U.S. Automakers’ Race to the Bottom
Credit analyst Shelly Lombard at Gimme Credit LLC is calling it a “race to the bottom.” Ford Motor Co. (NYSE: F) and General Motors (NYSE: GM) both reported plunging sales for February on Tuesday, with Ford sales down 48 percent from a year ago and GM sales down 53 percent.
This is looking like a race to the bottom and there is no grand prize, just grief for the first one to get there. The most frightening thing is that 2009’s seasonally adjusted annualized sales rate is threatening to come in below the two auto makers’ worst case scenarios.
Now comes the expected word of GM’s auditors’ “substantial doubt” about the firm’s ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.
How bad is it on the ground? At The Truth about Cars, you can see the latest memo from GM to its dealers, detailing how the company plans to buy back vehicles from bankrupt dealerships.
GM and Ford had plenty of company in their miserable sales results, with Nissan, Toyota and Honda reporting 37 percent, 40 percent and 38 percent declines, respectively, for February.
But believe it or not, German auto sales rose 21 percent in February, according to Verband der Automobilindustrie. Here’s what VDA President Matthias Wissmann said at the Geneva Auto Show:
These are the highest February sales numbers in the last ten years. For the first time in six months, registrations are growing. We expect that domestic sales of the complete first quarter will be above prior year numbers.
So what gives? Apparently, the German government reformed its vehicle tax, which provided ample incentive for Germans to dump their clunkers and order new cars.
Perhaps U.S. policymakers could take a page from the German playbook.
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
