Skip to comments.Are Truck Buyers Avoiding GM Because of Bailout?
Posted on 10/07/2013 9:07:10 AM PDT by jazusamo
Chevy Silverado: "Strong" Commercial | Chevrolet 1:03 minute
One of the most disappointing aspects of last week's sales results from General Motors was the underperformance of the much-hyped new truck offerings from the company. While the industry-leading Ford F-Series saw sales increase about 10 percent to around 60,500 vehicles for the month, GM's combined sales for its competing Chevy Silverado and GMC Sierra fell approximately 8 percent to about 46,000 units.
GM's Obama-appointed management's performance in trying to explain the declining sales was as lame as the sales results. Amongst the excuses for disappointing truck sales, GM did not include the possibility that a hangover from the auto bailout is contributing to the dip and to many consumers GM still stands for "Government Motors."
Demographically, truck buyers are older, less urban and more politically conservative than other consumers, just the kind of people who are responsible for all the internet postings along the lines of, "I'll never buy another Chevy..." In fact, GM's latest "Strong" ad is clearly calculated to appeal to this demographic. The targeted audience did not respond favorably, as evidenced by the sales figures. GM's spokespeople tripped over themselves trying to explain why.
GM tried to get ahead off what could be viewed as a problem on Wall Street with truck sales, which is considered the most profitable segment of the auto industry. Management went the easy route by resorting to the old Chevy Volt standby; that darned supply just can't keep up with all this demand! Before the sales figures were even reported, the Detroit News gave excuses for the impending underperformance of GM's truck division with an article entitled, " Demand for Most Popular GM Trucks Reportedly Outstripping Supply."
The piece quotes a GM spokesman who offered this hazy harbinger of the bad news to come:
Dealers always want more of the "hot new truck," said Terry Rhadigan, a GM spokesman. "It's a temporary thing." A dealer ordering 10 of the 5.3-liter pickups is getting eight of them, he said. "It's almost an oxymoron to call it a constraint at 80 percent."
It would also appear to be an oxymoron to say that we have an honest asssesment from a credible GM source. The initial convoluted explanation pointed to "a supplier's ability to produce certain drivetrain parts" for the 5.3 liter V8 motor used in some of GM's trucks. GM sources "declined to identify the supplier." As with the Chevy Volt supply constraint excuse , this one doesn't hold water.
GM backpedaled on its alibi, as mentioned in USA Today . This piece blows holes in the supply constraint theory by quoting, "The V-8 shortage 'is nothing that is affecting sales right now,' says Don Johnson, Chevrolet sales head." I'm glad we got to the bottom of that!
So just what is behind the disconcerting sales drop for GM trucks? Maybe Bloomberg Businessweek can come up with a better one from GM's media-manipulating arsenal. Here's a clip from the Businessweek article addressing the issue:
These models are brand-new-ostensibly the cutting edge of truck technology-and customers still aren't clamoring to buy them. Ford, meanwhile, sold 10 percent more of its F-Series trucks in September. GM is in big trouble if people are kicking its trucks' tires and deciding to go with slightly more dated models made by other companies.
That's not the case, though-at least that's what GM executives were saying Tuesday. Some buyers are choosing competing trucks, but only because the company is torqueing up its profit margins, they said. GM's average transaction price per truck was up about $3,000 from a year earlier and $800 since August.
"No one was close to us from an incentive reduction standpoint and a [price] increase standpoint," says Kurt McNeil, vice president of U.S. sales. "We definitely took a different tack."
That explains it! GM is just making so much darn more money than competitors when it comes to selling trucks! How credible is a company that would cut $5000 from the price of cars like the money-losing Chevy Volt but says that it will not sacrifice profitability for volume on the most important segment of its sales? No need to worry, though. The pricing strategy for GM trucks apparently only lasted the day as new incentives have been offered.
Trucktrend.com reported on the new incentives but was sure to add to their title that GM "Claims Incentives Part of Sales Plan, Not in Response to Competitors." Not in response to competitors? Shouldn't part of a sales plan be to respond to competitors?
GM is also ramping up discounts to its employees, retirees and friends and family of employees. From Automotive News, "GM also permanently expanded the program to include aunts, uncles, nieces and nephews in addition to spouses, parents, children and siblings. Previously, GM offered discounts to extended family only occasionally, and on a month-to-month basis." This move reeks of desperation as GM is pulling out all the stops to revive sales momentum.
My guess is that the employee pricing program does not show up in incentive spending, so GM can deceptively brag about how incentive spending is being held in check while it discounts its vehicles through other means. Perhaps they will also revive the dealership " stair-step" program to prop up sales without having to divulge how much money is being discounted .
GM will now have to get truck sales back on track, despite the cost to profitability, or face harsh criticism from even those analysts who continue to be lenient on the company's shortcomings. No excuse for poor truck sales will continue to be accepted. If supply for V8s was limited, why did they advertise the heck out of trucks that were supposedly unavailable? Does anyone actually believe that Ford is selling trucks at a loss while GM is making so much more on each unit sold?
The more likely, simple truth might be a little more unnerving for shareholders of GM. That is that competitors can afford to make vehicles that are equal or superior to GM at prices that are lower. Like the government that bailed them out and appointed the management, this is a company that still is not run like an efficient free-market corporation with a goal of profitability over appearance. As GM utilizes a political-campaign style playbook to cover up any perception of weakness with excuses, blame and smoke and mirrors, there may be yet another unspoken reason for lagging truck sales. Many consumers have not forgotten the auto bailout.
Mark Modica is an NLPC Associate Fellow.
It would appear so.
I won’t buy another GM product.
Hell yeah. So are the SUV buyers and muscle car buyers.
Are Truck Buyers Avoiding GM Because of Bailout?You betcha.
I prefer to explain that Americans are Rewarding Ford for cleaning up their situation as opposed to GM going to the government to have the taxpayers pay to fix GM’s problems.
Yup...just bought a new truck...F150...
Though, wasn’t happy to see Obambi visiting a Ford plant recently...
There will never be a GM product in my family.
“Many FReepers here have said they’d never buy another GM product, looks like we’re not alone. “
I know two staunch conservatives who bought GM. They were actually embarrassed. Both said, essentially, “You know, they practically gave it to me.” One of them got $10,500 off on a Volt. The other got a new Impala.
According to one of my car magazines if they charged the full cost of a volt, by amortizing costs as the do on all the other models, it would be $50,000 on top of the $40,000 price tag.
Me, I’d rather die than buy a GM product.
The 2014 Silverado should be a home run for GM. Most accounts praise it as a great improvement.
If it isn’t a hot seller, the reason will not be because it’s a bad pickup truck, but something else...
Well said, I agree.
One of my buddies has been hard core Chevy his whole life. There is a new Ford truck in his drive and he tells everyone why.
I bought a Ford.
I would have thought bailing out an auto manufacturing company that had real hardship, actually what was bailed out was the UNION, United Auto Workers, that’s where my sore spot started.
That's not good at all. It's like a mob guy telling a store owner he'd hate to see something happen to you. I can see this as intimidation via his his union thugs.
People around rural Vermont have a lot of four-wheel-drive pickups. Mostly what I see is either Toyota or Ford. And that was BEFORE GM became Government Motors. When I think of GM, I think of careless union workmanship and know-nothing bosses.
In short, bailout or not - who wants to buy a POS?
Yes. No GM or Chrysler ever.
Not only won’t I never buy another GM product, I won’t even rent one when I go on trips.
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