For months, General Motors has been teasing us with tidbits about the new Chevrolet Silverado, which is set to come out sometime next year. This is an important model for GM, because pickups only get overhauled about once a decade.
To get ready for the new Silverado, it's built up supplies of the old Silverado, because it doesn't want dealers to get caught short between the old truck and the new one. Makes perfect sense, in theory.
In reality, the situation has become GM's version of Mickey Mouse in Fantasia. It's overflowing with pickup trucks and Chrysler and Ford are not about to let it wash them away, no matter what GM tries to do.
We told you about GM's plight back in early October. Auto analysts have been raising questions about this for months.
And, when fall began, it looked like GM was making progress on winnowing down its inventories, and said it was on track to winnowing them down to 80-85 days by the end of the year. That's still a lot, because dealers like to have about 65 days of any vehicle on hand this time of year, or a two-month supply.
But GM's November sales release shows the situation is getting worse, not better. At the end of the month, GM had 245,853 full-sized pickup trucks in its inventory. That's equal to 136 days of inventory, or enough to last it until spring. The last time we checked in, GM had 240,810 trucks in its October inventory, which was equal to 116 days, or as we said, enough for everybody living in Saskatoon.
Those 245,852 pickups are out of a total November inventory of 788,194. Put another way, that means one out of three vehicles on GM showroom lots is a pickup truck.
We asked helpful GM spokesman Jim Cain if that meant GM was giving up on that 80-85 day year-end goal. He replied, "Based on our recent results, it is fair to say that our (overall) year-end inventory target of 660,000-670,000 vehicles is in jeopardy."
Cain says GM doesn't think it's all bleak.
"Keep in mind that December will see seasonally higher sales and low production, given the holidays. As we have said before, we will continue to use all levers to influence inventory on a go-forward basis. That includes first and foremost adjusting production, as well as marketing activity."
Marketing activity is the key here. Cain says GM is spending the lowest amount of any car company on pickup truck incentives for the third month in a row, according to J.D. Power & Associates. Its deals average $500 less than the average for pickups, and GM's competitors — we're looking at you, Ford and Chrysler — are spending $1,500 to $1,700 per vehicle more than GM.
Meanwhile, GM says it's able to collect more per vehicle than it used to. Its average price per truck is up more than $2,700 compared with last year. That certainly makes the bean counters happy.
However, there are other costs that GM has to calculate. First, all those pickups represent inventory that's sitting there, gathering dust. Dealers are going to want help from GM to sell those pickups at some point. While it might not be spending the money on the pickups now, it's going to spend it eventually, either directly to customers in incentives, or indirectly, to help dealers clear out showrooms,
And there's something else: is this really how GM wants to usher in the new Silverado? The last thing any company wants is to have a backlog of the old model on the showroom lot when the new model arrives. The idea is that you taper off production, and slim down inventories, so that it's an easy transition.
The Japanese and Germans are aces at this. They generally have slimmer inventories than the Detroit companies anyway. A few months before the new model arrives, they start to sell down the old one so that there might be just a few days left of supply. How many times have we read September sales reports where Honda or Toyota justified a sales drop in a certain model because of "low inventories?"
Detroit, however, has some classic examples where the baton was dropped. Back in 1996, Ford was introducing a radically different version of the Ford Taurus (Edmunds.com called it "fishy faced"). It wanted to charge more for the new one, and it wanted the previous jelly bean shaped Taurus out of sight. So, it put on a fire sale for the old Taurus that practically had people running to showrooms to get the deals.
When the new Taurus arrived, it was practically DOA. People weren't prepared for the new looks or the higher price. They just sat on their hands until Ford rolled out incentives. In 1997, Camry passed the Taurus to become the country's best-selling car, and has pretty much kept the crown ever since.
GM doesn't want to see a repeat of that for the Silverado, and because it's a big mystery exactly when the truck will reach the market, there's still some time for it to adjust the pickup truck inventory situation. But this all begs the question: why did GM build this many trucks in the first place? Did it think there would be more demand, or that its competitors wouldn't respond? Did somebody get drowsy, like Mickey Mouse?
As Cain mentions, there are two dials that a company can adjust: incentives, and production. Okay, we understand why GM hasn't turned up the incentives dial, since it would cut into that price per vehicle figure, but why didn't it turn down the production dial a little sooner?
Now it's got to do something, or those pickups will be starring in GM's own version of the Sorcerer's Apprentice.
Photo Credit: AP