DETROIT -- If U.S. automotive sales are about to plateau at a time of turmoil in markets around the globe, General Motors is ready for it.
So said GM President Dan Ammann in a speech at the Automotive News World Congress, barely an hour after the head of the nation’s largest dealership group -- AutoNation CEO Mike Jackson -- chided automakers for their inability to manage through cyclical downturns in the past.
“We all know there will be one,” Ammann said of the potential for a sales slowdown. “But there are a couple of things that are fundamentally different today” than the last financial crisis in 2008 and 2009, which sent GM and Chrysler into bankruptcy.
First, GM is raking in record profits -- $3.1 billion in pretax earnings during the third quarter -- which makes it very different from the money-losing company that limped into the last market pullback.
Also, GM has carefully built a fortress balance sheet since emerging from bankruptcy, a plan spearheaded by Ammann during his tenure as CFO from late 2011 through early 2014. It has committed to maintaining a $20 billion cash cushion so that it can withstand even a severe downturn without cutting back on the capital spending needed to keep fresh vehicles in the market.
Ammann said the industry in general -- and GM in particular -- has changed its bad habits of carrying excess capacity, which can lead to profit-sapping incentive wars when demand cools. He noted that inventory at GM’s dealerships is at its “lowest level in quite some time.” GM said it had 630,700 vehicles in its inventory at year end, a 61-day supply, down from 70 a year earlier, according to the Automotive News Data Center.
If anything, GM today is having a tough time keeping up with demand, Ammann said, and has been straining to squeeze additional production out of its existing plants rather than building plants.
“We’re leaner than we’d like to be,” he said.
In an earlier speech, Jackson said the industry “is clueless in managing plateaus,” implying that the industry’s remarkable six-year run of year-over-year sales growth is likely nearing an end.
