Costco Sold 58,000 GM Cars During a Holiday Promotion

2016 Chevrolet Cruze:  
Provided by General Motors Co.

Beginning October 2 and ending January 4, Costco Wholesale Corp. (NASDAQ: COST) and General Motors Co. (NYSE: GM) sponsored a promotion for Costco members who wanted to purchase a new GM car. Sales totaled approximately 58,000 GM vehicles for the three-month promotion, up 34% year over year and well above Costco’s estimated 20% increase.

The offer featured GM supplier pricing and included all qualifying manufacturer rebates and incentives on a selection of vehicles, including trucks, sport utility vehicles and luxury and fuel-efficient models. Buyers also received a $300 or $700 Costco cash card for completing a Costco member satisfaction survey.

Customers were also asked if the promotion was a “deciding factor” in their purchase of a GM car instead of another brand. More than half (53%) said it was, and GM took the most sales from Ford Motor Co. (NYSE: F). Some 32% of the GM buyers switched from Ford to GM cars. That’s about 18,650 fewer Ford cars sold in the three-month period. Toyota Motor Corp. (NYSE: TM) and Honda Motor Co. Ltd. (NYSE: HMC) lost 14% and 7% of sales, respectively.If Costco sold nothing but cars it would be the largest new car dealer in the United States. In 2015, the company sold more than 465,000 vehicles. AutoNation Inc. (NYSE: AN) is the nation’s largest car dealer, and it sold 343,753 new vehicles in 2015, a 5% increase year over year. Costco’s year-over-year increase in new vehicle sales totaled 16.8%.

Written by Paul Ausick of 24/7 Wall Street

(Source: 24/7 Wall Street)

GM’s Barra Says Focus is Unwavering


MILFORD, Mich.—General Motors Co. Chief Executive Mary Barra said on Thursday the company continues to act with urgency even after resolving major facets of a safety crisis, and said her focus is steadfast on improving profit margins, not chasing market share.

Ms. Barra, meeting this week with top managers at a test facility near GM’s headquarters, said the nation’s largest auto maker emerged from recent trials with a fresh eye on improving its performance in certain markets and countries rather than trying to be all things to all people. GM for decades aimed to be the most ubiquitous auto company in the world, leveraging a large stable of brands and manufacturing operations across the globe.

GM recently pulled out of manufacturing operations in Southeast Asia and is planning to shutter a factory in Australia. In Russia, meanwhile, the company responded to regulatory requirements and economic pressure by ending most of its sales and manufacturing operations there.

“We’ve got to decide where we can make a sustainable return, where we should deploy the capital,” Ms. Barra said during an interview. When setting goals, she said it is very important “do it in terms of margins, not market share.”

The comments come as Volkswagen AG, one of GM’s biggest rivals, is engulfed in a scandal related to emissions software. The crisis has cost the German company’s Chief Executive Martin Winterkorn his job, and threatens to require billions of dollars of capital to resolve.

Ms. Barra declined to comment specifically on Volkswagen’s emissions-testing scandal. Unlike GM’s recent strategy, Volkswagen had been pursuing ambitious sales goals and sought to wrestle the top spot in annual sales volume from Toyota Motor Corp.

GM’s chief executive spent much of her first year in office overseeing one of the U.S. auto industry’s biggest safety lapses—faulty ignition switches that led to millions of vehicle recalls and dozens of deaths and injuries. Last week, GM agreed to pay $900 million to settle criminal charges levied by the Justice Department. That settlement, she said, serves as a bookend to the ignition-switch crisis.

That settlement also proves the company has made progress, she said. By cooperating with the government and regulators, GM was able to settle the matter with the Justice Department relatively quickly and is now moving past what is likely to be the costliest part of the crisis.

Still, Ms. Barra faces plenty of other challenges ahead, including recent attempts by rival Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne to force the company into discussions on a merger.

She said her management team and board—working with external experts—“thoroughly reviewed” Mr. Marchionne’s proposal, but the group believes GM is better suited to achieving its goals operating on its own.

“We have scale and there comes a point where more scale becomes a diminishing return,” she said. Again referring to past decisions to chase volume over profit, she said focusing on the current strategy “is in the best interest of our shareholders versus doubling down on the past.”

Still, some Wall Street analysts have said GM shares appear to have little upside, and they have instead been bullish on automotive startups, such as Silicon Valley’s Tesla Motors Inc., which makes pricey electric cars, and ride-sharing company Uber Technologies Inc. Both have valuations near GM’s $47 billion market cap, but have only a fraction of the revenue and fixed costs.

Ms. Barra says she has been able to keep the Detroit-based company focused on growth objectives and on meeting the challenge of rapidly changing automotive technology by practicing “ambidextrous” leadership.

She said the company had a dedicated team of executives working on the ignition switch situation, so the rest of the company could focus on its plan for future products that are powered by batteries or can run via autonomous-vehicle technology.

Ms. Barra said she views its prime potential growth markets as including India, China, and the U.S. luxury car business. In recent years, GM has benefited from a sharp increase in U.S. demand for trucks and sport-utility vehicles, which is helping fund future projects, such as ride-sharing applications or autonomous-driving vehicle technology.

In addition, she said the company has grown nimbler since its bankruptcy, able to respond rapidly to market changes. For example, in China executives have implemented three “efficiency up, cost down” plans since the beginning of the year to respond to economic softening as Ms. Barra demands the region hit the promised results despite market conditions.

Ms. Barra said the company needs to deliver on what it promises if it hopes to get Wall Street to give it more credit. GM’s stock price hasn’t grown during her tenure, closing at $29.44 on Thursday, below the company’s $33 initial public offering price in 2010.

She also said GM needs to prove it can perform well during a downturn, delivering consistent results from the “peak to trough” of an economic cycle.

Written by Gautham Nagesh and John D. Stoll of The Wall Street Journal

(Source: The Wall Street Journal)