales.)

 

Not to mention GM typically does not do quite as well in the first part of the year, but closes the year with a firestorm of sales and market share gains?

GM has done better in the second part of the market for several years. Not to mention, GM predicted this downturn in sales.

Wagoner just this year said the second part of the year would be better and, also said the fourth quarter would be better for the company.

Is the market reaching its limits? Yes, because the market is saturated with new models and new automakers.

What are we going to do in 5 or 7 years when the Indian automakers come here?

 

I was going to say this should be "no duh" obvious, but General Motors has thrown tons of money at fruitless attempts at gaining marketshare.

When was the last time North America was profitable for GM? Early 90s, maybe? Ignore the people who day-trade based on sales figures, fix the fundamentals, and stock will reflect it.

 

All good points, and I think GM management is seeing the light of your wisdom.

Still, I have to play devil's advocate.

The North American pie may not be growing, but it's still a huge pie.

Also, you don't want all those new guys to be getting in the market at your expense, and that's basically been the GM's problem over the past twenty years. Nearly everyone (save Ford) is growing or at least holding. Since, as you say, the pie isn't getting any bigger, it's quite clear these sales gains are coming directly from GM's pocket.

I'm just concerned that GM, in pursuing the new "profit first" strategy does not forget that they still need to move a crapload of metal. Every strategist seems to say GM could be profitable at about 20 percent share. But they need to make sure that they don't end up bottoming out at 15 percent.

 

These are all signs of an overshot marketplace - the manufacturers are all capable of providing more quality and features than consumers demand (or, rather, can afford), and thus, the market is ripe for a disruptive force in the form of lower-tech lower-cost choices. In these situations, the new entrants usually win, as they are better positioned to provide low-cost product.

GM may be positioning itself to be profitable with less market share, but how low can they go? Five years ago, the goal was 30%; now the company is leaner and meaner, but have they reduced their fixed costs enough to be profitable with 17-18% of a 17M/year market? What if that same share is maintained in a market that shrinks to 15M/year? What if the market shrinks and market share drops further? Don't assume that GM's mantra of "less volume, more profit" puts them in a good position in a shrinking market - it'd be damn painful.

At some point, I see the government stepping with mandatory used-car "safety inspections" to force people into buying new cars every five years or so. Such policies are already commonplace in Europe and Asia, and they make it damn near impossible to keep even a well-maintained older vehicle on the road. Our neighbors to the south could absorb our "unsafe" older vehicles, and the new-car market would be propped-up for a while.

 

I don't see how this would do anything...the following would continue to increase>>>
<<<....it would only accomplish two things, discard old vehicles, and put 90% of those owners on the bus. i don't know how many new car sales that would translate to, but if a 1/4 of those people without cars could not get to work anymore, i'm pretty sure we'd take a bigger hit as a country than if those cars weren't moved.

 

As far as cars lasting longer, I don't see that really denting the car market. Look at how many people lease cars. Americans love new cars, and we can afford to have them all the time. Even here on a college campus, my 2000 Grand Prix is one of the older cars in the parking garage. We have a throwaway culture.

 

I agree, a lot of people just don't want an older car (I they can afford newer) Sure a car will last 10 years+, but many want new car reliability and warranties. Technology and safety change pretty rapidly also. No built in GPS or side airbags in those late 90's cars.

 

A comparison could be the PC market....we've gotten to the point, in the US at least, where pretty much everybody that wants a PC has one, and therefore growth has leveled off, and the game is now to compete over market share in a near-flat market. Who can steal who's customers...

 

Isn't that sad? I drove a clapped out 86 toyota truck (and my 67 C-10 my senior year ) to Clemson from 99-04 and the MAJORITY of college students (who supposedly have no money, but mommy and daddy do) had cars that were only a couple years old and a lot were brand new. I'm not talking kia's either. Trucks, SUV's, BMW's etc... Oh well. My 40 year old truck is cooler anyway

 

Well, I have no idea ultimately what the numbers will be, but the important thing is that GM projects them correctly and cuts down their business to suit. Largely GM's problems stem from over-optimistic goals and projections and the resulting massive over-capacity. Which has lead to a marketing program full of rebates and fleet sales that practically screams "We're undesirable!"

Fixing that is going to be ugly, but it's really a do-it-now or do-it-later type of problem. And I don't see how they can really fix the "perception issue" with their products until they give up on the idea of churning out hundreds of thousands of cars that nobody really wants.

 

I agree, the ability to create new and better cars is what this country lives on. Having better, faster, hotter things.
I think its how much of the market can you eat up? If there is a limit to number of sales a year, how much can GM get a year.
Gaining retail sales, which is where GM has shifted its attention, is what is needed at this point. How to get Mr. and Mrs. Smith to drop Camry and Accord for Malibu and Aura.
Bringing the hot new thing, even if its for a moment, will be enough to swing momentum. Just look at 300. It got fantastic press, but now its super commonplace and people are moving on to the next thing.