GM juices incentives amid pickup glut, sweetens some car leases
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GM said it had a 139-day supply of full-sized pickups such as the Chevy Silverado on Nov. 30 -- its highest level of the year. |
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DETROIT -- General Motors today is rolling out bigger discounts on full-sized pickups and other vehicles in an effort to slash bloated inventories, which are at their highest levels since before GM’s June 2009 bankruptcy.
A GM program that starts today and runs through Jan. 2 will allow dealers to add as much as $2,000 in customer cash to 2012 and 2013 Chevrolet Silverados and GMC Sierras, according to a memo sent to dealers.
The fresh cash is in addition to $1,000 in bonus cash that GM already had been offering on the pickups, according to AIS Rebates, an Ann Arbor, Mich., company that helps dealers manage incentives.
GM also is sweetening lease deals on the Chevrolet Malibu, Cruze and Traverse. Enhanced down payment assistance on 24- or 27-month leases ranges from $1,450 on the 2013 Cruze to $2,420 on the 2013 Malibu Eco, the dealer memo says.
A GM spokesman wouldn’t discuss details of GM’s incentives but said the company will do what is necessary to "level the playing field" with rivals’ offers.
106-day inventory
The move comes as GM is under pressure to pare its inventory, which stood at 788,194 units, or a 106-day supply, as of Nov. 30, according to GM. That’s the highest level since 111 days in April 2009, according to the Automotive News Data Center.
On Monday, GM said it won’t meet its revised year-end inventory target of 670,000 units. Just last month, GM boosted its target to that level, from 650,000 units.
A glut of Silverados and Sierras is the biggest problem. GM said it had a 139-day supply of the full-sized pickups on Nov. 30, its highest level of the year. GM is at risk of exceeding the high end of its year-end target of 220,000 pickups, or an 85-day supply.
For most of the year, GM had urged dealers to stock up on pickups ahead of factory shutdowns for a changeover to a redesigned 2014 Silverado and Sierra, due out by summer.
Denting profits
High inventories can dent GM’s profits by forcing the automaker to spend money on incentives or to cut production. For most of the year, GM sales executives had assured Wall Street analysts that they were on track to hit the year-end inventory target.
But soft pickup sales in November left GM with more stocks than the company had expected. GM officials said their pickup sales suffered when the company decided not to respond with bigger discounts last month even after Ford, Ram and other pickup rivals rolled out more attractive deals. (For details, click here.)
During a Monday conference call to discuss the results, GM officials acknowledged that production cuts and other moves were on the table to reduce the inventory.
As of Thursday, GM had not changed the production schedule at its pickup plants in Fort Wayne, Ind., and Flint, Mich., union sources said. GM also makes pickups at its plant in Silao, Mexico. It’s unclear if production has been reduced there.
Dealer discretion
The incentive being rolled out today on all ’12 and ’13 Silverados and Sierras gives dealers discretion on how to spend the extra cash.
GM will award dealers “instant value certificates” worth $250 apiece. Dealers will receive two certificates for every five pickups they had on their lots on Monday. They can apply up to eight of the certificates, or $2,000 total, on any given pickup deal.
For example, a dealer with 100 pickups in his inventory will get 40 of the $250 certificates. That gives him an extra $10,000 to lubricate deals. The dealer could use as little as $250 per pickup sale or as much as $2,000.
Many dealers say they’ve been waiting for GM to get more aggressive with incentives on the pickups, especially because the Silverado and Sierra are the oldest ones on the market.
Clear the lots
A Chevy dealer in the Southeast who didn’t want his name used said that the extra cash should help dealers clear their lots.
“I’ll tell my guys that we’ve now got another $500 or $1,000 to play with, so let’s call back every customer who came through here in November looking at a truck,” the dealer said.
"The problem is, a bunch of them could be driving Fords or Rams already."
You can reach Mike Colias at mcolias@crain.com.
