Still, at some price point, the GM/Chrysler cost advantage gives them a compelling value proposition. Have the various subsidies gotten them to that point? Well, I kind of doubt it. On the other hand, their sales are apparently doing surprisingly well in bankruptcy.
One of the biggest fears of a GM bankruptcy filing -- a collapse of revenue -- appears to not be as prominent an issue as originally thought.
Car buyers appear undaunted by GM's bankruptcy, assuaging one of the auto maker's biggest fears heading into Chapter 11. Early signs point to stable demand for GM cars and trucks since the company filed for Chapter 11.
Mr. Henderson said June retail sales are tracking higher than May. "June sales are moving along just fine," Mr. Henderson told reporters at a summit in Detroit. Sales to rental and other fleets are down from last month, he said. "We're very gratified for the support of dealers and customers that we've received through this."
Perhaps people are taking their patriotic duty to go out and buy an American car seriously.
Either that or people figure they have a choice between supporting GM at the dealership or supporting them every April 15th. It's like an owner's discount.
Personally though, even if I were going to buy American as a point of principle, it'd be a Ford. Support the one company that hasn't turned into a pack of leeches.
I don't understand why anyone would buy a new car in the first place.
Have you ever needed a minivan? We were dedicated certified used car buyers until we need a minivan -- the used car stock for minivans is atrocious. Apparently people hold onto them forever, and we weren't really keen on buying a 1998 Windstar...
Fair enough.
Be glad people do, or there would be no used cars to buy.
There are lots of reasons people buy new cars - some people just like new cars, some people don't feel knowledgeable enough to evaluate a used car, some people want a model that's hard to find used. It's cheaper to finance a new car.
My current vehicle - a Ford Ranger - was bought new - at the time it had a huge amount of factory rebates, so the price I paid wasn't all that much more than what a used one with some miles on it would have, and I was able to find one configured almost exactly the way I wanted it. I plan on keeping it for a number of years, so I'll do OK.
I buy new cars so I know that others haven't created perpetual maintenance problems I won't be able to resolve. Then I buy the extended warranty, because I have had my Jeep go through three engines, a transmission, and a master cylinder in five years. Next, I keep the machine for ten years to get my value out of it, and I do the preventative maintenance required. I have a home at 6200 feet of elevation, at the top of a private road which is covered in snow 50% of the year. My car has to work.
Then I buy the extended warranty, because I have had my Jeep go through three engines, a transmission, and a master cylinder in five years....My car has to work.
In that case, I hope (in all non-snarkiness) that you've learned your lesson: Never, ever, buy a vehicle with a Chrysler drivetrain. Chrysler vehicles are for pleasure use only. It took exactly one car to teach me that lesson, and now I'm moving back over to Toyota.
I buy new cars because I figure that a late-model used car is likely to have something wrong with it, or at least to have been treated badly. I keep cars for about ten years, on the average, so the supposed "loss" when you drive it off the lot doesn't much affect me, since I'm not going to sell it anyway. Even so, I lose some money doing it this way, but I can afford it. Buying a used car is a gamble; I'm not much of a gambler.
"Buying a used car is a gamble; I'm not much of a gambler."
Exactly! I just bought a new Honda, even though I surely could have gotten a good deal on a Chrysler, because reliability is important to me. There's a risk/return tradeoff, so an analysis based only on initial price won't capture everything.
Almost every car I have ever bought has been used. I just assume that I will spend 5-10% of the purchase price going through it in the first couple of weeks fixing things - and factor that in. On the more expensive used purchases, I have had a mechanic go through it first before I paid.
I have had very good luck with this approach so far.
It's a pointless question.
GM and Chrysler aren't in a competitive marketplace. That is to say ... the US car market isn't a playing field where the best car gets the most sales.
The government will end up forcing all the other manufacturers out, so in the end GM and Chrysler will dominate. But that's different than saying they were competitive.
The government can't have Ford or Toyota, for example, selling better cars for less money than GM and Chrysler. That would be bad for the taxpayer, you see.
Lets put it this way: Can DMV be competitive if they don't have the monopoly on Vehicle Registration? Actually no. I do my vehicle registration at my local AAA office because I simply don't have the time to waste on DMV lines.
Now that GM is Government Motors, you think the red tape is going to get better? The whole point of Government Motors is unionized worker, not profit. With that in mind, how can it be competitive.
Don't make the mistake of confusing state and federal regulation. Every state has its own vehicle registration systems. I register mine at the town hall.
Or perhaps they're investing in a vehicle that will have, in the future, some collector value.
Here in rural ME, I've noticed a lot of spiffed-up old Pontiacs for sale on both used car lots and front yards. Ebay and Antiques Roadshow have fine-tuned our second-hand collectable mentality. And people do like to hoard a vanishing commodity.
Or it could just be that buyers can get decent deals on GM and Chrysler vehicles.
Patriotic duty to buy an American car? That's funny. I consider it my patriotic duty never to buy another UAW product as long as I live!
But the greater irony is the one in the post; with gazillions of taxpayer dollars, and all sorts of strong-arming of the usual bankruptcy procedures, these guys will still lag behind the competition.
Amen to that. I'll never buy a GM or Chrysler again.
So, when their sales doing badly, it's because their products are garbage. When their sales aren't as bad as expected, it couldn't be because they have great prices or people like their products or they have effective advertising/sales teams, it's because their customers are on some moronic patriotism kick
IMO, GM deserves zero government support or public sympathy, but they don't deserve this kind of skewed hatred and scorn either. If people are happily buying their products, and GM is playing by the rules, good for them!
Mellow out, man. It was a snark directed at Obama's vaguely Peronistic "buy American" speechtoid. Your detection threshold for "skewed hatred and scorn" is set way too low if something as tame as this triggers Defcon One.
No. He has a point. You see it all over the web. People who have no rational basis for dumping on the products, since they've never owned one and their family hasn't owned one, keep calling them crap. Then they go on sing the praises of every foreign brand under the sun, with the same lack of experience with all those brands. Nobody can have experience with ALL brands.
It's like the stupid Mac vs PC wars. People with little, if any, experience with one complaining about the other. It's irrational and the hatred spewed is irrational.
I'm not talking about people being upset with the bailout, etc. I'm talking about the hatred of the brands themselves.
Going from actual experience, I can only repeat the old platitude: GM cars are crap, GM trucks are worth their price... ummm, heavily discounted price that is :-)
'Course there're exceptions, I'm sure. I'd be disinclined to dump on the 'Vette, at least in absence of actual experience with it.
Maybe once you see it all over the web, you start seeing afterimages of it in places where it doesn't exist?
Just in my lifetime, between immediate and close extended family, I can list at least 30 individual cars and trucks off the top of my head representing the Big Three as well as Toyota, Volkswagen, Nissan, and Mitsubishi. Extend that out further to friends, distant family, church acquaintances, coworkers, etc. and the average person who has some interest in vehicles can probably pick up some anecdotal, but fairly broad, operating and maintenance histories for at least 50-60 vehicles from at least 4-5 discrete manufacturers.
A little time spent with trade publications can expand that further, then maybe throw in some quality time with Consumer Reports (a staple reading item for many people before making a car purchase), and the average person's knowledge of the industry may be marginally more enlightened than you are giving them credit for.
Given the massive sums of money the American and Canadian taxpayers have just handed them, talking about what they "deserve" is laughable. If I wanted to give them money, I would have bought one of their cars.
People buy American cars because they are cheap as hell, and they don't understand Total Cost of Ownership (i.e. a Honda costs more but has better resale value because it doesn't suck). Federal subsidies will only reinforce this pattern.
I recently bought a new minivan and felt that it was my patiotic duty to buy the best product available. Buying from an inefficient, uncompetitive American supplier is a "Make America Weak" approach, since it encourages our companies to slack off.
Look at Japan - Japan's industries that are aimed at exporting are extremely strong and efficient and competitive, some of the best in the world. The industries that are protected and focused on the local market are ridiculously inefficient, some of the worst in the developed world.
Africa has been asking Europe and the US the "how can we compete?" question over and over when it comes to farm subsidies. The solution - you sell your land to the US and EU and then they make sure that they can compete.
"Perhaps people are taking their patriotic duty to go out and buy an American car seriously."
I'd bet it's more the fact that GM and Chrysler forcing or being forced to close thousands of dealerships and said dealerships are having fire sales. Just a guess.
It will take more than an added cost advantage to make them "competitive".
However, on the broader point- profit no longer matters in the case of GM and Chrysler since government does not operate on profit/loss bases. Both can pile up losses from now until someone in the future cuts the lifeline, if anyone ever does.
Yes, but no politicians are going to suggest cutting the lifeline.
They want the votes, see.
Pretty nice little campaign you got going there Senator. Be a shame if something were to happen to it.
My guess is at least part of it is that while gas prices have been going up, they are still not horribly high. Detroit still builds some pretty decent trucks and SUV's, so when gas is
GM's new Camaro has been selling very well, which has probably helped things as well.
that was supposed to say "when gas is less than $3 a gallon, trucks will sell well". Should have used that preview button.
PQ = MV. The price is down. The quantity is up.
This is all anecdotal of course, but I am not certain whether people still like GM and Chrysler cars, or they have just cut prices dramatically.
My wife and I were looking to sell her slightly used 2005 Saturn Ion (40,000 miles) and upgrade to a bigger car. In September 2008 we got a price quote from CarMax (which basically prices based on comparable sales in the local area) and were offered $7,000.
We decided to pass, and went back last week to see what we could get. This time we were offered only $4,000. While it is true that 6 months had passed, and we had put 3,000 miles on the car that doesn't seem to justify the decline in value. We got a couple quotes, checked recent dealer sales, and yep. Our car has declined in value almost as dramatically as the DOW.
We also checked out some brand new Pontiac's for sale, I can't resist a good bargain. Dealers were selling them for below inventory cost, taking a loss to get rid of the financing charges.
All anecdotal, but I don't think people are saying they have confidence in the new GM and Chrysler. I just think they are saying at some price everything moves.
You got hit by the announced closure/sale of Saturn. Demand for the brand drops like a stone. You also had a discontinued model which also effects resale price. If you had bought the Pontiac you would find that its trade-in value in the near future would also be very low.
Earlier this week the Dallas Morning Sun ran a story that dealers in the area were experiencing shortages of both light trucks and larger SUVS from GM and Ford. It was due to reduced production and a jump in demand. If you had been trading in a Chevy Tahoe or a pickup, in the Dallas market, you might have been pleasantly surprised at its value.
That is definitely true, however I thought that the announced sale to Penske (so their will still be Saturn's in the future) and the government guarantee on the warranty would ameliorate some of the affect. But no dice.
I also found it odd that they were trying to sell Ion's with similar age and mileage for between $8,000 - $10,000, although perhaps these stated prices will decline dramatically in the future.
I am still pretty bitter about the whole thing since my wife got the car before we were married, and if it were up to me she would have gotten a Corolla.
As luck would have it, my 06 Corolla with 35K miles, is in the shop getting fixed as I type this. There's this belt that runs all the connected stuff like the alternator, AC, etc and it crapped out. Since it's a belt it's a "wear item" - no warranty. Since it runs everything and has this weird placement, it's gonna cost me a few sheckles.
I will trade you a lightly used 2005 Saturn Ion for it, how about I kick in $2,000?
lc
I don't know how much your factors on the Saturn would really affect things. Yes, Penske is supposed to buy Saturn; but a) it is not a done deal, and b) even if it goes through, Saturn will be a competitor for Government Motors. That is not a good position to be in, since the government regulates the industry and controls the financial system. I also do not know if Penske-Saturn will be a UAW shop, but if it is not the UAW will want it destroyed, and with this regime, what the UAW wants, it gets. The demise of Saturn was one the the demands for bailing out GM.
Secondly, yes Obama personally guaranteed warranties. That guarantee, and $5.00 might get you a latte at Starbucks. Any guarantee by the government is ..... shaky at best. A guarantee by Obama has a fairly short life span. And there is the empirical evidence at hand. Under the lemon laws, new cars which could not be fixed under warranty, because they were irredeemably screwed up, were supposed to be returnable for refunds. If anything should be covered under a warranty guarantee, those should.
In the nationalization process, the pending claims under the lemon laws were specifically disallowed by the government as part of the process. This was months after the warranty guarantee was decreed.
If the market is going to rationally factor in those items, it has to discount them severely.
Subotai Bahadur
Subotai,
There was certainly a bit of wish-casting on my view of the Saturn deal. I mean I was hedged, since I was effectively short the price of the more expensive vehicle we are going to buy, but I was hoping that prices would have held up better.
However, I feel reasonably confident about the Penske-Saturn deal. There doesn't look like a lot of competition for it, and as I understand it it is just a distribution deal. They are going to build the cars either overseas, or via a JV with Nissan-Renault, and he is going to focus on distribution and marketing.
That seems like a pretty good idea to me.
As for competition with GM. I am relatively sanguine about that. I don't have much confidence in the government's ability to execute, and they will have their hands full trying to build tiny econo cars while working with the UAW as a major shareholder. My one worry would be the government flooding GMAC with lots of liquidity and enabling them to offer really attractive financing. That would be a huge advantage.
Lanny
HA ha. Should have taken what was offered. Even if Saturn survived, you still didn't take into account the worst global recession in years. The price people are willing to pay for cars has declined across the board.
That's true, but the car we were looking to buy. A used Lexus RX, has declined in value by more than $3,000 so at least we had somewhat of a hedge.
How gullible is the American public? Very, of course, but even gullibility has its limits.
Cadillac is a good car. As good as a Lexus? No, but comparable to a BMW. A different look, feel, and demographic, but still competitive. But Caddy isn't going to save GM. Opel is Opel, Holden is a bit player, Buick is becoming a Chinese niche vehicle, and all of the other brands are being sold or closed.
Except for one: Chevy. It all comes down to selling large amounts of Chevy's to the masses, and that's the problem. There isn't a Chevy out there, today, that holds a candle to the competition.
Honda, Mazda, and Toyota all still make better cars, even if the cost 20% more (or even 30%). Honda and Mazda are more fun to drive. Toyota is far more quiet and comfortable. Every one of them is much, MUCH more reliable. If you are talking TCO, then you can't touch these cars. Honda's reach 100,000 miles and still feel like great cars. Toyota's will go twice that and still have working air conditioners. Chevy *still* is known as "the brand that runs lousy longer than most cars run at all." If you find a Chevy with 200,000 miles that isn't a complete wreck you can bet that it was a long-hauler, and you will win that bet 3 times for every time you lose it.
That's hardly a sobriquet for success.
If this is as large as the "patriotic" bubble is going to get, GM is doomed.
The new Chevy Malibu is a fine car. Trouble is, not everyone is in the market for a larger midsize sedan, and those who are can get a 21k mile Pontiac fleet car for $9500.
My parents purchased a Malibu last Spring, and I quite enjoyed driving it while taking them from place to place when I have visited-definitely the best American-brand car I have driven in 20 years. It is a pity GM couldn't have produced something like this before Camry and Accord took over that segment of the market.
However, I will note their car was brand new, and who knows how it will hold up over the next five years. They had owned an 88 Accord for 20 years and 400K miles. I doubt the Malibu will make it that far.
There isn't a Chevy out there, today, that holds a candle to the competition.
Tahoe? Vette?
Of course when the oil is back to $150+, both will go Dodo.
There are pretty good US cars out there, and I am not an expert on this, at every price point where a comparison can be made I think you can get better value for an import.
If you want to spend $15,000 to get a basic machine. Do you want the aforementioned Saturn Ion, or a Hyundai/Kia.
If you want to spend $20,000+ for a comfortable sedan, do you want to get a Corolla/Accord or a Taurus.
If you want to spend $50,000 for a luxury vehicle, Cadillac CTS or BMW/Mercedes/Lexus.
I could go on, but I just don't get where the sweet spot of quality/value is for the US manufacturer.
Sure I would take a brand new Cadillac CTS over a Camry. But I would never spend an extra $30,000 for it. The Vette is a good looking car. But for $50,000 I don't see the value. But maybe I am just not patriotic.
Really large SUVs (the Sequoia is good, but pricey). Full-size pickup trucks. Oh, and as to Vette's value -- how much do you need to spend on Euro-hardware that will consistently outrun it (provided you discount the name cachet and quality of the interior, of course...)?
Of course this list makes GM a niche manufacturer, not at all an 800-lbs gorilla of the market. Which is where it probably belongs at this time and age.
BTW the CTS is a $40K car, not a $50K one. And it is comparable to the 5-series in terms of size. I am just not prepared to agree it is a comparable vehicle overall ;-)
Thanks for the info, as I said I am not a car expert and have just been shopping recently for my wife.
Part of my fear for GM as well is that the quality brands you outline where they have advantages, large SUV's, Full-Size Pickup Trucks, etc... are precisely the ones that the Auto Task Force tells us will be phased out.
It seems a bit like madness to begin dumping the few lines where GM can make good money consistently.
I did neglect to mention, however, that we got some pretty sweet financing on the Ion. 0 down and 0%, so it really made it difficult to get rid of the car. It is possible that GMAC can continue to offer super-cheap financing, and then the credit losses will eventually be felt by the US taxpayer.
It seems a bit like madness to begin dumping the few lines where GM can make good money consistently.
Yup! GM needs cheap gas, not carbon taxes, to stay afloat. The electric car boondoggle will be yet another sink for funds while Germans and Japanese are happily selling diesels and lean-combustion engines.
lc, and don't forget: GM has already sold Saturn.
Saturn, Pontiac, Saab and Hummer are all "ex-GM" either already or soon. In the case of Pontiac it's likely death. Saturn has an interesting future in the hands of Roger Penske.
Saab is going back to Sweden, and Hummer is heading to China.
GM is basically Chevy, Opel, Caddy, and Buick at this point. Buick is a Chinese cash cow (for now). Caddy is a decent niche, but still a niche.
It really comes down to how well Chevy and Opel can do - and it doesn't appear as if they can broadly compete with the Asians.
Vette? Yes. Then again, what competition does the Vette have from Asia? And, of course, it's a niche player. That's my main point, niche's aren't going to save the company.
Tahoe? I'm not sure that the Tahoe won't be chipped away at by either Ford, Honda, or Nissan. I just don't see it as a "best value in class."
But I will concede that it's a potentially high-volume vehicle.
I don't understand why anyone would buy a new car in the first place.
If your buying a new luxury car it can make sense they can deperciate by 50% in 3 years. A Camry, Accord or a Civic they may only be down 20%. If you include the value of the warranty and the 1.9% financing and the $1000 cash back - it can be cheaper to buy new.
That's not even counting the fact that if the Camry is going to go 15 years and 220k miles, at 3 years it's already used up 20% of it's usefull life.
That should read: "If your buying a used luxury car it can make sense"
"Honda, Mazda, and Toyota all still make better cars, even if the cost 20% more (or even 30%). Honda and Mazda are more fun to drive. Toyota is far more quiet and comfortable."
We just bought a new Honda Odyssey (minivan), and a comparably equipped Dodge Caravan was only $500 less. Not to mention that the brand new Dodge Caravan already felt... rickety, I guess, on its test drive.
(If anyone is shopping for minivans, consider the Nissan Quest. I *loved* it and we'd be driving one right now if the Honda dealer hadn't offered $2k more for our trade in. The Quest was a smooth, tight ride, and far more aesthetically pleasing inside than the Odyssey or the Sienna. I love our Odyssey, but the interior doesn't seem to have changed since the mid 90s.)
If anyone is shopping for minivans, consider the Nissan Quest.
I just bought a Ford Flex. It's not technically a minivan, but it's the same market niche. Whisper quiet on the highway, excellent handling (especially for being a boat), (astonishingly) better mileage at 55 than my 200 CR-V, and with some nifty electronic options. They're quite overpriced, but they aren't selling well so you can drive a nice bargain if you're willing to buy off the lot (we got it a couple thousand below dealer cost).
Too bad that they're not selling--I hope Ford come out of this all ok. They seem to have done the most to close the gap with foreign cars in terms of quality.
Rob, is that a mini-mini-van like a Mazda 5? We would have loved to go with a Mazda 5, but we're an extremely tall family, which is why we were getting rid of our station wagon in the first place.
No, it's a 202-inch 7-seater. They call it a "crossover," but with less than 6 inches of clearance it looks lowered. Basically it's the mother of all station wagons. The second row has (for my family) way too much leg room. The 2-seat third row is plausible for adults for short trips (at lest for average sized people like me); I anticipate it doing service for the lacrosse carpools when my sons are a bit older. We compared it directly to the Odyssey, and they are comparable in many respects. I don't have sliding doors, which I would like, but it's WAY quieter. Given that one of its principle missions will be road trips to grandma's (the CR-V keeping its job as beat-up commuter), that was important.
I went with the Odyssey in part to have the option of seating 8, for those trips to Six Flags with the children and their friends.
>June retail sales are tracking higher than May.
Higher sales does not mean higher profits.
From what I've seen, the 0% for 6 years has been replaced by 0% for six year at $6000 lower price.
And the market advantage given to losers in what way benefits the US economy?
We have just experienced the Canadian version of that transnational stupidity. Air Canada, a quasi monopoly who couldn't make money, went through receivership and reorg., just got another few hundred million from taxpayers. Stakeholders complaining how difficult it is to make money in an unregulated market where people don't want to pay premium prices for awful service. Poor things. Give them another subsidy.
Derek
Buy American campaigns didn't work well in the 80's and won't today. Besides, Toyota, Honda, Hyundai, Nissan, etc. are American companies with US plants and American employees. The anti-Asian racists remarks of Lee Iacocca years ago won't fly anymore. Consumers want quality and price and GM and Chrysler didn't have it and certainly won't get it under government/UAW ownership. Besides, what happens when 20-30 million die-hard right wing fanatics start to boycotte GM? They don't have to be a majority, just 10-20% of the market. A loss of that size of market share will kill almost any company. I have to think that the thought of a boycotte of GM and Chrysler keeps our President and his staff awake at night with fear and trembling. Are Obama supporters going to save the day by dumping their Toyotas and buying Chevies? People forget that lots of knuckle-dragging conservatives used to buy GM--not anymore!
I thought this was interesting, too, and surprising. As with so many of these things, though, it turns out that massive intervention is responsible for a large part of it. The GM retirement buyout package has left an awful lot of people with vouchers for new GM cars. Shockingly, many of them have spent this. My guess is that any time GM offers x number of free cars for "sale", their sales will go up by a little less than x. One hopes their business plan does not involve finding too many new ways to produce these wonderful figures.