Auto Sales: The Problem with Opinion Polls

By James Kwak

Back in December, when people actually had debates about whether or not Chrysler and GM (GMGMQ.PK) would go bankrupt, one of the claims made by the anti-bankruptcy camp was that 80% of people would not buy a car from a bankrupt automaker. That number came from a CNW survey; here’s a summary from Motor Trend (hat tip Jane Hamsher):

A recent study from automotive market research firm CNW surveyed 6000 people intending to buy a new car within six months, and discovered that more than 80 percent of them would switch brands if the vehicle they wanted came from an automaker that went bankrupt. Breaking it down by company, Americans were more likely to abandon domestic automakers than foreign ones, with Chrysler faring the worst — a full 91 percent of buyers wouldn’t take home an Auburn Hills product if the company went bankrupt.

The theory was that bankruptcy would lead to an immediate collapse in sales which would lead to liquidation. (A later study, cited here, said that if the government were involved in the bankruptcy, the number of people who wouldn’t consider buying from GM would be 51%.)

This is what I said in December:

I strongly suspect that 80% is just a poorly worded and interpreted poll question. If you ask people in the abstract if they would buy cars from a bankrupt car company, of course they will say no. But in the real world, if the car they want is made by a bankrupt company, and they get a good deal, they will buy it. Just look at the November auto sales. GM was down 41%; Toyota, Honda, and Nissan were down 34%, 32%, and 42%, respectively. And everyone buying a car in November must have been aware that bankruptcy for GM was a serious possibility. (Besides, haven’t we been talking about a GM bankruptcy on and off for years?) Sure, bankruptcy will hurt sales a little. But 80% is just not credible.

Well, now we know. In May – during which Chrysler was in bankruptcy – Chrysler sales were down 47% from the year-ago period. Overall sales were down 34%, which means non-Chrysler sales were down around 33%. So as a crude estimate, if Chrysler were like the average automaker, for every 100 cars it sold last May, it would have sold 67 cars this May. Instead, it sold 53. That’s a 21% decrease – a lot less than the 91% predicted.

I’m not claiming I can predict auto sales better than other people – I know virtually nothing about auto sales. I’m just saying you shouldn’t rely on polls that ask people what they would do under some hypothetical scenario, since they don’t know what they would do.

Comments

[Mistrofan:]

James - coparing estimates at different point in times is like comparing apples with pears. Of course the estimates from Dec did change, because the public sentiment was much worse in Dec compared with May. I don't think the estimate was bad - I would rather say the estimate in Dec was accurate based on the available information existent as of that day.

Jun 07 08:55 AM

[Big Bubbette:]

How is this action by our government Constitutional? Anyone watch the news in Russia where Putin forced the owner of a factory to re-open? And question how Putin supporting the unions and workers is any different that Obama supporting the unions over the investors? www.themoscowtimes.com...

Hopefully the Supreme Court will take this case and restore the Constitution and stop the Presidents take over of banks and private enterprise. While the bail-out bill, rubber stamped and not read or debated by our Congress may impact this issue, Youngstown Sheet & Tube is still good law. The only question is if the Supreme Court will take the case and cut back on the action being taken by the President:
www.law.cornell.edu/su...

Jun 07 01:06 PM

[303820:]

T

Jun 07 01:45 PM

[303820:]

The only good that came out of Youngstown sheet & tube was the fact that the fat cats took the money and ran to China, Brazil and Poland, living behind a devastated community, with thousands of job lost. ALL BECAUSE WASHINGTON DID NOT WANT TO INVEST $150 MILLION...It was the start of the end for the American steel industry.

Self destruction is the only thing we're good @.

Jun 07 01:52 PM

[nosajio:]

I would hazard a guess that a great many people in that poll equate bankruptcy with liquidation, not restructuring. Now, people don't see the risk, as the companies are not vanishing, just shrinking.

Jun 07 03:53 PM

[Tdot:]

A lot of the discrepancy described is related to folk's perception of what "bankruptcy" means. Many people equate bankruptcy with "out of business", along with the baggage associated with the ubiquitous "going out of business sale", as seen with Service Merchandise and Circuit City. Others think of bankruptcy as in Chapter 7 Liquidation, or as in personal bankruptcy - losing the house and car and moving into a cheap apartment, rather than simple Chapter 11 reorganization. The government and GM and Chrysler have gone out of the way to distinguish the difference.

Folks largely responded emotionally under the assumption of a Ch 7 Liquidation scenario, rather than simple Ch 11 Reorganization. If they were (perhaps more properly) asked "Would you buy a car from a REORGANIZED auto maker", they would have responded far more positively than if they were aked "Would you buy a car from a LIQUIDATED auto maker that had gone out of business".

Again, pollsters were able to twist and manipulate the responses to the desired result by carefully phrasing the question.

Jun 07 07:08 PM

[jthorner:]

People routinely say one thing, but do another. Opinion polls asking about plans and intentions are notoriously unreliable. The automaker bankruptcy poll in question was taken specifically for the purpose of bolstering political arguments at the time.

The fact that Chrysler sales are deeply in the tank has many causes, one of them being that all of Chrysler's factories were 100% shut down in May. Dealers are stuck selling whatever is left over and have had little to nothing new to offer in a long time. The most popular vehicles, colors and option combinations are running out. Also, fleet sales are mostly from the factory direct to the fleet buyer. Closed factories mean nearly zero fleet sales.

Jun 07 07:11 PM

[Steven Hansen:]

this is the problem with all opinion polls. if you want a positive spin, your polling questions are phrased one way - if you want a negative spin, you phrase the questions another way.

opinion polls of future actions are 100% bogus. not a chance in hell anybody knows the situation you would be in when the action would occur.

Jun 08 11:47 AM