GM Against Stimulating Pent-Up Demand; February Sales Disappoint

[NINETY EIGHT REGENCY]

GM Against Stimulating Pent-Up Demand; February Sales Disappoint

By James M. Amend

WardsAuto.com, Mar 2, 2010 1:27 PM

General Motors Co. says it is unclear how many potential new-vehicle buyers hunkered down during the recession might jump back into the market once sounder signs of economic improvement emerge, a key driver of past industry recoveries in the U.S.

According to GM estimates, the market typically replaces vehicles at a rate of 12.5 million units annually.

But last year, new-vehicles sales totaled just 10.6 million, and Ward’s forecasts 11.5 million light-vehicle deliveries this year. GM expects total sales in 2010 of between 11.5 million and 12.0 million.

That means some 2.5 million buyers could be waiting on the sidelines to jumpstart the industry out of its recession-induced funk.

“We’ve seen before in tougher economic times, when the economy does come back, we suddenly see replacement demand rise sharply, because (consumers) have been waiting and waiting to get a vehicle,” Mike DiGiovanni, GM’s top sales analyst, tells Ward’s during a monthly conference call earlier today with journalists and Wall Street analysts to discuss February’s sales results.

GM comes off a month where fleet deliveries propped up its 12.2% sales increase in February and rival Ford Motor Co. outsold the restructuring auto maker in total vehicle sales for only the third time since 1980.

The fear among some in the industry is a long-term economic recovery could leave many consumers, accustom to replacing their cars every few years, content to keep their vehicles longer and do without car payments.

Says DiGiovanni: “We’ve done a lot of studies on this, and we think the questions out there are particularly among young people – will they buy vehicles at the same rate as their parents when they get older?

GM North America President Mark Reuss adds sales responsibilities.

“There’s some modest decline in the number of them getting their licenses and registering to drive,” he says, adding quickly, “No one is really sure which way it is going to go – a permanent trend among younger people or temporary thing.

“We’ve only seen this in the last couple years and during one of the worst recessions, so it is very hard to tell,” DiGiovanni says.

The potential for complacency among new-vehicle buyers has led to some talk of perhaps launching another government-backed stimulus program to motivate those consumers against an economy beginning to show some life, but still nagged by high unemployment and a shaky housing market.

GM’s turnaround from last summer’s bankruptcy also would stand to benefit from government intervention, with the extra revenue from added sales.

But DiGionvanni argues differently. “The economy is getting its legs under it, (and) normal economic growth and industry growth is a better way to go about it than temporary stimulus – it creates pull ahead,” he says.

“Cash for Clunkers did its purpose. It was a good thing at the time. We needed to jump start the economy. But as the economy is getting its strength, it’s probably not a good idea.”

GM Vice President Susan Docherty gives up sales role, focuses on marketing.

GM sold 141,554 new light cars and trucks in February, compared with a 126,198 in like-2009, according to Ward’s data. However, the auto maker’s 12.2% uptick fell well short of Ward’s forecast for a 35.2% improvement from year-ago.

Roughly 29% of GM’s sales total was to fleet customers, up 114.5% vs. year-ago. GM would like fleet to account for 25% of its sales. Retail deliveries, meanwhile, fell 9%, in part socked by bad weather.

DiGiovanni says the higher fleet number reflects an improving economy and overly weak year-ago sales to rental companies, commercial customers and government organizations.

“Bad snow and more bad snow,” he says of two blizzards to hit the northeast U.S. last month, estimating it cost the industry 500,000 units on an annualized basis. “The good news is business conditions seem to be improving and fleet business is coming back, which is a leading economic indicator.

“We think the retail will come along as we move into spring and the better weather. We’re pretty confident the regions impacted – the northeast (and) north-central will come back strong.”

GM’s sales report also comes ahead of an announcement expected today shifting sales responsibilities currently overseen by GM Vice President Susan Docherty to GM North America President Mark Reuss.

The move by GM Chairman and CEO Ed Whitacre is seen as more evidence of his desire to get the auto maker’s sales moving and also remove a layer of management. Docherty reported to Reuss and now will focus on marketing after handling U.S. sales for five months.

Docherty admits a degree of impatience everywhere within the recovering auto maker.

“It doesn’t matter who you are in the new General Motors, everybody is moving with a sense of urgency,” she says. “We’re all very impatient for positive business results.”

link:

http://wardsauto.com/ar/gm_february_sales_100302/

[hyperv6]

There are still a lot of people out of work and the economy is not recovering fast nor will it. GM needs to just keep building the best newer cars and improve their marketing to show the best value in every class as value is the key to this battle.

GM and everyone else just have to ride it out and hope for real change.

[daves87rs]

There are still a lot of people out of work and the economy is not recovering fast nor will it. GM needs to just keep building the best newer cars and improve their marketing to show the best value in every class as value is the key to this battle.

GM and everyone else just have to ride it out and hope for real change.

Yep.

And cars will sell like they used to. The next credit crunch will take care of that...

[hyperv6]

What may have gone unreported or noticed are the large amounts or Repo cars due to people buying that could not afford the cars. The govement created a Freddie and Fannie like problem with the auto industry by offering money to help people buy what they could not afford.

The Repo auctions are running full right now.

I think this summer will be the year of the used car with cheap prices etc. I just saw a $40+ GMC Acadia for $27K and it was only a year old with low miles.