Auto Industry Retrenches After Second Quarter Losses

Despite the Big 3’s poor financial returns, Auto Trader’s Michelle Krebs sees hopeful signs on the horizons for the road ahead.

The North American International Auto Show in January 2019.

All of Detroit’s car manufacturers took financial hits in the 2nd quarter. 

General Motors reported the smallest loss, dropping about $800 million dollars from April through June. Fiat Chrysler lost more than a billion dollars. Ford would’ve lost $2 billion without a huge gain in its investment in autonomous vehicles. 

“We do believe the worst is behind us, but there are challenges.” — Michelle Krebs, Auto Trader

Michelle Krebs is an automotive analyst for Auto Trader. She tells WDET’s Alex McLenon while the industry is feeling the financial impact of the COVID-19 pandemic, the news could be worse for American car companies. She spoke with WDET’s Alex McLenon. 

Click on the player above to hear Auto Trader’s Michelle Krebs on the Big 3’s second quarter losses, and read a transcript, edited for length and clarity, below.

Alex McLenon, 101.9 WDET: With all of the Big Three manufacturers beating Wall Streets expectations for the quarter, why was that? Is it the result of something the manufacturers are doing on their end, or did Wall Street overreact in making those projections? 

Michelle Krebs, Auto Trader: We’ve never been in this situation before and so I think Wall Street’s forecasts were gloomier than it turned out to be. But also we saw Detroit automakers move very quickly to address the situation. 

On the sales side, they quickly introduced very compelling incentives to lure consumers into dealerships. Dealers made a lot of accommodations to sell vehicles online and deliver vehicles to homes. They also were quick to do furloughs, layoffs and cut costs where they could. 

Meta Stange
Meta Stange

One of the issues Detroit’s Big Three faced in the 2nd quarter was not having enough vehicles to put on dealership floors with plants running at limited capacity. Is that still an issue and what’s being done about that? 

As we look forward there are still a lot of challenges. We do believe the worst is behind us, but there are challenges. The factories are still trying to produce vehicles under these new protocols and it’s been slow going. There’s a serious inventory shortage even though the plants are up and running, so the supply is not meeting demand. 

And there are going to be some economic bumps in the road. We know that the stimulus package help for laid off workers has run out and we have seen a bit of lost momentum with consumers. We do think some business customers will comeback for sales but it’s going to be an uncertain ride going forward. 

Another thing that will play out over the 3rd quarter is Ford transitioning CEO’s from Jim Hackett to Jim Farley. Is that a move that’s going to have a major impact on Ford’s product line, or is it going to be a pretty seamless transition?   

The Ford changing of the guard was exactly what we expected. The only thing we didn’t know was what day it would happen. And I think it will be a very smooth, seamless transition because Jim Hackett and Jim Farley have worked very close together to develop the plan going forward.  

I think Jim Farley’s biggest job right now is to launch new products that are so important to Ford. The new Ford F150 comes out in the next few months. Then of course they have the Ford Bronco coming next year, and they also have the Mustang Mach E – the first EV SUV from Ford.  So those are extremely important products in the short term. Executing those products flawlessly is critical. 

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