August a Tough Month for Automakers

SUMMARY: <span style="FONT-SIZE:10pt; FONT-FAMILY:Arial">The nation’s top two automakers reported down sales for the third straight month today, according to Reuters. General Motors and Ford both saw demand for their aging lineup of cars slip 7 percent and 5.9 percent, respectively, as consumers continued to shift toward rival Chrysler and the foreign brands. </span>

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General Motors and Ford are suffering because they have to discount their cars to sell them.
They have to discount the cars, because they have overproduced for demand.
They have overproduced, because their employees are unionized, and they have too many plants they can't afford to operate at half-output.
If they are going to survive, they need new products that the public will latch onto.
They NEED to stop producing 1998 Tauruses and selling them as program cars.

I agree that they have overproduced and alot of factors are involved in the companies not gaining a bigger sales percentage. Yet regardless of the factors, they do need to bring in new fresh minds that will in turn produce newer models worth buying. Plus they have to keep current stock from falling into the constant recalls that hammer the vehicles. More and more consumers are getting better educated in terms of reliability and customer service. Not only does a vehicle have to look good on the outside but they have to be good on the inside as well. Consumers are realizing this and have gone for the vehicles that offer the best value in the long run. Especially in light of the economy which the article mentions. Yet even the ones that are doing good are also plagued with problems. Chrysler while doing good for sales is being sited for sludge problems in their 1998-2002 vehicels. The same has happen to Toyota in the past and currently with VW and others. For GM or any manufacturer to succeed they need to reduce the timeframe of producing new vehicles and bring them to the public. Introduce newer technologies that will sastify the consumer both in their desire for speed, agility and in their wallets. Deisels which have improved throughtout the years need to be brought back in to the mainstream. Hybrids like what Toyota and Honda are making should be improved upon and marketed even more. The unions, while always asking for more is only a small part of the problem just like the CEOs and stock holders wanting to give less. Yet they have to come to an understanding that for the betterment of the company changes have to be made to get the best product to the consumer in the least amount of time or they will lose out and lose out big.

As for natural occurances that slow down sales, well thats to be unavoided. Every year the hurricane/tornado season brings more damage to the vehicles being sold in those zones. Some of which end up as salvage to the unsuspecting consumer because the dealerships try to recap their losses and therefore retitle, repair and sell them to auctions or lesser secondhand dealerships as far away from the zone affected.

TS out

I also have to agree that the Big 3 tend to be on the bad side of supply and demand (obviously, or else they wouldn't have to cut production). But it was Nissan's own Carlos Ghosn that said something like "There's nothing bad about a car company that good product cannot solve."

From that basic viewpoint (and ignoring the rest of the economy for the moment), I'd tend to disagree with many who say things will get worse for the Americans in the coming months. Sure, Ford and GM have a few bumps left to hit, but new products are in the pipeline. Chrysler is already seeing the benefit of (good) new product. Ford should see things get better with the new Freestyle, Five Hundred, Mustang, and Fusion. GM's got the new Pontiac G6 and extremely important (IMO) Chevy Cobalt.

I may not be the biggest fan of the Big 3's previous efforts on the car side, but I think it'd do us all well to at least give them the benefit of the doubt with these new efforts. The last thing our economy needs is to see the health of the world's largest automakers degrade further, especially if that was because jaded consumers didn't give their products a fair shot.

On an unrelated note, TS brings up a good point that we all need to be on the lookout for. The latest round of hurricanes/tropical storms will likely mean a flood (no pun intended) of retitled used cars on the market with some kind of damage. While I'm certainly more worried about everyone in Florida as they brace for Frances, used car shoppers better be on their toes. Those damaged cars have to go somewhere...

Mike Cervantes
AutomotiveArticles.com Editor-in-Chief

General Motors and Ford are suffering because they have to discount their cars to sell them.
They have to discount the cars, because they have overproduced for demand.
They have overproduced, because their employees are unionized, and they have too many plants they can't afford to operate at half-output.
If they are going to survive, they need new products that the public will latch onto.
They NEED to stop producing 1998 Tauruses and selling them as program cars.

The "big 3" have a different approach to building cars. They crank the lines to maximum output and fill thousands of acres with unsold cars which have to be discounted heavily before every new year launch. This is a self defeating scheme which results in them shooting themselves in the foot by lowering the price to break even or below just to get rid of the excess inventory. The real problem is that there are just too many gas guzzlers in the lineup. The gas guzzler has become unaffordable for the mainstream consumer and it will take some time to retool for cars that people will actually buy. The Asian manufacturers are well known to be the very best in regards to efficient, reliable cars and it will take more time for domestics to get the level of respect that Toyota and Honda (and now even Hyundai) are getting.
GM is responsible for 2.5 retirees for every employee working and this number will get worse with coming layoffs.
Major changes will have to take place to let the "big 3" regain some of their lost market share.
Another interesting statistic.........The average wage at a Chinese auto plant is $0.95 cents/hr.!
The auto industry in general is in for some rough times.

The problem is the way they sell their cars. They have no confidence that the models will sell on their own merits, so they discount price, offer huge rebates and offer 0% APR interest rates. Still with all of this effort they sell fewer cars than Honda and Toyota which offer few incentives.

The big three (3) have taught the consumer how to buy a car from them and they did such a good job that it is effecting their very business model.

I agree with this because ford is major dealer in trucks and there is more demand for used trucks than the new trucks. Old ford trucks were very muscle trucks than the new ford ford trucks which do not look as rough and though as old trucks. Even I will tend to buy old trucks than the new trucks.