Episode 1004 – GM’s 3Q Earnings, Sandy Burns Fisker, Renault Corners EV Market

October 31st, 2012 at 12:03pm

Runtime: 8:42

GM’s third-quarter earnings are out and revenue is up. But GM barely out-earns its crosstown rival, despite selling a million more vehicles. Could the safety of lithium ion batteries be in question because of Hurricane Sandy? EV sales in Europe are down but Renault pushes to corner the market with 4 pure electric models, more than any other manufacturer. All that and more, plus John responds to your questions and comments on You Said It!

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Hello and welcome to Autoline Daily, we’re halfway through the week and here is some of the latest news of what’s happening in the global automotive industry.

GM’S 3Q EARNINGS
Well today was GM’s turn to report its third-quarter earnings. The company boosted its global sales by 36,000 vehicles to almost 2.3 million cars and trucks. That boosted revenue to $37.5 billion, an increase of $857 million. That improved the company’s operating profit by 4 percent to nearly $2.3 billion. But the bottom line didn’t look so good. Net profits dropped 13 percent to $1.8 billion. This has got to be somewhat embarrassing to General Motors. It sold a million more vehicles than Ford, but is barely out-earning its crosstown rival. GM showed big improvements in Asia and South America, but its profits dropped in North America, and its losses in Europe are growing wider by the quarter.

CAPACITY GROWS IN NORTH AMERICA
While most major auto markets are slowing down, North America continues running strong. WardsAuto reports that capacity utilization at assembly plants was 93 percent in the third quarter, the highest for the period since Wards started tracking the data. For the full year capacity utilization is expected to be around 96 percent and will rise slightly next year. The record breaking numbers are mainly due to automakers using 3-shift operations.

SANDY SLOWS SALES
But capacity utilization could fall this quarter because of Hurricane Sandy which is already impacting car sales. Earlier this month Wards forecast that this month’s SAAR would hit 15 million units but now it predicts that will fall to 14.5 million units because of the storm.

WRATH OF SANDY
Hurricane Sandy claimed over a dozen new victims, but we’re not talking bodies, we’re talking cars. About 16 Fisker Karma’s were parked in Port Newark, New Jersey last night when water submerged the vehicles. Jalopnik reports the cars caught fire and burned to the ground. This could potentially trigger a lot of worry about the safety of lithium ion batteries and is going to further tarnish Fisker’s image.

RENAULT EV SALES DRAINED
Speaking of EV’s, Renault is pushing heavily to corner the EV market in Europe. By the end of the year it will have 4 pure electric models, more than any other automaker. But that’s not translating to very many sales. The company has sold just under 14,000 EVs worldwide through September. Not surprisingly Renault has fared better in Europe. It’s Kangoo and Fluence EVs account for 28 percent of the EV market and the company has sold close to 8,000 of its small city EV, the Twizy. Renault will launch its Zoe electric car at the end of the year. Even so, it’s eye-opening to see how poorly electric cars are selling in Europe where gasoline averages eight dollars a gallon.

TWIN-TURBO PONY
Ford is beginning to use production components on some of its race cars, like this twin-turbocharged Mustang Cobra Jet Concept that’s at the SEMA show. Its turbos are based on units that are used in the Focus ST, but are 40 percent larger, allowing it to run an eight-second quarter mile. Ford uses production components in a racing environment because of the rapid learning curve and feedback it provides to go back into everyday driving vehicles.

Coming up next, It’s time for You Said It!

And now it’s time for some of your feedback.

Harold Rogers heard us talking about the take rates involving hybrid versions of cars and wants to know: “What is take rate?”

Harold, that’s industry jargon that describes the percentage of people who choose an option on a car. Or to put it another way, it’s the rate at which they take that option. So for example, if 10 percent of customers choose to buy the hybrid version of a given model of car, then we say it had a 10 percent take rate.

We sure got a lot of feedback from a bunch of you on Ernie Brinks ideas of how to improve the Wankel engine. piwright42 wrote in to say, “As a fan of the Wankel concept who is aware of its limitations I have to admit I was more than skeptical. After watching Ernie’s portion I have to admit I am more than a little excited. I hope Mazda does back this so we can learn one way or the other if Ernie’s ideas pan out. Autoline, please keep us updated.”

All I can say is that if anything comes of this you will be the first to know.

Ed heard our report that the SAAR could go back to 15 million units. But he doesn’t agree with me that this signals a full recovery in the American car market. He says, ”I remember the SAAR was at 16 million in ‘08 when the crash came. With population increase, and time (4 years hence) SAAR should be more than that at least upwards of 16, anyway you cut it, it is in decline, or dragging. But call it like it is.”

Ed, remember that when the SAAR was at 16 million and above it was the era of cheap credit. The experts I talk to estimate that boosted sales by well over 1 million units a year. So without all that cheap credit, a situation in which we find ourselves today, the natural rate of the market is more like 15 million. And while you’re right about population increase, the high unemployment rate is definitely holding back sales.

We were very grateful to hear from so many of you we celebrated the 1000th showing of Autoline daily. Emmy Says: “John, team, Congratulations on 1000 shows!! I’m another tiny little piece of this huge, global automotive industry, watching Autoline Daily in Japan. I happened to find your show two years ago and since then watching it is the first thing I do in the office every morning. Just love your shows! And I’m a big fan of John.”

Emmy, you make me blush. I’ve got a great team here and we love what were doing.

But even though you love us you’re not afraid to call us out when you think we’ve made a mistake. Richard Arnold, the editor of BMW TV Guide, though I have no idea what that means, anyway he says: “John, I enjoyed your piece on the BMW ALPINA B7, but your transcript of the video misspelled ALPINA — a common error committed by the automotive press. Both BMW & ALPINA spell BMW & ALPINA in ALL CAPS.”

Richard thanks for the correction, we’ll try to remember that in the future.

Thanks for all your letters and comments and please keep them coming.

Don’t forget that we’re also interested in getting any cool pictures or videos that you are interested in sending to us. And don’t forget that there will not be any Autoline After Hours tomorrow night. I’m traveling to Marysville, Ohio tomorrow as Honda celebrates its 30th anniversary of manufacturing in America. But After Hours will be back next week with special guest Sandy Munro who has a lot of inside information of what it really costs and automaker to build an electric car. That will be a dramatic show.

Anyway that wraps up today’s report thanks for watching will see it tomorrow.

Thanks to our Partners for embedding Autoline Daily on their websites: Autoblog and WardsAuto.com

46 Comments to “Episode 1004 – GM’s 3Q Earnings, Sandy Burns Fisker, Renault Corners EV Market”

  1. ColoradoKid Says:

    What do you call 16 Fisker Karma’s destroyed by the Frankenstorm Sandy ?

    A good start ! :o

  2. Ron Paris Says:

    Lack of cheap credit holding back the SAAR? I just bought a Mazda CX-5 using Mazda Credit’s 36 month loan @ .09% interest. If that ain’t cheap credit, I don’t know what is!
    Oh, and 16 Fiskar Karmas burning under water in Jersey? Heh-heh; there is justice in the world after all.

  3. Chuck Grenci Says:

    And they got on Chevy’s case when a Volt caught fire after being crashed and stored upside down for two weeks, ‘ah yes, I remember it well’ (apologies to Maurice Chevalier).

  4. pedro fernandez Says:

    I suppose after the mess that was this storm, we should see quite a spike in car sales to replace all the damaged ones as well as a bunch of water damaged cars being sold to unsuspecting buyers. In So Fl after Andrew there was actually a shortage of cars for rent and sale because the dealer’s supplies were also destroyed.

  5. Kit Gerhart Says:

    Maybe GM profits are lower per unit than Ford, because GM is building the Cadillac brand with products like the ATS. That costs a lot more money than mildly restyling and rebadging, which is what Ford is doing with Lincoln.

  6. pedro fernandez Says:

    It is not the credit situation that is holding back car sales, it’s the uncertainty of the economy and whether of not you’re gonna have a job in 6 months.

  7. Kit Gerhart Says:

    I would be very leery of any used car whose history I didn’t know first hand. That sea water wouldn’t be very good for cars, even it got only up to the middle of the wheels.

  8. Steve Henderson Says:

    John,

    I wonder how many Chevy Volts were sold over the 3Q period? In my book this will be Chevy’s Edsel….I hope I’m wrong. Lets hope the Jan 13 unvailing of the new C7 Corvette gives them some great PR.

  9. 14L Diesel Says:

    Kit (#5) – True that the current Lincoln product is mostly Ford derivative at the moment, but as John talked about a week or so ago, the Lincoln effort is underway. I think you hit on something inadvertently – what is it costing GM to maintain 4 brands with so much product overlap? Look at the Lambda triplets and the total GMC/Chevy truck overlap.

  10. gmveteran Says:

    John,

    I too am mystified as to the lack of EV sales in Europe where petrol is so much more expensive than the States. Could it be that their electricity is also much more expensive and so the financial advantage is not strong enough to overcome the higher prices and lower range of EV’s?

    GM Veteran

  11. Kit Gerhart Says:

    #9,
    To me, the brand that should have gone away is GMC. It is completely redundant, or nearly so, with Chevy trucks. I’ve read, though, that the “professional grade” ads actually convinced some people that GMC’s were better, and that is part of why they kept the brand.

  12. Kit Gerhart Says:

    #10,
    Maybe it is because few people in Europe would have a place to plug in an EV. Unlike in the U.S., large numbers of Europeans don’t live in a “house in the suburbs” with an attached garage, where they could have an outlet. If you park on the sidewalk outside a flat in the city, it might be hard to find a place to charge a car.

  13. T. Bejma Says:

    Couple of things driving profits lower for GM compared to Ford -

    - Increased sales of lower margin small cars and decreased sales of higher margin luxury and Full size SUV’s. New pickups/SUV’s next year will help

    - Ford’s profit margin is about 16% compared to GM’s 12%. GM is working to increase the margin by reducing complexity in platforms and powertrains to try and close that gap.

  14. C-tech Says:

    Given the other problems at Fisker, more bad Karma is to be expected. I hope they were insured.

    Went to a Mitsubishi Dealer about an hour outside of Orlando. They are stuck with 4 Mitsu. electric cars. The problem they have selling them is that their is hardly customers who can live with their range and recharge capacity in the this semi-rural area. By the way, he is selling them at cost. I suspect in Europe the problem is where to recharge it? Not as many garages attached to homes there, and it is more acceptable to ride a motorcycle or buy an “A” segment car.

    Oh John, I have a question: If the turbocharger on the SEMA mustang is 40% LARGER than the production turbocharger, then how is it still a “production” part?

  15. pedro fernandez Says:

    If the recharging issue is not resolved, EV’s will never become mainstream, look at the storm aftermath, power may be out for days and weeks, what do you do if you have an EV? you’re stuck with no juice, here in So Fl gas stations are required to have generators for the pumps in case the power is interrupted.

  16. Alex Carazan Says:

    100% Pure Battery EV’s sell poorly across the globe because of the following:
    1) Their too expensive (high up-front cash needed and economic payback from “fuel” cost savings is too long).
    2) Consumers can get much more vehicle for the same money. Alternatives are better value!
    3) Range on a charge is way too low. Yes for the daily commute many EV owners would be fine….but REALITY is real consumers like to travel farther on weekend trips. They CAN’T with an EV. Owning 2 cars defeats the purpose.
    4) Recharge time is too long. Imagine you are just about out of charge…but have an urgent call from a family member that just entered a hospital due to illness…they are stuck! Need to call a taxi! EV’s create high risk of ZERO mobility – ZERO freedom. This is contrary to purpose of a car!
    5) Poor charging infrastucture. Go try to plug in somewhere…not common to find an outlet….most are 110 VAC…way too low a voltage and high voltage charge stations are rare.
    6) Very few % of humans are pure “green” lovers or environmental extremists..and most of those that are cannot afford an EV.
    7) It is NEW technology most humans are not familiar with…high risk to buy due to uncertainty and unproven. Worried about failures, break-downs, obsolescence with next version, resale value, etc.

    Until the industry fixes these issues….which they likely won’t due to basics of chemistry and materials technology….pure battery EV’s will remain a TINY niche in the world with near ZERO impact or value to the world. Most OEM’s will use them solely for “image” and PR as they have already.

    Real electrificaton value is in hybrid brake regeneration and PHEV’s where pre-conditioning and other NEW value can be provided to consumers without HUGE cost penalty. Then look for hydrogen fuel cell vehicles that solve the range issue and re-fill time issue…just need to work on cost and hydrogen infrastructure. Well underway.

    Alex

  17. jack879 Says:

    It should have been pointed, not only is GM losing more money by the quarters in Europe, so is Ford.

  18. Bob in Atlanta Says:

    GM is costing taxpayers more money than any other auto company

  19. pedro fernandez Says:

    Hence the name Government Motors!

  20. Kit Gerhart Says:

    GM would be costing tax payers a lot more, if it had been shut down and liquidated, putting tens of thousands of people out of work, and seriously threatening many suppliers which also provide parts to Ford, Toyota, and everyone else building cars in North America.

  21. pedro fernandez Says:

    Too bad GM could not streamline their operation further and thus save money, why can’t they have world cars like Ford has, even though they dumped some redundant brands they’re still not efficient enough.

  22. Bob in Atlanta Says:

    GM liquidation? Who proposed that? Just a nice legal bankruptcy would have helped everyone, except one constituency. Guess who.

  23. G.A.Branigan Says:

    There are many viable alternatives for the driving public.But,other then gas stations,there is little to no infrastructure to support the alternatives nationwide.CNG,E85 are two that just isn’t available in my area at all.Hydrogen fuel cells would be awesome,but they aren’t around most of the country.Plug ins are in the same boat in cities as was already pointed out due to lack of stations to plug into when your parked on a street.We need alternative fuels to be as available at gas stations which are pretty much everywhere.Don’t look towards the feds to help out in that,they are just as broke as everyone else is for investments required for such a large scale project.

  24. Kit Gerhart Says:

    #22,
    Nearly all real economists, and even George W. Bush’s advisors were nearly unanomous that a regular bankruptcy wouldn’t work. The already broke banks couldn’t, and wouldn’t lend money to the ailing car companies. Even if they had, the spector of a long, drawn-out bankruptcy would have killed sales of the cars, and would have killed resale value of existing ones. I’ll post a couple links later when I’m at my computer, but if you separate it from politics, most people who knew the situation think the “bailouts” were the right thing to do.

  25. Charles Domanski Says:

    One of the things I have seen lately that is very disturbing to me is the cost of the option of CNG for Ram trucks. The cost is insane, a total ripoff. A friend of mine who lives in Belgium has had two vehicles since I have known him. The first one was a 2001 Dodge Ram 1500 4×4 that he had set up to run on regular gasoline of CNG. His second vehicle was a Hummer H2 also set up for gasoline or CNG. Neither vehicle cost any where near what Chrysler is charging. His total cost with instalation was less then $2000.00 So where the hell does Chrysler get off charging such an outrageous price for something that should cost the company less then it cost my friend to convert both his American vehicles over to CNG. What an absolute ripoff. Chrysler can stick their CNG trucks where the sun don’t shine.

  26. XA351GT Says:

    16 Fisker Karmas destroyed, What’s that the total production to date?

  27. Bob in Atlanta Says:

    #24
    In a free market there is always a buyer for a viable business. If the business is flawed and unsustainable the market will tell you that too. In a free market, a vacuum is filled in a heartbeat. (Watch Hyundai, Kia, Honda, Toyota) Do we need Volts and Sparks? (ironic names, eh?) The market will tell us.

  28. Kit Gerhart Says:

    #27,
    It would have taken much more than a “heartbeat” to “fill the vacuum” had GM and Chrysler shut down. Communities would have been devastated, and Toyota and Hyundai would have been adversely affected, since they use some of the same suppliers.

  29. Robert Morrison Says:

    Problem with GM is there is no incentive to do it right. Cash problem comes up go back to Obama and say need some cash or else will close and everyone out of work.
    No one cares they have a permanent safety net.

  30. Kit Gerhart Says:

    Here is one take on the “bailouts.”

    http://money.cnn.com/2012/09/06/autos/auto-bailout/index.html

  31. Kit Gerhart Says:

    Here is another, indicating that the U.S. auto industry won’t last “forever,” but that the bailout was the right thing to do:

    http://www.policymic.com/articles/4086/president-obama-and-george-w-bush-were-right-to-bailout-u-s-auto-industry

  32. G.A.Branigan Says:

    Well Kit,the bailout was funded by taxpayers money.Show me where in the constitution it says it’s legal to do that.Where in the constitution does it say that the federal govt can interfere with business?

  33. Kit Gerhart Says:

    Where in the Constitution does it say that Exxon-Mobile is a person? Interpretations of the Constitution have changed a lot over the years, haven’t they?

  34. Kit Gerhart Says:

    Sorry, it’s Exxon Mobil.

  35. C-tech Says:

    Kit, is it worth it to argue with people who ignore facts ?

  36. G.A.Branigan Says:

    I knew what you meant Kit.You make my point.Compounding unconstitutional wrongs on top of one another doesn’t make it right.It needs to stop.We need to get back to what our founding fathers originally intended.Corporations are businesses,not a person,lol.Business failures are not the taxpayers responsibility,or our govt using our money to bail them out.It has to stop somewhere.

  37. Kit Gerhart Says:

    G.A., I, for one, would much rather have the feds “bail out” the banks and car companies, than have another great depression with 20% unemployment. That quite likely would have happened without TARP, etc. Yes, some things may not have been done in exactly the right way, but overall, are much better off than to have gone through the alternative.

  38. Bob in Atlanta Says:

    Volts and Sparks, get it? At least someone at GM has a sense of humor, if nothing else.

  39. jmann Says:

    #16 Alex

    We’re talking about basic physics here. Not something that can be changed. Who is fooling whom?

  40. Kit Gerhart Says:

    You probably won’t see anyone using the name Inferno for a car, even a non-electric one.

  41. pedro fernandez Says:

    What about the Fiero? the daddy of the Solstice.

  42. Kit Gerhart Says:

    I bet they won’t revive the name Fiero, now that car fires have gotten a little more noteriety. It so happened, though, that Fieros had more than their share of fires. What I’d heard, was that most of the fires occurred when the 4 cyl engine was run out of oil and threw a rod out the side of the block, and the oil mist that was released caught fire. In those cases, most of the owners were probably glad to have the car catch fire, as long as it was insured, and they were able to get out safely.

  43. pedro fernandez Says:

    I still don’t get how GM messed up on the Solstice/Sky development, should have been turned into more than they were. Bad execution all the way!

  44. Chuck Grenci Says:

    #43
    Two more cars in an overcrowded niche market; others fell by the wayside as well.

  45. Kit Gerhart Says:

    The obvious competition for Solstice/Sky was the Miata, which was just a better car in most ways. That is what hurt the GM cars. But yeah, I guess that market became overcrowded, with only 3 entries.

  46. Chuck Grenci Says:

    I was thinking S-2000, Miata, Z-3(4), Solstice/Sky, MR2; I think most/all of these were available at the same/similar timeframe.