Friday, June 19, 2009
GM sold 20,000 more cars last week than projected.
Washington Post
Since January, Robert Walton had kept one eye on the bankruptcy drama unfolding at Chrysler and the other on the sticker price of a 2009 Town and Country van.
Walton, a nurse, said he was hoping the dealers’ desperation to get rid of unsold inventory eventually would rise high enough to spur deep discounts that would bring the $43,000 vehicle within his reach.
That day came. After hearing that he qualified for rebates and incentives because of previous military service and for owning another Chrysler product, Walton drove away from an Upper Marlboro, Md., dealership in a top-of-the-line cranberry Town and Country that cost him $34,755.
With historically weak sales and two of the Detroit Three having teetered for months on the brink of collapse, analysts said car buyers are getting some of the best discounts on record. And there’s evidence the perks are working: U.S. auto sales increased 0.5 percent from April to May, boosting overall retail sales.
“I saved $9,000,” said Walton, 47, who was still wearing black work scrubs from his midnight-to-8 a.m. shift at the hospital. “That’s a steal; that’s a good deal.”
Still, he said, he pushed the envelope, trying to stretch the money he had saved up. “I tried to counteroffer $30,000. [The salesman] wouldn’t go for it. He said, ‘Man, I’m already losing money on it.’”
Last month, according to the National Automobile Dealers Association, Chrysler sold 79,000 vehicles, 10,000 more than analysts had projected. General Motors sold 191,000, about 20,000 more than forecast. Despite the positive numbers, sales for the month are down significantly from a year ago — 21 percent at Ford, 26 percent at GM and 45 percent at Chrysler. Sales at the German automakers dropped 21 percent and at the Asian brands are off 35 percent.
As a result, automakers are pushing more and more incentives. According to the automotive site Edmunds.com, buyers in May on average got $4,880 knocked off the sticker price, including $2,952 in incentives from manufacturers and $1,928 from dealers. May’s incentives are topped only by March discounts, which reached an average of $5,003 per vehicle.
But the slow sales and discounts are taking a toll on dealers, which posted a net loss of $992 per vehicle during the first quarter of this year compared with a net loss of $128 per vehicle during the same period last year, according to NADA.
Though buyers are getting “the deal of a lifetime, this is why you see so many dealerships closing,” said Jesse Toprak, senior analyst at Edmunds.com. “They are making money on used cars and trying to ramp up business on parts and service.”
For consumers, the window of opportunity to get the huge discounts is likely to close by the end of the summer, analysts said. The automakers have significantly cut production. Once the inventories are depleted, they won’t need to offer incentives.
The challenge for the automakers, however, may be managing the expectations of buyers who are accustomed to receiving 50 to 70 percent discounts offered in the liquidation sales of such retailers as Circuit City, said Jeff Schuster, executive director of forecasting for J.D. Power and Associates.