Better read this one in 2 sittings - don't want to hurt your eyes!
Subby said:
rbattelle
You hit it right on the head with your "way too much post to read" post.
Many things in the industry have changed since I made that post back in April. Unfortunately, things have only gotten worse (from a profit standpoint).
Shortsighted efforts to temporarily prop up sales by offering employee discounts are now creating the attitude among buyers that they can simply sit and "wait out" the domestic makers until they offer employee pricing. GM was scheduled to stop the program on 1 July, but extended it to 1 August. All the analysts thought it would end for sure by 8 August, but now it's been extended into Labor Day. Ford and DC have followed suit. I think the automotive press is somewhat to blame in the whole thing, since they decided collectively that GM's program was great. Am I the only person on Earth who sees how woefully shortsighted this is, and how badly it may harm the US car market? [Of course not].
Now the analysts are pointing out that all the big 3 have done is enticed people who were already planning on buying a car within 6 months to buying one now. Guess what's going to happen over the next 6 months when employee discounts finally end? Sales are going to fall off into nothingness. That's why GM keeps extending the program - the impending doom has them absolutely scared out of their shorts! They'll do anything to stave it off as long as possible.
The elimination of the 7/70 (and presumably all the associated overhead costs associated with it) was pleasantly farsighted on DC's part. I doubt they could have predicted GM's introduction of the employee discount program, but the dropping of 7/70 will likely play a significant role in mitigating losses they would otherwise incur when the program ends and people simply stop buying cars.
Leadership changes at DC have also occurred over the last month. Schrempp is out (that's good), Zetsche is in (that's good), LaSorda is now the Chrysler-group CEO, and Ridenour is Chrysler's COO. All these new faces will undoubtedly have a profound effect on the DC group as a whole (one that I think will be positive). Interestingly, Ridenour was quoted as saying that there will be no changes to Chrysler's long-term strategy. He comes from a product development background and might be prone to a "free spending" attitude (which is out of line with attempts to cut costs). That could be very good for people like us (read: medium duty Ram's).
Chrysler has recently changed it's supplier strategy, as well. There will now be greater consequences for suppliers failing to produce quality parts; send us junk, you're out and we're going to your competitor. They're going to score their suppliers using a series of metrics ranging from price to technology. The first example of the system being used will be in some unnammed crossover SUV for 2008 (Johnson Controls and Magna International will be working on it). One of the consequences is that suppliers will be brought into the game much earlier than in the past, which pays dividends on both sides of the counter.
Dropping 7/70 is good for the bottom line. I'm not sure how good it will be for customer relations. We'll see. Didn't seem to affect Hyundai very much.
-Ryan
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