General Motors Co. (GM)’s truck inventory of more than 100 days of supply is acceptable in the short term and won’t prompt a surge in discounts, said Mark Reuss, president of the automaker’s North American operations.
“We’re not going to run big incentives to clear inventory,” Reuss said at the Detroit Regional Chamber’s Mackinac Policy Conference on Mackinac Island in northern Michigan. “We’ll adjust inventory on a production basis.”
GM ended May with 288,000 trucks in inventory, including a 110-day supply of large trucks, Don Johnson, GM’s vice president of U.S. sales, said on a June 1 conference call. The industry standard is about 60 days of supply. GM had about 275,000 trucks in inventory at the end of April.
Reuss declined to specify GM’s pricing or output plans.
The automaker’s deliveries in the U.S. fell 1.2 percent to 221,192 vehicles in May, Detroit-based GM said in a June 1 statement. While Johnson said GM is “not anticipating tremendous growth” in the truck segment, sales may rebound in the second half of 2011 due to seasonal factors and pent-up demand.
If truck sales don’t recover in the second half, “the risk steadily increases that GM will have to raise incentives on these vehicles in order to clear inventories,” Peter Nesvold, a Jefferies & Co. analyst, wrote in research note yesterday.
GM fell 48 cents, or 1.6 percent, to $29.12 at 4 p.m. in New York Stock Exchange composite trading, the lowest closing price since the shares’ initial public offering in November.
GM is offering rebates of as much as $4,505 as well as interest-free financing for as long as 60 months on Chevrolet Silverado and GMC Sierra pickups, according to AIS Rebates, an Ann Arbor, Michigan-based provider of incentive data. The trucks also have reduced-rate financing of as low as 0.9 percent for 72 months, according to AIS.
Ford Motor Co. (F), the second-largest U.S. automaker, may face a “pricing headwind” along with GM if inventories stay high, said Nesvold, who’s based in New York.
“GM’s problem could become Ford’s problem if a second-half recovery doesn’t emerge and GM needs to discount to flush out inventories,” he said in the note.
Gasoline prices that averaged $3.90 a gallon in May helped snap a 17-month streak of increases in F-Series truck sales last month, said George Pipas, Ford’s sales analyst.
“The full-sized pickup category has been affected by higher gas prices, and this is keeping some truck buyers on the sidelines,” Pipas said on a June 1 conference call. “We believe the softness in the truck market is temporary.”
Ford is offering cash incentives this month that can total $4,000 for F-150 trucks when buyers finance their purchase through the Ford Motor Credit Co. finance unit, according to AIS.
Ford fell 17 cents to $14.01 in New York. The shares earlier dropped to $13.81, the lowest intraday price since March 15.
Automakers cut spending on incentives for U.S. customers in May by 19 percent to an average $2,303 per vehicle, the lowest in more than half a decade, according to Autodata Corp.
Ford’s average spending on discounts and promotions declined 20 percent from a year earlier to $2,432, the Woodcliff Lake, New Jersey-based researcher said June 1. GM reduced incentives 17 percent to an estimated $3,085 per vehicle.
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