By John D. Stoll and Adrienne Roberts
General Motors Co. is limping into the highly-anticipated summer
selling season, getting passed by Ford Motor Co. as the market's
top seller in May and laying groundwork for more job cuts at its
American factories.
GM, among the world's most profitable auto makers, has been
scrambling to adjust production as the U.S. market plateaus. The
adjustment is part of a discipline installed by chief executive
Mary Barra after decades of stocking dealer lots with more cars and
trucks than customer demand warranted.
GM sales are off 1% through five months compared with the same
period in 2016 -- it has disclosed plans to lay off more than 4,000
workers since January.
Once known for flooding rental-car agencies with its cars and
slapping generous discounts on even its most popular models, GM has
retreated from profit-sapping fleet sales and shown restraint in
incentive spending.
The strategy, however, comes with a price for GM. Market share
has stagnated near historically-low levels, and the one-time global
powerhouse risks eventually losing its crown as the top American
auto maker.
Around noon on Thursday, GM shares were up about 2%, trading at
$34.57 as investors were cheered by broader stability in the U.S.
market. GM shares aren't trading considerably higher than the
company $33 initial public offering price set in 2010, raising
pressure on Ms. Barra following the abrupt firing of former Ford
Chief Executive Mark Fields in May.
Mr. Fields struggled to compose a strategy for combating an
onslaught of tech companies, including Alphabet Inc. and Tesla
Inc., looking to displace Detroit companies as industry leaders.
While Ms. Barra has made a series of high-dollar investments and
product introductions as part of GM's response to Silicon Valley
and enjoys backing from the company's board, she has also pulled GM
out of several markets to ensure profit growth as the U.S. car
market cools.
Broader demand for cars and trucks is expected to have been flat
in May despite one extra selling day and a spate of Memorial Day
deals.
Ford reported an unexpectedly-strong performance due largely to
a steep increase in sales to fleet buyers, while Toyota Motor Co.
and Fiat Chrysler Automobiles NV reported modest declines.
Honda Motor Co. and Nissan Motor Co. also reported sales
increases.
GM has been hit by a two difficult forces. It had to pull back
on production amid sharp decline in demand for the Chevrolet Malibu
bread-and-butter sedan, the Cadillac CTS luxury car, and other
passenger cars. At the same time, pickup sales -- the backbone of
GM's high-margin truck business -- are slumping through May even as
Ford's F-Series pickups and Chrysler's Ram pickups thrive.
GM's latest round of cuts are modest in number, but take place
in a city that is central to one of the Michigan counties that
played an outsize role in the 2016 election. GM's Warren, Mich.,
transmission plant will cut about 150 jobs, affecting temporary and
unionized workers living in Macomb County communities where
President Donald Trump's America First approach played well.
A spokesman noted GM's cuts in Warren, scheduled for late June,
affect less than half the workforce at the factory, and are part of
a broader plan to trim sedan capacity amid a continuing decline in
the popularity of small cars and sedans. A sustained run of cheap
prices at gasoline pumps and steady job growth have boosted the
appeal of sport-utility vehicles, including a stable of models GM
is in the process of updating.
Traditionally the top U.S. auto maker in terms of sales, GM has
struggled to keep up with rivals in the pickup truck department.
Sales of Chevy's Silverado and Colorado pickups, and sibling
versions of the trucks sold by GMC, have slipped 5.6% in 2016.
Ford's best-selling F-Series lineup, meanwhile, is up 8.5% and
Ram trucks increased 8% over the same period.
GM's weakness in the sector highlights a big concern for
analysts. Pickup trucks are a primary generator of profits for auto
makers and a bellwether for economic health.
Detroit's grip on this market has proven impenetrable: The three
domestic companies own most of the segment's market share even
after Japanese competitors repeatedly attempted to edge in with
models like the Nissan Titan or Honda Ridgeline.
However, when any one of the domestic pickups struggle, it
raises questions about willingness of consumers to spend more for a
new vehicle and the appetite of commercial buyers -- ranging from
small-business owners to municipal fleet managers -- to invest in
new equipment in response to economic optimism.
Pickup trucks are loaded with gear and routinely sell with
sticker prices in excess of $40,000, or considerably more than the
average vehicle sold in the U.S. Sales of light-duty pickup trucks
have soared in recent years amid declining gasoline prices and job
growth, now representing 16% of light-vehicle sales, according to
Autodata Corp.
However, the segment fell in April, the first decline for
pickups in 11 months. Unlike a prior decline that came as auto
sales were tracking at a record pace and inventories remained
relatively tight, pickup-truck softness comes amid a slowdown in
the broader market and a sharp increase in unsold stock on dealer
lots.
Inventory of pickups has particularly acute, touching 97 days'
supply as of the beginning of May, or a 12% increase in actual
vehicles on dealer lots compared with the prior year, according to
WardsAuto.com. That number is far above the industry norm for
inventory and has helped fuel a price war that is emerging in the
U.S. market.
Transaction prices are holding steady above $31,000,
representing a historically high mark, according to JD Power
estimates. But incentive spending touched a new May record last
month, exceeding $3,650.
Write to John D. Stoll at john.stoll@wsj.com and Adrienne
Roberts at Adrienne.Roberts@wsj.com
(END) Dow Jones Newswires
June 01, 2017 12:27 ET (16:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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