GM Boycott Hurting Market Share?

Last week's earnings report from General Motors revealed a troubling statistic for shareholders. GM's market share for North America shrunk from 18.3% a year ago to 16.7% for the latest quarter. Not coincidently, a survey by Yahoo Autos revealed that a full 13% of consumers would now "never" consider purchasing a GM vehicle while another 15% are less likely to purchase. A negative perception of the auto bailout process and the continued political overtones at GM are the reasons for the boycott.

Another recent Rasmussen poll showed that 59% of Americans view the auto bailouts as a failure. The Yahoo Autos' article puts a more positive spin on the auto bailouts stating that two thirds of Americans put GM on their shopping list. Unfortunately for GM, a loss of any segment of potential buyers causes the company to have to spend more in incentives to maintain market share.

Incentive spending for GM rose to 115% of industry average for the month of April. This is the highest number in a year. In addition, GM is relying on loosened credit standards to help spur sales as GM Financial sub-prime loans rose to 8.2% for the quarter, up from 6.1% a year ago. The industry average is currently 6%. Government-owned Ally Financial is pitching in as well, offering 72 month / 0% interest on struggling models like the Chevy Volt.

The extra help is needed as GM has taken an unusual position in vilifying conservative and Republican car shoppers by accusing them of running a "wrong-headed" misinformation campaign designed to hurt sales of the Chevy Volt. The argument holds no water as other plug-in cars, like the Nissan Leaf, are selling even more dismally than the Volt. GM CEO, Dan Akerson, claims that Republicans criticize the Volt but not the Leaf, thus hurting Volt sales. If the logic was sound, sales of the Volt would be suffering more than the Leaf. GM continues to spend a disproportionate amount of money promoting the Volt, which serves as a symbol of Obama's green energy initiatives, while losing market share in more profitable segments.

Many Americans recognize the blatant favoritism that political allies of Obama, like the UAW, have received in the GM bankruptcy process compared to other groups. GM bondholders and taxpayers fared worse than UAW members who not only kept their jobs and benefits, but are now receiving thousands of dollars each in bonuses. The auto bailouts seemed to have an underlying goal of protecting the powerful UAW. Perhaps nowhere else is the blatant inequity evidenced than in the treatment of Delphi retirees. UAW retirees had their retirement benefits protected while non-union retirees lost theirs. Congressional investigations are ongoing in the obviously biased redistribution of wealth that favored the UAW.

The automotive sector remains very competitive, companies can not afford to alienate potential buyers by taking political stances as GM has done with the Volt. The continued campaigning by President Obama on the "success" of GM and the Chevy Volt as Treasury refuses to exit taxpayers' stake in the company further alienates individuals who do not agree that the auto bailouts where overwhelmingly "successful." If the sacrifices of those classes that were not politically connected are not recognized, it is hard to let bygones be bygones. 13% of disenchanted Americans may not be enough to change an election, but it can sure put an auto manufacturer at a competitive disadvantage as the GM boycott continues. A strategy by Government Motors to vilify critics is not helping the situation.

Mark Modica is an NLPC Associate Fellow.

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