Car sales at General Motors are about to jump a whole lot higher. The government-owned automaker is clearing its lots by dumping two to three months of inventory onto the market at fire-sale prices. In reality, though, it's a suspect move that only serves to shuffle the cars around the lot in an end-of-year sleight of hand.
They're going, going ...
GM is looking to get the inventory off its books by today, the last day of its December sales calendar. It's willing to pay dealers $7,000 for each Saturn or Pontiac they move from their lot to their own fleets. The dealers can then use the incentive to sell them to the public. If the full amount is passed on to the customer, it can result in some models selling for up to 46% off of the manufacturer's suggested retail price. Sweet! The one caveat is they'll have to be sold as used cars because the tactic means the dealers actually become the first owners.
But it's only pulling sales forward. Like the Cash for Clunkers program, it's only going to give General Motors a temporary salve, and car sales likely will fall afterward.
The seasonally adjusted annual rate of sales jumped to more than 14 million cars in August, the last month of the Clunkers program, but fell off the cliff the next month to just 9.2 million. While sales have slowly climbed back up to 10.9 million cars in November, that's only slightly ahead of where it was a year ago.
Sales are still anemic, and on a non-adjusted basis fell 11% industrywide in November. The big winner was Hyundai, with a 46% increase, followed by Nissan up by 21%, and Toyota
On the other end, GM dropped 2% and Honda
For December, analysts are predicting the annualized rate will hit 11 million cars, but some still think the performance will be the worst since 1970 -- or, if you adjust it for population, the worst year since 1950.
Less is more
So GM's sales gimmick may enable the carmaker to show decent December numbers, but will add to the cost of its restructuring. Dealers, though, might have a harder time getting rid of the inventory because it'll be tagged as used and will be on discontinued brands that buyers may be reluctant to get into, even at dramatically lower prices. What GM gains for one month, the dealers may have to deal with for a longer time.
At a time when the average incentive on cars is around $2,700, GM's giveaway might amount to an unfair trade practice if the carmaker weren't being run by the federal government. But like Fannie Mae
Gimmicks can't create sustained sales, though, and GM is still pretty much a loser. The longer-term trend will be in building the kinds of cars buyers want. Ford's record hybrid sales continue to point the way to its own future and that of the industry.