GM sales dip casts shadow over IPO
General Motors’ sales in its core US market sagged in August,
potentially complicating its bid to drum up investor support for its
forthcoming public share issue.
Sales were a quarter lower than in August 2009, when demand was
bolstered by the Obama administration’s cash-for-clunkers scrappage
incentives. GM has also eliminated four brands since then.
More worrying, however, was a 7.2 per cent decline from July. Low-margin
sales to car rental operators and other fleet owners climbed to 28 per
cent of the total, from 25 per cent in July. “August was definitely what
we call ‘one of those months’,” said Don Johnson, GM’s head of US sales
Mr Johnson said that consumers remained cautious amid an unexpectedly
slow revival in employment. In the longer term, however, he forecast
that there was “pent-up demand building” that would “eventually be
released when the economy gets a firmer footing”.
Most other carmakers also posted lower sales in August than a year
earlier due to the cash-for-clunkers incentives.
Toyota, one of the scheme’s chief beneficiaries, saw a one-third drop.
Toyota’s sales last month were also 12.3 per cent lower than July. Ford
Motor posted declines of 11 per cent and 7.5 per cent respectively. But
Chrysler bucked the trend, with 7 per cent gains in each period.
US sales totalled 11.5m at an annual rate in August, a slight fall from
July and down from 14.1m in August 2009, according to Autodata. GM’s
market share dipped to 19.1 per cent in the first eight months of this
year, from 19.4 per cent in January-August 2009. Toyota, which has been
battered by a series of recalls, saw its share drop to 15.2 per cent
from 16.6 per cent. By contrast, Ford, Nissan, Hyundai and Volkswagen
have grown market share.
GM filed a bulky draft prospectus for an initial public offering with US
and Canadian regulators last month. The US and Canadian governments hold
72 per cent of GM’s equity.
The document warns that in spite of a pick-up in demand since late last
year, “many of the economic and market conditions that drove the
[earlier] drop in vehicle sales, including declines in real estate and
equity values, increases in unemployment, tightened credit markets,
depressed consumer confidence and weak housing markets, continue to
If the recent revival falters, the prospectus warns, “our results of
operations and financial condition will be materially adversely affected”.
In spite of the soft market in August, both GM and Ford are sticking to
their estimates of total industry sales of 11.5m-12m this year.
Emily Kolinski-Morris, Ford’s senior economist, said the carmaker
interpreted recent economic data “as a moderation of the pace of
recovery, but not a collapse”.
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