Posted on 01/09/2013 11:49:33 AM PST by jazusamo
General Motors finished 2012 with a 17.9% market share in the US and is expected to repeat the performance in 2013 according to a Bloomberg report. The number is at the lowest point it has been since 1924. So what is behind the dismal numbers at GM that sees the company performing at 88 year lows?
Before speculating on why GM has lost so much market share to the competition, I must point out the technicality that the company has actually only been in existence for 3 1/2 years, so we are comparing market share to "Old GM." "New GM" came into existence in June of 2009 after it filed for bankruptcy and reemerged as a company that was majority-owned by the government. Since then, GM proponents will point to historical performance comparisons to Old GM when convenient (as if the bankruptcy never occurred) even as they absolve themselves from any past litigation since they are technically a new company. To clear up the technicality we'll say that US market share for "GM brand vehicles" are at an 88 year low. Now that that's cleared up, we'll move on to why.
GM US market share was once as high as 51% in 1962 and at 31% as recent as 1997 according to the Bloomberg piece. Even during 2008, the last year for GM prior to its bankruptcy, the company held a 22.6% market share in the US. The market share has had a huge drop-off of about 20% since just that time. Obviously, the Obama Administration's orchestrated bankruptcy has not addressed the key issues plaguing the company.
The bottom line is that GM is losing ground to competitors when it comes to building the vehicles with the most appeal to US consumers that offer the best value. The fact that much of the lost market share came after the government's intrusion can not be ignored. There are a few reasons for this.
First and foremost, GM seems to have lost the focus on producing quality vehicles in segments that are most important to American car drivers. Since GM's emergence from bankruptcy with Obama-appointed management, all the hype and much of the marketing budget seems to have gone towards the money-losing and low-selling Chevy Volt. Just think about it, how much have you heard about or seen advertisements on the Chevy Malibu (which competes in the highest selling mid-size segment) compared to the Volt? I have to believe that the lack of focus on the more important gas-powered conventional vehicles has contributed to GM falling behind the competition.
Management at GM does not seem to be catching on to the cause of the problem as they seem to be doubling down on the politically-popular green segment as more plug-in electric models will be offered even as the company loses market share elsewhere. GM has even admitted a lack of market for the Volt, but they continue to try and manufacture demand through taxpayer subsidies and short term, incentivized leases that carry artificially low monthly payments. The company is losing market share in segments that see top performing cars selling over 20,000 per month as they take credit for having the number one selling plug-in vehicle in the Volt, which averages sales of a bit over 2,000 per month. Adding to the perplexing strategy is the fact that the Volt loses money for GM shareholders (in addition to costing taxpayers $7,500 a pop) with every vehicle sold.
It also comes down to which manufacturers can offer the most bang for the buck on their vehicles. It is tough for GM to compete with manufacturers like Volkswagen, Toyota, Honda and Hyundai that do not have the costly UAW overhangs that GM has. Essentially, they can build a better car for less due to the lower manufacturing costs for the cars. While GM may boast about how efficient they have become since the bankruptcy, operating profit margins at the company are below most of the competition. UAW benefits and pay were protected rather than reduced as a result of the government's bankruptcy plan for GM.
The government bailout of GM has also cost GM lost market share as many shoppers continue to boycott the company. Many are unhappy with the manner in which taxpayer funds and GM bondholder (as well as non-union Delphi retirees') assets were redistributed to politically-favored groups like the UAW. GM went on to alienate conservatives and Republicans by falsely blaming low Chevy Volt sales on a "wrong-headed" right wing agenda and then proceeded to criticize Mitt Romney during the presidential campaign . Add to all that the fact that GM has not been paying its fair share in taxes since receiving a sweetheart deal from the Obama Administration that sees the company paying even less per year in taxes (zero to be precise) than Warren Buffett's secretary! The percentage of those boycotting GM may be small but in a fiercely competitive field the lost sales are enough to hurt GM.
What it really comes down to is that the GM restructuring had more political motivations than economic ones. The people put in place by the Obama Administration to master-mind the GM bankruptcy process were hedge fund guys (like Auto Task Force Head Steve Rattner), union guys (Rattner successor Ron Bloom) and a multitude of bankruptcy experts and attorneys that received hundreds of millions of dollars to address the legal aspects of the restructuring. Nowhere were auto industry experts to be found when it came to the team that was put in place that was to guide GM towards a healthy future.
Given the players involved and the political aspects of the GM story, it should not have been hard to predict the outcome. UAW members are doing very well and receiving annual bonuses in the thousands of dollars range. President Obama received the help of said UAW members, campaigned upon the "success" of GM and was reelected. America gets plenty of green plug-in cars offered by GM that they do not want as taxpayers' ultimate losses are estimated to be in the $10 billion range. GM loses market share to the tune of 20% but is still presented as a shining example of American industrial prosperity. Unfortunately, taxpayers and GM shareholders may not benefit from a success that is more of a perception than an actual reality. The reality is that GM has not gone through a process that has greatly improved the fundamentals at the company. GM's lost US market share is further evidence of that.
Mark Modica is an NLPC Associate Fellow.
Die GM Die!!!
175,000 miles.
Will not ever buy a Government Motors vehicle.
That's how government reacts to such a problem.
If GM doesn’t turn things around they just may and have to go through a legitimate bankruptcy, the UAW leadership thugs won’t be happy.
No amount of bailouts can save GM. It keeps making cars that simply aren’t selling that well.
The idea was to force the consumer to buy more profitable full size trucks by removing the smaller ones from the market.
No worries. 0bama motors has a new wind-powered model that will be a hit with consumers. Uses no gas at all!
There is another number not plugged into the market share which makes it even worse. GM was the recipient of a large but hidden Federal subsidy (I’m not sure whether it still exists, but I strongly suspect it does). That is the subsidy for fleet sales to state and local governments. State and local governments recieved a “rebate” check from the Feds for purhcases of GM and Chrysler products, which did not apply to other manufacturers (including Ford). The rebate was substantial and pretty much guaranteed that GM was low bidder on these fleet sales. Add up all the vehicles purchased by local goverments during the year and you have a pretty big volume.
Check your local goverment fleet, and see how many GM/Chrysler products you see among the newer vehicles, compared to the number of Fords.
Take away the subsidy, and you significantly reduce the volume of these sales, and along with it, GM’s market share.
I believe you’re right about the small ford truck with no frills being brought back. It would be affordable and economical with todays engine technology. I and my son both had small trucks years ago and had them many years, they were handy.
Once the World leader in auto production, run out of business and the country by union scum. Now the scum in the white house bails out the business killers.
Just anecdotal, but I looked at the inventory of our local Toyota dealer. No pickups, but you can get a Prius in any color you want. The falling price of gas is bringing out the pickup buyers.
The problem is that the small truck cuts large truck sales on a 1/1 basis. The profit margin on large trucks is much larger than can be pushed on the public with a smaller truck. I once heard it was around $6,000 net to the manufacturer for a full size and around $800 for a small size. That was from a relative who owns a Chrysler dealership.
I tried placing an order for a Tacoma with nothing but air conditioning and rubber mat floors at a local Toytota dealer. They refused the order, informing me I had to take what they had from the lot. I don’t want or need a $23,000 small pickup bloated with $6,500 worth of crap.
Dad had a new Chevy every year, from the mid-50’s into the 70’s. I stayed loyal for 30 years, my last new Chevy was an ‘03 Duramax. But after the takeover, I swore off the brand. I sold the truck last year, and now drive a Hyundai.
Did they remember to include the Volt’s .0000000002% market share?
Try some other dealers. I bought a Tacoma in August. I knew exactly what I wanted, and the combination of dual cab and long bed meant there were only a couple in the state, none local. I gave several local dealers a chance at my business. One dealer wasn’t interested, two were thousands over MSRP, three dealers came in within a couple hundred dollars of each other. In the end, I bought the silver one as it hides the dirt best.
BTW, I tried the same thing a few years ago and it was such a horrible experience I gave up. I think now the dealers are realizing the game has changed (well, most of them). Good luck.
Tomorrow’s ObamaMedia headline: “GM To Repeat Record Performance In 2013!”
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