GM earnings and slow-selling cars in focus Tuesday

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General Motors (NYSE:GM) is expected to report weaker second-quarter earnings on Tuesday amid a slowdown in U.S. auto sales. Even as SUVs remain a hot segment, slow-selling passenger cars are likely to get attention as well, thanks to recent rumors that GM is considering big changes to its future lineup.

GM will be the first of Detroit’s Big Three automakers to report second-quarter results, with Ford (NYSE:F) and Fiat Chrysler (NYSE:FCAU) scheduled to post earnings on Wednesday and Thursday, respectively. In recent quarters, GM has capitalized on robust sales of its lucrative SUVs and pickup trucks while cutting less-profitable sales to rental fleets, overcoming an industry-wide sedan slump.

For the three months ended June 30, Wall Street expects GM to report adjusted earnings of $1.69 per share on revenue of $40.15 billion, down from the $1.86 per share in earnings and $42.4 billion in revenue reported a year ago.

Automakers have reported softer demand for new vehicles in the U.S., largely due to a persistent decline among passenger cars. Light trucks, including SUVs, crossovers, trucks and vans, are up 4.6% through June, according to Autodata. Sales of passenger cars have tumbled 11.4%, shrinking to 38.1% of the total market.

The rapid consumer shift from cars to crossovers has led to production cuts across the industry. GM, whose vehicle inventory hit a 10-year high of 105 days in June, recently extended a shutdown at its factory in Orion, Michigan, amid slower sales of the Chevrolet Sonic. The plant also builds the new Chevy Bolt electric vehicle.

In the coming years, GM could make more drastic cuts to its lineup, according to a Reuters report on Thursday. The report said United Auto Workers representatives are talking to GM about the impact that slowing U.S. sales could have on factories, particularly ones that focus on building small cars.

GM is said to be reviewing the status of six models that could be scrapped from the automaker’s product portfolio after 2020: the Chevrolet Volt, Chevrolet Impala, Chevrolet Sonic, Buick LaCrosse, Cadillac CT6 and Cadillac XTS. GM’s Hamtramck plant in Detroit builds four of the models in question.

GM declined to comment on future production speculation. Cadillac President Johan de Nysschen publicly denied the report, telling auto website Jalopnik that Cadillac has “absolutely no plan” to phase out the CT6.

Michelle Krebs, executive analyst at Autotrader, said it wouldn’t be a surprise if GM and its rivals are reconsidering large sedans, which now account for just 2% of U.S. auto sales. The Impala, LaCrosse and XTS, like competing full-size sedans, have lost buyers to midsize options and crossovers. Small cars like the Sonic have already been targeted with production cuts.

“SUVs and crossovers are a lot more popular than cars. We don’t see that trend ending anytime soon,” Krebs said. “Every automaker is looking at this. They are looking at their product portfolios and how much manufacturing capacity is dedicated to cars versus other products in their line.”

Shares of GM fell 0.7% to $35.82 on Monday. The stock is up 2.8% since the start of 2017, trailing the broader S&P 500’s 10.4% gain.

Ticker Security Last Change Change %
GM GENERAL MOTORS CO. 34.63 -0.21 -0.60%
F FORD MOTOR CO. 12.35 -0.17 -1.36%
FCAU n.a. n.a. n.a. n.a.