Ford and GM Should Benefit From Jump in Car Sales

By Douglas A. McIntyre Published Dec 18, 8:15AM EST

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General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F) got a boost from increased auto sales in November.
This helped offset their struggles in China, the world’s largest car market.

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Ford and GM Should Benefit From Jump in Car Sales — © praetorianphoto / Getty Images

As their sales slip in China, the world’s largest car market, success in their home market has become more critical for General Motors Co. (NYSE: GM | GM Price Prediction) and Ford Motor Co. (NYSE: F). Their sales in the immensely profitable Chinese market have been severely undermined by the surge in sales by the nation’s rapidly growing electric vehicle (EV) companies. The two companies got good news as November retail sales data showed that U.S. car sales have jumped.

As a sign of how troubled the once immensely profitable Chinese market has become, GM wrote off $5 billion for its joint venture there. The total was based on two non-cash charges.

Census data on retail sales in November, not adjusted for inflation, rose 0.7%. The improvement included upward revisions from the two previous months. Bloomberg reports that the sales increase would have been approximately 0.2% without car sales.

A study from Ward’s Automotive Group, a car research firm, shows that November car sales were the best in three years. It appears that falling interest rates and large discounts pushed most of the improvement.

GM’s U.S. market share is nearly 17%, and Ford’s is 13%. This year, about 15.5 million new cars and light trucks will be sold in America.

The November success may be a two-edged sword. While U.S. car sales rose, incentives were a factor. A Cox Automotive report showed, “New-vehicle sales incentives climbed higher in October, jumping from a revised 7.2% of the ATP in September to 7.7% in October, an increase of more than 6% month over month.” Note that ATP stands for “average transaction price.”

While China’s prospects have faded, Ford and GM have a much better situation in the United States.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.