In a pioneering move, General Motors Company GM has reportedly taken the decision to abandon its usual practice of reporting sales on a monthly basis in favor of quarterly reporting. The U.S. auto giant is of the opinion that sales releases every month does not provide the true picture of the company’s intricate operations or the health of the auto industry, as it includes short-term fluctuations. However, per management, quarterly sales releases will provide a better idea about the health the company.
To date, experts heavily rely on monthly vehicle sales data to not only gauge the performance of individual automaker but also to get an idea about the shape of the auto market. Earlier automakers used to report their sales every ten days. Monthly reports became the standard industry practice since early 1990s. Per the latest monthly sales report, in February 2018, the seasonally adjusted annualized rate (SAAR) of U.S. car and light truck sales declined to 17.08 million units from 17.45 million in the year-ago period. Among the auto biggies, both General Motors and Ford Motor Company F reported a 6.9% decline in U.S. sales. Among the other automakers, sales of Fiat Chrysler Automobiles N.V. FCAU, Honda Motor Company, Ltd. HMC and Nissan Motor Co. NSANY declined 1.4%, 5% and 4%, respectively. The only exception was Toyota Motor Corporation TM, which witnessed a 4.5% rise in sales. (Read more: Autos' February Sales Sag on Weak Demand & Thin Discount)
That said, March’s car and truck sales, to be released today, will be General Motors’ final monthly report. Subsequently, the automaker will publish sales figures on a quarterly basis. The company will report sales for the next three quarters on Jul 3, Oct 2 of this year and Jan 3 of 2019. The quarterly sales reports will be issued separately from the quarterly earnings reports.
Rationale Behind General Motors’ Decision
Abandoning monthly sales reports can be attributed to a number of factors. It has been witnessed that the effect of volatility does not smoothen adequately in 30 days period. This has sometimes resulted into exaggerated monthly sales figures. According to the automaker, a month having incentive campaigns, abnormal weather or product launches tilt monthly sales figures up or down.
However, the company intends to provide investors and others a less volatile, longer-term metric to evaluate its performance. Replacing the monthly cycle with quarterly one is likely to aid the company in this respect. This is echoed in the statement of Kurt McNeil, General Motors’ U.S. vice president for sales operations, “Thirty days is not enough time to separate real sales trends from short-term fluctuations in a very dynamic, highly competitive market.” McNeil further adds, “Reporting sales quarterly better aligns with our business, and the quality of information will make it easier to see how the business is performing.”
How Will the Other Players React?
This significant move taken by the industry big shot is likely to impact the other players considerably. In fact, in the early 1990s, while majority of the automakers continued to report sales every ten days, the former Chrysler Corp, a predecessor of the present day Fiat Chrysler Automobiles N.V. began to report its sales figures on a monthly basis. Over the next three years, all other automakers started to follow Chrysler. Given the fact that monthly reporting is time consuming and expensive too, a similar type response is anticipated.
Moreover, monthly sales figures sans General Motors will look void and incomplete. If one or two other big players join General Motors, then monthly sales reporting system will become increasingly irrelevant and speculative.
Again, though this new sales reporting system, General Motors will join Tesla, Inc. TSLA as the only automaker which reports sales quarterly. Moreover, companies engaged in auto retailing, as well as industries such as technology, heavy equipment, consumer products and retailing follow quarterly sales figures reporting system. General Motors’ recent decision is not an utterly unfamiliar move on introspection.
While both General Motors and Toyota sport a Zacks Rank #1 (Strong Buy), Honda carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
While Ford and Nissan carry a Zacks Rank #3 (Hold), Tesla has a Zacks Rank #4 (Sell).
Over the past six months, shares of Tesla, General Motors and Ford declined 27.5%, 17.7% and 12% respectively. Meanwhile, over the same time period, shares of Honda, Fiat Chrysler, Toyota and Nissan rose 12.6%, 11.1%. 5.2% and 4.2% respectively.
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