A Surprising Look at General Motors' Sales After 26.5 Million Vehicles Recalled
General Motors has had a rough year in the headlines, and rightfully so after the company recalled more than 26 million vehicles, some of which had issues that led to tragic deaths. In fact, thanks in large part to GM, the automotive industry in the United States broke its annual vehicle recall record with six months left to spare -- the entire industry's prior record was 30.8 million vehicles in 2004.
With that type of negative attention and tens of millions of recalls, customers are surely shying away from the automaker once commonly called "Government Motors," right?
Wrong. Let's take a look at some recent sales figures and three factors driving GM's sales higher despite its massive recall numbers.
General Motors sold nearly 2.5 million vehicles globally in the third quarter of 2014, according to the largest Detroit automaker. For some additional perspective, those 2.5 million vehicles sold will be chalked up as General Motors' best third-quarter performance since 1980.
To let that sink in and resonate, let's rephrase the above information: The very year GM posts absolutely staggering recall numbers, and one of its worst years of negative press, it records its best third-quarter sales performance in 34 years.
Surprising, right? It certainly surprised me. Here are a handful of factors behind GM's surprising sales surge.
First, one large driving force behind rising sales are GM's two powerhouse auto markets, the U.S. and China, which are both growing at a healthy clip.
It's been a strong year to date in the U.S. and China, with YTD sales rising 4% and 12%, respectively -- and you can see in the graphic above that the third quarter was even stronger.
Second, in the years following General Motors' unique bankruptcy and cash crunch, the troubled Detroit automaker wasn't able to pump vital cash into its product line. The result was an aging fleet of vehicle offerings that resembled dinosaurs in the land of the automotive industry. GM knew its old vehicle offering was at the top of the list of things to fix -- it has worked diligently for that.
In 2013, General Motors rolled out 18 new or significantly refreshed vehicles in the U.S. alone, which has drastically helped drive dealer foot traffic and sales higher. It's a theme that will continue, and in 2014, GM plans to unleash an additional 15 models in the United States.
In fact, as these new vehicles continue to be unveiled, GM expects 27% of its global sales to be from new or refreshed vehicles rolled out within 18 months. That percentage of new vehicles accounting for global sales jumps to 38% in 2016 and as high as 47% in 2019. Simply put: New cars sell better, and GM is unveiling a bunch of vehicles.
Third, and perhaps the most surprising reason behind surging sales, is the recalls themselves. It sounds a bit crazy, at least to me, but as customers continue to bring in their recalled vehicles, GM is wheeling and dealing them with additional incentives to move them from a problem-riddled vehicle from "old" GM to a newer and less troubled vehicle from "new" GM -- and the strategy is working.
Furthermore, many of the recalled vehicles are no longer in production, which may ease consumers into giving General Motors a second chance with its newer vehicle models. In addition to that, financing and credit are still easily available, making a large purchasing decision that much easier.
Jesse Toprak, chief analyst for Cars.com, made an interesting point. "Consumers are getting desensitized," Toprak told The New York Times. "You keep hearing about recalls every day. After a while, it doesn't mean much."
Ultimately, despite the tragic deaths that resulted from GM's overdue and massive recall, among the many other recalls the automaker announced this year, don't expect sales to slow down anytime soon. General Motors looks to continue being America's largest automaker, as well as one of the largest globally -- for better or worse.
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The article A Surprising Look at General Motors' Sales After 26.5 Million Vehicles Recalled originally appeared on Fool.com.Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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