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GM Leads in Loss per Vehicle in North America
30 August 2005
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| Average profit/loss per vehicle. |
GM had the worst per-vehicle net income of the top six automakers in North America during the first half of 2005, according to analysis done by Harbour Consulting.
GM lost an average of $1,227 per vehicle sold in North America during the first half of the year. Ford followed that with a per-vehicle loss of $139. The Chrysler group pushed into positive territory with a per-vehicle profit of $186.
Nissan, Toyota and Honda, however, all netted more than $1,000 per vehicle, with Nissan on top with $1,826.
Toyota followed with a per-vehicle net of $1,488, and then Honda with $1,023.
August 30, 2005 in Market Background | Permalink | Comments (12) | TrackBack (0)
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What drives these numbers? Is it something as simple as
(total revenue - total costs) / #cars sold
or something more complex? How does research budgets, changing inventories, marketing, etc impact these numbers? Are there any projections for how these numbers will change next quarter? Next year?
Posted by: stomv | Aug 30, 2005 1:00:38 PM
The numbers reflect total costs—personnel, facilities, R&D, manufacturing, marketing...the whole shebang. So it’s the simple formula you noted first.
GM’s—and Ford’s—stated goals and plans are to change those numbers. Hence the recent announcements on layoffs, plant closings, and the focus that GM especially has on altering the whole pensions/benefits situation. Also the increased focus on sourcing less expensive foreign parts.
What makes GM’s situation particularly precarious is that the revenue they earn comes largely from the SUV/truck side of the house. Looked at another way, even though the bulk of their sales are the higher-margin, larger vehicles, they still post that large a loss.
If the market for larger vehicles rapidly erodes...say,more rapidly than GM can fix its cost structure...losses per vehicle will likely increase, as even the vehicles it sells would yield a lower margin...and given the current trends, they are not going to make that up in volume.
All of the above being a large part of the reason the agencies have downgraded GM (and Ford) debt to junk.
Posted by: Mike | Aug 30, 2005 1:50:17 PM
I guess Nissan is doing the best because they haven't gone full force into Hybrid R&D yet, whereas Toyota must be spending quite a bit as they expand options for hybrid powertrains across the models.
Posted by: Schwa | Aug 30, 2005 4:14:06 PM
Sure, GM loses $1,200 on every vehicle, but they make it up on volume.
(Oh, c'mon--everyone here was thinking it.)
Mike's right, though, that GM is in a very precarious position, given the expected trends in gasoline prices for the next few years.
I have to wonder which major car company (VW doesn't count) will be the first to bring a high-efficiency diesel to the US. Given that such a car would be vastly cheaper to develop than a hybrid and get nearly the same MPG, I have to believe that one of the companies will break from the pack soon. (Curiously, it seems Honda has discontinued the Civic HX for 2006, which got 44MPG highway from a non-hybrid gasoline engine.)
Posted by: loudGizmo | Aug 30, 2005 8:23:33 PM
The US disembowelling itself. Maybe Honda and Toyota just got lucky having developed a hybrid.
After all who could have forecast the tightness of refining capacity (well Rand did with a study in 2000), a shortage of crude oil capacity, well the guys buying oil futures 18 months ago sure did.
Introduce a European style diesel, who's going to produce the extra low sulfur fuel needed for Euro diesels, distibute it nationwide to allow nationwide sales of the model ...or even by region? It took 30 years for diesels to make 40% of the European market for cars.
Posted by: Edward Teague | Aug 30, 2005 11:48:58 PM
Just run them on biodiesel like they do in parts of Europe. No sulfur in B100 at all!
Posted by: B100 | Aug 31, 2005 8:32:08 AM
A while back there was an article quoting a GM spokeswoman on their oil price expectations. They were saying (based on DOE numbers) $26/bbl by 2010.
The story appeared last month(!) but has since fallen behind a "subscribe" wall:
http://www.dfw.com/mld/dfw/12238960.htm
Anyway, if "group think" at GM let them believe in $26, it is not surprising that they find themselves in hot water. On the other hand, if they were just saying $26 to lure in SUV buyers ... that's just mean.
Posted by: odograph | Aug 31, 2005 8:50:08 AM
>> Curiously, it seems Honda has discontinued the Civic HX for 2006, which got 44MPG highway from a non-hybrid gasoline engine. <<
This isn't too curious when you realize that it used Honda's lean burn engine technology, which is really efficient but leads to much higher NOx emissions. Honda dropped future use of that technology because it's significantly dirtier, from what I've heard. An example of how signigicant this is lies in fact that the automatic version of the Insight (the manual version has the lean burn tech) has the lean burn technology taken out of it's engine controller (whatever its called) to meet California emissions. That's why the auto version of that car gets so much less mileage than the manual.
Posted by: Scott | Aug 31, 2005 10:21:57 AM
"Honda dropped future use of that technology because it's significantly dirtier, from what I've heard."
No, the technology is still around. It's just the HX that has disappeared. It's hard to sell a Civic HX as clean when it's parked next to a Civic hybrid. There is not much to distinguish it to the average consumer. Remember that in sales, customer perception is everything.
Honda is still using plenty of lean air-fuel sensors in their cars.About 30% of all cars (not just Honda) sold in the US this year will have some sort of lean-burn (anything leaner than 14.7:1) technology.
Lean-burn is ultimately more difficult in the US because of the sulfur levels in our gasoline. Although Honda has offered engines as lean as 22-25:1 here, 40:1 is common in Japan and Europe - Toyota even went to 50:1 for a few years with one model, and it ran fine.
Naturally, the leaner mixtures produce high NOx levels. High-lift EGR systems, throttle-by-wire, and fast ECU processors help mitigate this, but special catalysts are still needed to bring NOx back down to acceptable levels. However, those catalysts have a very low tolerance for sulfur. Once US refiners start producing low-sulfur fuels ONLY, lean-burn systems can be used to their fullest potential here, and we'll start to get some of those 40:1 engines...
Posted by: Jack | Sep 1, 2005 9:39:35 AM
^ One of the hidden benefits of Katrina might be some new/renovated refineries, which might do a better job with low-sulfur fuels. But, don't hold your breath.
Posted by: stomv | Sep 1, 2005 10:38:41 AM
The comment about "GM making up for it" with volume is absurd. The more cars you sell at that loss, the more you lose! The fact that they have high volume is the only reason the loss per vehicle isn't $3000 or whatever!
Posted by: DM | Sep 2, 2005 9:10:34 AM
I think loudGizmo was making a joke. :-)
Posted by: Mike | Sep 2, 2005 9:46:07 AM
