Posted by: David Welch on February 5, 2009
Circumstantial evidence is a cheap way to draw a conclusion. But anyone who says that rumors of bankruptcy, sale or anything else that clouds the future of a car company won’t affect sales is simply not paying attention. All of this came to a head in December, by the way, when many in the commentariat said that General Motors should file for bankruptcy. Opponents of bankruptcy, including me, argued that consumers would flee and revenue would fall so fast that no court-ordered restructuring would happen fast enough. Liquidation would be the result.
Since no major carmaker has ever filed for bankruptcy to test the theory, we have little to go on. Except what’s happening to a slew of brands that are either for sale or on death watch. Ford Motor has put Volvo up for sale. GM has been flogging Hummer for almost nine months and the company has chatted up at least one suitor for Saab. Saturn is also under review for some kind of sale, shut down or something else that says it won’t exist in the same form in the not-so-distant future. Pontiac will still exist, GM says, but as a smaller niche brand selling a couple of sporty cars.
How did consumers respond to all of that? They avoided those brands like the showrooms doubled as a cholera ward. Volvo sales fell 65% in an overall car market that fell 40%. Hummer, Pontiac and Saturn were all down about 61% and Saab sales fell 48%. There isn’t concrete proof that the talk of sale or closure of these brands kept buyers away. Generally, people are avoiding showrooms of any kind. But their sales did plummet compared with a dismal market. In Saturn’s case, GM Vice President for Sales and Marketing Mark LaNeve said they did get question from consumers about the brand’s future. Doubt is out there.
All if it’s tough to sell their cars, it will be almost impossible for the carmakers to sell these brands. Saab is already a tough sell, having moved just 93,000 cars globally last year. Saturn also is in decline, but it has a dealer body that someone may want. Hummer was mismanaged from the start when GM tried to turn what could have been a great niche business selling to serious off-roaders and suv lovers into a volume producer. Now it’s saddled with weak line and a bloated dealer network. Volvo has brand cachet and a name for safety. But profits have been elusive. Add in consumer avoidance to that motley crew’s existing problems, and unloading any of them will be very difficult.