Fullsize pickup truck inventories are bulging a bit in the U.S., but General Motors executives tell financial analysts today they will have the situation firmly under control as the auto maker heads into 2012.
GM ended July with 209,000 fullsize pickups on dealer lots, equal to a 115-day supply. That compares with 159,000 units, or a 70-day supply, at the end of 2010.
Only a slight reduction is expected over the year’s second half, with inventories forecast by GM at 200,000 units, or about a 90-day supply, at the end of 2011.
But the inventory muscle is needed to get the auto maker through next year, when production will be limited by changeover to a new model and overall market demand is expected to rise, Chief Financial Officer Dan Ammann says during a conference call to discuss GM’s second-quarter earnings.
GM will carry an additional 50,000 units into 2012, he says, with 20,000 of that a hedge against an improving economy and the remaining 30,000 required to offset expected production losses related to model-changeover downtime next year.
“If sales don’t meet expectations, we will cut production while maintaining our incentive levels,” Ammann assures the financial analysts.
GM says it will have full capacity for about 640,000 pickups on three shifts in 2012, down from 780,000 this year due to the expected plant-retooling shutdowns.
Ammann says he doesn’t believe GM is being overly optimistic about the market in stockpiling fullsize pickups heading into 2012.
“We’re not making any heroic assumptions,” he says. “It’s really about what the (seasonally adjusted annual rate) will do. We don’t need it to pick up too significantly to get the numbers we’re talking about.
“If the environment doesn’t improve along the way, we’ll be modulating production.”
| 2011 | 2010 | % Chg. | |
|---|---|---|---|
| Sales | $39,373 | $33,174 | 18.7 |
| Net Income | $2,524 | $1,334 | 89.2 |
| E/S | $1.54 | $0.85 | 221.8 |
| Unit Sales | 2,320 | 2,162 | 7.3 |
| Note: Dollar sales and net income stated in millions; unit sales in thousands. E/S is earnings per share. Unit sales are worldwide wholesale deliveries. Net Income excludes adjustments. | |||
Ammann would not specify launch timing for the revamped pickups, but the new models likely will carry either ʼ13- or ’14-model designations.
The truck-market discussion comes as GM reports strong second-quarter earnings of $2.5 billion ($1.54 per share), nearly doubling year-ago’s $1.3 billion ($0.85 per share). Revenue jumped a healthy $6.2 billion to $39.4 billion.
The performance appeared to underwhelm investors, however, as GM stock slipped $0.71 to $29.46 in morning trading.
The auto maker says it gained 0.6 points of global market share, at 12.2% to end the quarter, on a 7.3% rise in vehicle deliveries to 2.32 million units. Worldwide production hit 2.4 million cars and trucks in the quarter, up from 2.26 million year-ago.
South America was the weakest link in the chain, as earnings before interest and taxes were cut in half from like-2010 to $100 million. Although volume increased 15.3% to 273,000 vehicles and revenues rose 22% to $4.4 billion, market share declined 0.3 points to 19.2%.
GM says its aging product portfolio and strong competition from Korean brands were factors in the key market of Brazil. But the auto maker is planning to launch nine new products there and 40 across the South American region by the end of 2012.
Restructuring continues in Europe, where GM recorded a $100 million profit before interest and taxes, up from a loss of $200 million year-ago. The auto maker says its restructuring charges were about $100 million in the quarter, compared with $300 million in last year’s second quarter.
Revenues in Europe reached $7.5 billion, up from $6.0 billion in like-2010. GM gained market share, rising to 9.1% from 8.8%, on a 9.0% volume jump to 483,000 vehicles.
“We’ve stabilized share and started to grow in Germany,” CEO Dan Akerson notes. “And we’ve had some progress on cost structure. So, there’s cautious optimism…we’ll have a better ʼ12 than we did ʼ11.”
In the key emerging market of China, GM gained 0.2% share as industry sales declined slightly overall. Ammann says he expects demand to rebound in the second half and the year to show modest growth over 2010.
Akerson says GM will launch 60 new or upgraded models in China over the next five years.
