Big Truck Constipation, Confirmed
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.”
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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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.
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 ...