Poor poor car companies

GM hopes to end US sales slide in 2007

General Motors' decline in US sales has "bottomed out" and the company hopes to end a four-year slide in US market share during 2007, marketing chief Mark LaNeve said yesterday. GM is counting on new sport-utility vehicles and redesigned cars, pickups and SUVs to stop the fall, LaNeve said. "If we grow a 10th of a point next year, I'll be thrilled out of my mind." GM ceo Rick Wagoner's success with new models through 2007 will determine whether he will rely more on increased revenue or on shedding additional workers and plants to restore profit. He's already identified $9 billion in cuts after posting losses of $13.7B over the last eight quarters. That leaves about $7B, in some combination of reduced costs and increased revenue, to meet his financial targets. GM will get about 40% of its sales next year from such new models as the Chevrolet Silverado pickup, GMC Acadia and Saturn Outlook SUVs, and redesigned Cadillac CTS and Chevrolet Malibu sedans. They have enjoyed rising sales as dealers stocked inventories of new large sport utilities like the Chevrolet Tahoe, though production now is running ahead of demand. GM said Wednesday that it was shutting three factories that build large SUVs for two weeks in January.

Wagoner has said that GM isn't out of the woods. He and the automaker are riding higher than they were 19 months ago and in the last year, Wagoner has accelerated cost-cutting and is in the midst of an effort to reduce GM's fixed costs by US$9B annually, aided in part by the agreement of 35,000 United Auto Worker union workers to leave or retire early. A showdown with the UAW and unexpectedly high steel costs will likely dog GM in the coming year, however, according to some Wall Street analysts who sat down with Troy Clarke, GM's head of North America auto operations, Wednesday. GM is poised to post peak earnings on the back of its new products and hefty labour cost reductions, according to a note from Credit Suisse analyst Chris Ceraso, part of a group meeting with Clarke. GM's return to profitability in 2006 will also serve to bolster the union's position that they have conceded enough already, Ceraso said in a note yesterday. From GM's point of view, however, the cost structure for domestic car makers is still out of whack with foreign manufacturers, like Toyota. Until this is resolved and more concessions are given, GM and its peers will remain at a disadvantage. "As it stands today, we think the UAW has a stronger case than the Big 3, and thus we are not anticipating meaningful concessions to be awarded next year," Ceraso said. Thomas Weisel's Scott Merlis said GM focused more on the impact of higher steel costs than in previous discussions. GM is faced with renewing some steel contracts at today's prices, the analysts said, which are much higher than two or three years ago when many of these contracts were likely inked.
(National Post, Montreal Gazette 061208)

Beleaguered Ford sees US sales plunge

Embattled Ford slipped another notch last month as its sales fell an unexpected 10% in the US market, and Toyota surpassed it on a monthly basis for the second time this year. The gloom out of Detroit was dissipated in Canada as sales in this country rose 3% last month, partly because of strong November sales at Ford of Canada. “We missed our own internal sales target for the month,” George Pipas, Ford's US sales analysis manager, said yesterday during a conference call with analysts and reporters. The slide in Ford's US sales last month allowed Toyota to jump ahead of it into second place in the sales rankings. Ford actually fell to fourth spot behind DaimlerChrysler when sales of Mercedes-Benz models are added to those of the Chrysler group. There was more bad news for Ford, as Merrill Lynch analyst John Murphy reiterated his sell recommendation yesterday on the company's shares. “We believe that the current planned reduction in capacity will need to be dramatically accelerated, and cut deeper, to keep up with or even get ahead of the rate of Ford's market share declines,” Murphy said in a note to clients. Ford sales in November, which includes Lincoln and Mercury but not Volvo, Land Rover or Jaguar, were 167,545 in the US last month, compared with 187,199 last year. If Ford is seeking examples of where things are going well, it can look to Ford Canada, which posted a 15% jump in sales last month on the back of an 86% rise in passenger car sales. Ford's Fusion small car made the list of top-10-selling cars in Canada in October for the first time, joining fellow newcomer Dodge Caliber, according to DesRosiers Automotive Consultants. The strong November added to what has been a solid year for Ford in Canada with an 8% gain in the first 11 months of the year. Ford has jumped back into second spot, although it has been a three-way battle with DaimlerChrysler and Toyota for the second-through-fourth spots for much of the year, behind market leader GM. The Ford gain offset GM's 14% slide and helped propel sales in Canada to 123,755 from 120,495 a year earlier, which was the best November since 2002. Toyota's sales fell 2% last month, ending a strong run of consecutive monthly increases. Despite the decline, Toyota sales in Canada for all of 2006 surpassed the record high hit last year. Gains of 8% by the Chrysler group and 17% by Honda pushed them ahead of Toyota and into third and fourth spot respectively.

In related news, Ford announced another production cut on Friday, mirroring similar plans at GM. Ford will cut output in Canada, the US and Mexico by another 15,000 this current quarter. Ford plans to build 620,000 vehicles in North America, 22% less than the 793,000 it produced on the continent in the same quarter last year. The automaker has suspended production of its Freestar minivan in Oakville temporarily to focus on two new models. "Ford is still going through a period of adjustment and I don't think it's finished yet," said Richard Cooper, executive director of J.D.Power & Associates in Canada. "They still are very vulnerable" to their dependence on bigger trucks and SUVs. Half of the new vehicles Canadians are buying now are so-called entry-level products, essentially the cheapest and smallest cars and trucks you can buy. That's been a boon for Honda and Toyota in particular.
(National Post, Globe and Mail, Wall Street Journal 061202)

Woowee! The Big 3 are hoping for a happier 2007, but aren't we all? GM's taking a big gamble that they're going to be able to pull themselves out of their current situation riding on the sales of their gas-guzzling behemoths, which they feel are still very much in demand. Can you imagine what's going to happen if fuel prices spike again in 2007? It's a thought I don't want to dwell on for too long. For Ontario and Michigan, it could be a very, very sad 2007 indeed. Of course, things could get a lot rosier for the car companies as well. If fuel prices stabilize, they might be able to see themselves returning to solvency! I'm still pessimistic about the rosy reports on the state of our fuel supplies. I think excess capacity is gone and the slightest change in the status quo could send prices skyward.