car sales indicator suggests recession nearby

[1prophet]

The real reason why dealerships are going out of business:

Detroit Ignores Its Dealers At Its Peril


Remember it is the dealer that is paying a finance charge on every unsold vehicle sitting on their lot every month to whomever holds their floorplan (line of credit for their vehicles) since the car company already got their money for the vehicle on the lot.



If those vehicles sit too long in the lot all profit is gone and now you are paying the interest on the vehicle out of your pocket and in some cases the financial institution wants you to pay down the principle too after 6 months to 1 year.

 

[dmcowen674]

Originally posted by: Stunt

Originally posted by: dmcowen674
What analogy do you have for all these car dealerships I see going out of business?

Dealerships that have been around since WWII.

With interest rates going up, it's more costly to hold inventories of unsold cars. Closing dealerships can be a huge cost savings if you pick the right ones.

I realize you're still a younging.

How do you explain when interest rates were a lot higher than now that dealeships dating back to WWII had no problem then.

Why all of a sudden now?

You don't see the wheels falling off the car.

 

[Stunt]

Originally posted by: dmcowen674

Originally posted by: Stunt

Originally posted by: dmcowen674
What analogy do you have for all these car dealerships I see going out of business?

Dealerships that have been around since WWII.

With interest rates going up, it's more costly to hold inventories of unsold cars. Closing dealerships can be a huge cost savings if you pick the right ones.

I realize you're still a younging.

How do you explain when interest rates were a lot higher than now that dealeships dating back to WWII had no problem then.

Why all of a sudden now?

You don't see the wheels falling off the car.

GM and Ford were in better financial shape and actually had the higher turn over from selling higher volumes. Today dealerships are a huge burden on these companies as they struggle to maintain free cash flow for operations. It's the difference between having a bunch of cars on the lot and upgrading equipment and keeping the companies around.

I may be younger than you...but I understand reality

 

[bctbct]

Car sales are based on disposable income. People have less....they drive the car they have.

 

[BaliBabyDoc]

Originally posted by: Stunt

Originally posted by: dmcowen674

Originally posted by: Stunt

Originally posted by: dmcowen674
What analogy do you have for all these car dealerships I see going out of business?

Dealerships that have been around since WWII.

With interest rates going up, it's more costly to hold inventories of unsold cars. Closing dealerships can be a huge cost savings if you pick the right ones.

I realize you're still a younging.

How do you explain when interest rates were a lot higher than now that dealeships dating back to WWII had no problem then.

Why all of a sudden now?

You don't see the wheels falling off the car.

GM and Ford were in better financial shape and actually had the higher turn over from selling higher volumes. Today dealerships are a huge burden on these companies as they struggle to maintain free cash flow for operations. It's the difference between having a bunch of cars on the lot and upgrading equipment and keeping the companies around.

I may be younger than you...but I understand reality

Dealerships are a burden on GM and Ford?! I didn't know you could get a F-150 at Costco or Amazon. Well, dealerships are a little bit of a burden. I hear they've been chewing out Ford and GM about all the unsold POS littering the lot.

Dealerships are franchises. Ford and GM get paid when they sell cars to the dealers (and rental companies). The free cash flow problems at the Big Two is a function of dealers buying fewer vehicles b/c they can't sell Detroit/Dearborn crap that's already on the lot. In fact, that's why GM and Ford have cut production so much in the past five years.

1prophet explained it clearly. In fact, if it wasn't for the finance arms . . . Ford and GM would have balance sheets that look like the federal government.

The world catches up to Honda

Honda's decision to stick with what it believes in is now paying off big time. Look at what happened in July. For its first quarter, Honda reported sales up 15 percent and operating profit up 19 percent. The Honda Accord and Civic ranked as the second and fourth best selling passenger cars in America. In a U.S. market where overall sales fell 17.4 percent, Honda brand vehicles rose 6 percent.
---
As a result, Honda's percentage of light truck sales is the smallest in the industry at 42.7 percent (compared with Chrysler and Ford at around 66 percent). - a good place to be with truck sales falling. And it has the highest corporate average fuel economy and, not coincidentally, the highest median household income for buyers - $87,907. By comparison, GM checks in at $75,888.
---
Looking ahead, Honda is planning a big worldwide expansion. It plans to boost annual sales to 4.5 million by 2010, up from 3.4 million last year. About a third of that growth will come in North America, where it will build a sixth assembly plant, this one in Indiana. Honda's new factories potentially offer around a 20 percent improvement in productivity compared with existing sites.

It must be those dealerships holding Honda back.

 

[Stunt]

Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

 

[dmcowen674]

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Ah OK, so the numbers should be reversed because the U.S. sucks, that's right, gotcha.

10-4

 

[Stunt]

Originally posted by: dmcowen674

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Ah OK, so the numbers should be reversed because the U.S. sucks, that's right, gotcha.

10-4

What are you talking about?!

American automotive companies have lost significant marketshare and now have to adapt their operations to represent this. Besides, most of the jobs lost at the big 3 are being made up in new and exisiting Toyota, Honda and Hyundai plants.

 

[Stunt]

Toyota expansion creates new jobs

Highlights: [2005]
Toyota employed 29,135 workers in its U.S. product development, manufacturing, and sales and marketing operations, while an additional 74,060 workers were directly employed in new-vehicle, dealer-related operations.
Spin-off jobs created by spending from Toyota employees added another 312,000 jobs to the economy.
Toyota's $13.4 billion investment in the U.S. yielded $14.4 billion in wages in 2003.
Average annual salary at Toyota Motor North America was $63,872, substantially higher than the average $26,902 for non-farm work.

 

[BaliBabyDoc]

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Dude, are ya 12 years old!

Ford started making cars in the US over a century ago. The first Hyundai import to the US came in 1985.

In the past one hundred years, GM had an interest in no less than 15 makes: Oldsmobile 1897, Cadillac 1902, Buick 1903, Oakland/Pontiac 1907, Rapid Motor/GMC 1909, Chevrolet 1911, Isuzu 1971, Suzuki 1981, Saturn 1985/1990, Lotus 1986, Volvo truck 1986, Saab 1989, Fuji/Subaru 1999, Hummer?, Daewoo 2002 . . . and that doesn't include ops like Fiat, Vauxhall, Holden and Opel.

Maybe its just me . . . but I bet it takes a lot of dealers to sell all those things.

US automakers cannot support their dealer networks b/c the product sux. There's certainly some bloat but the blame primarily lies with corporate. You cannot just plant some blacktop and say you're a Lincoln/Mercury shop. Corporate for the Big Two were happy to add dealers in the past b/c more dealers means more people to sell product (and push in-house financing). If anybody should be complaining its the dealers . . . and they are complaining. Both GM and Ford will likely pay through the nose to get some of them to go away . . .

 

[TheSlamma]

Originally posted by: dmcowen674

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Ah OK, so the numbers should be reversed because the U.S. sucks, that's right, gotcha.

10-4

I'll say it... US cars do suck yes. I gave domestics a try again back in 99.. now I am paying for it with dash rattles, faulty electronics (Windows regulator, ABS Module, TPS) squeaky suspension and 3 trips for warranty (intermediate drive shaft twice and slip yoke) My old 95 Corolla is doing better with 40K more miles and 4 years elder with only warped rotors being the only parts I replaced.

Domestic car companies are short term gain mentality. They figure "Oh screw it, use cheap parts and let warranty just deal with it, but we want cars cars cars NOW.. sell sell sell."

Toyota on the other hands wants their cars to not return on warranty but on tradein 5 years down the line.

 

[zephyrprime]

Originally posted by: TheSlamma
I don't know about the dealerships in other cities, but here int he Denver area I have been to every Honda Stealership and have yet to find a Fit.. even Civic stock is short.. but SUV's are all over the lot.... I thought SUV sales were getting stagnant right now with gas price? So why the huge stock still and where are the econoboxes.. or is this just a problem here?

Dude, the reason there are no fits available is because they are selling out. The reason there are a ton of SUVs is because they are not selling.

 

[Stunt]

Originally posted by: BaliBabyDoc

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Dude, are ya 12 years old!

Ford started making cars in the US over a century ago. The first Hyundai import to the US came in 1985.

In the past one hundred years, GM had an interest in no less than 15 makes: Oldsmobile 1897, Cadillac 1902, Buick 1903, Oakland/Pontiac 1907, Rapid Motor/GMC 1909, Chevrolet 1911, Isuzu 1971, Suzuki 1981, Saturn 1985/1990, Lotus 1986, Volvo truck 1986, Saab 1989, Fuji/Subaru 1999, Hummer?, Daewoo 2002 . . . and that doesn't include ops like Fiat, Vauxhall, Holden and Opel.

Maybe its just me . . . but I bet it takes a lot of dealers to sell all those things.

US automakers cannot support their dealer networks b/c the product sux. There's certainly some bloat but the blame primarily lies with corporate. You cannot just plant some blacktop and say you're a Lincoln/Mercury shop. Corporate for the Big Two were happy to add dealers in the past b/c more dealers means more people to sell product (and push in-house financing). If anybody should be complaining its the dealers . . . and they are complaining. Both GM and Ford will likely pay through the nose to get some of them to go away . . .

Toyota has been selling cars in the US since 1957. What's your point?

I 100% agree GM's product line is hugely bloated; this however does not excuse themselves from their excessive number of dealerships. Just because they have a lot of brands, doesn't mean they need 5 times more dealerships; means they need more consolidation. GM products do suck and until they cut brands, focus on creating a better product; this trend will continue. If GM can ditch some dealerships and invest those limited funds into their restructuring efforts, more power to them.

 

[TheSlamma]

Originally posted by: zephyrprime

Originally posted by: TheSlamma
I don't know about the dealerships in other cities, but here int he Denver area I have been to every Honda Stealership and have yet to find a Fit.. even Civic stock is short.. but SUV's are all over the lot.... I thought SUV sales were getting stagnant right now with gas price? So why the huge stock still and where are the econoboxes.. or is this just a problem here?

Dude, the reason there are no fits available is because they are selling out. The reason there are a ton of SUVs is because they are not selling.

Then it's back to their fault for even owning an inventory they know won't move.

 

[Genx87]

Well they were selling cars last summer at or below cost with these employee buy options. It only makes sense that sales slow, I dont think it is a very valid indicator. I would say slowing in the housing market and higher interest rates is a good indication.

It is coming, they always do, just a matter of when. I am thinking we will see another 12-18 months of good growth but see a slow down in mid to late 07 or early 08 as interest rates put the squeeze on capital improvements.

 

[theeedude]

Looks like this thread went from the economy vs overall car sales to bashing domestic and praising Japanese carmakers. Shocking!!!

 

[desy]

GM does not suck they still sell more vehicles than anybody if they sucked this would not be true. Yes certain lines suck and Toyota and Honda lines are quality, everyone.
Nissan and Mazda and Subaru and other Asian companies fair no better than NA ones do typically in terms of the vehicles they make.

Overall the industry is down, some companies winners and some losers with $3 gas. The bottom line is Consumer confidence and spending is the driving economic force and when they stop buying big ticket items its an indicator of a slowing economy.
When you are a net energy importer it means trade imbalance and $ that used to be spent within the economy are flowing out of the economy. . .

 

[BaliBabyDoc]

GM products do suck and until they cut brands, focus on creating a better product; this trend will continue. If GM can ditch some dealerships and invest those limited funds into their restructuring efforts, more power to them.

One more time . . . it's GM's responsibility to create a better product. The dealerships are FRANCHISES! Money goes FROM the dealer TO corporate. One of the few times it goes the other direction is when GM gives back money on sold vehicles, rebates to move vehicles, or other promotions (holdback, dealer cash, surplus ad money, etc). So there isn't this big pile of cash for GM to spend on corporate restructuring that's currently being spent on dealers.

Aside from GMAC its the dealers that generate the cash. The inherent benefit from cutting dealers is that there's MORE customers to go around so the remaining dealers will make more money and hopefully provide better service/sales experiences for customers. Again, I doubt there's any big savings there for GM b/c its the consumer that pays for shipping from factory to dealer . . . and I imagine most of the profit from that goes to GM not the dealer.

This is not chicken vs egg. GM sold cars . . . got dealers. Sold more cars got more dealers. Sold more cars got more dealers. Sold fewer cars . . . dealers no change. Sold a lot fewer cars . . . dealers no change.

What GM REALLY wants to do is to sell more cars . . . not have fewer dealers. Unfortunately, people don't want GM cars/trucks like they did in the past . . . except for Pontiac Solstice/Saturn Sky.

But for the general theme of the thread . . . consumer spending is already slowing. Vehicle selection is just a function of people being more prudent with their money.

 

[dmcowen674]

Originally posted by: senseamp
Looks like this thread went from the economy vs overall car sales to bashing domestic and praising Japanese carmakers. Shocking!!!

Originally posted by: Stunt

Originally posted by: dmcowen674

Originally posted by: Stunt
Number of dealerships in the US:
GM: 7600
Ford: 4400
Toyota: 1400
Hyundai: 695

The US automakers cannot support all these dealerships. How has Toyota's marketshare been doing? Does GM sell 5 times more cars than Toyota?

Ah OK, so the numbers should be reversed because the U.S. sucks, that's right, gotcha.

10-4

What are you talking about?!

American automotive companies have lost significant marketshare and now have to adapt their operations to represent this. Besides, most of the jobs lost at the big 3 are being made up in new and exisiting Toyota, Honda and Hyundai plants.

I'm talking about your love of foriegn companies at the expense of the U.S.

You hate everything that made America yet yet act like you have a vested interest.

 

[imported_Tango]

Well, it's business cicles theory... an expansion period is followed by a recession period. The timing has shown a consistent trend with longer expansions and shorter recessions after WWII, but no expansion is endless of course. Statistics based on median durantion of business cicles would say a recession is scheduled for 2007 or 2008. Of course what is statistically higly prabable isn't certain... but the last expansion period started in 2002 so do the math...

About the automotive industry numbers. Cars are the second largest single expense an individual makes after reals estate, and in some case the largest (if you only rent). Increasing interest rates put a burden on many people who jumped in the real estate market during the last few years with flexible rate loans (why do americans do this?? I'll never understand it...) and other exotic (and financially irresponsible) solutions. Increasing rates means less disposable income in a country which is already dissaving. This leads to some corner cutting, and cars would be a major target given the dimension of the expense and the fact that cars, like real estate, is a market very responsive to interest rates.

The crysis of american car-makers is largely due to products, really. Ask yourself why you need to wait 1 year to get a BMW in Manhattan while nobody is buying a cadillac in Frankfurt.

 

[BaliBabyDoc]

The crysis of american car-makers is largely due to products, really. Ask yourself why you need to wait 1 year to get a BMW in Manhattan while nobody is buying a cadillac in Frankfurt.

M6 convertibles don't exactly grow on trees, while an XLR-V would look better if it was wrapped around one.

 

[UptheMiddle]

Originally posted by: BaliBabyDoc

The crysis of american car-makers is largely due to products, really. Ask yourself why you need to wait 1 year to get a BMW in Manhattan while nobody is buying a cadillac in Frankfurt.

M6 convertibles don't exactly grow on trees, while an XLR-V would look better if it was wrapped around one.

First quote - Germans have pride in their country and heritage. Many US citizens do not and its become "hip" to hate everything US.

GM has to struggle with a very large number of retiree healthcare and pension costs. Something that the other mfg's don't. Just because a manufacturing plant is built in the US, don't be fooled into believing that the same number of jobs displaced are replaced. There's much more than just line workers involved (Various Engineering, Finance, Purchasing, Management, Supply Chain, etc).

 

[piasabird]

The car market has priced itself beyond the budget of a lot of people. Also the real estate market is the same way. It is becoming increasingly harder to own a home and a new car. It is really rediculous. Meanwhile here come all the low-paid illegals Chinese and Indian workers to the rescue to keeping all the wages down. It is a very odd world.

 

[BaliBabyDoc]

Originally posted by: UptheMiddle

Originally posted by: BaliBabyDoc

The crysis of american car-makers is largely due to products, really. Ask yourself why you need to wait 1 year to get a BMW in Manhattan while nobody is buying a cadillac in Frankfurt.

M6 convertibles don't exactly grow on trees, while an XLR-V would look better if it was wrapped around one.

First quote - Germans have pride in their country and heritage. Many US citizens do not and its become "hip" to hate everything US.

GM has to struggle with a very large number of retiree healthcare and pension costs. Something that the other mfg's don't. Just because a manufacturing plant is built in the US, don't be fooled into believing that the same number of jobs displaced are replaced. There's much more than just line workers involved (Various Engineering, Finance, Purchasing, Management, Supply Chain, etc).

I'm not sure if many people really hate everything US. But anyone old enough to have owned a domestic auto older than 5 years old probably has a sad story to tell you. Contrary to popular belief, Americans aren't that stupid. If you offer them a 25% better vehicle at comparable cost . . . they'll take it.

If you doubt it ask CA.

Over the first six months of this year, the Detroit 3's domestic brands accounted for just 31.4 percent of the state's retail registrations -- down 3.7 percentage points compared with the same period last year, according to R.L. Polk & Co.

The Polk data suggest the Detroit 3 may be nearing the point of no return in California. Here's one startling indicator: Toyota's brands now generate more retail sales in California than the North American brands of GM and Ford combined.

The big winner was Toyota Motor Corp., whose brands accounted for 26.7 percent of retail registrations, up 2.6 percentage points. The big loser was General Motors, whose brands totaled 14.4 percent, down 2.1 points.

Ford Motor Co., the Chrysler group and Nissan Motor Co. also lost share, while Honda Motor Co. gained.

So Nissan is falling. I believe MB is losing market as well. So it's not enough to be Japanese, German, or otherwise NOT American. You have to make something people want and sell it at a price they believe is fair. I think it's called the free market.

Here's another sign of the times: Bert Boeckmann, owner of the world's largest Ford dealership, recently opened a Honda store in Mission Hills, Calif.

After more than 50 years of selling cars and trucks at Galpin Ford in suburban Los Angeles, it is Boeckmann's first venture with a Japanese brand except for Mazda, which is controlled by Ford.
---
And it has been a great start, he said. After targeting monthly sales of 135 new cars and trucks, the Honda store is on pace to sell 250.

Boeckmann already has asked for a meeting with Honda to seek a bigger vehicle allocation. "We're going to run a little bit short of cars in August."

Hmm, that sounds like good news for Honda employees in Ohio/Indiana, and domestic parts suppliers, etc. Tell me again . . . how many of those Fords were built in Canada or Mexico?

 

[OS]

Originally posted by: BaliBabyDoc

Here's another sign of the times: Bert Boeckmann, owner of the world's largest Ford dealership, recently opened a Honda store in Mission Hills, Calif.

After more than 50 years of selling cars and trucks at Galpin Ford in suburban Los Angeles, it is Boeckmann's first venture with a Japanese brand except for Mazda, which is controlled by Ford.
---
And it has been a great start, he said. After targeting monthly sales of 135 new cars and trucks, the Honda store is on pace to sell 250.

Boeckmann already has asked for a meeting with Honda to seek a bigger vehicle allocation. "We're going to run a little bit short of cars in August."

Hmm, that sounds like good news for Honda employees in Ohio/Indiana, and domestic parts suppliers, etc. Tell me again . . . how many of those Fords were built in Canada or Mexico?

what's also interesting is japanese corporations pay their executives much less than american companies.


"Honda doesn't disclose executive pay in detail, but the sum of salaries and bonuses that Fukui shares with 36 board members, $13 million, is just about enough for the boss at a big American company."


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