Speaking of the follies to the U.S. car industry….
The front page of the WSJ had a story on GM’s shrinking market share that is a classic story of businesses being more concerned with symbols than actual reality. The story is a pretty old one (by now): GM is losing ground to Toyota and is pulling out all the stops to halt the sales declines and regain market share. It’s worth noting that GM’s latest sales push is probably more about general desperation to generate sales then it is about protecting market share at this point.
(From the WSJ) “On the verge of ceding its crown as America's best-selling car company, General Motors Corp. announced further production cuts as well as sweeping new incentives on many 2008 models -- a reversal of recent strategy and a fresh sign of how badly rising gasoline prices are slamming auto makers.
GM, Ford Motor Co. and Chrysler LLC have been trying for over two years to back away from heavy incentives, which eat into profit margins and tarnish brands in the eyes of some consumers. But a worsening of the slump in car and light-truck sales this month is forcing the Detroit companies to go all out to halt sales declines.
Through the first half of June, normally a strong period, U.S. auto sales were running at an annualized rate of about 12.5 million vehicles, according to J.D. Power & Associates. It was the lowest level for June in decades and a huge drop from the year-ago rate of 16.3 million vehicles.
For GM, the June swoon has an added peril: Without a sales surge in the next few days, it risks losing its U.S.-sales crown to Toyota Motor Corp. for the month. That would be a first and a powerful symbol of Detroit's long decline.”
I wish GM and the Business Media would abandon its fascination with market share and focus on the core issue: GM’s ability to sell cars efficiently. As I’ve
said before the idea that GM is the world’s largest automaker has been false for several years now, due to the fact that Toyota (and other smaller competitors) exceeded them on a profitability basis a long time ago. In fact I’d argue that it’s ridiculous to even speak of GM being “#1” when they’re unable to generate more profits than a significantly smaller company like Honda. For instance over the course of 2004-2005 GM had roughly 4X the U.S. market share as Honda, in 2004 GM earned $2.8 billion dollars while Honda earned about $4.5 billion, in 2005 GM lost $10.6 billion dollars and Honda earned about $4.1 billion.
