From a press release: GM, Ford and Chrysler are expected to post losses on fourth-quarter operations despite sales gains. Automaker’s revenues are based on factory out-put rather than retail sales by dealers, and last quarter’s sales increases were from the bulging inventories at the end of the third quarter, rather than from model’s produced in the fourth quarter.
Does anyone know what are the possible accounting-based reasons that contribute to these expected fourth quarter losses of automakers.
November 1st, 2009 at 1:31 am
If the dealers aren’t selling as many cars as they are buying from GM, Ford, Chrysler then their inventory is going to go up even though sales are down. Usually the dealers will have to either decrease the price or increase the marketing (or both) in order to stimulate more slaes. By decreasing the price during the 4th quarter they will sell more cars but make less money.