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[00:01]
A
Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday SAP Netsuite operate like a local everywhere. Visit d e l.com WSJ that's d e e l.com WSJ. This is yous Money Matters from the Wall Street Journal.
[00:38]
B
Welcome to youo Money Matters. I'm Charlie Turner in New York. U.S. automaker sales fell sharply in July as companies cut back on lease deals that kept monthly payments low. General Motors led the way down with GM sales falling more than 15% as has been the story for quite a while. While SUV and pickup sales remained strong, sales of sedans and other passenger cars continued to struggle with amid low gas prices. Joining us from Detroit is Wall Street Journal reporter Mike Kalias. Mike, I thought July was supposed to be a strong selling month for car companies. What exactly is going on here?
[01:11]
C
Yeah, I think what you're seeing is just a continued sort of running out of steam on the consumer's part. To step back and put it in perspective, the auto industry has always been a cyclical one. We're coming off of seven straight years of increases since the recession. That's really unprecedented. Including the last years have been record highs of about 17.5 million cars. This year we're down from that. It's probably going to be around 17 million once the year ends.
[01:44]
B
Still not bad. Still pretty good.
[01:46]
C
Still in the top five years of all time. Just point of clarity that this is not sky is falling kind of stuff just yet. I think if you ask any auto executive, they probably in the 15.5 million range and above they would take and we're still north of that. But there's no question that if there was any question coming into this year whether or not we'd set another record, I think we've answered that one. There's probably no chance that that would happen.
[02:15]
B
How much is it believed at this point that July sales fell compared to a year ago?
[02:21]
C
We're in the 5% to 6% range. It's looking like. And the Detroit companies are far worse than that. You mentioned GM's 15% drop. Ford was about 7.5%, Chrysler was worse than that. So yeah, I think what's happened here is sedan sales have been tough for everyone. All the consumers are moving away from cars and towards crossover vehicles, SUVs. The truck sales for the Detroit companies, especially GM in the month were really surprising because they fell off steeper than expected. They were pretty flat for Fiat Chrysler. Ford still did ok, but those big pickup trucks that really fuel the profits of the Detroit companies fell off in July and that was a little bit unexpected.
[03:04]
B
Haven't inventory levels ballooned? There are a lot of unsold vehicles on dealer lots.
[03:08]
C
Yeah, it's becoming a little bit more of an issue. So GM kind of skews things though. Normally you'd want to see a 60 to 70 day supply of cars on dealership lots. GM for several months in a row now has been running over 100. There are some reasons for that. They've been saying for months now they've been telling Wall street, listen, we've got a handle on this. We're building ahead of time because in the fall we're going to take down several factories to get ready some new products that we're building. We need these dealership lots to be stocked before that happens. In advance of that, by the end of the year, you'll see our inventories fall to normal levels so far. You wonder whether or not investors believe them because GM stock today really got hammered. It was down close to 4% at one point. I think that that's a concern. Investors are sort of. I think the jury is still out on whether or not they're really going to bring those inventory levels down back to normal levels in coming months because if they don' they're going to have to add on big discounts. That hurts profitability and that could pressure the stock as well.
[04:13]
B
I'm speaking with Mike Kalias of the Wall Street Journal. He's joining us from Detroit. And you're listening to your Money Matters. Thanks for listening, everyone. Mike, you quoted J.D. power as saying manufacturers typically pull back on sales incentives after the July 4th holiday. But because of inventory levels being elevated and sales being down, it's compelled the automakers to maintain aggressive discounts throughout July. So if I'm in the market, wouldn't this be a great time to shop for a vehicle since dealers might offer more aggressive incentives to get rid of all that inventory?
[04:45]
C
Yeah, I think it would be the reason why the second half of the year those kind of discounts start to moderate and the deals aren't as good is because you get into a new model year, you go from model year 17 to 18 and those are newer cars, a lot of times newer features. So you're not going to get as good a deal. Right now the discounts are as good as they've been since the recession. But it depends on what you're looking for. You might not get a screaming deal on a new crossover SUV that a company just came out with. GMs come out with several of those. Chrysler has as well. All the Asian.
[05:22]
B
Why would they want to drop the price on that?
[05:24]
C
Right. Because those are in fairly high demand. But if you want a really nice sedan, this is definitely the time to buy one. Silver lining in terms of the health of the automakers though, is that we've seen these discounts rise to a certain level that is as high as we've seen in years. The last few months they've not gone beyond that even with volumes falling. So it seems like people are looking around, the automakers are looking around saying, okay guys, let's not start a price war here. This is still a pretty good market. Sales volumes are still pretty high. Let's not go crazy with incentives to try to protect our market share because that's going to hurt everyone's profitability overall. You didn't really always see that in the past during cyclical downturns.
[06:07]
B
What's it look like for the latter half of the year? More of the same?
[06:10]
C
Yeah, I think so. I think it looks like these incentive levels are going to moderate, but they may not if we don't see those inventories start to go down. Because that's going to be a problem. Because I think they, you know, the two things that carmakers can do if volumes are falling is one, they can put discounts on cars to get more people in showrooms. The second thing they do, which is not what they want, is to cut production. We've already seen some of that and I don't think we want, you know, I don't think the automakers want to do much more of that. So we could see those incentives stay pretty high through the rest of the year with inventory levels where they are now.
[06:48]
B
Joining us from Detroit, Wall Street Journal reporter Mike Kalias. Thanks a lot, Mike.
[06:52]
C
You bet, Charlie.
[06:53]
B
And that's yous Money Matters. I'm Charlie Turner with the Wall Street Journal.
[06:56]
A
Got an Amazon Echo or an Amazon Tap? Listen to the Wall Street Journal as part of your flash briefing. The Wall Street Journal listen ambitiously still running global payroll like a relay race deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday, SAP, NetSuite, operate like a local everywhere. Visit d eel.com WSJ that's d e-l.com WSJ.

Summary4 min read

WSJ Your Money Briefing

Episode: July U.S. Auto Sales Fall Sharply
Date: August 1, 2017
Host: Charlie Turner
Guest: Mike Colias, Wall Street Journal reporter (Detroit)

Episode Overview

This episode explores the sharp decline in U.S. auto sales during July 2017, focusing on shifting consumer preferences, high dealership inventories, and the strategies automakers are using to manage the downturn. Host Charlie Turner interviews WSJ’s Detroit-based reporter, Mike Colias, to break down the trends, expectations for the remainder of the year, and what it means for consumers looking to buy.

Key Discussion Points and Insights

The State of the Auto Industry

Sales Decline Amid Years of Growth
- U.S. automakers saw sharply lower sales in July 2017. The industry had enjoyed seven consecutive years of rising sales, including recent record years at roughly 17.5 million vehicles sold.
- Quote (Mike Colias, 01:10):
  
  “The auto industry has always been a cyclical one. We’re coming off seven straight years of increases since the recession. That’s really unprecedented.”
- 2017 is expected to close at about 17 million vehicles sold—not a record, but still one of the top five years historically.
Not a Catastrophe, but a Change in Expectations
- The industry isn’t “falling off a cliff,” but it’s clear a new sales record for the year is unlikely.
- Quote (Mike Colias, 01:45):
  
  “This is not sky-is-falling kind of stuff just yet... But there's no question that... there’s probably no chance [of] another record.”

Sales Breakdown: SUVs vs. Sedans

Car Type Disparity
- Sedans and small passenger cars: Suffer continued weak sales.
- SUVs and pickups: Remain strong, but even these saw unexpected dips in July, notably for GM and Chrysler.
- Toughest Impact:
  - GM saw a 15% drop, Ford 7.5%, and Chrysler an even steeper decline.
  - Detroit’s large pickups, pivotal for profit, fell unexpectedly.
  - Quote (Mike Colias, 02:20):
    
    “Truck sales for the Detroit companies... fell off steeper than expected. They were pretty flat for Fiat Chrysler. Ford still did okay, but those big pickup trucks... fell off in July and that was a little bit unexpected.”

Inventory Glut and Its Consequences

Ballooning Dealership Inventories
- Ideal inventory: 60–70 days’ supply. GM was carrying over 100 days' worth.
- GM’s rationale: They’re preparing for fall factory downtime (to retool for new models), but investors remain skeptical.
- Stock Impact: GM’s stock fell nearly 4% on inventory news.
- Quote (Mike Colias, 03:08):
  
  “GM... been running over 100 [days’ supply]. There are some reasons for that... But you wonder whether or not investors believe them… Stock today really got hammered.”
- If inventories aren’t reduced, companies may need to cut prices further (hurting profits) or reduce production.

Incentives and Consumer Opportunities

Persistent Discounts
- Despite pulling back on lease deals, automakers kept incentives high throughout July to move inventory.
- Incentives seen as high as during the post-recession years.
- Best Time for Buyers: Especially if shopping for sedans, as aggressive deals are available.
- Quote (Mike Colias, 04:45):
  
  “Right now the discounts are as good as they’ve been since the recession. But it depends on what you’re looking for… If you want a really nice sedan, this is definitely the time to buy one.”
Crossover SUVs Exempt from Deep Discounts
- High-demand models (like new crossovers and SUVs) don’t see steep price drops.
- Manufacturers are wary of triggering a price war, so incentives have plateaued.
- Quote (Mike Colias, 05:24):
  
  “If you want a really nice sedan, this is definitely the time to buy one… [Manufacturers] are looking around saying, okay guys, let’s not start a price war here. This is still a pretty good market.”

Outlook for the Rest of 2017

Incentives May Remain Elevated
- Future incentives depend on how quickly inventories decrease.
- If lots remain full, further discounting or production cuts may be needed.
- Automakers want to avoid further production cuts, hinting incentives could linger.
- Quote (Mike Colias, 06:10):
  
  “We could see those incentives stay pretty high through the rest of the year with inventory levels where they are now.”

Notable Quotes & Memorable Moments

On Cyclical Nature:
- “The auto industry has always been a cyclical one.” (01:10, Colias)
Not a Panic Situation:
- “This is not sky-is-falling kind of stuff just yet.” (01:45, Colias)
Buyer’s Advantage:
- “If you want a really nice sedan, this is definitely the time to buy one.” (05:24, Colias)
Incentive Plateau:
- “Let’s not start a price war here… Sales volumes are still pretty high. Let’s not go crazy with incentives to try to protect our market share because that’s going to hurt everyone’s profitability overall.” (05:24, Colias)

Timestamps for Major Segments

[00:38] High-level overview: July sales drop; SUVs vs. sedans
[01:10] Cyclicality, historical perspective, total sales context
[02:15] Comparison to last year; brand-specific declines
[03:08] Dealership inventory concerns; impact on GM and stock price
[04:13] Discounts/incentives; consumer implications
[06:06] Industry outlook for second half of 2017

This episode explains why July 2017 marked a notable shift for the auto industry, what it means for shoppers and automakers, and how incentives and inventory issues are shaping competitive strategies for the rest of the year.

Loading summary

Transcript19 lines

[00:01]
A
Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday SAP Netsuite operate like a local everywhere. Visit d e l.com WSJ that's d e e l.com WSJ. This is yous Money Matters from the Wall Street Journal.
[00:38]
B
Welcome to youo Money Matters. I'm Charlie Turner in New York. U.S. automaker sales fell sharply in July as companies cut back on lease deals that kept monthly payments low. General Motors led the way down with GM sales falling more than 15% as has been the story for quite a while. While SUV and pickup sales remained strong, sales of sedans and other passenger cars continued to struggle with amid low gas prices. Joining us from Detroit is Wall Street Journal reporter Mike Kalias. Mike, I thought July was supposed to be a strong selling month for car companies. What exactly is going on here?
[01:11]
C
Yeah, I think what you're seeing is just a continued sort of running out of steam on the consumer's part. To step back and put it in perspective, the auto industry has always been a cyclical one. We're coming off of seven straight years of increases since the recession. That's really unprecedented. Including the last years have been record highs of about 17.5 million cars. This year we're down from that. It's probably going to be around 17 million once the year ends.
[01:44]
B
Still not bad. Still pretty good.
[01:46]
C
Still in the top five years of all time. Just point of clarity that this is not sky is falling kind of stuff just yet. I think if you ask any auto executive, they probably in the 15.5 million range and above they would take and we're still north of that. But there's no question that if there was any question coming into this year whether or not we'd set another record, I think we've answered that one. There's probably no chance that that would happen.
[02:15]
B
How much is it believed at this point that July sales fell compared to a year ago?
[02:21]
C
We're in the 5% to 6% range. It's looking like. And the Detroit companies are far worse than that. You mentioned GM's 15% drop. Ford was about 7.5%, Chrysler was worse than that. So yeah, I think what's happened here is sedan sales have been tough for everyone. All the consumers are moving away from cars and towards crossover vehicles, SUVs. The truck sales for the Detroit companies, especially GM in the month were really surprising because they fell off steeper than expected. They were pretty flat for Fiat Chrysler. Ford still did ok, but those big pickup trucks that really fuel the profits of the Detroit companies fell off in July and that was a little bit unexpected.
[03:04]
B
Haven't inventory levels ballooned? There are a lot of unsold vehicles on dealer lots.
[03:08]
C
Yeah, it's becoming a little bit more of an issue. So GM kind of skews things though. Normally you'd want to see a 60 to 70 day supply of cars on dealership lots. GM for several months in a row now has been running over 100. There are some reasons for that. They've been saying for months now they've been telling Wall street, listen, we've got a handle on this. We're building ahead of time because in the fall we're going to take down several factories to get ready some new products that we're building. We need these dealership lots to be stocked before that happens. In advance of that, by the end of the year, you'll see our inventories fall to normal levels so far. You wonder whether or not investors believe them because GM stock today really got hammered. It was down close to 4% at one point. I think that that's a concern. Investors are sort of. I think the jury is still out on whether or not they're really going to bring those inventory levels down back to normal levels in coming months because if they don' they're going to have to add on big discounts. That hurts profitability and that could pressure the stock as well.
[04:13]
B
I'm speaking with Mike Kalias of the Wall Street Journal. He's joining us from Detroit. And you're listening to your Money Matters. Thanks for listening, everyone. Mike, you quoted J.D. power as saying manufacturers typically pull back on sales incentives after the July 4th holiday. But because of inventory levels being elevated and sales being down, it's compelled the automakers to maintain aggressive discounts throughout July. So if I'm in the market, wouldn't this be a great time to shop for a vehicle since dealers might offer more aggressive incentives to get rid of all that inventory?
[04:45]
C
Yeah, I think it would be the reason why the second half of the year those kind of discounts start to moderate and the deals aren't as good is because you get into a new model year, you go from model year 17 to 18 and those are newer cars, a lot of times newer features. So you're not going to get as good a deal. Right now the discounts are as good as they've been since the recession. But it depends on what you're looking for. You might not get a screaming deal on a new crossover SUV that a company just came out with. GMs come out with several of those. Chrysler has as well. All the Asian.
[05:22]
B
Why would they want to drop the price on that?
[05:24]
C
Right. Because those are in fairly high demand. But if you want a really nice sedan, this is definitely the time to buy one. Silver lining in terms of the health of the automakers though, is that we've seen these discounts rise to a certain level that is as high as we've seen in years. The last few months they've not gone beyond that even with volumes falling. So it seems like people are looking around, the automakers are looking around saying, okay guys, let's not start a price war here. This is still a pretty good market. Sales volumes are still pretty high. Let's not go crazy with incentives to try to protect our market share because that's going to hurt everyone's profitability overall. You didn't really always see that in the past during cyclical downturns.
[06:07]
B
What's it look like for the latter half of the year? More of the same?
[06:10]
C
Yeah, I think so. I think it looks like these incentive levels are going to moderate, but they may not if we don't see those inventories start to go down. Because that's going to be a problem. Because I think they, you know, the two things that carmakers can do if volumes are falling is one, they can put discounts on cars to get more people in showrooms. The second thing they do, which is not what they want, is to cut production. We've already seen some of that and I don't think we want, you know, I don't think the automakers want to do much more of that. So we could see those incentives stay pretty high through the rest of the year with inventory levels where they are now.
[06:48]
B
Joining us from Detroit, Wall Street Journal reporter Mike Kalias. Thanks a lot, Mike.
[06:52]
C
You bet, Charlie.
[06:53]
B
And that's yous Money Matters. I'm Charlie Turner with the Wall Street Journal.
[06:56]
A
Got an Amazon Echo or an Amazon Tap? Listen to the Wall Street Journal as part of your flash briefing. The Wall Street Journal listen ambitiously still running global payroll like a relay race deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday, SAP, NetSuite, operate like a local everywhere. Visit d eel.com WSJ that's d e-l.com WSJ.