September was an absolute disaster for new car sales, more bad news may lay ahead for the car industry as a whole, General Motors’ striking workforce digs in, Tesla’s going to China and more for The Morning Shift of Wednesday, Oct. 2, 2019.
1st Gear: The ‘Oh Shit’ Moment Has Arrived
For the past two years or so, we’ve seen a general flattening or outright decline in new car sales after nearly a decade of unfettered growth. Some segments and brands have fared better than others, of course. In general, this hasn’t been a stellar time to be selling sedans and small cars. But fears of a saturated new car market have always loomed large, compounded by concerns over a larger economic downturn lurking around the corner.
Well, September’s new car sales figures won’t do anything to assuage those fears. Very much the opposite. Things seem bad across the board.
Results were disastrous for leading Asian automakers Toyota Motor Corp. and Honda Motor Co., which both suffered double-digit declines that were worse than analysts anticipated. While a fuller picture will emerge Wednesday when General Motors Co. and Ford Motor Co. are due to report, the poor performance suggests that overall deliveries of cars and light trucks could come in worse than the 12% drop anticipated by analysts, based on six estimates.
The severity of the slide stokes fears that a long-anticipated car sales collapse may be arriving. The slowdown puts auto dealers already struggling with shrinking profit margins in an even more precarious position. With outgoing model-year vehicles clogging their lots, automakers had to pony up record incentives of more than $4,100 a vehicle in the third quarter, according to researchers at J.D. Power and LMC Automotive.
I won’t go into all the details here but there’s a ton more at Automotive News explaining how bad it was, brand by brand. Just read the headlines:
The party’s even over at seemingly invincible Subaru.
Update 1:30 p.m.: Since a lot of people are reading this story, I’ll go ahead and add the newly released numbers from the American automakers.
According to Automotive News, Fiat Chrysler posted a 10 percent year-over-year sales decline, as did GM, while Ford was down a whole 12 percent. So it’s pretty not-great news all around.
It’s scary, but it makes sense. We only had so many years of buying brand new cars before, presumably, buyers tapped out. As dealer lots get “clogged” (good Lord, that’s bleak) with unsold new cars, incentives and deals to get them gone will be the name of the game. The one ray of hope in this dismal situation is the SAAR. Back to Bloomberg real quick:
A closely watched measure that aims to smooth out month-to-month sales swings — the seasonal adjusted annualized rate, or SAAR — suggests the pessimism reflected in how auto shares traded Tuesday may be overblown. The rate was 17.2 million in September, according to Ward’s Automotive Group, up from 17 million in August, which benefited from more selling days this year, including the Labor Day holiday weekend.
As we’ll discuss in Neutral, if you haven’t bought a new car in the last few years—making you among a small minority, it would seem—this grim situation could be used to your advantage.
2nd Gear: UAW Rejects GM’s Latest Proposal
GM has it even worse with its unionized workforce currently on strike for the 17th day, the longest labor action that automaker has faced since 1970. Last night UAW negotiators rejected GM’s latest deal offer, indicating the two sides are far from an agreement. From The Detroit Free Press:
In a letter to members, Terry Dittes said that GM made a “comprehensive proposal” at 9:40 p.m. Monday. “This proposal that the company provided to us on day 15 of the strike did not satisfy your contract demands or needs. There were many areas that came up short like health care, wages, temporary employees, skilled trades and job security to name a few.”
Dittes, who is vice president of the union’s GM Department, said the company made proposals he described as seeking concessions on the union’s part.
“We have responded today with a counterproposal and are awaiting GM’s next proposal to the union,” wrote Dittes. “Regardless of what is publicized in print or social media, etc., there are still many important issues that remain unresolved.”
While the automaker is profitable and currently cash-rich, IHS Markit analyst told the Freep that “GM is looking at a very expensive footprint going forward with autonomous vehicle and electric vehicle development, and they don’t want an expensive legacy costs.” Workers say they’re being asked to make too many concessions and are trying to get back things they gave up during the recession.
Meanwhile, strikers live on $250 a week strike pay as GM loses an estimated $25 million per day.
3rd Gear: UAW Wants A Faster Path To Top Wages
One big reason the latest offer was rejected is that it apparently didn’t address one key issue the union wants resolved—speeding up the path to top-tier wages.
Right before the recession, workers agreed to a two-tier wage structure that split employees between legacy people making $28 an hour and new hires making half that. After eight years the second-tier workers can ostensibly move up (they can and do get raises but those are capped) and the union wants that process sped up. From Automotive News:
Now, General Motors’ resistance to letting workers attain full pay faster is seen as one of the reasons the union has been on strike since mid-September. UAW members today argue that eight years is too long to wait, especially as the automakers amass record profits and dole out lucrative bonuses to executives.
[…] Labor experts say there’s recent precedent for quicker paths to earning top dollar, making it an issue on which the two sides could find compromise.
“The UAW is determined to make headway, in part because the notion of equal work for equal pay goes to the very heart of the union,” Harley Shaiken, a University of California at Berkeley professor who studies labor issues, told Automotive News. “Their motto is solidarity forever, and this gnaws at that. Some major movement here is going to be necessary to get a deal ratified.”
The union’s argument is that the recession is over, the company’s doing great and executives are getting awarded huge bonuses, so it’s time for new hires to hit the higher wages sooner.
4th Gear: BMW Very Narrowly Beats Mercedes
Thirty-four cars! Via Bloomberg:
BMW Group’s namesake brand was neck-and-neck with its German rival in the U.S. last month, edging Daimler’s Mercedes-Benz unit by a mere 34 light vehicle and keeping the race for sales bragging rights close into the final stretch.
BMW posted a 6 percent gain in September, delivering 27,467 cars and SUVs. Sales of the 3 Series sedan rose 19 percent and the X5 SUV more than doubled volume from a year ago.
Mercedes deliveries rose 4.8 percent to 27,433, paced by deliveries of the GLC and GLE SUVs, which jumped 13 percent and 28 percent, respectively.
Mercedes, I’m sure, will strike back by making yet another coupe-crossover in a different size than what BMW makes, and BMW will thus have no choice but to make an X4.5 or something.
We haven’t even gotten into the decimals yet, people. This war is far from over.
5th Gear: Tesla In China
Tesla’s Shanghai plant is slated to finally open this month, allowing the electric automaker better access to the world’s biggest car market (and most important EV market.) That’s a huge deal for Tesla, although some questions remain. Via Reuters:
Tesla Inc.’s China factory aims to start production this month but it is unclear when it will meet year-end production targets due to uncertainties around orders, labor and suppliers, sources with knowledge of the matter said.
The U.S. electric vehicle maker aims to produce at least 1,000 Model 3s a week from the new factory by the end of this year, the centerpiece of its ambitions to boost sales in the world’s biggest auto market and avoid higher import tariffs imposed on U.S. cars.
The factory is kicking into gear amid the U.S.-China trade war and weakness in China’s auto market. Sales of new energy vehicles contracted for a second month in a row in August, and are likely to grow at a slower pace this year to 1.5 million vehicles, down from a previous forecast of 1.6 million, according to an industry association.
Tesla has fared better, with China sales rising 98 percent in the first seven months of this year thanks to strong demand for Model 3, according to research firm LMC Automotive.
Reverse: You Don’t Do A Land War With Russia Right Before Winter
Hitler was a dumbass.
Neutral: Will You Take Advantage Of The Sales Slump?
Get ready for the incentives and deals, to say nothing of the year-end sales events. Any new cars on your wish list?
The Liberty Beacon Project is now expanding at a near exponential rate, and for this we are grateful and excited! But we must also be practical. For 7 years we have not asked for any donations, and have built this project with our own funds as we grew. We are now experiencing ever increasing growing pains due to the large number of websites and projects we represent. So we have just installed donation buttons on our websites and ask that you consider this when you visit them. Nothing is too small. We thank you for all your support and your considerations … (TLB)
Comment Policy: As a privately owned web site, we reserve the right to remove comments that contain spam, advertising, vulgarity, threats of violence, racism, or personal/abusive attacks on other users. This also applies to trolling, the use of more than one alias, or just intentional mischief. Enforcement of this policy is at the discretion of this websites administrators. Repeat offenders may be blocked or permanently banned without prior warning.
Disclaimer: TLB websites contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of “fair use” in an effort to advance a better understanding of political, health, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than “fair use” you must request permission from the copyright owner.
Disclaimer: The information and opinions shared are for informational purposes only including, but not limited to, text, graphics, images and other material are not intended as medical advice or instruction. Nothing mentioned is intended to be a substitute for professional medical advice, diagnosis or treatment.