GM’s Market Share Projected At 15 Percent
Bank Of America-Merrill Lynch have released their annual “Car Wars”
report, and it predicts slumping sales for GM and Chrysler. GM’s market
share of 22 percent last year is seen shrinking to a mere 15 percent,
which is significantly lower than the 18 percent number that GM admits
to. The real butt-clencher? Merrill Lynch based its calculations on a
14m unit SAAR, which is much higher than the 10m SAAR that we’ve been
seeing through the first half of the year. Which means GM’s losses could
be even worse if we don’t see a return to those sales numbers soon. Even
at a 14m SAAR though, the three percent discrepancy between GM’s numbers
and Merrill’s would amount to GM selling half a million fewer autos than
expected. The report places blame on weakness in GM’s new-product
pipeline for the projected drops. GM’s Tom Wilkinson fires back at the
Freep, arguing “we understand that analysts get paid to try to predict
the future… but that doesn’t necessarily mean they are going to be
right.” Gosh, can’t anyone just trust GM?
The Car Wars report also savages Chrysler, arguing that (like GM) a weak
product pipline will bring Auburn Hills down. Again. Still. Merrill
predicts that ChryCo will be half its size within a few years. Chrysler
refused comment on the report, except to say “we have no plans to be
half our size in the future.”
Meanwhile, the fact that Ford plans on replacing 99 percent of its
lineup in the 2010-2013 window makes Merrill bullish on the blue oval.
Ford is projected to pick up about 3 percent market share by 2013,
joining Honda and Hyundai/Kia as the top-tier in projected market share
growth. Toyota and Nissan are seen increasing their shares as well,
although at a slightly slower rate. The European manufacturers should
stay about level, according to Business Week’s take on the report.
The Freep »
Analysis finds GM, Chrysler's plans weak
Car Wars report predicts high market share losses
BY TIM HIGGINS
FREE PRESS BUSINESS WRITER
General Motors and Chrysler, fresh out of bankruptcy, will remain
challenged in the United States by relatively weak plans to bring new
cars and trucks to market, according to an annual competitive analysis
released Wednesday by Banc of America Securities-Merrill Lynch.
The report -- called Car Wars -- predicts:
# GM's market share losses "are likely to be greater than expected"
because the company is not replacing its lineup as fast as the industry
and key rivals.
# Chrysler's weak product pipeline is also "an ominous sign" and is
expected to drive "significant market share losses." The report said
Chrysler could be roughly half of its current size "within the next few
# Ford -- with a relatively strong replacement rate and lower average
showroom age -- could continue to pick up market share because of a
strong product replacement rate over the next four years of an estimated
25%. "This appears to be a result of planning as well as the fortuitous
stress at its two main competitors," Car Wars said.
GM calls report simplistic, questions accuracy
Less than a week after the new General Motors emerged from bankruptcy,
the report says GM’s business assumptions are overly optimistic and
further restructuring might be required.
GM strongly disagreed with the report's findings, criticizing the study
as being overly simplistic and questioning its accuracy.
"We understand that analysts get paid to try to predict the future. I
would take you back two years to what all of the analysts were
predicting about the economy, the car market, the housing market and ask
them how they did," GM spokesman Tom Wilkinson said. "They get paid to
predict the future, but that doesn't necessarily mean they are going to
GM, which had a 22% market share ending last year, predicts its share
will even out around 18%.
However, the lack of new product in GM's product pipeline over the next
few years is expected to contribute to a further erosion of the Detroit
automaker's market share, the report said.
"This puts the market share target of 18-19% at jeopardy, which means
that further restructuring actions may be necessary," said the report,
whose lead author was analyst John Murphy. "We believe a more reasonable
target would be 15-16%."
The discrepancy of 3% means that GM would sell 500,000 fewer vehicles --
or need about two fewer assembly plants -- if U.S. consumers purchase 14
million cars and trucks, the report said.
The Detroit automaker's U.S. restructuring plan already includes cutting
27,000 jobs this year, closing 13 factories and shedding 2,400 dealers
by the end of next year.
GM has said the company is being restructured to break even with a U.S.
sales market of 10 million vehicles.
Wilkinson noted that GM's future product pipeline is not made public and
questioned the accuracy of assumptions used by Car Wars to make its
GM has said its key challenges over the next few years include product
design and quality, as well as its ability to execute its brand
reduction from eight to four and strengthen its dealer network by
shedding underperforming stores.
Industry analyst Erich Merkle, president of Autoconomy.com, disagreed,
however, with the notion that further restructuring would be needed at
GM if its market share predictions are wrong.
"Even if their market share is a percentage point or two lower than they
are expecting, they can still make it up because the ... market will get
a lift next year and into 2012," Merkle said.
Last summer, Car Wars said Chrysler's lack of product indicated that its
parent company was trying to sell off the Auburn Hills automaker.
A few months later, GM and Chrysler began negotiations about a merger,
but those talks were set aside as the sales market plummeted and the
companies began running into graver troubles.
Both companies ultimately sought U.S. loans and eventually were
restructured through federally-backed bankruptcies. Chrysler was
acquired by Fiat.
In the report, the forecasted product replacement rates at GM and
Chrysler over the next four years -- of 11% and 8%, respectively --
ranked at the bottom of the industry.
A Chrysler spokesman declined to comment on the report. "However, I can
tell you we have no plans to be half our size in the future," spokesman
Rick Deneau said in an e-mail.
Ford Motor Co., meanwhile, was a star in the Car Wars report.
The automaker is forecasted to replace 99% of its lineup of cars and
trucks from 2010-2013, which will lead it to gain market share, the
report said. Ford's annual replacement rate of about 25% during that
period is above its historical average of 15% and better than the
industry average of 18%, too.
In a separate report, Murphy wrote that the annual Car Wars study
"bolsters our confidence in Ford."