REPORT: Analysts chide GM for boosting production [*UPDATED]
General Motors has announced its planned production for next year: 2.8 million vehicles. That's a 45% increase over its production this year – 1.9 million cars and trucks – and according to some analysts, it's completely unwarranted. GM says it arrived at that number based on "real simple math." Analysts quoted in the Detroit Free Press today appear believe that GM was guided more by hope and a quest for market share.
Just about everyone agrees that next year's new car market will grow compared to this year, with estimates generally ranging from a 10% to 15% increase in sales. GM slashed its production this year so much that by September, its inventory hit unprecedented lows. To be ready for what it believes will be a 15% bounceback in overall North American car sales, a boost in its own sales (which were down almost 40% this yea)r, and to have enough inventory on hand, it figures it needs to bump production by 45%.
Every analyst appears to agree that GM will need to make more cars. But 2.8 million? Even as one analyst said, "There is no question that their production is going to be up next year and it's going to be significant – it really is," they were all in agreement that 2.8 million vehicles will leave a lot of cars either sitting on lots or being ridiculously discounted. The announcement has brought out sentiments that we are seeing shades of the old GM with a 'make them and move them by any means necessary' mentality. Both GM and the analysts' math is "real simple," but we'll have to wait until next year to see whose is accurate.
UPDATE: GM has responded to the original article on its Fastlane blog, chiding the Detroit Free Press for questioning a number that GM only meant as a 2010 production possibility, not a certainty.
[Source: Detroit Free Press | Image: Chung Sung-Jun/Getty]
Reader Comments (Page 1 of 3)
mapoftazifosho 2:38PM (10/12/2009)
I wonder what the next Chapter will be for GM?
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PJ 3:48PM (10/12/2009)
GM also responded in its FastLane blog that the comment was misinterpreted--that they indicated that they *could* build up to 2.8 million vehicles next year, not that they necessarily planned to.
Hopefully that's true. GM's sales, along with everyone else's, will be on the rise over the next year, but they need to be realistic about their hit-and-miss product portfolio and tarnished image.
The post yesterday about Chevy "aiming for 70%" of total GM sales had me worried. If Chevy's VP is still thinking about competing with other divisions, instead of competing with *the competition,* there's still a lot of culture change to do.
IK 10:52PM (10/12/2009)
11
ufgrat 9:30AM (10/13/2009)
GM's current production seems based on their current demand-- hence adding shifts for their most popular vehicles (Camaro, SRX, LaCrosse, Equinox).
As for Chevy taking 70% of the General's sales, don't forget that Pontiac, Saturn, Saab and Hummer are gone-- It's easy to believe that Chevy could take up sales from Pontiac and Saturn. Less so for Saab and Hummer.
ack154 2:40PM (10/12/2009)
*facepalm*
Really? REALLY GM?!
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alex 2:48PM (10/12/2009)
One thing Autoblog fails to mention is that GM's current inventory is a whopping half a million vehicles fewer than they started the year with. That means GM didn't have to produce as much this year because they had a million cars sitting on the lots to sell. That isn't the case anymore.
It seems like a shocking number at first, but when you really crunch the numbers it doesn't seem too unreasonable. those 500,000 fewer vehicles in inventory accounts for over half of the production increase.
ack154 2:51PM (10/12/2009)
Ya, but who says they need to get back to those levels?
geo.stewart 3:09PM (10/12/2009)
hey, if you are the union and you own 40% of government motors, what good is it if you cant increase production and put more of your cronies back to work and increase union power again.
i guarantee those addtional line jobs wont be temps, contracts, or other non-union roles.
inline6 4:25PM (10/12/2009)
ack,
No, not really. POSSIBLY. Read their FastLane blog follow-up.
Makes much more sense at that point.
alex 6:07PM (10/12/2009)
ack, now i'm giving you the facepalm for that stupid response.
It's not about getting the inventory back up to where it used to be. If you start the year with more cars, then you don't have to produce as many to meet your sales needs. Last year they started with 500,000 more cars than they have now. That means if GM sees identical sales next year and if they want to keep their inventory right where it is now (very very low), they have to produce 500,000 more vehicles next year than they did this year!
it's simple.
mbslrm 2:42PM (10/12/2009)
So they're going back to the days on 45 day supplies?
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Jake 2:45PM (10/12/2009)
The Unions and the Govt. have most of the control in the company, right?
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roadwarrior 2:48PM (10/12/2009)
GM has already made a response to this story:
http://fastlane.gmblogs.com/
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Obviously DaMinority 11:15PM (10/12/2009)
Darn it, roadwarrior! Don't confuse anybody with facts, we'd much rather shoot from our hip (or hypocrisy).
Thanks for the link, it was nice to see that at least someone at GM realizes you need to compare expected production to expected SALES when you have no inventory.
Epsilon-Not 2:49PM (10/12/2009)
I honestly have no respect for Wall Street analysts' claims...
Though, admittedly, I could say the same thing about a lot of the decision-makers at GM. So it's a difficult situation.
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GoLowDrew 2:57PM (10/12/2009)
There is no need to pay stockholders dividends, so there is no need to make a profit. The new GM will need more debts to offset future income - after they flood the market share. Wait...Is it time to trade in our new cars again?????
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Greg Aryous 3:05PM (10/12/2009)
Gov't Motors is just plain STUPID and with our money... pisses me off!
Just run the numbers - if 2010 is up 15% to maybe 11.5-12 Million units and GM maintains their 18% marketshare (after shedding Saturn, Pontiac, Hummer and Saab), then they should sell 2.07 - 2.16 Million vehicles (avg.2.1 million) means they will OVER produce by 33% and have 700,000 vehicles in inventory at a daily sales rate of 6800 would give them a whopping (103) days of inventory... STUPID!!!!!!!!!!
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Pokey 3:25PM (10/12/2009)
It was never "our" money.
UCJR 4:16PM (10/12/2009)
And the rest of the government is smart with your money?
inline6 4:23PM (10/12/2009)
Greg,
Now add the market share they have in Canada and Mexico, to which they export. You'll get a lot closer to 2.8M then.
Also, as the FastLane blog said, they said that they COULD hit 2.8M, not that they WILL, and that they will be aggressively adjusting production levels on a quarterly basis to control supply and inventory.
Helps if you read the article and think before you react...