GM blames slow pickup sales on rivals' spiffs
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DETROIT -- General Motors' November sales rose 3 percent, but an unexpected decline in pickup sales left GM with swollen truck inventories.
GM blamed an 8 percent drop in pickup sales on heavy incentives offered by Ford Motor Co., Chrysler Group and other rivals in the full-sized pickup market.
GM executives were "shocked" to see Chrysler's Ram division "at five thousand bucks a unit" in incentives, GM U.S. sales chief Alan Batey said during a conference call with reporters today. "We don't think that's sustainable."
Incentives on the Chevrolet Silverado and GMC Sierra were $500 per unit below the average for full-sized pickups, GM said. The segment's "biggest spenders" had incentives of $1,500 to $1,700 more than GM.
A Chrysler spokesman said that incentives on Ram 2012 trucks are "within a few hundred dollars" of the spiffs offered by competitors on their 2012s. Across both model years, Ram's incentives were higher because more than 90 percent of its November sales were of the outgoing 2012 model, which is being replaced with an re-engineered 2013.
2013s vs. 2012s
A major reason: GM rolled out its 2013 pickup models about 45 days earlier than last year. As a result, dealers were selling mostly the higher-priced '13 models while competitors were offering more heavily discounted '12s.
GM said 60 percent of the pickups it sold in November were 2013s vs. 35 percent for Ford and less than 10 percent for Ram.
GM sales executives noticed early in November that rivals were ramping up incentive spending but decided not to match them.
Mark Reuss, president of GM North America, said the company doesn't want to confuse customers by tweaking incentives "every time someone moves."
"We've found that adjusting incentives on a short-term basis to our competition is highly inefficient because the dealers can't get behind it fast enough to make an impact," Reuss said. "We're trying to run this on a longer-term, strategic basis."
That's a change from the past, when GM was known for tweaking incentive plans week to week to match rivals or boost sales of certain lines.
Rising stocks
The lower-than-expected truck sales sent GM's inventory of pickups up to 245,853 units, or a supply of 139 days, on Nov. 30, up from 110 days Oct. 31. GM now might exceed its year-end inventory target of 200,000-220,000 pickups, said Kurt McNeil, vice president of sales operations.
GM also will exceed its all-vehicles year-end inventory target of 660,000-670,000 units overall, McNeil said. On Nov. 30, its inventory stood at 788,194 units, or 106 days.
Some analysts questioned why GM wasn't more aggressive with its pickup discounts, given dealers' swollen lots.
"When you saw the competitors hike their incentives to clear out the 2012s, you decided not to move," Credit Suisse analyst Chris Ceraso said to GM executives during a sales conference call. "I'm wondering why you didn't make some move to keep the units going. And now you face deeper cuts in production."
'Real test' of discipline
Batey said the decision was "a real test" of whether GM would stick to its plan to "build equity in our vehicles with a very disciplined approach."
"Yeah, we definitely gave up some sales and gave up some share in the month," he said. But he noted that holding incentive spending in check helped drive up pricing. The average transaction price on GM's full-sized pickups rose more than $2,700 from a year earlier.
"If we didn't have the lowest incentive spend," he said, "and the highest ATP, we'd be concerned."
Across its lineup, GM's incentive spending totaled less than 9 percent of its average transaction price -- down nearly two percentage points from a year earlier. The average transaction price rose $750.
McNeil wouldn't say whether GM will curb pickup production. He said the company will "continue to use all levers to influence inventory," including "first and foremost adjusting production, as well as marketing activity."
GM today sent a memo to workers at its Lordstown, Ohio, plant, which makes the Chevy Cruze compact, notifying them that the factory will be idled the week of Dec. 17 to balance inventory with demand, according to a person who received the memo. That will halt production for an additional week, ahead of the traditional two-week holiday break.
Cruze sales rose 27 percent in November, to 16,807. They are up 1 percent this year.
Retail sales flat
Overall, GM sold 186,505 units, its highest November total since 2007. Sales to fleet customers rose 16 percent vs. a year earlier, while retail sales were flat.
The lackluster sales of pickups and SUVs were more than offset by strong demand for GM's cars and crossovers. Its car sales rose 19 percent; crossovers were up 9 percent; truck sales declined 11 percent. GM's mix of cars and crossovers rose to 62 percent of its portfolio from 56 percent a year earlier.
Cadillac led the way with a 30 percent increase, driven by sales of the recently launched XTS large sedan and ATS compact. Buick sales rose 22 percent on strong demand for the Verano compact and Enclave large crossover.
Chevrolet sales were flat while GMC sales rose 1 percent.
You can reach Mike Colias at mcolias@crain.com.
