GM Has 240,810 Trucks On Dealer Lots While The Truck Market Tumbles

This is supposed to be an era when car companies don't build vehicles unless they have customers to buy them. You don't tie up money in inventory that's just going to sit there, gathering dust. To make the most money, you want one fewer vehicle available than you have buyers for.

So, how did General Motors build so many pickup trucks? It's been one of the stories people in the industry are talking about, much like the collapse of the Chicago White Sox. (Sorry, we couldn't resist.)

In September, GM had 116 days worth of pickups on hand at its dealerships — or 240,810 vehicles, essentially one for every person living in Saskatoon. That's a little better than August, when it had 122 days worth of pickups. But it's basically double what dealers generally like to have on hand, and industry analysts have asked a lot of questions about it.

GM knows it's a problem, and for the last three months, it's spent time on its sales call with analysts and reporters explaining the issue, since all that sheet metal sitting on showroom lots is pretty obvious. Always helpful GM spokesman Jim Cain shared its explanations.

Last month, GM said,

"September usually marks an acceleration of the seasonal factors that favor higher truck sales this time of year, and we're also very encouraged by the continued signs of a housing recovery and the overall resilience of the U.S. economy.

These are among the reasons why we're going to stay the course with the strategy we have been following now for more than a year, which is to compensate for launch-related down time by carrying higher than normal truck inventories."

Translated: GM read the improvement in housing as a sign that contractors and other home-building related people would buy pickup trucks. And, because the plants that build Silverado (Arlington, Texas and Fort Wayne, Indiana) are going down for the model changeover, it churned out more trucks than it usually would.

That makes some sense: you figure sales will be going up, and since you won't have the trucks, let's just make them in advance.

But, here's another issue. GM's fleet sales pretty much fell apart in September, and pickups are a big fleet vehicle. Fleet sales were down 55 percent last month, when GM says retail sales (to regular folks) were "close to flat" compared with 2011.

Here's what GM says about that.

"...We began the new model year for Silverado and Sierra about 45 days earlier than last year, which prompted many fleet customers to pull ahead their purchases.

That explains the 55 percent year over year decline in fleet sales in the segment. Year to date, however, fleet sales of pickups are up more than 3 percent."

And something else: the deals aren't there. You've got to figure that when a pickup truck buyer drives into a showroom and sees all those trucks sitting around, it's time to bargain.

Nope. GM says the price it's getting per truck is $2,300 higher than a year ago, and it has the lowest truck incentives of any company in the industry, according to J.D. Power. It points out that its inventories dropped in August. And it says it's on target to reach its goal of 80-85 days worth of pickups by the end of the year.

That's fine, but 80-85 days of a lame duck truck in January is still going to be a lot of pickups covered in snow. Of course, it's a lot fewer trucks than will be covered in autumn leaves, but GM is gambling here. We don't know when the new Silverado is coming, even though GM keeps teasing it.

And the long this backlog goes on, the more difficult it will be when the new Silverado reaches showrooms. We also don't know what the new Silverado will cost, and that brings up another issue for GM: if it tries to significantly raise the price, buyers might just want an older truck.

We remember a similar situation when the Ford Taurus was restyled back in 1997. Remember when Ford changed the looks of the jelly bean car, and bumped up the price? Buyers balked, and Ford lost the best-selling car crown to Toyota. It never got it back.

GM says it isn't worried. "Going forward, we're confident that we can continue to deliver a strong, disciplined bottom line result and strong sales in the months ahead."

But sometimes, a little panic is a good thing — for inventories, and for consumers who probably could use some discounts given what they've been through over the past few years.

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