General Motors Co. reported a sales decline in May despite an extra selling day and Memorial Day clearance sales, as an abrupt decline in demand for high-margin pickup trucks added to concerns about the health of the auto industry.
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The auto maker reported a 1% drop in sales to 237,364 units. Sales of the GMC Sierra pickup were down 8.2% to 16,200 units, and sales of the GMC Canyon pickup dropped 26.3% to 2,477 units.
Also on Thursday, GM said it would cancel a production shift at its Warren, Mich., transmission factory in response to weakening demand for passenger cars, such as sedans.
In other sales results from May, Fiat Chrysler Automobiles NV also reported a 1% drop in sales for the month to 193,040 units, with sales of its Jeep brand vehicles down 15%.
Meanwhile, Ford Motor Co. reported an unexpected increase in sales. The auto maker's sales rose 2.3% in May to 240,250 units, with sales of its F-Series pickup truck up 12.8%.
The Japanese auto makers reported mixed results in May. Nissan Motor Co. reported a 3% increase in sales in May to 137,471 units, driven by continued demand for crossovers and SUVs. Honda Motor Co. also reported a sales increase, with its sales up .9% in May to 148,414 vehicles.
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Toyota Motor Corp. saw its sales decline .5% to 218,248 units, a decrease driven by a 17.3% drop in its Toyota and Lexus brand cars.
The results come amid heightened focus on demand for pickup trucks, which are a primary generator of profits for Detroit and Japanese auto makers and a bellwether for economic health.
When Ford F-150s, Chevrolet Silverados and other pickups are selling well, it is a sign that consumers are able to spend more for a new vehicle and that commercial buyers -- ranging from small-business owners to municipal fleet managers -- are investing 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.
Further softness in May for the segment will heighten concern that has been growing for several months as the pace of the wider market loses steam.
Inventory of pickups is 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.
GM's cut back at the Warren, Mich., transmission plant affects less than half of the facility's roughly 600 employees. The reduction is tied to a broader job-cutting scheme that the No. 1 U.S. auto maker started rolling out earlier in 2017 at certain assembly plants.
GM and many of its revivals have recently announced or reiterated significant job and investment commitments in response to pressure from President Donald Trump related to U.S. manufacturing. In January, GM confirmed a $1 billion U.S. investment plan.
In May, overall auto sales are expected to have been relatively flat compared with the same month in 2016, but this year had an additional selling day. As a result, the closely watched seasonally-adjusted annual selling rate is expected to have tumbled to the mid-16-million unit range, or far below the 17.3-million annual pace set a year ago.
Through the first five months of 2017, auto sales have fallen slightly even as incentive spending heats up, indicating a string of two consecutive annual-sales records will be broken this year. Further production cuts are expected in coming months, a trend that will dent profits and heighten the likelihood of a prolonged sales plateau and potential pricing battle.
"Continued elevated incentives reflect the challenges of balancing record levels of inventory and are likely to remain elevated unless production is adjusted to meet consumer demand," said Deirdre Borrego, general manager of J.D. Power's automotive data and analytics.
Write to John D. Stoll at email@example.com and Adrienne Roberts at Adrienne.Roberts@wsj.com
(END) Dow Jones Newswires
June 01, 2017 10:57 ET (14:57 GMT)