Pick an automotive issue. There is always some friction generated when a company’s internal analysis and external spin are different. Recall from auto show speeches – it seems that every new vehicle program introduced is going to be a success. PR rainmakers need to make rain when the show’s spotlight is on.
Yet, the external victory lap is not always consistent with the internal analysis of the facts. “Sales may not rise to meet the forecast” is often a Powerpoint conclusion during program reviews, right after the money has been spent. Program managers run for the exits when that final slide goes up.
Sales reporting and analysis is the latest example of spin versus reality.
If you had your own company you would want to know your sales, inventory level and cash balance daily. Good or bad news needs to be understood immediately. Many internet and brick-and-mortar businesses follow this internal daily-reporting practice globally, including auto dealers.
This daily “pulse of the market” reporting is not just confined to vehicle sales. The now-defunct Saturn division had a system that replenished a dealer’s service parts on a daily basis. Why let the customer wait for a service repair?
Now, I am not advocating that daily reporting provides insight into “trends.” It just gives internal analysts a serious measure of performance. However, monthly analysis of sales performance is in a different category, especially in the automobile business.
An auto firm captures significant insight when it compares monthly performance relative to the same time last year (So does any government agency responsible for collecting and reporting economic data).
This internal reporting gives leaders a sense of growth or decline for each product line. Nothing new here. Every month, presumably since Henry Ford rolled cars off the assembly line, manufacturers take an assessment of where their business is going.
Importantly, they turn that monthly assessment into an update of a production schedule for their assembly plants and all their suppliers.
“Reporting sales quarterly better aligns with our business, and the quality of information will make it easier to see how the business is performing,” says Kurt McNeil, General Motors sales vice president.
Quarterly sales reporting is an SEC requirement, not a good operating practice for understanding the business. Procrastination seems like an odd way to judge a company’s health. I can hear the howls inside any auto company if dealers were to proclaim a “new” quarterly reporting process. Heads would roll.
Change happens. Adapt quickly or die. Lean companies don’t wait for a full quarter to adjust – to “see how the business is performing.” Some manufacturers make adjustments faster than others. Toyota does a good job of keeping their inventory and production in balance; others wait until days’ supply reaches 120 before reacting.
Shareholders should not be alarmed. GM still will report internally on a monthly basis and provide monthly data to the government.
It appears as if they will just not report the data externally, presumably because industry analysts are drawing the wrong conclusions from the monthly data. Are analysts not correctly interpreting the “Good News” talking points generated by company insiders?
Seems like it was just a short time ago that auto writers, presumably drawing on data provided by dealers or company insiders, couldn’t wait to pre-report a new record during the monthly cycle. What changed?
Look, we can’t all be Dan Neil, award-winning automotive writer, or Alex Taylor III, senior editor-at-large at Fortune. Unfortunately, today’s automotive reporting is filled with calculated controversy and Pollyanna proclamations.
The opinion pieces are not as bad as the sanctimonious preaching on cable news stations, but are in drastic need of a tune-up. Some analysts can’t make up their own minds on how the market is truly performing, reporting that actual sales are down but SAAR is up.
Likewise, creating controversy is not guidance. Touting is best left to dingy guys hiding in dark shadows at the race track and promoting every horse in the race. Perhaps we just need better outside analysts?
Many mainstream writers (and some bloggers) provide great insight.
Perhaps we should all take a refresher on the Art of Giving Advice. As the Harvard Business Review pointed out in its 2015 advice article, “When the exchange is done well, people on both sides of the table benefit. Those who are truly open to guidance (and not just looking for validation) develop better solutions to problems than they would have on their own.”
Companies should not imagine that quarterly reporting will provide more analytical clarity and insight. It will generate more controversy, not less. Expectations will build and PR mavens will have to spin more in the interim – a mess.
Why? Because the monthly reporting cycle will continue with competitors. The monthly-cycle beast will be fed data one way or the other. Sales will be estimated from changes in production schedules, extensive dealer surveys or understanding changes in incentives.
You don’t have to be a rocket scientist to figure out that a $10,000 incentive is offered on vehicles that have inventory that is out of control. Heck, analysts may just get the monthly information from the government – or the UAW.
If the objective is to avoid criticism, forget it. If sales performance is poor, the quarterly review will be harsher. At the end of the day, it’s all about real sales growth and profit. There is no amount of monthly or quarterly spin that changes that business axiom. It’s about reality, not the interpretation of reality that increases shareholder value.
Here is a bit of advice to maintain shareholder value: Tell the sales folks to ignore the external spin on quarterly sales reporting. Remind them that they are still expected to hit their monthly sales objective, and so are their dealers. Management by pressure still has a place in the vehicle business.
Warren P. Browne, former GM executive, is an adjunct professor of economics at Lawrence Technological University and has his own consulting company.