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Automobile prices on new vehicles once again lagged overall consumer inflation, down 0.3% M/M in...

Automobile prices on new vehicles once again lagged overall consumer inflation, down 0.3% M/M in February and only up 1.1% compared to a year ago. Though automakers have been making a big deal on their earnings conference calls about being less promotional in recent quarters, today's CPI report showed the largest monthly drop in new car prices since 2010.
Comments (17)
  • Autoindustry is slipping back into its old thinkiong.
    Build what they want the consumer to buy.
    Instead of manufacturing what the consumer wants to buy.
    Auto companies back to selling undesireable models at huge discounts.
    If they were building what thee consumer wanted they would not need to offer such deep discounts. And their margins would improve.
    15 Mar 2013, 12:10 PM Reply Like
  • M&M - Nice assertions and accusations, but please provide evidence of this "Channel Stuffing", as it is often called and that you are asserting. This would be the difference between wholesale production deliveries over the last few months, and the actual retail and fleet sales. Please sort by Automaker so we can see who the real villains are.


    Please provide proof of these "huge discounts" you are claiming. If they exist, then you would see the automakers' profits being slashed in the US - and the profit margins falling as production and sales increase. This is not happening, profit margins are at record highs. But please produce the evidence if you have it. Automakers are earning record profits in the US, and they are growing.


    Europe is in a full on Depression right now. Don't plan on much in terms of profits there, and don't use Europe's losses to paint a picture of problems in the US.


    Just because average car prices went up less than the CPI is not in any way direct evidence of overproduction and dumping of unwanted vehicles on the market with huge incentives. The average price of cars is highly dependent on the level of competition, and on what consumers are buying.


    February is a notoriously slow month for car sales, mostly due to weather. There may be some minor incentives to encourage folks to visit the showrooms, and some automakers may be selling down remaining 2012 stocks and preparing for arrival of new 2014 versions. One time events in February are not representative.


    US Automakers would love to raise prices more, for even higher profit margins, but they are facing stiff competition from the Asians. There is a highly sensitive balancing act to maximize profits by adjusting inventory and pricing.


    But by all means, show us your numbers so we can pick them apart.
    16 Mar 2013, 07:47 AM Reply Like
  • TDOT,


    Good rebuttal.


    I agree with your comments 100%
    16 Mar 2013, 11:37 AM Reply Like
  • It is about fierce competition, fragmentation, overcapacity and lots of choices, not incentives.


    Years ago people had about 6-8 nameplates to choose from in the US market. Now there are about 20.


    Commodity pricing (steel, aluminum & copper) have eased the last year or two as well, on relative growth moderation in China.
    16 Mar 2013, 01:56 PM Reply Like
  • Is it true that loans are more readily available and that credit standards have loosened?
    16 Mar 2013, 03:58 PM Reply Like
  • Geeeees, it should be obviouse that Japan's attack on the Yen has been a game changer for the Japan companies and not just cars.


    Were talking a BIG price advantage and strong competitve cars.


    All companies must keep prices down.


    PS.. And the world markets and major city real estate prices have done quite nice.Thus, the rich have not suffered via the EU recession & high end cars are strong.
    17 Mar 2013, 05:26 AM Reply Like
  • Well, to be fair, the Yen game has forced Toyota and Honda (etc.) to build development facilities and production plants in the States. But since they knew all about the crushing Union tactics, they have been locating those blue-collar plants in mostly southern, impoverished, underemployed, under-skilled, desperate, non-Union, Right-to-Work States, where their vehicles can be built for about half the cost of the northern Union plants. Which is why Toyota can turn in double and triple the profits, for half the market share. Enjoy!
    17 Mar 2013, 10:04 AM Reply Like
  • Tdot, I see a strong political view in your comment and it hides the real facts. The Yen had nothing to do with there move to the USA... Shipping costs to the US and US bailouts that helped cut the healthcare costs of US companies had taken away most of there price advantages.


    Right to work states are healthy.Not horrific places as your decribing.Now,all companies must compete worldwide and unions destroy any chance of that.US union workers might as well be French. Useless ! They also don't do anywhere near to same work per 40 hours! It's about half with huge vacations ,sick days, personel days and plane old laziness!


    Fortunately, we see the old car producing states who've been saved by handouts have partially come down from there pie in the sky wages and have lessened raping of there employers.It was rape of the American people by the Government to steal the value of those companies from the first in line bond holders and give it to the unions...


    This will come back to bite the US as foreign firms will consider that in there decisions to locate in the US !


    The car companies will have the last laugh as they used G W Bush's 40 billion bailout to fund operations and Obama's cash to expand Mexico and explode the size of there China plants. This has turned out to be the greatest outsourcing of all time.You can find GM's China CEO on video touting how they eventually will make most if not all GMs vehicles there and don't forget Fiat's PR stuff during the election ! Where not making Jeeps in China. Yes they are and eventually they will faze out the Jeeps from US plants.. ha ha ha ha


    Lies and damn lies that equal ~ Bill of Goods 101


    PS.. In the new world unions can only exist in Government. There they can gouge as they have no competiton. In the private sector it's worth closing down if your forced to employ union workers.
    17 Mar 2013, 01:06 PM Reply Like
  • Einstein - You mistook my remarks. Nothing political here, simply pointing out facts. Try again, and pay attention this time. The real Einstein was better than that.


    Toyota (etc.) built plants in otherwise relatively impoverished Southern states and counties, which happened to be Right to Work, specifically so they could pay relatively low wages to non-unionized workers, who were not accustomed to making a whopping $15-20 per hour right out of high school. As a result, they were able to maximize their sales and profits, at the expense of the Unionized automakers to the North. It was a good move for them, Toyota, and it explains their lower costs and prices, and higher productivity and profitability. Not having to deal with a cranky Union has its advantages.


    Meanwhile, the Yen fluctuations made it too expensive to ship completed vehicles from Japanese factories to the US. Building the factories in the center of the cheapest average wage areas in the States made the business highly profitable.
    17 Mar 2013, 02:22 PM Reply Like
  • Thanks for the insult.


    NOTE: They pay a fair wage.Union automakers paid ridiculous wages and paid a price for it. Then we all paid for it again !
    Who thinks small ? You !


    Your a typical American and don't get the US standard of living is so far above reality that it can't remain. The big thinkers say it's structural... employment wise,but, the rest of the world is catching up and the current car makers in those right to work states are paying a fair wage. And, isn't it nice some of the old car states just became right to work ! Now, they can have a chance to rebound somewhat.
    17 Mar 2013, 02:30 PM Reply Like
  • Isn't it odd that the rest of the world is still "catching up" with what is essentially the second youngest nation on the planet in a global history context (after, arguably, Israel 1947, which is also one of the "oldest" in another historical context...)


    As for Michigan, home of the remaining US Automakers, it will be years, possibly decades, before the old-school Union contracts can be untangled and dismantled in an orderly way with respect to Right to Work. The current UAW contracts specifically forbid anything of the sort, regardless of the new state law, which has not yet taken effect, and is extremely vulnerable to the next election cycle, never mind ongoing court challenges.


    Michigan strangely allows a simple majority of voters on Election Day to change their State Constitution and other State Laws to say essentially anything they want, including the vetoing of previously adopted legislation. This actually happened last year in the elimination of the previous Emergency Financial Manager law (which was promptly replaced a few weeks later in a Lame Duck session).


    Stay tuned.
    17 Mar 2013, 03:18 PM Reply Like
  • "The current UAW contracts specifically forbid anything of the sort, regardless of the new state law, which has not yet taken effect, and is extremely vulnerable to the next election cycle, never mind ongoing court challenges."


    You obviously don't live in Michigan. It does not matter what the Union contracts say, when RTW takes affect any person in the Union does not HAVE to pay dues. Will they? Probably. Texas is a RTW state and almost every person in the GM Truck Plant there pays their dues. If the Union provides a service that the members feel is worth the cost, they will pay. The law was passed because most of the 75% of the voters in Michigan that do not belong to the Union saw through all of the lies and propaganda that the UAW put out there during the election and made the correct choice.


    Sure is nice and convenient that the transplants all had their pick of where to put a plant in just the last 20 years, unlike the domestics that already had there manufacturing footprint established.


    Also see how Japan's manipulation of their currency is even starting to hurt the Koreans in addition to the domestics...

    17 Mar 2013, 06:58 PM Reply Like
  • TCB - Bunk. You must not know your Contracts, nor the Michigan Law, nor Grandfather Clauses.


    The Right to Work Law in Michigan is specifically written so as not to supersede ANY currently active UAW or other Union Contracts. They are specifically Grandfathered.


    The Law specifically only applies only to New Employee Hires into New Businesses that seeking to hire New Employees, and to New Hires being added to existing Companies with other Employees already under Union Contracts, but only once those Contracts expire.


    New hires shall be hired under current Contract. The UAW Contracts are good for another 3 years, and cannot be overturned by ANY law.


    The next round of Contract renewals will be, in theory, subject to the New Law, assuming it has not been invalidated, tossed out, constitutionally reversed, or revised substantially. Assuming it remains valid, at that time, Union Employees would be given the opportunity to "opt out" of paying Union Dues. At present, the vast majority have been opposed to that option, and intimidation could be a significant issue at the ground floor level. It could take many years if not decades for the UAW to release their grip around the necks of US Automakers (and its clients).
    17 Mar 2013, 08:20 PM Reply Like
  • Looks like we are both right...


    "Does that mean all union members can now stop paying union dues?
    They can already do that if they wish, under federal law, and only pay an agency fee that covers the cost of their contract representation. But the right-to-work law, although signed by the governor, won’t take effect until around April 1. Employees covered by union contracts that take effect before then will have to keep paying dues — or at least the agency fees — until those contracts expire."


    "If members stop paying dues, will they no longer be covered by the contracts?
    No, even after the law takes effect, all employees who are subject to a contract will be covered by its terms, whether they pay dues or agency fees or not. That’s a major concern of unions, that it allows what they describe as freeloading."

    18 Mar 2013, 08:38 AM Reply Like
  • Maybe. Universities and other unionized entities in Michigan are signing long term contracts, out to 8-10 years durations, before the RTW law takes effect, specifically to avoid those Right to Work rules.



    19 Mar 2013, 06:10 PM Reply Like
  • Saw that. Tricky. Could end up hurting the members if there are not any wage increases. A lot of the current contracts were holding wages due to the economy. 10 years is a long time to go without a raise.


    I also heard that none of these contract extensions have been approved yet. I believe the employers have some say in the approval (specific quote on the news "...this is not over...")
    20 Mar 2013, 03:58 PM Reply Like
  • Yes, the Mexico;Costa Rica ,Panama,Brazil, China other Asian Tigers. Israel too.. Gees... Many third world countries are older age wise then the US.But,everyone in the world knows the US has plundered 30% of the worlds bounty and doesn't have anywhere near that population level.


    I'll leave this thread.. No sense playing with someone who is so smart. Or distorts reality.


    Every real scholar has stated the American Standard of living is the problem. And, it isn't possible for either poltical party to change or fix that !
    17 Mar 2013, 03:24 PM Reply Like
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