GM Plans 10-Weeks of Pickup Downtime as Inventories Rise
General Motors Co. (GM), which saw pickup inventories rise 24 percent last month, will take out 10 weeks of truck production as it prepares to introduce a redesigned Chevrolet Silverado and GMC Sierra in the second quarter.
After finishing 2012 with a pickup inventory almost in line with targets, GM yesterday reported that the number of trucks it has on hand rose to a 117-day supply at the end of January from 80 a month earlier. The 10 down weeks are a total for GM’s three pickup plants to allow for the changeover, Jim Cain, a company spokesman, said yesterday in a telephone interview.
High inventory levels have tested Detroit-based GM’s resolve not to revert to expensive old habits of heavily discounting vehicles to boost sales, which can hurt brand and resale values. The company has to balance having enough of the older version of the trucks to sell to customers while not having so many that it hurts the rollout of the new product.
“We feel very good about where we are, going into an improving industry, a segment that has opportunity,” Kurt McNeil, GM vice president of U.S. sales operations, said yesterday during a conference call.
The automaker had a full-size pickup inventory of 234,342 at the end of last month, according to a statement. That’s 45,774 more trucks than a year earlier and up 5.7 percent from 221,649 at the end of December. The company’s 2012 target was to end the year with 200,000 to 220,000 pickups in inventory, giving it 80 to 85 days’ supply on a selling-day adjusted basis.
The inventory increase came as Silverado sales last month rose 32 percent to 35,445 and Sierra deliveries increased 35 percent to 12,846 from a year earlier, GM said.
The company’s monthly pickup inventory report “has become a stock-moving event for GM,” Rod Lache, an analyst with Deutsche Bank who recommends buying the shares, said in a Jan. 31 note to investors. He expected the inventory to increase by fewer than 5,000 vehicles.
GM’s total U.S. sales in January climbed 16 percent, exceeding the 13 percent average of 11 analysts’ estimates. GM rose 0.3 percent to $28.17 at the close yesterday in New York.
The automaker also announced yesterday that it would offer free standard maintenance for two years or 24,000 miles on 2013 Sierra 1500 pickups purchased in February.
As GM transitions into building the new versions of the truck, it plans some production downtime, Alan Batey, vice president of sales, said on the conference call.
Inventory during that period “will be a little bit lumpy,” he said. “Sometimes it’ll go up a little bit and sometimes it goes down a little bit but frankly things are playing out exactly as we expected them to.”
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