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Why Did GM Switch from Monthly Sales Reports to Quarterly Sales Reports?

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2016 Chevrolet Trax Midnight Edition

GM is turning it’s back on monthly sales reports. But why?

Usually at the beginning of the month, we here at The News Wheel would have an article published about GM’s sales numbers from the prior month. However, the next time you see a GM sales report won’t be until July.

Moving forward, GM is publishing its sales reports on a quarterly basis, rather than on a monthly basis. While most corporations publish sales and earnings on this quarterly schedule, it is a rarity in the automotive world, where automakers publish sales reports on a monthly basis instead.

GM’s decision to move away from monthly sales reports has been somewhat controversial. Many critics accuse the automaker of publishing sales less frequently as a way to distract from declining vehicle sales.

Yet, GM argues that there are plenty of alternate reasons why it, and ultimately other automakers, should cease monthly sales reports and start utilizing quarterly reports instead.

A Look to the Past: History of Chevrolet

First and foremost, automotive companies are corporations, just like any company outside of the automotive realm. Unlike other corporations, though, automotive manufacturers are some of the only companies to release statistics on a monthly basis.

In GM’s opinion, automakers should adopt the same reporting methods that companies outside their segment use. In that way, investors will be presented with a sales and earnings format they are more familiar with.

Mary Barra at the GM 24th Annual Supplier of the Year Awards

GM is hoping that reporting sales quarterly will make it more attractive to investors

Furthermore, automakers already release financial earning reports on a quarterly basis. It is only the vehicle sales reports that are currently released at the beginning of each month.

GM argues that quarterly reports present more concrete evidence of emerging trends. Monthly sales increases or declines might just be a fluke during the month in question, but if they repeat for two additional months, there is more cause for alarm or celebration, depending on an upward or downward trend.

“Quarterly reporting makes it easier for people to spot trends because monthly sales are inherently volatile,” explains Jim Cain, a GM spokesman. “Eliminate the noise and you minimize the risk of confusion.”

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Quarterly reports might also result in investors and shareholders making reactionary financial decisions less often, thus resulting in less inconstancy for GM’s standing on Wall Street. As the automaker’s stock price has gone back and forth in recent years, more stability is certainly something that GM would be looking forward to.

Finally, GM argues that quarterly sales will convince automakers to be more honest with their sales practices. For example, it is not unheard of for manufacturers to coax dealerships into adding new models to their demo and rental fleets, thus artificially increasing sales.

As it stands, executive bonuses and incentives often depend on monthly sales goals, thus increasing the likelihood that automakers will try to artificially create more sales. GM argues that by using a quarterly sales system, the temptation to engage in these practices will be diminished.

Quarterly sales might provide a more accurate look at how certain models are performing

Not everyone is so sure that these sales practices will simply disappear with the introduction of quarterly sales reports. Critics like Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive, say that these practices will likely be employed with the same frequency as before.

“It won’t put an end to some of the creative counting,” Schuster goes on to say. “You’ll still see those shenanigans at the end of the quarter, instead of every month. It minimizes how often it happens, but it doesn’t eliminate the manipulation.”

GM will still be sending sales reports to the Federal Reserve on a monthly basis. Still, the public shouldn’t expect to see these sales figures until later this year.

Of course, now that GM, one of the largest automotive companies in the world, has made the transition from monthly sales reports to quarterly reports, it may not be a question of if other automakers follow suit, but rather when they will.

News Source: Bloomberg