Automakers are just different. Given their size, just what they do matters to people ranging from suppliers to policy makers. Thus it is news when a company like General Motors decides to be a little less transparent about just what it is doing (GM goes dark on output stats, causes stir, Automotive News, Jun 17).
For decades, GM and nearly all other major automakers have reported the number of cars and trucks produced at their North American plants each month, broken out by nameplate. The data get folded into numerous economic indicators, including ones published by the Federal Reserve, and are a benchmark for industry insiders to forecast GM’s future production.
But this month GM notified several research providers that publish production data — including IHS Automotive, the Automotive News Data Center and Autodata Corp. — that it will no longer give them those figures, providing instead only the number of wholesale deliveries.
Things brings up two questions. First, who was using this data? Second, just why is GM reporting wholesale deliveries instead?
On the user side, the article reports that essentially anyone and everyone who does forecasting related to the auto industry was using GM’s production data and that even GM’s own suppliers are reliant on third-party forecasts.
GM’s move could complicate suppliers’ planning. Many of them subscribe to the production forecasts crunched by third-party research firms, which use production figures as a key input for their projections. Forecasters will have to replace the firm numbers with estimates.
Suppliers say they rely on third-party forecasts because the projections they get directly from automakers often are off the mark, befouling their plans and crimping their profits.
“Suppliers depend heavily on forecasting services to build their production schedules,” says Craig Fitzgerald, an automotive analyst at Plante Moran. “If GM’s decision gets in the way of the accuracy of the forecasts, it’ll be a major problem for the supply base.”
It’s quite plausible that external forecasts are more accurate — especially when general trends (e.g., a shift from big to smaller cars dues to rising gas prices) are in play. The article states that at lease one forecasting firm believes they can back out production numbers but it remains to be seen just how this will affect forecast accuracy. An interesting point is that this may burn firms that don’t have any business when GM. If the forecast accuracy across all makes and models suffer, then a supplier that is serving, say, only Ford could take a hit.
As for what GM will report going forward, I must admit their explanation has some face validity to it.
GM says the decision stems from a recent accounting change aimed at giving investors a more accurate picture of its health.
In the first quarter, GM began assigning the profit or loss on a specific vehicle to the country in which it is sold, not where it’s made. For example, a Cadillac ATS made in Michigan but sold in China will be reflected in the financial results of GM’s Chinese operations, rather than in its North American results.
GM says the change will give it a clearer view of its profitability across regions. But it also makes the North American production numbers less relevant, GM spokesman Jim Cain says.
At one level, this new cut on data should give outsiders a better view on just where GM is and is not growing. If more vehicles are being shipped to dealers in a particular area, it is presumably because GM is experiencing strong sales in that area. Further, to the extent that a given model is only produced in one or two facilities, shipments will over the long haul match production. They will only be offset in time. That time offset might matter, however. If irrational exuberance prevails and GM overproduces, it may take a while for market watchers to catch on to an inventory build up.