In other words, fleet sales are intended to dump excess capacity. GM
is pledging to reduce output rather than sell the excess to fleets.
That only makes sense if fleet sales are unprofitable. Of course, the
entire corporation is wildly unprofitable, so you know that fleet
sales must really be financially unattractive.
If Honda and Toyota are trying to make fleet sales, it must be at
prices which are profitable. No wonder they are losing out to GM and
Ford dumping cars below cost.
GM has $300.000.000.000 debt and growing
It will be interesting to see how far banks are willing to let the debt
What is really the point of producing cars just to increase the debt?
GM is losing more than $1000 on each car they make
It will also be interesting to see who is going to lose most when GM
finally rolls over that is when the banks have the guts to stop lending
There will be a lot of other bankruptcies to follow the big one
Gordon McGrew wrote:
GM and Ford have produced way too many cars for years -- many more
than they can sell profitably. In order to sell these excess
vehicles, they offer incentives. Many times, selling the huge
supply overage requires huge incentives -- which of course reduces
(or in this case eliminates) profitability. They have done this way
too much and for way too long and they are drowning in the resulting
red ink. The obvious answer is to stop making too many cars, but
they're having difficulty doing this. Ford and GM are configured to
make lots and lots of cars and the fixed costs are killing them. If
they reduce the number of cars produced without changing the
underlying problems of being configured to make so many vehicles
(i.e., number and costs of employees and too many plants, etc, etc,
etc) it may not help at all and may actually make things worse. Of
course, they need to make some vehicles -- besides SUV's and pickups
-- that people want to buy too. Also, they need to solve the huge
union contract (salary and healthcare) issues. All in all, not a
very pretty picture.
You live in a dream wold, no manufacture sells vehicles to their dealers
below cost and no dealer sell to a customer below cost. GM has had
operatinh lossed but they still make a profit on every vehcile they sell.
MSRP has nothing to do with market pricing and economies of scale determins
the build cost. You would be srprise if you knew what it actully cost to
build any vehicle and the small differace in the build price of a vehicle
with an MSRP of 25K and one with an MSRP of 45K.
You are such a lying sack of shit, Mike. Admit it, you just make this
stuff up out of thin air. If you told me my mother loved me, I would
call her and check it out.
As of May 31, GM car sales are down 13% while trucks are only down 4%.
Not what you expected, huh? The story is that the redesigned BIG SUVs
have been selling much better than the old ones did last year. That
seems to be cooling quickly with $4.00 gas fears and the realization
that they are not much better than the old ones. Ford car sales are
up 8% but their truck sales are down 9%.
All this is measured on the basis of 2005 sales which were so bad that
the "big three" ended up offering huge discounts to retail and fleet
buyers. So will they offer the same discounts this year, Mike? Or
will they shut down the production line? Or will Prince Charming
arrive and buy up all those vehicles at full MSRP?
Even without the Chinese, the Wall Street Journal reported that SUVs
are renting for less than cars because renters don't want to pay for
the gas. That means that the rental companies will be buying fewer
and smaller SUVs and more fuel efficient cars. With GM and Ford
vowing to reduce fleet sales (really discounts on fleet sales), look
for other manufacturers to jump in. Mitsubishi and Nissan might be
well positioned for this.
The fleet discount averages around $600 among all manufactures, domestic and
foreign. Every manufacture tries to sell to government fleets, corporate
fleets and rental car companies. The difference is the domestic are more
successful at getting those sales than imports. The reason is simple, the
domestics are more cost effective in terms of the overall purchase,
insurance, maintenance, repair, down time and replacement costs. With
exception of rental vehicles, and short term leases, fleet vehicles are kept
in service for a long time
Gee, then why is GM trying *not* to make so many fleet sales?
(GM sales and marketing chief, Mark) LaNeve said GM's fleet sales in
May will be down 20,000 units, "which will hurt our year-over-year
comparison." Overall, GM fleet sales will be down in 2006 "to a level
that makes sense."
"GM, though, was able to continue lowering its fleet sales and
incentives substantially. The company reported that fleet sales,
typically less-profitable sales to the rental-car companies,
businesses and the government, were down 16%."
"GM's incentive spending kept plummeting, partially explaining the
falling sales. GM's incentive spending declined 30.6% in May compared
with a year ago, for an average of $2,781 per vehicle, said Autodata
Corp., a research firm in Woodcliff Lake, N.J. Automakers do not
publicly report how much they spend on incentives, which eat into
profits, so several firms estimate the spending."
And, in Canada:
"Some analysts are predicting that General Motors Corp. will be hit
hardest because it is trying to wean itself off incentives and fleet
So lets summarize. GM is spending $2,781 per vehicle in retail
incentives and fleet sales are less profitable than that. GM actually
wants to reduce the number of such sales which suggests that they
don't even cover their variable costs.
I have posted links to this information for you before. Quit trying
to make it sound like fleet sales are profit generators. Otherwise,
explain why GM is trying to reduce them. It's not like they are short
of cars to sell.
Simple, GM has dramatically reduced the MSRP on all of their vehicles, there
is no need to offer an extra $600 discount to its dealers that sell to
fleets, particularly those dealers that sell primarily to fleets.
A few weeks my brother in law got a Ford Explorer for the mid sized car
rate. Admittedly that rental location usually rents the Explorer in the
winter for the local ski hills.
A few years ago in may Atlanta Budget wanted me to take a Cherokee for
the mid sized car rate. Not being familiar with it or even interested in
it, I waited until a mid sized car came in.
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