GM takes hit in Canada

image credit: Maryland GovPics

Derrick and Eric Sharma are done with their Chevy Camaro.

Self-proclaimed “car-heads,” the brothers from Brampton, Ontario, bought a Transformers-inspired, yellow and black Camaro in 2007. After the massive recalls by General Motors Co. (NYSE:GM) this year, the brothers sold it and bought a Nissan Altima.

“We never really had issues with it,” Derrick Sharma, 27, said in a phone interview this month. “But once the recalls started happening and we found out how GM wasn’t really faithful as to being up front about things as they happened, that’s taken us aback a bit.”

While the biggest U.S. automaker has surprised analysts with strong sales in its home country as well as in China, consumers in Canada aren’t buying as many Chevys and GMC trucks. Sales plunged 15 percent in Canada last month from a year earlier, even as sales for all automakers gained 2.2 percent, according to a DesRosiers Automotive Consultants report.

GM Canada sales declined 2.3 percent in the first half of the year, while total vehicle sales jumped 2.8 percent in the country. Canada is the seventh-biggest market for GM in the world, with unit sales of 234,944 in 2013.

The Detroit-based automaker is also suffering from weak sales of its pickups in Canada, along with lingering disputes with its dealers after the carmaker closed almost 250 outlets following its U.S. bankruptcy filing in 2009, said Dennis DesRosiers, president of the auto research firm based in Richmond Hill, Ontario.

Closed dealers

“Some of it’s related to the recalls, some of it’s just because they have horrific issues in their distribution network with car dealers fighting with each other going back five years in the bankruptcy,” he said in a phone interview last week.

When GM filed for bankruptcy in the U.S., GM Canada didn’t follow suit. Instead it eliminated 242 dealerships overnight, DesRosiers said.

“In a lot of the small and midsized towns where these dealerships closed, the loyalty was more with the dealership than with the brand,” he said. When dealers decided to sell another brand, their customers followed.

Punish GM

“A lot of the dealers that were terminated are trying to actually punish General Motors,” DesRosiers said.

GM attributes last month’s drop in Canada to strong sales in June 2013 due to a short-term program offered at that time, Adria MacKenzie, a spokeswoman for General Motors Canada, said in an e-mail last week.

The company has recalled vehicles in North America since the beginning of this year, with the most recent round announced last week. The reasons range from small-car ignition flaws, linked to at least 13 deaths, to a radio chime. GM has set aside at least $400 million for victim compensation, the company said in its most recent earnings statement on July 24.

GM, whose second-largest shareholder is a trust for the Canadian and Ontario governments, has dropped 14 percent this year, compared with a 7.3 percent gain in the Standard & Poor’s 500 Index. GM shares rose 0.3 percent to $35.01 at 10:29 a.m. in New York. There are 14 analysts with buy ratings, five with holds and three with sells, according to data compiled by Bloomberg.

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