A pileup of pickups
GM starts December with swollen inventories, sliding market share. Will a barrage of spiffs help?
General Motors entered December with bloated inventories reminiscent of its prebankruptcy days-and its lowest market share in 90 years.
GM will try to fix both problems in a hurry.
Dealers say the company has begun rolling out bigger discounts on many models, including the redesigned Chevrolet Malibu sedan and GM's full-sized pickups. GM had 243,691 pickups -- a 138-day supply -- on hand at the end of November.
GM purposely built up stocks this year in preparation for 29 total weeks that its truck plants would be down for retooling. But last week, GM acknowledged that it's likely to end the year above its target of about an 85-day supply. About 40 percent of its current full-sized pickup inventory is 2012 models.
"The incentives that changed this month are crazy. Almost everything went up," said Jill Green, owner of Green Chevrolet in East Moline, Ill. "If anyone was going to buy a truck, I can't imagine they're going to get it any cheaper than they are this month."
On Friday, GM launched a program that gives dealers the option to add as much as $2,000 in customer cash on 2012 and 2013 Chevrolet Silverados and GMC Sierras. That's atop the $1,000 in bonus cash GM already was offering on the trucks. The amount of money dealers will get to play with is based on the number of pickups on their lots. GM also is sweetening lease deals on the Chevrolet Malibu, Cruze and Traverse.
Some dealers plan to deploy the fresh incentives to put some eye-popping numbers in their ads. Green said her store is planning to advertise Silverado pickups at up to $11,000 off sticker price this month, and Green Buick-GMC, across the Mississippi River in Davenport, Iowa, expects to offer $10,000 discounts on some GMC Sierras.
GM is trying to sell down its inventory of 2012 and 2013 pickups as much as possible before introducing redesigned 2014 models by next summer.
"I'm overloaded" with pickups, said Carroll Smith, owner of Monument Chevrolet in Pasadena, Texas. "I've got them everywhere."
Bonus cash added
Smith said he was likely to take the rare step of not taking any pickups from GM on his upcoming monthly vehicle order. He thinks it will take bigger discounts to move the pickups clogging his lot.
"They've got a tired truck and some really aggressive competition," said Smith, who expects to sell about 1,600 new Chevys for the year. "They're also going to have to get really aggressive to sell these trucks."
Last week Edmunds.com said GM added $500 to $1,000 in bonus cash to the incentives available on most Chevrolet models.
GM also began offering 0 percent financing on the 2013 Sierra and Silverado 1500.
"We said we would be competitive, so it stands to reason that we would take action," GM spokesman Jim Cain wrote in an e-mail. Given strong average transaction prices, he wrote, "We have room to maneuver."
With industry sales in December typically about 20 percent more than November and with holiday downtime at many plants, "We don't have to overdo it on incentives to manage our stocks, especially with a growing economy," Cain said.
GM blamed high incentives offered by rivals Ford Motor Co. and Chrysler Group in November for a 9 percent decline in sales of its own pickups from November 2011. Overall, GM's sales rose 3 percent, but the industry was up 15 percent.
That pushed GM's November share down to 16.3 percent, apparently its lowest level since the early 1920s, when Alfred P. Sloan was named president.
GM also is in danger of finishing 2012 with less than 18 percent market share for the first time since the company's early years. Through November, GM's share was 17.9 percent, down from 19.7 percent in 2011.
'December is really critical'
Based on TrueCar.com's 2012 U.S. sales forecast of 14.5 million units, automakers are expected to sell 1.4 million vehicles in December. If so, GM would need to sell 260,000 vehicles -- the most since September 2008 -- to reach 18 percent share for the year.
"I don't necessarily see this as an alarming situation as long as this is a temporary drop in sales and a temporary pileup of inventories," said Jesse Toprak, TrueCar's vice president of industry trends and insights. "Because January and February are typically low sales months, December is really critical for GM in terms of getting rid of excess inventory."
Although analysts said GM's November results were among the most disappointing, other major automakers lagged behind the industry's overall growth rate. Five of the top seven manufacturers -- the others were Ford, Chrysler, Nissan and Hyundai -- lost share.
Honda's share rose 1.8 percentage points, and Toyota, Volkswagen, BMW and Subaru were up as well. They helped the industry reach a seasonally adjusted annualized selling rate of 15.6 million, the highest since January 2008.
Toprak noted that GM's recent market share losses have not hurt profits; in fact, the company is making more money now than it used to with much higher sales.
Besides tweaking incentives, some of which is being done regionally to avoid cutting margins more than necessary, GM is cutting production of models with too much inventory. Last week, GM told workers in Lordstown, Ohio, where the Cruze compact car is produced, that their plant's holiday shutdown would be three weeks instead of the usual two.
As of late last week, 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 whether there has been any production pullback there.
Nelson Neal, general manager of Superior Chevrolet in Decatur, Ga., said the biggest problem hurting his sales is an inability to get many customers approved for financing.
"To sell 100 cars I have to write 400 deals," he said.
Neal said GM Financial and Ally Financial, GM's former lending arm still widely used by many dealers, have become "a little bit more flexible" this month. "It seems like here in December we've gotten off to a better start," he said.
Mike Colias contributed to this report
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