
No. 1 in U.S. Sales for GM or Ford Could Be a Poisoned Chalice
For the time being, General Motors (GM) - Get Report is king, the top-selling automaker in the U.S. But that distinction could change soon if current trends continue at GM and No. 2 Ford (F) - Get Report , which is nipping at GM's heels.
The six-month sales totals in the U.S. through June showed Ford with sales of 1,345,170 vehicles, up 4.4% from a year ago, and GM with sales of 1,438,915, down about 4.4%, during the same period of 2015. GM's U.S. market share fell to 16.3% while Ford's rose to 15.3% -- a mere one point share difference. (Worldwide, Toyota (TM) - Get Report is the top seller, a status GM once held).
GM has hastened to assert that its deliberate post-bankruptcy strategy has been to reduce lower-profit sales to daily-rental and other fleets in favor of so-called retail sales to individual customers. In May, following GM's annual meeting, CEO Mary Barra said the strategy of emphasizing so-called "retail" sales will continue.
"We'll be sticking with it," she said. "I think we've had the most significant, not only last year but this year, increase in retail share growth. We're going to continue to do that, looking for the quality of the sale. We think it's very core not only to strengthen the business, (also to) strengthen residuals (trade-in values), it has benefits."
Ford claimed it isn't interested in being No. 1, per se, but there's little doubt that the title would be extremely sweet for GM's arch-rival, which hasn't finished the year No. 1 since before World War II. In any event, automakers know that being on top can be a poisoned chalice, especially by enticing them to increase discounts in order to stimulate sales to a degree that can undermine vehicle resale value.
"What we don't want is for a large number of vehicles coming back into the market from rental and other fleets competing with new vehicles" and driving pricing down through oversupply, said Dan Flores, a GM spokesman.
Ford is quick to point out that while its share of fleet sales, as opposed to retail, is higher than GM's, those fleet vehicles tend to be sold to police forces and others at prices that generate attractive profit.
"We expect 2016's full-year daily rental volumes to be consistent with 2015," said Erich Merkle, a Ford analyst. "We saw daily rental moderate in the second quarter to about 14% of our total sales, which is down from 17% in the first quarter, as planned."
Michelle Krebs, an analyst for Kelley Blue Book, noted: "A race for sheer volume and market share is the wrong race. Any company can increase volume and market share by pulling some levers -- beefing up incentives (which everyone is doing), boosting fleet sales or pushing dealers to take vehicles they can't sell, for instance, loading up their demo fleets."
Before the global financial crisis, GM and Ford often pursued questionable tactics to best one another in terms of production, pricing and sales, which rendered the stocks of both automakers unattractive to investors.
To this day, the shares of both automakers sell at prices their managements think too low. Both have been posting strong profits. Perhaps, investors aren't convinced the automakers have completely sworn off their bad habits.
Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.









