GM May Cut Full-Size SUV Production

[Perian]

Link: http://www.autonews.com/apps/pbcs.dl...04031/1078/ANE

DETROIT -- General Motors may trim third-quarter truck production to offset increasing levels of inventory, particularly with the 2007 full-sized SUVs.

GM pumped its redesigned full-sized SUVs into the market earlier this year to ignite corporate revenue.

As a result, GM insiders say the company is weighing its third-quarter production of those trucks, which include the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade.

The full-sized SUV segment overall has shrunk this year in the United States, partly as a result of increasing fuel prices and higher interest rates. Sales of large and luxury SUVs for the entire industry are down 20.6 percent through July compared with the year-ago period, according to the Automotive News Data Center. Sales of GM's full-sized SUVs are down 16.0 percent through July.

In speaking about GM's current full-sized SUV inventory, one GM executive said, "It's not where we'd like it to be. We'll be taking a close look at third-quarter production." The executive asked not to be named.

The full-sized SUVs, which debuted early this year, are built on the GMT900 architecture. GM will launch its full-sized pickups on GMT900 this fall.

Through July, GM has built an estimated 324,000 GMT900 trucks at its plants in Arlington, Texas; Janesville, Wis.; and Silao, Mexico. GM has sold 231,305 GMT900s through July.

GM's third-quarter total production forecast remains unchanged at 1.05 million vehicles, 645,000 of which will be trucks, said Paul Ballew, GM's executive director of global market and industry analysis, in a conference call.

Ballew said GM currently has about 100,000 large SUVs in stock in the United States. Overall truck inventory is 660,000. GM will be monitoring inventory closely.

He added that GM will look closely at third-quarter production and manage it.

GM plans to hold to its marketing strategy of higher transaction prices and lower incentives. Another GM executive insisted the company will not run a big financing program or lean on daily-rental fleet to clear out excess inventory but will do so through production cuts.

Most likely, GM will eliminate overtime and go to straight shifts for August, September and October at key plants, the insider said. That would allow GM to avoid a couple of down weeks and get inventory back in line.

The number of days that new Tahoes sit on dealership lots is rising, according to the Power Information Network.

In January, a new Tahoe spent an average of seven days on a dealership lot and had an average transaction price of $42,191.

In July, that same Tahoe sat an average of 62 days on a dealership lot and sold at an average transaction price of $37,667.

[Perian]

Originally Posted by Perian

In January, a new Tahoe spent an average of seven days on a dealership lot and had an average transaction price of $42,191.

In July, that same Tahoe sat an average of 62 days on a dealership lot and sold at an average transaction price of $37,667.

When you're hot, you're hot; when you're not...you cut production.

It's the right thing to do.

[mpsrent]

Originally Posted by Perian

When you're hot, you're hot; when you're not...you cut production.

It's the right thing to do.

I agree, react in a timely manner to high inventory problems. I know my local dealer has far more GMT900's in stock then they would like to have. Initial interest was strong from those replacing their older units, but the continuing high fuel prices are starting to hit home. My dealer told me that Tahoe, Yukon, Suburban owners are now looking at other options.

As an example, I know of one person who owns a fully loaded Silverado, so when he went to trade in his 2003 Denali he felt he really didn't need 2 large trucks. He actually bought a fully loaded HHR, quite a change from a Denali.
I guess the good news for GM is that they kept a customer, though their profit on an HHR will be far less than that of a new Denali.

[Ultra Magnus]

GM really needs to find a cost effective way to get their gas mileage up. Dont get me wrong, I love the new trucks, but most people who drive them as cars are really looking at gas mileage. If the 900s could get their CITY mpg up to 20, then people would really want to take a more solid look at them. The people that were going to get them already did, now its time to sell to the rest of the market. Take the incentive dollars out of the equation and spend it on R&D to get your fuel economy ratings better.

[boblutzfan]

Originally Posted by mpsrent

I agree, react in a timely manner to high inventory problems. I know my local dealer has far more GMT900's in stock then they would like to have. Initial interest was strong from those replacing their older units, but the continuing high fuel prices are starting to hit home. My dealer told me that Tahoe, Yukon, Suburban owners are now looking at other options.

As an example, I know of one person who owns a fully loaded Silverado, so when he went to trade in his 2003 Denali he felt he really didn't need 2 large trucks. He actually bought a fully loaded HHR, quite a change from a Denali.
I guess the good news for GM is that they kept a customer, though their profit on an HHR will be far less than that of a new Denali.

Keeping the customer is the most important objective - even if you don't make as much on their new car. GM needs to wise up and realize that the entire world is now looking for more fuel efficient cars and fewer trucks. With the news this morning that a big oil field in Alaska is being shut down to repair part of the pipeline - gas prices will rise big time.

GM - bring out that new Malibu fast!!!! You need a high quality high mileage stylish sedan to keep your customers in the fold. Bring out the Malibu in the 1st quarter of next year - your future depends on it.

[Havasavana]

Originally Posted by Perian

In January, a new Tahoe spent an average of seven days on a dealership lot and had an average transaction price of $42,191.

In July, that same Tahoe sat an average of 62 days on a dealership lot and sold at an average transaction price of $37,667.

In January, there were 13,093 Tahoes sold; in July, 13,481. So that's a net difference in profit of about $61 million in July if those had been sold at the higher price. About 3 times as many full sized pickups are sold as Tahoes, so if we see this pattern with the new pickups, a lot of money will be 'lost'. With Ford and DCX cranking up the incentives, it will be hard for GM to resist after the early adopters get theirs.

[Shotgun]

The surge lasted longer than I (and most, probably) thought it would. Have a gut feeling the trucks will do the same. That's when the 2006 will be dirt cheap and sell like wildfire with their discounts and the 2007 have so-so sales after being out a few months.

[samy1691]

When the new Tahoes came out , GM dealers were selling them at sticker!!!! Now that sales slow they can't figure it out!!!! How stupid are these executives when one follows the other. Wait to see if there is a die down in Z06 sales as the dealers are getting $ 30000 over sticker and after a year they start collect dust!!!!!!!

[Quickening]

Cut production, we do not want a fire sale. THey need to be getting the 6 six speed in all of these cars and the hybrid out. I also wonder if they could tweak AFM to allow the engine to go into 4 cyclinder mode more often.

I really hope GM's Lambdas can achieve good mpg, I also hope they are working on Hybrid versions of them also.

[saturnsteve]

I am sure surprised that they went down as quick as they did. Wait a minute, no I'm not, GAS IS OVER $3.00 A GALLON!!!

[johnny smallblock]

Thank god they're cutting production.

It's early August and no major incentive-powered sales push is on the horizon.

Generally, imports benefit from the domestics' summer discounts, because the Big 2.5 spend a lot of advertising money and drive up people's interest in buying a new car. Then, of course, a bunch wind up buying imports. This was very apparent last year when the imports had much smaller discounts, but saw their sales skyrocket along witht he domestics. Without GM pushing a big sale, I am very curious to see how the imports make out this summer.

[Canyonaro]

In this situation, it is the best option that they have. It is better to cut production, then do a big sale and loose potential profit.

It is sad to hear that they have to do it, but with gas only getting more expensive, the '08 models can't come out soon enough.

[DMC]

Too bad they don't have a small diesel ready to go. There's your 20 mpg city, could probably do 26 highway.

[01cavalier]

Good thing they realize there is a problem, but they really should move faster to adjust production.

[cadillacpimpin]

stick the 3.9L in there for an economy engine, maybe it doesnt have enough power and will just strugle and use more gas.
and wheres the diesel?