Edmunds Reviews GM Status One Year After Bankruptcy
SANTA MONICA, Calif. — Tuesday marked the first anniversary of General Motors filing for bankruptcy, and several analysts from Edmunds.com who looked back on the past year for GM said they believe bankruptcy might end up being "one of the best things that ever happened to the company."
Edmunds.com chief executive officer Jeremy Anwyl took the lead in assessing where GM now stands financially and in terms of potential performance.
"With the company much leaner and more focused, it is making a profit even in today's tough market," Anwyl stated.
"This bodes well for GM's profit potential for when the market fully rebounds," he continued.
Karl Brauer, the editor at large for Edmunds.com, touched on how the relative turnaround of GM didn't just happen overnight.
"GM introduced some excellent product to the market over the past year, and we must remember that these vehicles were in process for at least three years — well before the financial collapse required the company to beg for help," Brauer commented.
"This suggests that the organization is healthy beneath the surface," he added.
Edmunds.com senior analyst Jessica Caldwell offered what the automaker must do to sustain the momentum it's gained since bankruptcy proceedings commenced.
"GM must maximize its second chance by continuing to turn out great products at a profitable level without getting distracted by egoistic pursuits," Caldwell asserted.
"It makes no sense to vie for the title of world's biggest automaker if that puts them back into the hole from which we just rescued them," she interjected.
Finally, another Edmunds.com senior analyst, Michelle Krebs, offered in her report on AutoObserver.com, rattled off several other tasks GM needed to accomplish.
"In the future the automaker must return to public ownership, repay taxpayers, fund union health care and earn profits — not easy tasks," Krebs conceded.
"Going forward General Motors needs strong, stable leadership that assures the American public that the company will remain on track," she went on to say.
The analysts shared this view throughout monthlong series about the new GM in collaboration among Web sites Edmunds.com, InsideLine.com, AutoObserver.com and GreenCarAdvisor.com. The entire package can be found at www.autoobserver.com/gm-bankruptcy.html.
Monthly Review of Incentive Levels
In other industry analysis shared by Edmunds.com, the site compiled the average manufacturer incentive offered by OEMs in May. Analysts found the May figure to be $2,603 per vehicle sold, down $28 or 1.1 percent from this past April. The amount also was off by $340 or 11.6 percent from May of last year.
Caldwell shared her thinking why incentives dropped in a month that included the crucial Memorial Day weekend.
"Inventory levels are relatively low so many automakers have cut back on incentives," Caldwell contended.
"Bargain-hunters planning to hold out for traditional late summer deals would be wise to start shopping now since there is a less dramatic need for old model year clearance sales this year and the 2010 inventory is already slim pickings," she continued.
While the incentives by the industry as a whole decreased, Edmunds.com noticed that domestic manufacturers bucked the trend last month. The site determined that domestic OEMs awarded an average of $3,366 in incentives per vehicle sold. That amount is up from the $3,298 they handed out in April.
Meanwhile, analysts noticed that European, Japanese, and Korean automakers all decreased their average incentive offerings in May as compared to April. For European companies, the figure dipped by $211 to $2,300. For Japanese manufacturers, the amount moved lower by $148 to $1,913. While for Korean OEMs, the total edged lower by just $29 to $1,738.
All told, Edmunds.com calculated that automakers spent an estimated total of $2.81 billion on incentives last month. That figure is actually 9.1 percent higher than the site's estimation for April.
Breaking down the whole amount, analysts believe the Big 3 compiled 59.7 percent of the total, about $1.7 billion. Down the line, they said Japanese manufacturers spent $786 million or 27.9 percent; European automakers used $208 million or 7.4 percent; and Korean manufacturers utilized $140 million or 4.9 percent.
Krebs offered her take specifically about what domestic and Japanese automakers are getting for their incentive dollars.
"Compared with three years ago, the Japanese automakers have increased their incentives spending by 62 percent while domestic automakers are spending a mere 7 percent more," Krebs noted.
"In the same period, Japanese market share has only increased by 2 percent while domestic market share went down by 10 percent," she pointed out.
Turning to how incentives were used among vehicle segments, Edmunds.com determined that companies handed over the highest average amount for sales of large trucks. This segment averaged $4,650 per unit sold in May. The site mentioned incentives for premium sport cars were the next highest at $3,892.
The vehicle segment garnering the smallest average incentive in May was sports cars at $1,263, followed by subcompact cars at $1,296.
The site explained that its analysis of incentive expenditures as a percentage of average sticker price for each segment showed large trucks averaged the highest. Analysts found it came in at 12.7 percent, followed by compact cars at 11.5 percent of sticker price. Conversely, they said premium luxury cars averaged the lowest with 2.3 percent and sport cars followed with 3.6 percent of sticker price.
Taking a look at how specific brands operated last month, Edmunds.com found that Scion spent the least, an average of just $457 per vehicle sold. The next brand was Subaru at $667.
At the other end of the spectrum, analysts determined Saab spent the most at $6,813, followed by Lincoln at $4,987 per vehicle sold. Relative to their vehicle prices, Edmunds.com believes Saab and Chrysler spent the most at 17.1 percent and 12.2 percent of the sticker price, respectively. Meanwhile, the site contends Porsche spent just 1.7 percent, and Subaru spent 2.6 percent.
Edmunds.com reiterated that its monthly True Cost of Incentives report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers.
To ensure the greatest possible accuracy, Edmunds.com stressed that it based its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.
|True Cost of Incentives for the Top Seven Automakers|
|Automaker||May 2010||April 2010||May 2009|
|* Indicates Record|