In a “watershed” move that has industry watchers scratching their heads, and which will ripple throughout the auto industry, General Motors announced that it is ending a 25-year practice and switching its reporting of U.S. auto sales from monthly to quarterly, effective immediately, in “an effort to give a more accurate view of its business operations.”
According to the US automaker, Q2 sales will be released on July 3, Q3 sales on Oct. 2 and Q4 sales on Jan. 3, 2019. The latest US sales report for March 2018, will be released as previously scheduled on April 3 at 9:30am ET, at which point there will be a three month radio silence. The change, which does not impact dealers reporting monthly sales to the automaker, was announced Tuesday ahead of GM releasing U.S. light-duty vehicle sales for March, its last monthly report.
It follows by five years a decision to stop reporting North American production data. Fiat Chrysler has followed suit on that front.
It is unclear how or why providing market updates two-thirds less frequently is supposed to provide a “more accurate view” of the business, and the transition has pundits wondering just how bad recent trends must be for the company to resort to such a dramatic adjustment in public reporting. Coincidentally, the announcement comes just hours after we published that the “Subprime Auto Bubble Bursts As “Buyers Are Suddenly Missing From Showrooms.”
How did GM justify the move? GM cited monthly sales being subject to many issues that make them more volatile than quarterly sales, including product launch activity, weather, other seasonal factors, the number of selling days and incentive activity.
“Thirty days is not enough time to separate real sales trends from short-term fluctuations in a very dynamic, highly competitive market,” Kurt McNeil, U.S. vice president of sales operations, said in a statement, even though it was for nearly three decades. “Reporting sales quarterly better aligns with our business, and the quality of information will make it easier to see how the business is performing.”
Once again: one wonders what the real cause for the unexpected lack of clarity truly is.
According to Autonews, GM is the first major automaker to change how it reports monthly light-vehicle U.S. sales results since the industry dropped 10-day reports in the early 1990s. It is a step certain to be considered by other automakers – if it hasn’t been already.
Some more details on the decisions: as Autonews adds, the company conducted due diligence prior to making the decision. That included analyzing nearly three years of stock trading data on sales days and researching how other industries and companies report sales.
GM benchmarked companies such as Amazon Inc., Apple Inc., AutoNation, John Deere, Penske Corp., Walmart Inc. and Whirlpool Corp. — all of which do not report sales on a monthly basis. California electric vehicle manufacturer Tesla Inc. also reports quarterly sales instead of monthly results.
Well yes, if GM polls companies which all report sales on a quarterly basis, it will find precisely what it is looking for. The question is why was GM reporting sales monthly for decades, and nobody had a problem with that. Until now.
“GM gave this decision a lot of thought,” said IHS Markit senior analyst Stephanie Brinley, adding this “wasn’t a knee jerk” reaction to its sales or business operations. “Other automakers are going to have to take that same look.”
Michelle Krebs, executive analyst with Autotrader, said she wouldn’t be surprised if other automakers followed GM in reporting on a quarterly basis.
“I understand the reasons they are doing it,” she said. “There can be a lot of fluctuation during a month.” Krebs compared the newest change to the auto industry switching from 10-day sales reports to monthly sales in the ’90s.
“What happened was they decided to go monthly, and everybody did it,” she said. “That would make me believe everybody is going to follow suit and follow GM’s lead.”
Foreign units of GM will have separate treatment of sales reporting: GM’s Canadian operations, according to company spokesman Jim Cain, will continue to issue monthly sales results. GM China, the automaker’s top-selling market, will cease reporting on a monthly basis; however its joint ventures will continue to report wholesale volumes to government and industry associations. GM’s operations in Brazil and Mexico will also continue to report sales to their respective associations.
Cain declined to speculate if the company expects other companies will cease reporting sales on a monthly basis.
“With respect to competitors, we’re doing what we think is right for our business,” he said. “Competitors will have to assess for themselves whether it makes sense to continue with the status quo.”
If others do follow GM, it could take years for the entire industry to move to quarterly reporting, much like it did to shift to monthly. For example, the former Chrysler Corp. eliminated 10-day reports in 1991; GM didn’t do so until 1994.
The move is merely the latest attempt by GM to mask and massage trend data; it comes nearly five years after GM stopped holding a monthly sales call with media and investors, something Ford Motor and other competitors continue to do.
Switching to quarterly sales reporting, Krebs cautioned, could lead to “less transparency” and “leave an information gap” for the industry, which could lead to unintended speculation, particularly if some automakers follow GM but others do not.
Naturally, GM argues it is not being less transparent, as it will continue to report the same amount of information on a quarterly basis as it currently does monthly. The disclosed data includes total deliveries, brand and nameplate sales, fleet mix and inventory, more than many of its competitors report. The company will also continue sharing J.D. Power PIN estimates for incentive spending and average transaction prices.
In the end, all that will happen is that wealthy hedge funds will start using satellite tracking services to keep tabs on dealer lots and be informed on a day to day basis about trends, while the rest of the investing public will once again have to wait for months to realize why the stock – if indeed the subprime bubble has not burst – is down.