Truck Sales Slump Hold Back Gm

by : Jenny Mclane



The slump sales of trucks is hindering General Motors Corp.'s turnaround plan in North America. Just as the auto giant was gaining momentum to recuperate, there was an apparent shift of the market to small and fuel efficient cars. Additionally, gasoline prices were rising. And for a company that depends much on the truck market, such a change in the trend would spell trouble.

GM was relying on its all-new full-size GMC Sierra and the Chevrolet Silverado pickups to be smash hits. Unfortunately, the pickups are taking longer to sell as compared to their ancestors. They are also leaving showrooms with just $420 less in incentives.

According to Edmunds.com, GM sold 200,505 of the trucks through the first three months of 2007 - a figure one GM insider said fell well below internal projections. The aftermath of the slumped truck market will come into lingering hype this week as the GM and other auto giants report April sales. GM is scheduled to release its first quarter results Thursday.

The long-drawn-out slowdown in housing and construction markets in the United States, coupled with the increasing gasoline prices, is weighing on the sales of pickup nationwide. The pickup truck segment is a lucrative market on which Detroit's automakers are heavily dependent. "Things aren't falling apart, but those external factors are having an impact," Jesse Toprak, chief economist for Edmunds.com, said of GM's pickup sales. But even , the jack of all trades in the aftermarket accessories world, is not capable of wiping the doldrums away.

GM officials declined to delve further on the truck sales, saying that the automaker does not comment on the sales and earnings ahead of announcements. Analysts in the industry anticipate GM to post a profit overall in the first quarter. They added that they will be closely watching the North American earnings for signs of progress.

The automaker hoped that the profitable Silverado and Sierra would far surpass sales of the 2006 models. While the new Silverado and the Sierra are generally outperforming the rivalry, they have been injured by the slumping market. GM increased the production of the new pickups by eleven percent in the first quarter of the year in hope of strong demand. But sales are up just 4.8 percent through March as compared to a year ago, according to Edmunds.com.

Moreover, the trucks are being discounted $2,453 on average and are sitting on dealer lots 81 days, according to Edmunds' data for the first quarter of 2007. It could be noted that the old models carried $2,874 in incentives and moved in 55 days during the same period last year.

GM's pool of engineers has redesigned the pickups to make them bigger, more powerful and available with more features. This is why GM and Wall Street were expecting more. "Usually, you'd want to see a double-digit gain" on new products, Toprak said.

Troubles in the truck market have been threatening automakers. The segment is heavily dependent on contractors who use the vehicles for work. As a result, demand has slumped with the housing market, as fewer workers build fewer homes.

Full-size pickups, which account for 22 percent of sales for Detroit's automakers, plummeted ten percent in 2006, according to Autodata Corp. Sales for the segment were down another 4.6 percent for the first three months of 2007 compared to the same time last year.

According to Autodata, the Ford Motor Co. saw sales of its F-Series fall 14.1 percent in the first quarter of 2007 following a year in which the Dearborn automaker's sales benefited from a post-Hurricane Katrina construction boom on the Gulf Coast.

"The housing market doesn't seem to be getting any better - that is a concern," Ford sales analyst George Pipas said. "The prospects for a rebound are more remote today than they were four months ago."

The research firm Global Insight is predicting that Silverado sales will be up 4.6 percent through April and Sierra sales will jump 5.9 percent. And one analyst estimates that GM's April truck sales fell three percent.

GM's U.S. sales in April may have dropped an adjusted four percent, falling as much as seven percent for cars and three percent for trucks, Christopher Ceraso of the Credit Suisse Holdings in New York said. GM's large pickups "may struggle broadly given the weak housing market," the note said.

Still, truck competition heats up. Toyota unleashed the new Tundra. The Nissan Motor Co. introduced its Titan truck. Ford's new F-Series Super Duty truck lineup is now in showrooms. And both Ford and Chrysler Group are discounting their older pickups by up to 20 percent, Edmunds' Toprak said. "They have sold more trucks in this weak market that they did last year," he said of GM. "At least that trend is positive."

Dealer Steve Cook, the owner of the Cook GM Superstore in Vassar, is seeing the pickup problems firsthand. "It's a competitive market and manufacturers are having a hard time getting people to feel it's a good time to buy a truck," Cook said.