Back in the summer, I was at a cookout and talking to a friend of mine who is very enthusiastic about outdoor activities like camping, hunting, and fishing. My friend drives a big honkin' manly-man's Chevy Silverado 4x4 truck. He commented that while he was very happy with his Silverado, he was so incensed with the federal bailouts of GM and Chrysler that he would never again buy anything built by (as he called it) "Government Motors."
Over the next several months, I heard similar declarations from a few others I crossed paths with. They were absolutely, positively never--never, I say!--going to buy anything from one of the bailed-out automakers. On the other hand, I don't recall anyone openly expressing support for the GM or Chrysler bailouts, or any great desire to get new wheels from the newly nationalized manufacturers.
I happen to live in one of Ohio's more conservative counties, so I wasn't surprised to hear people talking like that. Because my hometown is what it is, politically speaking, I figured that what I was encountering was not necessarily a representative sample of opinion across the state, or across the country.
Six months later, I'm not so sure it wasn't--and here's why.
The auto manufacturers have released 2009 year-end U.S. sales figures, and the results (as reported at The Truth About Cars and various business news sites) are grim. Overall, 2009 had the lowest new car sales in 27 years, about 21% less than 2008, which wasn't exactly a banner year.
When you break it down by manufacturer, it looks like this:
- Subaru was up 15% on the year. You wouldn't expect a quirky and somewhat premium-priced niche brand to increase sales in a recession, but there you have it. Proof, perhaps, that car lust is a potent market force.
- The Korean makes, Kia and Hyundai, are up 9.8% and 8%, respectively. Both nameplates offer competitively-priced vehicles with good amenities and good reputations and 100,000-mile warranties; just the sort of new car people are looking for in a soft economy.
- Volkswagen was down 4% from last year.
- Volvo was down 14.6%.
- Mercedes Benz was down 15.3%.
- Ford sales were down 15.4%.
- Nissan down 19%.
- Toyota down 20%.
- Honda also down 20%.
- BMW down 21%.
- Mazda down 21.3%.
- GM down a whopping 30%.
- Chrysler down an even more whopping 36%.
- GM affiliate Suzuki just plumb fell off a cliff, down 54%.
What jumps out at me is how the manufacturers formerly known as the "Big Three" fared. Ford lost sales, but had less of a decline than most other manufacturers, while GM and Chrysler took a serious pounding. What does this have to do with the bailouts? Well, there's at least a correlation. Ford, which did relatively well, never asked for a government bailout; GM and Chrysler took the bailouts, and had awful sales.
Of course, correlation does not always indicate causation, and there's a little bit of a chicken/egg issue here. Even before the bailouts, Ford was in much better financial shape than the rest of Detroit. It has the strongest product line of the domestic auto companies, and has done a stellar job of improving its assembly quality and reliability from where it was in the "Found On Road Dead" era of the 1970s. In comparison, GM has been sort of hit-and-miss in recent years, and Chrysler's passenger car lineup is a study in deadly dull mediocrity. Neither of the bailed-out companies has had the chance to roll out much in the way of new product yet, so it's at least arguable that their steep 2009 sales decline came because these companies had unappealing products, causing them to lose money, which led them to clamor for a bailout, and not because their customers rebelled against the bailout after the fact.
I do not doubt, however, that some part of GM's and Chrysler's decline is attributable to hostility to their status as recipients of government money. The bailouts have never been popular with the voters. In a nation of 300 million people, my outdoorsman friend is certainly not the only one who has resolved to conform his shopping patterns to his distaste for current industrial policy. But are there enough people like that to make a meaningful difference in the marketplace? There is at least anecdotal evidence that there are. Some Ford dealers are openly touting the fact that their manufacturer isn't on the government dole, and if Ford's December sales (up 33% over December 2008 while GM's sales for the month fell by 6% and Chrysler's by 4%) are any indication, that line of argument may be having some effect.
This leads me to something that is potentially a huge problem for GM and Chrysler, and one I fear no one is really thinking about: by taking enormous sums of government money through a politically unpopular program, have GM and Chrysler fatally poisoned their brand equities? If there are enough people like my outdoorsman friend out there, and if they remain adamant in their refusal to buy any GM or Chrysler product ("You already got my money from the IRS!"), then it may not matter how cleverly the car czars and marketing mavens plan their turnaround strategies, or how green or stylish or advanced GM or Chrysler's new products are. The damage to the brand equity may be so bad that they will not be able to sell enough new cars to sustain the enterprise--at least, not without more government money to prop them up!
So let me throw the question open to you, the readers of Car Lust. You might not be a scientific sample in the strictest sense, but you live in many different places and have friends and neighbors I'll probably never meet. Are you more likely or less likely to buy a GM or Chrysler product because of the bailout? What about your friends and neighbors and family members? Are they expressing sentiments like I've heard--or the opposite? Hit the comments and let us know.
--Cookie the Dog's Owner
Note from Chris: For obvious reasons, I'm relaxing the usual "No Politics" rule in the comments, with the caveat that commentary should focus on policy and not partisanship. Our other commenting guidelines are still in place--treat each other with respect and don't say anything you wouldn't say to somebody's face.
Okay: "The bailout was unethical, and I'll never buy a GM car."
Not Okay and Will Be Removed: "(Insert political figure) is a crook, and I'll tar and feather every (insert political party) I see."
Not Okay and Will Be Removed: "You're a (fascist/communist)!"