General Motors: Truck Sales Are Slipping and Inventories Are Rising

By John Rosevear Markets Fool.com

General Motors (NYSE: GM) said its U.S. sales fell 5.8% in April, as strong sales of GM's crossover SUVs were more than offset by declines in sales of sedans and -- surprisingly -- GM's full-size pickups.

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GM's decline was greater than the overall market's 4.7% year-over-year drop. But relatively speaking, GM fared better in April than did its old Detroit rivals, Ford Motor Company (NYSE: F) (down 7.2%) and Fiat Chrysler Automobiles (NYSE: FCAU) (down 7%).

GM's crossovers did well in April, but its big truck-based SUVs didn't. Sales of the super-sized (and super-profitable) Cadillac Escalade fell 18%. Image source: General Motors.

GM sales: The raw numbers

Brand Total Sales (Including Fleet) Change From April 2016 Retail Sales Change From April 2016
Chevrolet 164,367 (10.4)% 124,535 (7.5)%
GMC 47,004 (0.3)% 37,509 (4.8)%
Buick 20,735 17% 18,743 14.8%
Cadillac 12,300 9.5% 11,124 7.2%
Total GM 244,406 (5.8)% 191,911 (4.4)%

Data source: General Motors.

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A bright spot for GM: U.S. sales of the Chevrolet Camaro outpaced the Ford Mustang's in April. Image source: General Motors.

What's working (and isn't) for GM right now

Simply put, April was a good month for GM's crossover SUVs with retail buyers:

  • Chevrolet crossovers (Equinox, Traverse, and Trax) were up 27%.
  • Buicks (Encore, Envision, and Enclave) were up 48%.
  • GMCs (Acadia and Terrain) were up 20%.
  • Cadillac's XT5 was up 23% over the combined year-ago results of it and its predecessor, the SRX, at retail.

Note that all of those results were with retail buyers. Overall results were less impressive, in large part because of a planned 20% reduction in GM's sales to rental-car companies. But retail sales generate higher profits on average, so growth in retail is always welcome.

There was some other good news in the report. Cars have been a tough sell across the industry in recent months as more buyers migrate to crossovers, but some of GM's car models did well:

  • Sales of the compact Chevrolet Cruze sedan rose 51% (overall).
  • Sales of the Chevrolet Camaro sports coupe rose 17% to 8,737, enough to outpace its arch-rival, the Ford Mustang. (Ford sold 8,063 Mustangs in the U.S. in April, down 37% from a year ago.)
  • Buick LaCrosse sales were up 9.4% from a year ago.
  • The electric Chevrolet Bolt EV had its best month so far, with 1,292 sold. If InsideEV's estimates of Tesla's U.S. sales in April turn out to be accurate, the Bolt's sales outpaced both Tesla models last month.

The little electric car that could? The Chevy Bolt EV may have out-sold Tesla's Model S and Model X in the U.S. last month. Image source: General Motors.

That said, some important parts of GM's lineup didn't fare nearly as well, at retail or otherwise.

  • Sales of the Chevrolet Silverado full-size pickup fell a sobering 20% to 40,154. The Silverado was outpaced by FCA's Ram (43,321 sold last month), dropping it to third place in the truck standings for the second month in a row.
  • Sales of the Silverado's upscale sibling, the GMC Sierra, fell 15% to 17,400.
  • Sales of GM's big truck-based SUVs fell 11.5%. The group includes some of GM's most profitable products: Chevrolet Tahoe and Suburban, GMC Yukon and Yukon XL, and the Cadillac Escalade and longer-wheelbase Escalade ESV.
  • Sales of the midsize Chevrolet Malibu sedan fell 20%.

Long story short: A good result for GM's crossovers wasn't enough to overcome surprising weakness in full-size pickups and SUVs -- or that 20% drop in sales to rental-car fleets.

GM's inventories are swelling: A concern?

As of April 30, GM and its dealers had 935,758 vehicles in inventory in the U.S. -- a 100-day supply. That's quite high: Most automakers target 60 to 70 days' supply, though full-size pickup inventories often run higher.

Like their full-size siblings, GM's midsize pickups had a rough April. Sales of the GMC Canyon fell 22%. Image source: General Motors.

GM has said that it's building inventories of crossovers and pickups ahead of planned factory shutdowns (for retooling and renovations) later this year. It reiterated this week that it expects to end the year with inventory comparable to what it had at the end of 2016 (71 days' worth), but with a greater percentage of crossovers and trucks (versus cars) in the inventory mix.

It may work out fine. But it's worth noting two things:

  • Rising inventories in a slowing market raises concerns among investors because of the possibility that the surplus vehicles will have to be sold at deep discounts later on.
  • Ford's inventories are much leaner. The Blue Oval had 72 days' worth of vehicles at dealers as of April 30, or 83 days' worth if vehicles in transit were included.

The upshot: It's not a problem yet, but that "days' supply" number is something to watch closely.

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John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford and Tesla. The Motley Fool has a disclosure policy.