GM Encouraged by 24.5% Sales Drop in August

After posting a 24.5% decline in August sales, GM announced on September 3 that it was encouraged by falling gas prices and signs that the market might finally be bottoming out. It takes a whale of a positive attitude to see a bright spot in a sales report like that, especially when the drop occurred during a much-hyped “Employee Discount Sales Event” designed to rid GM lots of a backlog of large to mid-sized trucks and SUVs. Ford reported a 26% drop in August sales, Chrysler a 35% drop.

Sales at Honda and Toyota also dropped but less than 10%, while Nissan actually saw a 15% increase in sales.

Gasoline prices have fallen 11% since mid-July when they hit their peak price ever, but customers remain skittish and for good reason. With three new Atlantic hurricanes currently stacked up like airplanes waiting for a runway and a near-miss from Gustav on gulf oil refineries, there is little cause for celebration. One major disaster could send oil skyrocketing all over again, and that’s not counting geopolitical problems, just hurricane risk.

GM, Ford, and Chrysler are all looking forward to 2010 when they plan to put all kinds of brand new fuel-efficient and alternatively fueled small cars on the U.S. market. Until then, the “bottoming out” of the U.S. auto market is likely to be a long bumpy bottom, made worse by tightening credit conditions and the GM EV1 Headed for Demolitionpossibility of a new waive of unsecured credit and auto loan defaults. In other words, it’s going to be a long year before the U.S. auto industry can expect to see much relief, and what the country will look like at that point is almost anybody’s guess.

Both major presidential candidates are championing $25 billion in low-cost loans to help the U.S. auto industry build the fuel-efficient cars it needs to sell right here in the U.S. Recently, the auto industry requested another $25 billion in government loans to retool their assembly plants. It’s been almost 30 years since the U.S. bailed out Chrysler to give them a leg up against the Japanese, and now here come all three of the Big Three again, hats in hand, asking for rescue so they can “keep jobs in America.”

I confess, I have a chip on my shoulder when it comes the the Big Three. Why is it that lately, after hearing for 25 years about how free markets always regulate themselves when allowed to do so, the U.S. government is suddenly expected to bail out some of the largest corporations on earth? The airlines, the Big Three automakers, Bear Stearns, Faddie Mae and Freddie Mac, and what next?

GM built a successful and wildly popular electric car in 1996 – 12 years ago – to show the state of California that it couldn’t be done, and that people would hate it and refuse to buy it. They wanted to show that new fuel emissions standards enacted by the state would cripple the auto industry.

What happened?

People in California loved the GM electric car, which was dubbed the “EV1.” They loved the EV1 so much that nearly every single person who agreed to the trial lease of the vehicle (it was not for sale but only leased to select customers as a test) wanted to purchase and keep it. GM reacted in 2003 by recalling and destroying every single EV1 in the state. An excellent documentary on this bit of recent history can be purchased or rented almost anywhere; it’s called Who Killed the Electric Car?

It’s a little known fact that the very first car ever built was an electric car. William Morrison built the first model in 1890. It ran for 13 hours at a stretch and achieved an average speed of 14 mph. In 1900 Camille Jenatzy built an electric car that reached a maximum speed of 66 mph. In 1903 the first electric/gas hybrid car was manufactured by Krieger. Then, in 1930, with the invention of the internal combustion engine and the release of Ford’s famous Model-T, production of electric cars came to an abrupt halt until once again, in 1996, GM released one to prove a point and ended up making itself look ridiculous and corrupt.

Here’s a thought: maybe the Big Three are ridiculous and corrupt. They knew in 1996 that 1) they could build an efficient electric care at a reasonable price and 2) there was a market for this car. Why didn’t they keep building it? The documentary has some things to say about that, but I submit that one less conspiratorial reason is that they have rarely been much for innovation, preferring to stick to what (they think) works and ignore what is actually happening in the wider world. And electric cars aren’t even all that innovative: they’ve been around for 118 years!

Businesses that conduct themselves so pigheadedly often fail.

I want to see automobiles made in the U.S. as much as the next guy. More, actually. (I live in Michigan.) But why give $50 billion the U.S. doesn’t have to robber barons who squandered their inheritance by thinking short term, playing it safe, and shipping their factories overseas? Why not give someone else a chance? Why not subsidize start-ups with great automobile ideas in the area of alternative energy and fuel efficiency instead? Hand it off to the little guy, see if he can score a touchdown, because these three sure can’t.

It’s going to be a long, slow 2009 any way you cut it.

Am I worried about how the Fords are doing this winter?

Not on your life.

12 comments to GM Encouraged by 24.5% Sales Drop in August

  • Giving more billions to the same auto makers who squandered even more billions doesn’t make much sense.

    GM has still not come clean about the EV1, still has not explained why it refused to sell the EV1 to willing buyers.

    GM’s Lutz claims it “cost $80,000 each to build”; but Lutz apparently doesn’t see the other side of that claim, if it cost so much, why did GM spend the extra dollars to haul them out to the Mesa, AZ crusher, strip them of tires and batteries, subject them to an 18″ crush, then truck them back to the smelter for sale by weight as junk. If so valuable, GM, why didn’t you hold onto them??

    The plain truth is, GM has not told the truth; and any more money given to a liar and wastrel will just be thrown away. GM can burn through $25 billion in a year, and have nothing to show for it; they’ve done so many times. Imagine GM in the 1950’s, and think about what idiocy it must have taken to get them to their current situation: market value less than a motorcycle company.

  • [...] After posting a 24.5% decline in August sales, GM announced on September 3 that it was encouraged by falling gas prices and signs that the market might finally be bottoming out. It takes a whale of a positive attitude to see a bright spot in a sales report like that, especially when the drop occurred during a much-hyped “Employee Discount Sales Event” designed to rid GM lots of a backlog of large to mid-sized trucks and SUVs. Ford reported a 26% drop in August sales, Chrysler a 35% drop. Sales [Read the full article here] [...]

  • Evelyn Black

    Doug, I can’t argue with any of what you say. I’m losing no sleep over their predicament, but I do feel for the workers. It is corporate mismanagement plain and simple IMO and lots of it, for many, many years. Let’s hope something better happens for our kids. Thanks for your comments.

  • The battery technology and the vehicle technology was sold to an oil comglomerate, for what I am thinking is a huge dollar amount. Contractually binded, GM had to destroy the technology. The battery technology and patents is owned by, I believe Texaco, until 2014. This is what killed the electric car, but if it were more profitable to GM to keep the electric car then the oil company was willing to pay out, then you would still see EV1’s on the road today.

    One could speculate that GM went on this venture with the premeditated intention to sell the technology to the oil companies after proving that it would seriously effect the oil companies interest. What do you think?

  • kerry bradshaw

    Boy oh boy, is Evelyn one EV-ignorant
    soul, repeating that pack of silly lies
    from perhaps the most fictitious
    crockumentary since those produced by the
    NAzis during the 1930’s. The EV-1 was hardly
    “loved wildly by the masses” – they never
    managed to have more than 3/4 of the paltry
    1100 EV-1s under lease at any one time, despite
    soliciting 5,000 GM customers who had responded
    to their survey who indicated they might be interested
    in an electric car. 50 of those folks were actualy
    dumb enough to lease what a panel of auto experts
    recently named as one of the worst cars ever built.
    The idea that the automakers are deependent upon the
    oil companies might have been Chris Paine’s dumbest
    theory of all. A real gem. Perhaps he might explain
    why Gm would ever pay attention to an oil company.
    The oil companies depend upon the automakers, moron,
    not the other way around. And how come Toyota and
    Honda’s cancellation of their electric car programs
    (Honda after a few months!) would eve lead anyone to
    claim that GM killed anything. The elctric car was DOA.
    Nobody needed to kill it. Nor did Roger Smith attempt to
    show that an electric car “couldn’t be built.” They had
    been build before WWI. Unfortunately, electric cars hadn’t advanced one iota during the 90 years since then – they still didn’t have a practical battery. The EV-1 battery pack weighed 1250 pounds (!!!), cost over $20,000, and leasted about 5 years, making battery costs about $4,000 per year, or 4 times the cost of gasoline in those days. The car had
    a driving range (round trip) that couldn’t reach destinations a mere 45 miles away. Oh, yeah, that piece of crap was REAL popular. I was around during those days and NO ONE I knew had the slightest interest in driving a stupid battery-only
    electric car. They made zero sense. Then a California chemist determined that the Honda Insight was actually much friendlier to the environment than the EV-1. Just a few of the thousands of facts that were covered up by Hanks, begley andPaine, the
    Three Stooges of documentaries. They are pure liars.
    I might add that putting 5 million electric cars on the road will reduce gasoline consumption aby 1% and emissions by a much smaller amount. Obama’s con that a million plug-ins by 2015 will accomplish anything is pure con. or ignorance. With
    him it’s always a toss up as to why he tells so many lies.

  • Evelyn Black

    Thank you Kerry and John. It always makes me sad when I see that people in this country are unable to disagree without hate-speech and name-calling. It shows what we are coming to here in the U.S. and it seems to me the press just encourages that kind of ugliness. I’ve always felt that if a person really has something to say, the thing they are saying will stand on its own without the ugly language and invective. If a person has nothing of real content to add though, I guess the ugly language is necessary to promote the illusion of content.

    John, I don’t know about GM selling the battery technology to the oil companies, but it wouldn’t surprise me. Actually battery technology has improved quite a bit as evidenced by the Tesla. We could make the car, if there weren’t corporate interests actively opposing the car. No, it wouldn’t be a solution for everyone, but it would appeal to many. I commute three miles to work and walk everywhere else, so an electric car would be perfect for my needs.

    I agree with Thomas Friedman that what we need to do now is to support hundreds of new ideas, as many as we can find, so that the two or three that will stick get a chance.

  • Best to just completely ignore “Kerry Bradshaw.” Just one more alias in a long list that is used for similar trolling. Quite sad.

    It boggles my mind that the tax payers are being asked to help the auto makers build what we need at this point. We’ve known what was needed for quite some time. And the car makers could have done it if they’d wanted to. They DID do it when they had to. And every time, we let them off the hook, to continue working really, really hard on the H2 cars. :sigh:

  • Evelyn Black

    Thanks Darell, I agree. I wonder how long these bail-outs are going to go on? The budget deficit is at an all-time high even without Fannie & Freddie added in yet, and now we have the auto industry with their hands out, Lehman Brother’s buyers expecting help from the Fed (that can’t go on every time an investment bank goes belly up), and what next? The airlines? At some point aren’t we just throwing bad money at bad money? Thanks for posting your thoughts! As for trolls, I just can’t get used to them. It seems like an illness or something–like that movie “28 Days”–rabid web posters. I’m old, so to me, it’s just so bizarre. But I suspect you are right, best to ignore the lot of them. What a weird hobby that is though!

  • J.D. Seagraves

    Let GM fail.

    You know, when Lehman was on the ropes, all of the other banks came together and demanded that government do something.

    What do you think Toyota or Honda are going to do if GM fails? They’ll rejoice! In a REAL business, you want your competitors to fail.

    Banking, of course, is not a real business, but a government ponzi scheme in which firms fall like dominoes.

  • Evelyn Black

    Hi J.D.

    I agree about the banks. I’m really upset about it, and I think whatever is done at this point will likely be nothing but another finger in the dike and down the line it will be another emergency. I live in MI, and I’m a big fan of Governor Granholm, who is pushing to make MI the place to locate all things innovative and new in the area of clean energy, renewable energy, and hybrid and alternative vehicles.

    I’d like to see some other companies get a chance in regard to building cars. When Chrysler was bailed out, it helped for awhile, and now the company is on the ropes again all over again. I see it as a management problem–lack of vision, unwillingness to stay ahead of the curve, lack of innovation.

    They say that, with regard to the banks, at this point something must be done or we will see something akin to the Great Depression–but I’m struck by how many people say, “Bring it on! At least the guys at the top will go down with us.” I think people are sick to death of banks, and I’m right there too. I think we’ll continue to see bail-outs, but it won’t work in the long run. We have to have something to offer the world instead of debt, inflated pieces of paper and bad cars. Until we do, we’re going to be hurting.

    Thank you for your always welcome thoughts.

  • J.D. Seagraves

    Hey, I live in MI, too (Saginaw). Although, sorry to say, I’m not a fan of Granholm! As for everything else, I agree with you.

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