Apparently, Japanese auto maker Nissan and European counterpart Renault have some ideas which might help US auto maker General Motors (GM) turn their financial fortunes around. Today, the GM Board of Directors agreed to sit down and listen to the ideas of these two companies and gave CEO Rick Wagoner the “green light” to discuss these ideas and report back to the board with his findings. I think this is the right path from General Motors and in my view the board at Ford Motor Company will be making the same decision at some future date.
The American automobile industry is in a mess right now financially because most domestic vehicles are not selling at full price because the American consumer has been “brainwashed” into believing that all they must do to get a better deal on a vehicle is to wait for another big sale or interest rate reduction. In fact, it was reported on the news just a couple of day ago that GM and Ford were getting ready to offer huge discounts this summer just to get rid of a glut of inventory which is still setting unsold on the sales lots of their dealers. My guess is that millions of Americans are waiting until these sales start before deciding to buy a vehicle this summer.
The "deal" has always been a part of how Americans buy a car and I don’t think that aspect will ever totally go away. GM’s “Saturn” branch went to one price shopping many years ago and that type of marketing just won’t work in the United States on a domestic automobile. Why? It is because of the “trade-in” involved in most automobile purchases these days. While a manufacture like GM can propose and get agreement from most of their dealers on a “one price for all” option when they are selling a new car. The problem of the trade-in always comes up because the value of that trade in will be different from dealer to dealer across the country.
Yes, there is a “bluebook” value on all vehicles seven years old or newer, but it has never been acceptable practice for any automobile dealer to base his or her trade in value strictly on the amount of money posted in that book. Wear and tear of the vehicle and the ability of that dealer to sell that used vehicle once they trade for it will effect greatly the amount of money they are willing to offer as a trade in value. Even in the same city, various dealers will have a different opinion of various models of a trade in based on their own first hand experience. Also, if one dealer already has a person who wishes to purchase that "trade-in" vehicle, that dealer will be in a position to offer a greater trade in value than another dealer who must place that car on his lot and hope a buyer will come along.
While some folks in the US love to hate the Japanese because of old feeling which never faded after World War II, the hard truth is they are better at building and selling cars than US manufactures have even been. The biggest area the Japanese excel at isn’t in the actual construction of their automobiles, but in how they present that product to the American public and create confidence and pride of ownership in their vehicles. Japanese business leaders don’t watch “short term” profits as closely as their American counterparts and they have a greater patience to let the marketplace grow to love their products over time rather than discounting their own vehicles for short term profit.
I am glad to see General Motors (GM) get involved in talks with Nissan and Renault and hopefully some good news will come out of these talks and bring GM back to financial strength over the long haul. The alternative of a huge manufacture like General Motors seeking bankruptcy protection sometime in the future is a much worse option than sitting down with their peers and listening to new ideas which might help their company get back on the tract to profitability. I personally believe that domestic auto makers have improved the quality of their vehicles over the past ten years or so and that is great news. Now all they have to do is convince the American people that their vehicles are worth the asking price and if successful their problems should start to fade away.
Related pages: Ford, Cooper, Toyota, Honda, Future
Nissan - GM Future