As the credit crunch bites in the US vehicle market, availability of credit is becoming an issue that is compounding depleted consumer confidence. GM COO Fritz Henderson tells Dave Leggett that while action on credit is required, some perspective is also needed on September’s gloomy sales numbers.
The US light vehicle sales figures for September did not make pretty reading for many manufacturers. Even Toyota and Honda took a battering in a market that is clearly suffering under a general malaise being wrought by the credit crisis, news of banks in disarray and a slowing economy.
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GM’s COO Fritz Henderson is under no illusions about the scale of the problems facing all automakers in the US on the back of the problems in the money markets.
“Ours is a credit sensitive industry – consumers, retail leasing, dealers and of course for manufacturers there’s the financing of projects,” he says.
“Action to establish some normalcy to credit markets over the next time is important to our industry, period.”
It’s a mind-boggling question that I never thought I would have to ask, but what do you do if your customers don’t have access to credit?
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By GlobalData“You can’t force the banks to lend,” Henderson helpfully confirms.
“We are working with GMAC as a partner as we always have and we try to provide competitive financial products for our dealers and customers but GMAC itself is a financed company. There’s no magic bullet here.”
GM has moved to offering cash incentives rather than financing and that helped lift sales on some models in September, but Henderson acknowledges that things will be tough while credit markets remain effectively frozen.
“There’s no question that limited credit is having an effect on consumers in the US. We will continue to have a tough industry while that is the case.”
He also admits that there are more uncertainties than usual about where the market could go.
“Could it get worse, I don’t know. I just know that the current level of sales is pretty anaemic and is cause for concern of itself.”
What about working assumptions on overall US light vehicle market volume?
“Well we developed our most recent plans for the US market based on 14m units. Year-to-date through September it has been 14.1/14.2 and at the time that we came up with 14m units we thought that number was conservative – working on year-to-date through June. But 14m units looks like where ’08 is going to land.”
And next year? Uncertainties loom large.
“We forecast 14m units for ’09 also. When I look forward to the first six months of ’09, I think things are going to stay difficult and stay challenging.
“As for the second half of ’09, I can’t tell you about that.”
But what about those frightening September numbers – don’t they suggest 14m units is a bit high?
Henderson seems a little frustrated with the tendency for people to overly focus on the latest monthly figures.
“I do find forecasting is heavily driven by what happened in the last month and I do think it’s important to step back and get some perspective.
“My perspective is that the industry ran at the rate it did in the month of September with the most pressing consumer credit crisis that we have had in the last 25 years. So, okay, that’s one data point.
“Let’s see what happens in the months of October and November – one month is not a trend. If I look at the month of August for example, that’s closer to the 14m unit level than September’s 12.8m running rate. I don’t reach conclusions based on one month’s data. I don’t think that’s smart.”
And we’re back to the bigger picture and the hopes of corporate America that the politicians in Washington do what’s necessary to bring about stabilisation in money markets.
“If there’s not action to address the overall credit situation, I think we could be in for even tougher times in ’09. If the right actions happen at government level and it proves to be effective – then 14m units could very well be right. That’s not actually a forecast as such, it was a conservative number on which to plan our liquidity and I’m glad we went with a conservative number.”
Is that number conservative enough?
“I think we will find out a lot more in the next sixty days.”
Dave Leggett
See also: US: Credit crunch carnage continues
PARIS SHOW: Automaker execs fret over credit crunch
