10/22/2008, 11:37 AM
General Motors News
&
NYTimes
GM to dealers: Expect profits to drop 18 percent this year



The current economic downturn has been difficult for all automakers, but has been particularly rough on the Big Three. Sales continue to slide by the day, with 2009’s outlook getting darker by the day. It looks like General Motors will be able to sidestep bankruptcy, but the U.S.’ number one automaker recently warned its dealer network to expect a sharp decline in profits.

In a meeting with dealers last week, GM vice president of Service and Parts Operations Doug Herberger warned that dealer profits will likely fall by an average of $199,000 per store this year. That’s about an 18 percent drop from a year earlier, according to Automotive News.

GM’s president for North America, Troy Clarke, added that GM is taking “the tough but necessary actions to position the company, and you, for future success,” but the overall message of the meeting was rather somber.

U.S. auto sales have fallen to 15-year lows, with the hangover expected to last well into 2009. GM had been hopeful that its North American turnaround could be complete by 2009, but that goal likely won’t be reached until 2010 at the earliest.
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While most of its rivals all reported significant losses through the first half of 2008, Toyota managed to increase market share to 16.8% and post a $3.8 billion profit for the second quarter. Despite this, both analysts and the carmaker itself are predicting a drop in year-on-year sales volumes for the first time since 1999.

Japan’s Nikkei business daily reports that Toyota will post a drop in sales for the current year, with the final tally coming in 2% lower than last year’s total of 8.43 million vehicles. Toyota recently revised its global sales targets for 2008, adjusting the total down from the 9.85 million cars it had expected at the start of the year to a more realistic 9.5 million.

However, it is now hopeful of achieving about 8.3 million sales worldwide. As for the U.S., the carmaker is only predicting 2.45 million sales for 2008, compared to 2007's tally of 2.6 million it sold across its Toyota, Lexus and Scion brands.

While the Toyota brand itself is expected to sell around 8.3 million units, when combined with its subsidiaries Daihatsu and Hino sales are expected to reach 9.3 million units - still around 700,000 less than last year's 9.37 million sales for the entire Toyota group.

The fall in sales this year has been attributed to a combination of factors, although the current credit crunch and recent high fuel prices are claimed to be the main driving forces behind the drop.

Despite its dropping sales, Toyota has not been affected as badly as its competitors. While 2008 may have been the worst year for the carmaker in more than a decade, its market share compared to most of its rivals has not changed and in many cases has actually improved. As one spokesman put it, Toyota now has a larger piece of a smaller pie and that will allow it to build a larger customer base once sales pick up.
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Despite hardships encountered throughout the auto industry this season, Volkswagen has remained a relative bright spot, according to company CEO Martin Winterkorn. Speaking to Tennessee civic and business leaders gatheredin Germany to discuss Volkswagen’s upcoming Chattanooga, Tennessee, assembly plant, Winterkorn stated that his company expects to sell more cars in 2008 than it did in 2007.

Volkswagen moved 6.2 million units in 2007, a 4 percent increase from the year before, and the automaker expects to improve upon that figure by the end of 2008. Volkswagen’s sales figures include VW, Audi, Lamborghini, Bentley, Bugatti, Seat and Skoda.

“The world economy is going through tough times,” Martin Winterkorn told the Associated Press earlier today. “We don’t know the full impact on our business yet, but VW is doing better than the competition so far.”

However, echoing sentiments shared across the industry, Winterkorn added, “2009 will be difficult for the entire industry.”