Study Says Buyers Cross Struggling GM, Chrysler Off Their Shopping Lists
By Chris Haak
Although as a rule I always take any research conducted by CNW Marketing Research with a grain of salt (after their Swiss cheese-porous argument that a Hummer costs less per mile in dust-to-dust energy costs than a Prius, refuted by Autosavant friend Michael Karesh of TrueDelta.com here and here), the same firm has conducted research that indicates that of about 40,000 new-car buyers surveyed in January and February 2009.
CNW’s survey found that the share of car shoppers who say their primary vehicle choice would be one from GM declined 12%, while those who said that their primary vehicle choice would be one from Chrysler declined 33%. The fact that the companies are in the news about asking for money from the government every few days, that the ‘bankruptcy’ word is bandied about constantly in reference to GM and Chrysler, and that both companies have reduced advertising expenditures (and therefore are less in the forefront of buyers’ minds) are all exacerbating the situation.
Meanwhile, across town, Ford is reaping the benefits of the way it has positioned itself as the [relatively] healthy domestic automaker, and the only one that has not [yet] accepted money from the Federal government. The share of car buyers who told researchers that their first choice was a Ford vehicle jumped 12%. While Ford had the foresight or luck to mortgage the entire company’s assets to secure funds to finance much-needed restructuring, the company’s sales are still in the tank, in spite of noise like this study and local news reports showing that Ford is snapping up all sorts of conquest buyers from other manufacturers, and in particular from GM and Chrysler. Ford’s year to date sales are down 45.9%, GM’s are down 51.1%, and Chrysler’s are down 49.1% – that is hardly an example of Ford kicking ass and taking names.
Now, the year to date actual sales results may be different from the “first choice intenders” due to some factors such as richer incentives at one company compared to another (for example, Chrysler is putting around $8,000 on the hood of new Rams nowadays in a play to grab market share from its rivals. Brands such as Lexus, Kia, Infiniti, and Land Rover have really jacked up their incentives in March (with each of those at least double what they were a year ago, and in the case of Land Rover and Lexus, more than 300% over last March’s incentives, according to Edmunds).
CNW made a big deal about how the share of buyers who said Hyundai would be their primary choice saw their share increase by 59% and those who said that Kia would be their primary choice rose by 50%. While some of Hyundai’s increase may be attributable to the Hyundai Assurance lose-your-job-and-return-your-car program as well as to the introduction of the Genesis sedan, some of the increase in consideration may be due to the poor economy and the public’s lingering perception of Hyundai (and Kia) as a purveyor of cheap cars. The combination of cheap cars adn $4,148 in average incentives are probably what’s driving Kia sales forward in a poor economy. The other thing in the Korean brands’ favor is that they have a very small market share in the US (just over 5% in 2008), so even a substantial increase in buyer intent translates to a relatively paltry market share bump.
Meanwhile, Chrysler LLC’s CFO told Bloomberg that his company is a safer bet for survival than GM. CFO Ron Kolka’s logic is that because Chrysler would be OK if the SAAR is much lower than GM’s predictions (in other words, Chrysler has cut more fat than GM and has a lower breakeven point than GM does), it is in a better position to survive than GM is. His concern is that the government might see GM as too big to fail, and Chrysler worth sacrificing just to reduce excess capacity in the industry.
These are certainly interesting times we’re seeing. The lesson to take from this news is that just because GM and Chrysler are bailout recipients and both struggling to gain consumer acceptance, it does not mean that is the primary reason for those struggles. Also, in spite of the hype about Ford’s health, that company is also very sick, and struggling to get sales.
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