By on July 9, 2011

When we wrote about dealer lots overflowing with trucks, especially of the GM kind, there were a lot of nods, but also many flames.  Some commenters said it can’t possibly be true. Mainly because the charts were the product of financial analyst algebra that was not readily transparent to the common high school graduate.  Then, we received messages accusing us of sleeping, because other more esoteric blogs supposedly “called the GM bulls.. months ago” ago. (Or two days later.)  Can’t please them all. However, today, Automotive News [sub] confirms that “Big pickup trucks are clogging many U.S. dealer lots, causing headaches for General Motors and other automakers, and raising concerns about price wars and lower profits later in the year.”

AN confirms  that the “inventory of Chevrolet Silverado and GMC Sierra full-size trucks stood at 122 days at the end of June, according to the Automotive News Data Center.” AN says the preferred inventory number is 80 days.

According to AN, only Ford (79 days) is on target. Chrysler and Toyota sit on 93 days supply. The industry average stands at Metamusil-needy 99 days.

Jesse Toprak of TrueCar told AN:

“Clearly most manufacturers overestimated the kind of demand we were going to get for full-size trucks in the first half. Do we have high inventory levels for full-size trucks? Yes. Is it a major issue? It’s not at crisis level, but it’s above healthy levels.”

If it’s “above healthy” then GM must be the sickest of them all. Says AN: “GM raises the most concern with the high number of trucks on its dealer lots.”

Toprak came to a diplomatic conclusion:

“If demand doesn’t come back in the second half, that means fire sale come December. On the flip side, if demand does rebound, the company will be sitting pretty with lots of trucks to offer.”

Buckingham Research analyst Joseph Amaturo expects GM’s third-quarter truck production to be 65,000 lower than the second quarter, “which would suggest a loss of $520 million in profits”, assuming $8,000 per vehicle profit margin.

IHS Automotive analyst Tracy Handler says: “The concern is that it looks more like the old GM again.”

And guess who is profiting from the change in BOFortunes? You won’t believe it. Says Edmunds:

“Midsize-truck buyers must look to Japan. The midsize-truck segment has largely become a neglected stepchild of the U.S. auto market. Small beds on wheels started the personal-use truck boom decades ago, but sales have fallen precipitously in the last several years as lifestyle buyers exited. Not even rising gasoline prices have nudged significant percentages of buyers out of fullsize pickup consideration and into the smaller trucks that have grown from their former “compact” designation to what now are commonly known as midsizers. The domestic Big Three have essentially mothballed their midsize efforts to focus on more popular – and higher-profit — large pickups. The Japanese giants in the U.S. now dominate the midsize-truck business.”

 

 

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43 Comments on “Big Truck Constipation, Confirmed...”


  • avatar
    obbop

    Outfit the trucks with weapons-ready platforms in the bed and market them to third-world despots, various radical groups etc. and point out the advantages of a 20mm or whatever mounted on a Chevy vice a Toyota.

    Imagine the commercials showing a rapid-fire crew-served weapon mowing down humanity or engaging an aircraft of even being fired randomly at the general area where the “bad guys” are supposedly entrenched as the onlookers shout out their jihad-like shouts of joy and passion and the wimmenfolk ululate their joy as the opponents receive the Chevy truck-based barrage of semi- to non-aimed barrage of those missiles of freedom and justice.

    Like a rock… a “rock of the mount” distributing justice in the name of whatever deity is popular at that place and time.

    A modern-day “Rat Patrol” (old-timers recalling lame 1960s TV shows might recall that) absorbing excess Chevy truck manufacturing capacity.

    So much opportunity awaiting the truly creative marketing and sales teams.

  • avatar
    Philosophil

    It’s sounding more and more like everything old is new again…

    • 0 avatar
      OldandSlow

      Old story – supply exceeds demand.

      The Truth is Chevrolet sold 9.8% more full-size trucks this year versus 2010 – but for whatever reason, GM is building far more trucks than dealers can sell.

      Old story, part 2 – Will anyone at GM be held accountable? In other words, will GM fire whoever thought it to be a great idea to ramp up supply beyond reasonable demand?

  • avatar

    “If demand doesn’t come back in the second half…”

    This must have went to print before the June jobs report was released. Maybe they can put camper shells on the back and charge rent.

    “Not even rising gasoline prices have nudged significant percentages of buyers out of fullsize pickup consideration and into the smaller trucks”

    None of these trucks offer a diesel in the US. They are all priced within spitting distance of the full size trucks and get mileage in the teens.

    • 0 avatar
      Ralph ShpoilShport

      “Maybe they can put camper shells on the back and charge rent.”

      +1. But unfortunately obbop’s plan probably makes more economic sense.

    • 0 avatar
      PenguinBoy

      “None of these trucks offer a diesel in the US. They are all priced within spitting distance of the full size trucks and get mileage in the teens.”

      I was talking to a fellow who had a V6 Toyota Tacoma 4×4, and a Diesel Ram – he said the milage was about the same, but he could tow his trailer with the Ram. You would think there might be a North American market niche for a Diesel HiLux, perhaps with the option of a more plush interior.

      Preference for plush full size trucks may not be unique to North America – I have heard about an organization in South America that is thinking of moving to Tundras rather than HiLux diesels. With fuel prices trending up it seems like a step backwards to me. I wasn’t even aware the Tundra was sold outside of North America, I wonder if a diesel option is offered?

      If what I heard is true, it will also be interesting to see how Tundras hold up to rough use. The HiLux diesel strikes me as a 5/8 scale model F-250 SuperDuty, while a Tundra seems to me more of a lightweight “lifestyle” truck. I wonder if they offer a heavy duty version for overseas markets?

  • avatar
    stationwagon

    the real news is that there is a “midsize-truck business” for the Japanese to dominate.

    • 0 avatar
      ajla

      The Japanese giants in the U.S. now dominate the midsize-truck business.

      Unless they mean on a quality basis, this isn’t really the case.

      The Ranger is a distant #2 in the segment, the combined sales of the Colorado and Canyon get very close to that of the Frontier, and the Dakota handily outsells the Ridgeline.

      I think I’d be much more correct to say: “Toyota dominates the mid-size truck business.”

    • 0 avatar
      Bryce

      The entire world buy Japanese trucks they own the market for work trucks The US full size lifestylers are rare anywhere else NZ has Chevy trucks RHD new but i hardly see any on the road

      • 0 avatar
        NulloModo

        As I understand the new Ford Ranger and VW Amorak are both popular abroad. The fullsizers may be a North American phenomenon, but the US sales alone are more than enough to make them the most important vehicle in the lineups for automakers who do well with them in this market.

  • avatar
    Strippo

    I’m not sure what difference it makes if demand rebounds since the F-150 has become the “Coke” of trucks since the bailouts. Only cash on the hood can fight that in the short run.

    • 0 avatar
      highdesertcat

      Cash on the hood isn’t helping GM at all. What moves in the GM line in the US is the Work Truck series, mostly to Mom&Pop businesses like plumbers, carpenters, handymen, dog-catchers, security guards, etc.

      In my area, ALL GM dealerships are overstocked with Standard Cab, Ext Cab, and CrewCab versions in any number of specialty trims like the “Texas Edition”, the “Zia Edition”, as well as standard trims like LT and LTZ.

      With the specialty trims you do get a nicer interior and a specialty badge on the truck, but all of the equipment is the same. So what if it lists for $38K? It doesn’t even move at $28K. Why would someone buy a tired old 4.3 V6 GM truck when they can have a doubly-blown Ford V6?

      Why would anyone buy a tired old 5.3 V8 truck when Tundra has that magnificent all-aluminum, DOHC, 32-valve, 5.7, albeit at a much higher price, and Ford has a 6.2 F150? We don’t see $10K in incentives on the hood of a Tundra 5.7 or the F150 6.2. People buy them without discounts!

      GM continues to market to their loyal fans, but there just aren’t enough of them left to keep GM afloat. Not now. Not in the future.

      I want GM to succeed, not only because my brothers sell Buick and GMC vehicles, but because I would like GM to pay back we, the people, all that money Bush and Obama gave them. But the reality is that it is highly unlikely that we, the people, will ever see back all of the money that was bestowed upon them by ill-advised administrations.

      The Big Truck Constipation is just the tip of the ice berg. Wait until August/September to see what remains left on GM lots. And I’m betting that the government will take many of these trucks off the hands of GM, at cost, and use them as foreign aid in Iraq, Afghanistan, Mexico, Libya and any other war zone where trucks are expendables.

    • 0 avatar
      windswords

      highdesertcat,

      TWO years ago, when the new Tundra was really “new” I saw a scrollable LED sign at Keith Pierson Toyota that said “New Tundras – $6000 off MSRP!”. Don’t tell me there aren’t rebates on these trucks. The Japanese do it differently. They give the money to the dealer who then chooses whether to offer it to the customer. They don’t advertise cash on the hood to the same degree that the domestics do, but it’s still there. Almost immediately after the latest Tundra was introduced, the incentives were up to $3,000 – if the customer knew to ask. This amount was reported in an article on TTAC. If someone buys just about any Toyota without a discount then they are not very good shoppers.

  • avatar
    Ralph ShpoilShport

    Did anyone expect anything different? Didn’t I read recently that Hakerson just a got a big bonus or pay raise? For this?

  • avatar
    ciddyguy

    It’ll be interesting to see what happens come Sept when I suspect that gas prices will begin to rise again as I don’t expect this lowering of the gas prices to last much beyond the summer driving season.

    And if gas DOES rise back to the $4 a Gal level or above, then all bets are off on the sale of new full sized trucks.

    Even the small trucks like the Ford Ranger will begin to look expensive to operate when it takes over $60 to fill one up with even the more prosaic 87 octane gas and still get – at best 27mpg on a good day on the highway, if they even get that high with the newer units.

    But that said, trucks like it will become MUCH more preferable than the huge behemoths that are being pushed as the trucks to have that often get WAY less than that – all in the name of profits for the short term and less about long term survivability.

    • 0 avatar
      highdesertcat

      I just finished buying exactly $100 worth of Shell Premium gas in town which filled up my Tundra, 2 – 5 gallon gas cans and a 2 and 1/2 gallon gas can, for a total of 26.8 gallons. It is a weekly chore and depending on how much we each drive sometimes we fill up more often. I don’t see gas getting cheaper anytime soon. More expensive? Yes!

      But that is just the cost of living. People need to suck it up and deal with it: adapt and overcome. Change their spending habits to accommodate the higher cost of living. Think of all the people living on fixed incomes, too old to go back to work, whose quality of life is going down the tubes. Is this the Hope and Change we voted for?

      Them chickens have come home to roost! More bail outs, anyone?

      • 0 avatar
        ciddyguy

        Highdesertcat,

        Don’t know if it’s the change we hoped for, may still be too early to know for sure but I DO know that incomes have GOT to keep pace with the cost of living or it’ll definitely be a bad omen when people can’t afford to BUY anything and then what happens?

        I agree we have to adapt and overcome to some degree and that’s why I’m hoping to sell my aging Ranger that’s in my avatar for something smaller and infinitely more fuel efficient (and MUCH newer to boot).

      • 0 avatar
        highdesertcat

        ciddyguy, I don’t see incomes keeping up with anything these days. And it becomes more evident with each passing day that even the sales of big pickup trucks are inextricably linked with politics, and how our economy is doing.

        On this and other boards and threads it seems that the camps are divided along the lines of how well people are doing today, in relation to yesterday, last year, last decade. There are those who are doing well under the Obama administration and I include the UAW in that group because they continue to live large on the tax payer dime.

        But MOST Americans, and not just the long-term unemployed, are not doing as well with Obama as they did during Bush or Clinton. This has nothing to do with the man’s race and everything to do with his economic policies and vision for America’s future.

        The people with money, earned or inherited, were carefree spenders during Bush and Clinton. They bought everything that wasn’t tied down back then. But that well dried up when Obama took the reigns of power in America as many of them saw what Obama and the Democrats had in store for them — more taxes to spread their wealth around to the recipients of social programs and welfare. Now these people have become hoarders, sitting on their own money, and the demand for new cars and trucks is not what it was during Bush and Clinton.

        Ahh, some say they were the good old days, but even if they weren’t, there was a lot more confidence on the part of the consumers that tomorrow was going to be even better.

        With all the uncertainty that has prevailed with Obama, and GM pushing the envelope to overstock their dealers with cars and trucks just to keep the UAW justifying their jobs, even a blind man can see that Obama’s policies are not working for most of America.

        And truth be told, there still is no end in sight to this misery, since some forecasters tell us that things may even get worse in the housing and auto industry before they get better. They will only get better when the people with money, aka the job creators, will feel confident enough about America’s future to start hiring again.

        In my state we don’t have many people and little industry, so anyone who is unemployed is a drag on our state’s economy and the welfare system. But I don’t see Obama moving to bail out states that are overwhelmed by the effects of the recession, yet he was more than willing to keep failed companies like GM alive just to keep the UAW living high on the hog at tax payers expense.

        That in itself turned a lot of people against GM and their products, and the rising cost of gas, food and services only led to more unintended consequences.

        There will be a lot of unsold GM cars and trucks on dealer lots come August/September. Because of the number of new vehicles they have on their lots, my brothers and their partners are going full throttle just to move their current stock. There really is no better time to buy a GM Big Truck, but few people are willing or able to take advantage of it.

    • 0 avatar
      Luke42

      My Ranger already costs $60 to fill up….!

  • avatar
    getacargetacheck

    I like the look of the GMT900s, but from everything I’ve read they’re outclassed by Ford (and even Dodge by some measures). The bankruptcy clearly hurt GM’s development timeline. But I still contend that because Ford is focused on only its namesake brand, it will outperform GM until GM gets serious about putting a full court press with only the Chevrolet name (that will probably require another bankruptcy). Everything else is a distraction that GM can no longer afford (especially spending even one dime or one second engineering a special grill for GMC.

  • avatar
    Scorched Earth

    Listen to what the Buckingham Research dude said!

    They’re going to end GMT900 production super early and retool the plant for the next gen. Even Autoblog said the pickups could take up to a year (I doubt THAT long though). They’re just building up supply to get them through the production hiatus.

  • avatar
    Andy D

    My employer retired our 08 E-150s and replaced them with Transit Connects. For what I do, it is perfect. I just bought a project Ranger 4×4 to replace my rusted to flinders Grand Wagoneer.

  • avatar
    eggsalad

    I quit looking at full-size trucks when they quit putting clutches in all but the HD/Diesel versions.

    • 0 avatar
      highdesertcat

      That’s how I got started in full-sized trucks, with an inline 6 cylinder, and three on the tree. My first V8, automatic, was my 1988 Silverado ExtCab LB 350, which I kept along with my 2006 F150 SuperCab, until I bought my 2011 Tundra.

      Were I to design full-size trucks for GM I would do away with many of the choices that are available now. Make a drive train with three choices of either a V6, a small-block V8 and a large-block V8, coupled to a six-speed automatic, and make the differential ratios optional, depending on frame-length used.

      For the interior it comes in two trims only, W/T and Silverado. And for the warranty, make that 10-year or 100,000-miles, as long as periodic service is documented by a GM dealership.

      Not only would that simplify the choices, but it should increase profit margins. I also think that GMC should go the way of Pontiac, Saturn and Hummer. Buick should become a Shanghai GM exclusive with import privileges to the US.

      If that were to happen, GM might just make that miraculous recovery that we are all hoping for.

      • 0 avatar
        NulloModo

        It’s the high trim level trucks that really bring in the profit though. A base XL SuperCrew F-150 retails for a little over $30,000. A loaded Platinum/Lariat Limited/King Ranch/Harley-Davidson SuperCrew F-150 retails for over $50,000. It doesn’t cost Ford $20,000 for the extra equipment in that loaded truck, so the profit margin is a lot higher.

      • 0 avatar
        highdesertcat

        Nullo, I agree that there is a lot more margin in the loaded vehicles, and people with money are going to continue to buy them. But in relation to overall sales of F150 and other trucks, my guess would be that loaded trucks at $50K+ are only a small percentage of total sales in each configuration/trim category.

        Speaking from my own experience, my 2006 XLT was bought at the start of the model year, as was my 1988 Silverado, so I was willing to pay more. Same with my 2011 Tundra, which I thought was overpriced at $32K+ MSRP. But I paid it willingly because I wanted that configuration, trim and the 5.7.

        But I wouldn’t want to buy at the end of the model year when all the sales are on because you already will be behind the eight-ball since the loan value may be less than what the dealer needs to sell that vehicle for.

        Ditto with all those wonderful sales going on right now. In most cases in order to buy that pickup truck that stickers for, let’s say, $38K (plus tt&l) the dealers expect a sizable down payment or trade in order to get that transaction price down to where a lender will finance. No one is going to finance that $38K truck for the $28K where it is advertised after all the discounts and credits, when the truck is only worth $23,5 to the finance company.

        I’m certain you must see that in your own transactions as well. A salesman tries to separate a customer from as much of his money as he can. But with fewer people currently willing or able to commit to that large expenditure, it doesn’t surprise me that GM is having a difficult time moving its existing supply.

      • 0 avatar
        NulloModo

        Generally if your credit is good you can finance a new vehicle without a down payment regardless of the point it is in the model year. For customers with imperfect credit, the situation can change.

        As far as what is the smarter buy, it depends on your trade cycle and usage. If you generally keep a vehicle for 10 years and put well over 100,000 miles on it, then buy late in the model year and get the extra discounts, the extra bit of resale value that a one year newer vehicle can provide will be nearly wiped out by the time you are done with it. If you are the type that trades every three years at 30,000 – 40,000 miles, then depending on the difference in incentives between the outgoing model year and the brand new one, sometimes the extra resale value of the newer model will work in your favor.

  • avatar
    HoldenSSVSE

    So what have we learned?

    When gasoline goes to $4 a gallon, trucks don’t sell; unless you happen to be selling a brand new platform with brand new engines and a multi-million dollar marketing campaign behind it.

    When trucks don’t sell you better have something else that customers want.

    GM, unlike in 2005, have products that customers want that aren’t trucks, and they don’t sell them at a loss and hope to make up the profit in volume (that last part was a joke). They are now selling more cars than trucks.

    Toyota has always sold more cars than trucks – but limited supply due to problems out of their control have caused a SHORT TERM problem that will solve itself in a couple of months.

    Chrysler, big problem. Big, big, problem. They still aren’t building cars in any volume that people really want.

    So the headline is, trucks don’t sell when gasoline is $4 a gallon; unless they are a new platform with new engines and a big ad campaign behind them.

  • avatar
    Zackman

    I wish I needed a truck and could afford to feed one, I’d gladly adopt a cute Chevy or GMC red, standard cab, short bed immediately!

    obbop’s right – “Rat Patrol” was a real lame TV show. “Combat!” was the best!

    • 0 avatar
      Dukeboy01

      My thoughts exactly. I wish I was going to be in the market for a new truck this Fall. There will be deals out the yin- yang at the GM dealers. I wonder if any of them will do the “buy one, get one free” deal I saw at a Dodge dealer at the end of 2008. If you bought a fully loaded 4WD King Cab Ram at sticker, they would give you a 6- cylinder 2WD Ram Work truck for “free.”

      • 0 avatar
        GarbageMotorsCo.

        I;ve heard deals on the radio where I am for deals where someone buys a Silverado, they get a free Aveo.

        Probably have to buy the most decked out truck on the lot and the Aveo is probably the most basic model with nothing, including A/C. Probably amounts to the same 8 or 9 thousand they throw on the hood to move them.

  • avatar
    DrSandman

    Not to get all Colbert on you, but ZH beat you by at least a month, and I didn’t feel like looking any further back:

    http://www.zerohedge.com/article/gm-channel-stuffing-hits-new-record

  • avatar
    Steven Lang

    The problem isn’t with demand.

    http://news.pickuptrucks.com/2011/07/june-2011-top-10-pickup-truck-sales.html

    The problem is overproduction… which may not be much of a problem if the model changeover for their full-sized trucks takes several months.

    Compared to the business GM now has in overseas markets, the ‘sales’ numbers for full-sized pickups in North America for the next couple of quarters will barely be a blip.

    What is worrisome? Opel is probably the biggest one of all.

    However I would say that the long-term viability of Cadillac is the greatest issue right now for GMNA. The STS and DTS are no more. CTS and SRX will be lucky to plateau during the next few years without very generous lease packages. The Escalade is no longer perceived as the ‘gold standard’ large SUV and as for the upcoming XTS and ATS models… GM is already trying too hard to make Cadillac a ‘European’ competitor.

    I wish them the best. But to offer the ninth version of a European sedan in today’s market with typical frumpy Cadillac styling is a very tall order.

    • 0 avatar
      Pch101

      The problem is overproduction

      There may also be a product and/or branding issue.

      For many years, the F-150 has outsold the Silverado, but the gap today between them is larger than in the past:

      January – June 2011: F-150 led by 81,294 units
      January – December 2008: F-150 led by 50,448 units
      January – December 2007: F-150 led by 72,332 units

      The YTD gap for the last six months is larger than was the gap for each of the 12 months of 2008 and 2007. I don’t have all the figures in front of me, but it would appear from that alone that the distribution of market share is shifting, and it’s going against GM.

  • avatar
    joe_thousandaire

    There is no “mid-size truck business” and won’t be until there is a significant advantage in fuel economy, which there simply isn’t Japanese or not. There likely never will be either. If you’re a consumer why give up all that extra capability for a couple mpg’s at most? If you’re a manufacturer why run two product lines that essentially compete against each other when you can just tweak your full-size offering to get a little better mileage?

    As for GM’s oversupply it sounds to me like they were victims of the double-dip recession we’re head towards. Like probably were listening to some of the more rose-colored economic forecaster that expected things to be ticking back up by now, particularly in the housing sector. You wanna talk about oversupply? look at the real-estate market. New housing construction is royally F-ed for probably the next twenty years, pickup sales will suffer accordingly.

  • avatar
    ronin

    Makes perfect sense on the part of GM ownership.

    Win your bet, you have a lot of on-hand big margin trucks to sell.

    Lose your bet, you got the American public covering your losses.

    All the while, your members keep on truckin’ at the plant.

  • avatar
    Brian P

    There have been some suggestions in the above posts that GM might be overproducing in order to bridge a plant shutdown and retooling.

    But … a replacement for the GMT900 is at least a couple of years away. Maybe more. You don’t overproduce now to bridge a production gap a couple of years in advance!

    The GMT900 platform is not bad for the truck’s mission. Sure, it doesn’t have whiz-bang weight reduction and aerodynamics features that the environmentalists tout and the actual people who buy these trucks shudder at the thought of. That stuff is years down the road for pickup-truck applications and maybe even longer for consumer acceptance. And yes, it’s bigger than what most buyers actually need. But that’s what the Colorado is for.

    GM is behind in powertrains … 4.3 pushrod V6 base engine, 4-speed auto base transmission, and you can’t get the V6 in anything but contractor-special models, and that engine is hardly a fuel-sipper relative to the 5.3 displacement-on-demand V8 anyway … but that V8 is no Ecoboost. Right now, for every powertrain combination that GM has in the GMT900, with the possible exception of the Duramax, Ford has one that’s at least equal, if not at least perceived as being better …


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